FRANCE Law and Practice Contributed by: Antoine Mercier, Myriam Mejdoubi and Gabriel Dalarun, DLA Piper France LLP
3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Fees paid on the granting of security over real estate assets are proportional to the amount of the secured debt at the time of creation, and depend on the type of security granted (mort - gage or lender’s lien) as follows: • For publicity tax, the mortgage is 0.715% of the secured amount and the lender’s lien is between EUR0 and EUR25. • For the notary’s emoluments, both the mort - gage and the lender’s lien are EUR18.87 of the loan amount, plus VAT. • For real estate security contributions, both the mortgage and the lender’s lien are 0.05% of the secured amount. 3.5 Legal Requirements Before an Entity Can Give Valid Security Under French law, a French entity granting any type of security must ensure that it complies, where relevant, with the following rules. Financial Assistance Rules A French entity is prohibited from providing assistance (whether by way of a loan, a guaran - tee or security) in financing the acquisition of its own shares by a third party. Corporate Benefit Requirement Managers of a French entity must ensure that acts and decisions taken on the entity’s behalf fall within the entity’s corporate benefit ( intérêt social ), which is distinct from that of its share - holders and other entities. Corporate Purpose Requirement As a principle, any act or decision made on behalf of a French entity must be included in its corporate purpose, as stated in its by-laws.
Consultation of the Works Council French labour law obliges French entities for which the existence of a works council is man - datory (ie, entities with more than 50 employees) to inform and, in some cases, consult the works council in respect of decisions that may have significant consequences for the company’s future. 3.6 Formalities When a Borrower Is in Default The principal risk for a creditor if a debtor defaults depends on whether that debtor opens insolvency proceedings, as creditors may not enforce their security interest for the duration of such proceedings. In the absence of insolvency proceedings of the French debtor, and provided that all the formali - ties regarding the mortgage or the lender’s lien have been correctly accomplished, the creditors will effectively have priority over the real estate asset. The secured creditors can enforce the mortgage or the lender’s lien in the following ways: • by way of application to the court for an order to seize the property ( commandement aux fins de saisie ); following the proceedings, the property will be sold by way of a public auc - tion at a hearing before a civil court (Tribunal Judiciaire); • by way of application to the court for the attri - bution by court order of the property to the beneficiary of the mortgage or the lender’s lien; or • if so provided in the security deed, by way of appropriation ( pacte commissoire ), in which case the creditor becomes the owner of the real estate asset and the value of the real estate asset will be determined on the day of the transfer by an expert designated by the
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