FRANCE Law and Practice Contributed by: Fernand Arsanios, Delphine Guillotte, Guillaume Chaboureau, Houda Idaroussi and El Sayegh, King & Spalding
Note, however, that the enforcement of a security ordered by courts may be subject to registration duties in respect of the transfer of ownership triggered by the enforcement. The related registration duties would be due either at (i) 0.1%, when the security relates to shares other than shares of real estate com- panies; or (ii) 5%, when the security relates to real estate or shares of real estate companies provided that the enforcement of security entails a transfer of ownership. 4.3 Foreign Lenders or Non-Money Centre Bank Lenders As mentioned above, interest paid to lenders (or into a bank account) located in an uncooperative state or territory are subject to withholding tax in France. Consequently, careful attention should be paid by a French borrower to ensure that (i) lenders (and bank accounts into which interest is paid) are not located in such jurisdictions; and (ii) no transfer to lenders located in such jurisdictions can be made without prior consent. In practice, facility agreements contain a prohibition from transferring any loan participation or commitment, or entering into sub-participation or subcontracting in relation to a loan or commitment to any entity incorporated or acting through an office situated in an uncooperative state or territory without the prior consent of the borrower. 5. Guarantees and Security 5.1 Assets and Forms of Security The standard security packages available to lenders in France are as follows. • For acquisition finance transactions – security over (i) shares issued by stock company such as société anonyme or société par actions simplifiée or by un/limited partnership; (ii) bank accounts; and (iii) intra-group loan receivables (either in the form of pledge or in the form of assignment by way of security). Such security packages may also include cash collateral, pledges over going concerns or pledges over intellectual property rights. • In real estate financing – a mortgage, a pledge over shares issued by the borrower, a pledge over shareholder loans and a specific assignment of
receivables by way of security ( cession de cré- ances professionnelles à titre de garantie , or Dailly assignment – see 3.2 Restrictions on Foreign Lenders Receiving Security ) over all revenues derived from the property (eg, rents, insurance proceeds). • Within the context of a distressed scenario – in addition to the security packages mentioned above, creditors often require the creation of a fiducie agreement (an arrangement similar to a trust) (see section 3.5 Agents and Trust Concept ) applicable to shares issued by the holding com- pany of a group, the borrower or the key assets of the group. As a general rule, a French-law security interest will be validly created once the pledgor and the pledgee have entered into a written pledge agreement identi- fying the pledged assets and the secured liabilities. Some security will only be validly created if the rele- vant pledge or assignment agreement contains certain mandatory information (in addition to the description of the pledged assets and secured liabilities). This is the case for the pledge over shares issued by the stock company, the Dailly assignment and the fiducie agreement. Mortgage deeds will only be valid if they are created pursuant to a notarial deed drawn up by a notary. The fiducie agreement also requires registra- tion with the local tax authorities within one month of its signing. Some security interests have to be registered in order to be enforceable against third parties: • the pledge over shares issued by un/limited partnerships and the pledge over going concerns must be recorded in a special registry ( registre des sûretés mobilières ) held by the competent com- mercial court; • the pledge over intellectual property must be recorded in a special registry held by the Institut National de la Propriété Intellectuelle and • a mortgage must be recorded in the relevant land registry ( registre de publicité foncière ). This regis- tration is handled by the notary. Additionally, depending on the corporate form and the by-laws of the issuing company, a pledge over shares
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