FRANCE Law and Practice Contributed by: Fernand Arsanios, Delphine Guillotte, Guillaume Chaboureau, Houda Idaroussi and El Sayegh, King & Spalding
• the financing is structured as a loan agreement, with foreign lenders whose purpose or activities are comparable to those of French credit institutions acquiring loan receivables (eg, funded participa- tions) from licensed credit institutions, financing companies, or certain types of funds. 3.2 Restrictions on Foreign Lenders Receiving Security Under French law, there are no restrictions or impedi- ments (other than international sanctions-related restrictions) to foreign lenders receiving the benefit of security or guarantees. A specific receivables secu- rity assignment known as the “Dailly assignment” and commonly used in real estate financing may only be granted to duly licensed credit institutions ( établisse- ments de crédit ), financing companies ( sociétés de financement ) or certain alternative investment funds reserved for professional investors and securitisation funds. 3.3 Restrictions and Controls on Foreign Currency Exchange There are no controls or restrictions regarding foreign currency exchange in France. 3.4 Restrictions on the Borrower’s Use of Proceeds The use of proceeds from loans or debt securities is generally agreed upon between the parties to the rel- evant financing agreement. There are no specific restrictions on the use of pro- ceeds under French law, except for non-compliance with international sanctions-related provisions, anti- bribery laws and regulations or anti-money laundering laws and regulations, or certain limitations and condi- tions related to the general principal of corporate inter- est of the borrower and to the prohibition of financial assistance. 3.5 Agent and Trust Concepts The agent concept as representative of the lenders for the management and administration of the facility relies on a civil law power of attorney ( mandat ) granted by the lenders to the agent of the facility.
The agent concept as representative of the lenders for the creation, management or enforcement of French law security interests relies on either (i) the above- mentioned civil law power of attorney – in which case the agent is acting in the name and on behalf of the lenders, or, increasingly, (ii) the “security agent regime” provided by Articles 2488-6 to 2488-12 of the French Civil Code, which enables a security agent to take, register, manage and enforce security interests in its own name but in favour of the creditors of the secured liabilities. In the latter case, the rights of the security agent under these security interests are part of a dedicated estate ( patrimoine affecté ) which is separate from the security agent’s own estate. Although not used within an agency structure, a con- cept similar to the trust called the fiducie exists under French law. The fiducie is a contractual arrangement whereby a grantor transfers the full ownership of one or several asset(s) to a fiduciaire (trustee) who will hold, manage and, as required, dispose of, those assets for the benefit of designated beneficiaries. The fiducie can also serve as a form of security interest. In such cases, the beneficiaries are the creditors of the secured obligation, the assets transferred to the fiduciaire constitute the collateral securing the debt, and the fiduciaire acts in its name but in favour of the secured creditors. 3.6 Loan Transfer Mechanisms Under French law, loans can be transferred by the lenders by way of the following. • Assignment of receivables (cession de créances) – an existing lender assigns the loans receivables it holds against the borrower to a new lender. The borrower’s consent is not required for this to be valid between assignor and assignee or to be enforceable against third parties (other than the borrower). It must be notified to the borrower in order to be enforceable against it, or, alternatively, the borrower shall have acknowledged or approved the assignment. • Novation (novation) – the existing loan obligation towards the existing lender will be replaced by a new obligation created in favour of a new lender (the existing obligation towards the existing lender being automatically and simultaneously terminat-
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