Updated on 14 May 2020

In order to deal with the economic, financial and social consequences of Covid-19 and related containment measures, the French government has decided to set up a solidarity fund for severely affected businesses, by enacting Ordinance No. 2020-317 of 25 March 2020 (the "Solidarity Fund Ordinance").

This solidarity fund supplements other schemes already in place (such as the partial activity support scheme, the granting of deadline extensions in relation to tax payments and other social security contributions, and tax rebates).

The government specified the conditions applicable to this fund in Decree No. 2020-371 dated 30 March 2020 on the solidarity fund for companies particularly affected by the economic, financial and social consequences of the spread of the Covid-19 epidemic and the measures taken to limit this spread. This decree came into force on 31 March 2020 and was amended by a Decree No. 2020-394 of 2 April 2020, by a Decree No. 2020-433 of 16 April 2020 and then by a Decree No. 2020-552.

In addition, clarifications were provided by the ordinance No. 2020-460 of 22 April 2020 on various measures taken to deal with the Covid-19 epidemic.

CREATION OF A SOLIDARITY FUND

Pursuant to Article 1 of the Solidarity Fund Ordinance, a solidarity fund is established for a period of three months (extendable by decree for one additional period of three months maximum) and its purpose is the payment of financial aid to natural persons and legal entities governed by private law whose economic activity is severely affected by the economic, financial and social consequences of the spread of Covid-19 and the measures taken to contain the spread.

The fund is to be financed by the State, and any local authority (both overseas or domestic), and any inter-municipal public establishment subject to ad hoc tax rules may also participate on a voluntary basis. The document published by the Government in the form of a Frequently Asked Questions updated on 16 April 2020 (accessible here) also refers to contributions from private donors, in particular insurance companies, which have already announced a contribution of 400 million euros, without this being reflected in the Solidarity Fund Ordinance.

The Director General of France's public finance department is responsible for the management of the fund.

ELIGIBILITY CRITERIA, AID ALLOCATION AND AMOUNT

Aid amount

The solidarity fund enables to pay aid directly to eligible businesses, comprising two tranches:

• The first tranche (March) allows a business to receive aid (in the form of a subsidy) in an amount equal to the declared loss in turnover for March 2020 up to a limit of one thousand and five hundred euros (EUR 1,500). It should be noted that this sum will be tax-exempt. The loss of turnover is calculated by comparison with the turnover of March 2019 (or for companies created after 1 March 2019, by reference to the average monthly turnover calculated between the creation of the company and 29 February 2020).
   
• The first tranche (April) allows, in the same way, a business to receive aid (in the form of a subsidy) in an amount equal to the declared loss in turnover for April 2020 up to a limit of one thousand and five hundred euros (EUR 1,500). It should be noted that this sum will be tax-exempt. The loss of turnover is calculated by comparison with the turnover of April 2019 or, at the choice of the business, by comparison with the average monthly turnover for 2019 (or for businesses created after 1 April 2019, by reference to the average monthly turnover calculated between the creation of the business and 29 February 2020 or, in the case of businesses created after 1 February 2020, by reference to the turnover achieved in February 2020 and reduced to one month).
   
• The first tranche (May) similarly allows a business to receive aid (in the form of a subsidy) in an amount equal to the declared loss in turnover for May 2020, up to a limit of one thousand and five hundred euros (EUR 1,500). It should be noted that this sum will be tax-exempt. The loss of turnover is calculated by comparison with the turnover of May 2019 or, at the choice of the business, by reference to the average monthly turnover for the year 2019 (or, for businesses created between 1 May 2019 and 31 January 2020, by reference to the average monthly turnover calculated between the creation of the business and 29 February 2020, or, for companies created after 1 February 2020, by reference to the turnover achieved in February 2020 and reduced to one month).
  It is specified that for natural persons who have received one or more retirement pensions or daily social security allowances for the month of April 2020 or May 2020 and legal persons whose majority manager has received such pensions or allowances, the amount of the subsidy for the first part of the relevant period (April or May), as the case may be, is reduced by the amount of the pensions and daily allowances received or to be received for the month of April 2020 or May 2020, as the case may be.
   
