FRANCE Law and Practice Contributed by: Anne-Sophie Noury, Saam Golshani and Alicia Bali, White & Case
Security Over Cash Under a cash collateral, title to cash collateral is transferred to the creditor. If the debtor defaults, the creditor should be able to set off all sums owed by the debtor against the creditor’s obligation to return the
clause and acts in good faith, the creditor loses the right to repossess. However, if the third-party buyer has not yet paid the debtor, the creditor can seek pay - ment directly from them. Set-Offs Creditors may offset mutual obligations with the debt - or, enabling them to deduct amounts owed by the debtor from any debts they themselves owe to the debtor. Set-off rights may be contractual or statutory, generally taking three forms. • Legal set-off: applies when debts are certain, due and payable ( créances certaines, liquides et exi- gibles ), occurring as soon as these conditions are met and the set-off right is claimed by one of the parties. • Related debt set-off ( dettes connexes ): for debts arising from the same contract, account or frame - work agreement. Unlike legal set-off, this only requires the certainty of the reciprocal debts and does not depend on them being due or payable. • Contractual set-off: this can extinguish current or future obligations between parties, taking effect either on the agreement date or when obligations coexist. Use of Contractual Remedies In continuing performance contracts (eg, leases, recurring services or goods supply agreements), cred - itors can suspend their obligations under the contract if the debtor’s non-performance is sufficiently serious. Typically, creditors are advised to issue a formal notice to the debtor indicating that their obligations will be suspended if the debtor does not fulfil their own obli - gations. Creditors may also suspend performance if it becomes evident the debtor will not perform when due, provid - ed that the non-performance is likely to have serious consequences. In such cases, notice of suspension should be issued promptly. Seizures A means usually used by creditors while demon - strating a due and payable claim against a debtor is to seize, through a bailiff’s notification, (i) any cash amount in the debtor’s bank account within the limit
charged cash to the debtor. 2.4 Unsecured Creditors
Unsecured creditors benefit from several remedies outside of a restructuring or insolvency context, as follows. Formal Notices Upon non-performance of the debtor’s obligations, creditors can issue a formal notice requesting per - formance. Formal notices entitle the creditor to claim interests on arrears at the legal rate without needing to dem - Creditors may seek a court order for pre-judgment attachment to secure the debtor’s property, prevent - ing asset disposal before a final judgment. This action requires the creditor to show both a likelihood of suc - cess based on the merits of the case and a risk that the debtor may dissipate or conceal assets. However, pre-judgment attachment is not a per - manent remedy, as the creditor must still obtain an enforceable title ( titre exécutoire ) to enforce its rights over the debtor’s assets. Retention of Title Also known as a “reservation of title” clause ( clause de reserve de propriét é), this allows the creditor to retain ownership of goods supplied to the debtor until the debtor fully pays for them. onstrate actual damages. Pre-Judgment Attachment This clause, which must be explicitly included in the contract, enables the creditor to repossess the goods if the debtor defaults, provided the goods are still in the debtor’s estate and have not been transferred to a bona fide transferee. If the goods under a retention of title clause are sold by the debtor to a third party who is unaware of the
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