Private debt restructuring during Covid-19: overcoming travel restrictions to enter into a notarised acknowledgment of debt
A formal acknowledgment of debt is helpful to a creditor as it provides evidence of the existence and quantum of a debt. In Common Law jurisdictions such as Hong Kong, it is recommended to arrange for an acknowledgment of debt signed by the debtor as a deed (with all the required formalities).
In France, the Finance Ministry offers a straightforward version which is a private deed, but there is also an enhanced version which is drafted by and signed before a French notary. According to the provisions of the law, failure to pay the debt in a timely manner as set out in a “reconnaissance de dette par acte notarié” (hereafter a French notarised acknowledgment of debt) entitles the creditor to request the assistance of a court bailiff for debt collection – without the prior requirement to file a claim to obtain a judgement.
Furthermore, copies of documents prepared by a French notary are saved in a central register to evidence both the date and terms of the documents.
Private debt restructuring during Covid-19 travel restrictions
Case study: In one example, the debt held by a BVI company first had to be assigned to the sole member and director of this company (Creditor). The Debtor – a French resident – had agreed to enter into a French notarised acknowledgement of debt with the Creditor. The assignment of debt had to be completed by the end of June 2020, prior to the transfer of the BVI company.
The Debtor was in France, which enforced strict confinement measures from 17 March 2020 until 2 June 2020 and the Creditor was located in China (PRC), which also enforced strict confinement measures and travel restrictions. Hence, the signature of the documents had to be arranged remotely.
Signing private deeds remotely
Under Articles 1322 et seq. of the French Civil Code, an assignment of debt must be recorded in writing to be valid. In order to be binding on the debtor, the assignment shall be notified to him/her or the debtor shall have acknowledged the assignment or consented to it. An assignment of debt can be executed electronically. A qualified electronic signature, which is an e-signature allowing the signatory to be identified and the document to be drafted and stored in conditions guaranteeing its integrity, has the same binding force as a wet signature (Articles 1366 and 1367 of the French Civil Code).
Similarly, in Hong Kong, the Law Amendment and Reform (Consolidation) Ordinance (Cap. 23) requires a legal assignment of debt to be in writing and an express written notice of assignment to be given to the debtor. Without notice, the debtor may validly discharge their obligation by paying the assignor. The debtor’s consent is required only if the loan agreement prohibits assignment. The document can be signed electronically: the Electronic Transactions Ordinance (Cap. 553) provides that an electronic signature is legally binding as far as the signatory identifies him/herself, the method is reliable and appropriate and the signatory consents to the use of the e-signature. However, a wet signature is required for certain documents such as deeds, oaths and affidavits, statutory declarations, trusts, etc.
Signing a French notarised acknowledgment of debt remotely
Since 2008, French law has authorised the electronic signature of notarised documents. However, the parties are still required to be present at the office of the notary, where they sign the document on a touch screen. The notary then identifies itself with a REAL secure USB key and PIN code and signs the document. The electronically signed document is automatically transferred to the notary office’s archive in the electronic official record of notaries (“Minutier central électronique des notaires de France, Micen”) via the REAL network.
In response to the Covid-19 outbreak, the Decree No. 2020-395 of 3 April 2020 authorised the remote signature of notarised documents during the State of Health Emergency and for one month thereafter. France declared the State of Health Emergency from 24 March 2020, initially for two months (Law n° 2020-290 of 23 March 2020), then extended it until 10 July 2020 (Law n° 2020-546 of 11 May 2020).
During this period, French notaries can notarise documents remotely, provided that the parties are equipped with a stable internet connection and a camera.
Two preparatory steps need to be completed prior to the formal videoconference with the French notary for the signature of the notarised document itself:
- verification of identity: the notary sends a link to each party allowing him/her to connect to the identity verification platform IDNow via a video call, where an agent asks the party to present his/her identity document for verification (the artificial intelligence software scans the passport and matches it with the live video of the person); and
- signature of the remote appearance consent form by the parties via DocuSign.
Subject to satisfactory verification of the parties’ identities, the notary will thereafter send a link to each party to join the signing meeting via the dedicated LifeSize software (LifeSize is the remote communication system certified by the French High Council of Notaries).
The signing meeting is held by means of videoconference: the notary reads the document and both parties give their approval to enter into the agreement by signing a certificate of confirmation of consent via DocuSign. Instead of affixing his/her seal, the notary uses a REAL key and PIN code to sign the deed. The deed is signed by the notary only, as the parties are only required to sign the consent form.
The document is recorded, encrypted and sent via the REAL network to the Micen. The document can be consulted for 75 years, after which it is deposited to the archives. The binding force is the same as a paper document signed in a notarial office.
A temporary solution that we would like to continue using for our clients
Currently, the remote signature of notarised documents is only possible until 10 August 2020. But this temporary solution answers the needs of many people living overseas with interests in France.
Our firm has working relationships with notaries in France to assist our clients in drawing up French notarised acknowledgments of debt – relevant when the debtor is a French individual or a French company. We would like to see this temporary solution made durable.
If you have any questions about private debt collection or restructuring, with the debtor being in Hong Kong or in France, do not hesitate to contact us for a preliminary assessment of your needs and to discuss if and how we can help you.