• The second tranche allows businesses that benefited from the first tranche (for at least a month) and employ, as of 1 March 2020, at least one employee on a permanent or fixed-term contract or have been the subject of a ban on receiving the public between 1 March 2020 and 11 May 2020 and have recorded the last closed financial year a turnover of at least EUR 8,000 (for businesses that have not yet closed a financial year, the average monthly turnover over the period between the date of creation of the company and 29 February 2020 must be greater than or equal to EUR 667) to receive an additional lump-sum in the event that (i) the balance between, on the one hand, their available resources and, on the other hand, their debts due within 30 days and the amount of their fixed expenses, including commercial or professional rents, due in respect of the months of March, April and May2020 is negative (the absolute value of this balance is hereinafter referred to as the "Balance") and (ii) they have been refused an application for a cash loan of a reasonable amount requested to their bank since 1 March 2020 (a request that goes unanswered for over ten days is deemed as a refusal). The amount of the additional aid varies according to the turnover recorded in the last financial year:

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Aid beneficiaries

The fund is intended for any natural person and legal entity under private law (companies, non-profits, etc.) that is a French tax resident exercising an economic activity, regardless of tax or social security regime, and that meets the following conditions:

1.    It is subject to:

(i) For the first tranche (March), (a) a ban on receiving members of the public implemented between 1 and 31 March 2020; or (b) a turnover loss of at least fifty percent (50%) for March 2020 when compared with March 2019 (it being specified that for a business created after 1 March 2019, the reference for the calculation of turnover loss is the average turnover between the business' creation date and 29 February 2020);

(ii) For the first tranche (April), (a) a ban on receiving members of the public implemented between 1 and 30 April 2020; or (b) a turnover loss of at least fifty percent (50%) for April 2020 when compared with April 2019 or, at the choice of the business, when compared with the average monthly turnover for 2019 (it being specified that for a business created after 1 April 2019, the reference for the calculation of turnover loss is the average turnover between the business' creation date and 29 February 2020);

(iii) For the first tranche (May), (a) a ban on receiving members of the public implemented between 1 and 30 May 2020; or (b) a turnover loss of at least fifty percent (50%) for May 2020 when compared with May 2019 or, at the choice of the business, when compared with the average monthly turnover for 2019 (it being specified that for a business created after 1 May 2019, the reference for the calculation of turnover loss is the average turnover between the business' creation date and 29 February 2020 or, in the case of businesses created after 1 February 2020, the turnover achieved in February 2020 and reduced to one month).

2. It started its activity before 1 February 2020 for the first tranche (March) or before 1 March 2020 for the first tranche (April and May);

3. It is not in judicial liquidation as of 1 March 2020.

4. It has no more than 10 employees (this threshold is calculated in accordance with the provisions of Article L.130-1 I of France's Social Security Code, i.e. by reference to the average number of persons employed during each month of the previous calendar year);

5. Its turnover excl. tax was less than one million euros (EUR 1,000,000) in the previous financial year (for companies that have not yet closed a financial year, the average monthly turnover over the period between the date of creation of the company and 29 February 2020 must be less than EUR 83,333) or, where the company falls within the category of non-trading profits (bénéfices non commerciaux), net income excluding tax of less than the same amount (without taking into account donations and subsidiaries for non-profits);

6. For the first tranche (March) exclusively: to have made a taxable profit, plus, if applicable, the sums paid to the director, of less than 60,000 euros for the last financial year ended (for businesses that have not yet ended a financial year, the taxable profit plus, if applicable, the sums paid to the director is established, under their responsibility, on 29 February 2020, over their operating period and adjusted over twelve months);

7. For the first tranche (April and May) exclusively: to have made a taxable profit, plus, if applicable, the sums paid to the directors holding shares, in respect of the activity carried out, for the last financial year ended which is lower than:

• for individual businesses: 60,000 euros (this amount being doubled if the spouse of the head of the business carries out a regular professional activity in the business under the status of collaborating spouse); and
   
• for companies, 60,000 euros per shareholder and collaborating spouse.

8. For natural persons or, the majority director in the case of legal persons, did not hold on 1 March 2020 a full-time employment contract or (only for the first tranche of March) an old-age pension and did not receive, during (i) the period from 1 March 2020 to 31 March 2020 daily social security benefits in excess of EUR 800 (for the first tranche (March)) or (ii) from 1 April 2020 to 30 April 2020 daily social security benefits in excess of EUR 1,500 (for the first tranche (April));

9. It is not controlled by a commercial company within the meaning of Article L.233-3 of the French Commercial Code;

10. When the natural person or legal entity controls one or more commercial companies within the meaning of Article L.233-3 of the French Commercial Code, the sum of the employees, turnover and profits of the related entities comply with the thresholds mentioned in points 4, 5 and, as the case may be, 6 or 7 above;

11. For non-profits, be subject to commercial taxes or employ at least one employee.

Furthermore, the aid paid to businesses which were, on 31 December 2019, in distress within the meaning of Article 2 of EU Commission Regulation No. 651/2014 of June 17, 2014 declaring certain categories of aid compatible with the internal market pursuant to Articles 107 and 108 of the Treaty on the Functioning of the European Union must be compatible with Commission Regulation No. 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid.

Aid allocation

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