Restructuring & insolvency lawyer — Nursing homes & elderly care (EHPAD) sector

Sector scope

Commercial, non-profit and private-law elderly care homes (EHPAD), assisted-living residences, senior service residences, long-term care units, home care and home nursing services, and multi-site operating groups.

Sector context

Care homes for dependent elderly people operate under an administrative authorisation granted jointly by the regional health agency and the department council (Art. L. 313-1 of the Social Action and Families Code), with tripartite funding: a care package, a dependency package based on the weighted average dependency score, and an accommodation tariff. Revenue is therefore largely administered, while staff, energy and catering costs move freely, and occupancy drives the financial balance. Difficulties usually build gradually and are best addressed through confidential out-of-court procedures, before any cessation of payments, in coordination with the pricing authorities.

Key legal issues

• Continuity of care: protecting residents takes priority throughout the procedure; any reorganisation must preserve care and, where needed, organise transfers with the regional health agency and the department.
• Authorisation and approved capacity: the authorisation is granted for fifteen years and its transfer to a buyer requires the competent authorities' consent (Arts. L. 313-1 and L. 313-1-1 of the Social Action and Families Code), which drives the value of any sale plan.
• Tariffs and multi-year agreements: annual pricing orders, the multi-year objectives and resources agreement (Art. L. 313-11), forecast income and expenditure statements, allocation of results and clawback clauses on public funding.
• Residency agreements and deposits: treatment of ongoing residency agreements (Art. L. 311-4), sums paid in advance, deposits and accommodation services invoiced after the opening judgment.
• Split property and operations: commercial lease, real estate leasing or off-plan sale structures with separate operators; the fate of the lease often determines whether a plan is feasible (Arts. L. 622-13 and L. 642-7 Commercial Code).
• Payroll and collective agreements: applicable collective agreement, staffing ratios, seconded care staff, the AGS wage guarantee and works council information and consultation.
• Inspections and injunctions: regional health agency or department inspections, injunctions, provisional administration (Art. L. 313-14) and how those measures interact with court proceedings.

How a matter is handled

1. Diagnosis: review of available cash, due and payable liabilities, tax and social security instalments and existing security, in order to establish whether cessation of payments is characterised (Art. L. 631-1 Commercial Code).
2. Choice of procedure: arbitration between confidential out-of-court tools (ad hoc mandate, conciliation) and formal proceedings, in light of the sector's own timetable.
3. Negotiation: discussions with banks, strategic suppliers, the AGS wage guarantee scheme, the tax authorities and URSSAF, and where relevant before the CCSF.
4. Implementation: preparation of the filing, representation before the commercial courts, monitoring of the observation period, and preparation of the plan or of the sale.

French procedures at a glance

A declaration of cessation of payments must be filed within 45 days of that state arising, unless a conciliation request is filed within the same period (Art. L. 631-4 of the French Commercial Code).

Frequently asked questions

Can a nursing home be placed in insolvency proceedings?

Yes, where it is operated by a private legal entity, whether commercial or non-profit: Book VI proceedings are open to any private legal entity (Arts. L. 620-2, L. 631-2 and L. 640-2 of the French Commercial Code). Public establishments, by contrast, follow a separate regime outside insolvency proceedings.

What happens to residents in rehabilitation proceedings?

Opening proceedings does not close the establishment: the observation period is designed to allow the business to continue and residency agreements remain in force. If activity ceases or the home closes, the regional health agency and the department council use their public health powers to organise continuity of care and the transfer of residents.

Is the operating authorisation transferred automatically to a buyer?

No. The authorisation granted under Art. L. 313-1 of the Social Action and Families Code attaches to the operator and its transfer requires the consent of the issuing authority (Arts. L. 313-1 and L. 313-1-1). A sale plan adopted by the court (Art. L. 642-1 Commercial Code) must therefore be coordinated with that administrative authorisation.

Why consider conciliation for a group of care homes?

Conciliation is confidential (Art. L. 611-15 Commercial Code) and may be requested as long as cessation of payments has not lasted more than 45 days (Art. L. 611-4). It allows bank and real estate debt to be renegotiated and the pricing authorities to be involved without publicity, limiting the impact on occupancy and recruitment.

Must claims of the health agency or department be filed?

Yes. Claims arising before the opening judgment, including funding clawbacks and tariff overpayments, must be filed with the creditors' representative within two months of publication in the BODACC (Arts. L. 622-24 and R. 622-24 Commercial Code).

Can provisional administration coexist with insolvency proceedings?

The two follow different logics: provisional administration under Art. L. 313-14 of the Social Action and Families Code aims at the safety of the people accommodated, whereas insolvency proceedings organise the treatment of financial difficulties. How they interact is assessed case by case with the court and the supervisory authorities.

Contact

Phone: +33 1 45 03 20 20
Email: accueil@macmahon-avocats.fr
Address: 33 avenue Mac-Mahon, 75017 Paris, France

Other sectors