Security interest law in France

Guarantees

1. Can an intercompany guarantee be granted?

1.1 Upstream?

Yes, under limitations depending on whether the guarantor derives sufficient corporate interest.

1.2 Downstream?

Yes

1.3 Lateral?

Yes, under limitations depending on whether the guarantor derives sufficient corporate interest.

2. Can a guarantee be given under foreign law (e.g. English law)?

Yes, provided that an international element exists in the transaction.

3. Any special arrangements (e.g. to deal with transfer pricing/corporate benefit)?

For 1.1 and 1.3, the scope and conditions of the guarantee shall comply with the corporate interest of the guarantor.

Security

4. Can a security interest be granted in the following type of asset?

4.1 Real property 

Yes

4.2 Shares (privately held)

Yes

4.3 Shares (marketable securities)

Yes

4.4 Receivables 

Yes

4.5 Bank account

Yes

4.6 IP/Trademark

Yes

4.7 Equipment/Plant/Machinery

Yes

4.8 Inventory

Yes

4.9 Insurance

Yes

4.10 Rights under a contract

Yes

5. Can security interests be granted to a foreign lender? 

Yes, exceptions exist.

6. Can multiple security interests be granted over the same asset? 

Yes in most cases. However, depending on the type of security, further ranking security interests are disputable.

7. Can a security interest be granted to secure liabilities of a holding company, a subsidiary or any other affiliate?

Yes in most cases. See limitations in 1.1 and 1.3 above.

Perfection

8. In order to be enforceable against third parties, must a security interest be?

8.1 Notarised? 

No, except real estate.

8.2 Registered? 

It depends.

8.3 Other?

It depends.

9. Does registration in most cases protect the secured creditor against the debtor’s subsequent dealings with the secured asset?

Yes, when registration is a condition to achieve enforceability of the security interests against third parties.

10. Is there any stamp or similar tax or duty payable on the security document? 

Yes, most costs are negligible. Costs may be significant for security over real estate.

Enforcement

11. For a security interest to be legally enforceable which items must be filed as part of the registration or notarisation process?

11.1 Entire security agreement?

Yes, for real estate or other specific types of security interests.

11.2 Names of pledgor and pledgee?

Yes

11.3 Description of secured asset in general terms?

Yes

11.4 Description of each individual secured asset?

Yes

11.5 Documents concerning ownership of secured asset?

No

11.6 Documents concerning debt in respect of which the asset is being secured? 

No

12. Can a right to enforce security arise:

12.1 When the secured debt is unpaid and due?

Yes

12.2 When there is some other breach of the pledge/security agreement?

No, except for first demand guarantee.

12.3 When the debtor becomes insolvent?

No

13. Can the creditor enforce its security interest by taking possession of the asset and selling it without court assistance?

No, a court decision is required for direct sale by a secured creditor. 
However, the parties may agree that the secured creditor will become owner of the assets pursuant to the terms and conditions of the security agreement.

14. Is an instrument for direct enforcement necessary/available/market practice? 

It depends.

15. Are powers of attorney to the secured party used to facilitate a sale of secured assets in an enforcement situation?

No, the secured party can act on its own.

16. If a sale is permitted without court assistance does it have to be made by public auction?

See 13 above.

17. Can a transfer of all or part of the debt be made without affecting the security over the assets?

Yes, it depends on the way the beneficiary is defined and on the type of security interest.

18. Is there anything else of which a lender should be aware as unusual or particularly difficult?

Certain notarised or registered security interests agreements have to be drafted in French.