| “Macron law”: two further steps into banking disintermediation and collaborative financingJean-François Adelle, partner, Finance, JeantetAssociés The French law on Growth, Activity and Equal Economic Opportunities of 6 August 2015, named Macron law after the French minister of the economy, finances and industry, includes a vast array of measures aimed at undoing identified blockages in French economic, financial, legal profession and labour regulations. It was adopted after a six month difficult parliamentary process in which the Manuel Valls socialist government fearing a lack of majority resorted to the French constitution Art 49-3 procedure, which was adopted on a vote of no confidence. 23 of the 308 articles, mostly relating to employment regulation, were censored by the Constitutional Council. Two of the Macron law provisions remove regulatory restrictions to disintermediated financing: Art 167 promotes corporate lending beyond the corporate group whilst Art 168 extends laws on the issuance of debt bonds to crowdfunding platforms, expanding the types of bonds that can be issued to include certificates of deposit (bons de caisse). Corporate lending to other companies Article 167 of the Macron law allows companies, regardless of their nature and nationality, to extend credit for less than two years to other companies, except large companies over a certain size. . The purpose of this provision is to facilitate the supply of credit to SMEs that have been penalised by the restriction in bank lending in light of Basel III and do not have easy access to capital markets because of high entry barriers – in particular the cost of documentation and high issuance volume. After several assaults on the French banking monopoly in recent years in favour of financing companies, debt funds and crowdfunding platforms, this new law favouring lending by corporates presents a further assault in. Until now, companies have been allowed to extend credit to other companies within the corporate group in accordance with a common control test. The Macron law allows corporates to lend to other companies outside the corporate group and so inject their cash surpluses into the wider economy. The new provision contemplates a supplier-purchaser of goods or services relationship. Addressing the risk of financial dependence In parliamentary debates, the concern was raised that the financing terms imposed by the corporate lender should not be too onerous.. To limit this risk, the law, by way of implementing decree, provides that each corporate loan will set a maximum amount . The thresholds ensure that facilities finance working capital only. Further, by analogy with intra-group financing terms, the terms of the credit should be at least as favourable for the borrower as other financing sources available to it on the market and entered into on arm’s length terms. No circumvention of commercial payment time limitsAnother risk associated with corporate lending is the circumvention of payment time limits, which are set at “sixty days - end of month” after the invoice date under EU regulation as implemented in French law. Indeed, the purchaser (borrower) could seek to postpone the payment deadline by getting its supplier (corporate lender) to lend it an amount equal to the purchase price so as to extend, in practice, the effective payment date until the maturity date of the facility. The Macron law provides that the loans will not impose time limits on payments that do not comply with the law. Tax treatment The lender’s interest received will be subject to the normal rate of corporate income tax of 33,1/3%. Interest paid by the borrower will be taken into account for computing the corporate’s net financial expenses subject to a limitation of the deductibility of 75% of the total up to €3m. Thin-capitalisation rules that limit the tax deductibility of interest in proportion to capital ratios do not apply, as they are limited to loans or advances between companies under direct or indirect common control. H1 Extending the type of debt instruments that crowdfunding platforms may distribute Article 168 of the Macron law purports to facilitate the distribution of debt securities via crowdfunding platforms and to extend the type of instruments that can be distributed to include certificates of deposit. Under the crowdfunding ordinance of 30 May 2014, crowdfunding platforms can work as intermediaries offering certain securities to the public under the Conseiller en Investissment Participatif (CIP) provided that transactions are restricted to €1,000 per subscriber and €1m per securities issuer. Offerings benefit from an exemption from both the requirement to provide a prospectus approved by the French market authority (AMF) despite being offered to more than one hundred persons and the financial solicitation regulation. Securities available for distribution by CIPs are limited to ordinary shares and fixed trade bonds, excluding all types of financial securities. |