Companies in difficulty
The "Company in Difficulty" status closes the door to almost all financing options...
To start, what is the "Company in Difficulty" (ED in French) status?
Companies are considered "ED" if they are more than 3 years old and have accumulated losses over past fiscal years that exceed half of their share capital and share premiums.
In the case of an SME, two additional ratios are considered:
1 . A debt-to-equity ratio greater than 7.5.
2 . An EBITDA less than the interest on the debt.
What are the repercussions on financing?
- CIR > ok
- CII > excluded
- Financing from Bpifrance > excluded
- Bank loans > excluded
- Grants (Region, Bpifrance, Europe...) > excluded.
Fortunately, there are two options to exit this status:
- Option 1: Increase equity (raise funds or generate a significant positive net income).
- Option 2: Reduce share premiums by at least twice the result of the ED calculation and subtract the same amount from accumulated losses from previous fiscal years...
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