FRANCE Law and Practice Contributed by: Raphaële Courtier, Sébastien de Monès, Victor Camatta and Jessica Chartier, Bredin Prat
Mortgages are not commonly used in acquisition finance as this type of security interest tends to be very costly in France (various costs including real estate registration duties). The registration remains effective for one year after expiry of the corresponding loan agreement. Movable Assets A pledge over a business ( fonds de commerce ) is a non-possessory security interest, including a large scope of assets, such as: • trade name; • leasehold rights; and • fixed assets (machinery and equipment, goodwill, IP rights, etc). Until 31 December 2022, to be enforceable, the pledge over a business had to be registered with the tax authorities and with the registrar ( greffe ) of the relevant commercial court within 30 days of the execution date of the pledge agreement. Since 1 January 2023, when Decree 2021–1887 entered into force, enforceability is now only subject to a registration requirement, as Decree 2021–1887 has repealed the 30 days’ period for such registration. This registration must also be renewed after ten years. As previously mentioned, if the pledged assets include IP rights, additional registration must be made with the national trade marks and patent authority. It is to be noted that the Ordinance has repealed specific pledges over machinery and equipment, in line with the simplification goal of such reform. Machinery and equipment, when they are not an element of a broader business ( fonds de com- merce ), are now to be pledged under the civil pledge over inventory ( gage de biens meubles )
mechanism, which allows the creation of similar security interests. 5.2 Form Requirements As mentioned in 5.1 Types of Security Com- monly Used , certain security interests require to be perfected, by the execution by the grantor of a document the form of which is strictly regu- lated by law. This is the case, in particular, for the statement of pledge for a pledge over a financial securities account or for the bordereau Dailly for a Dailly law pledge or assignment. 5.3 Registration Process See 5.1 Types of Security Commonly Used for each type of security interest. 5.4 Restrictions on Upstream Security Upstream security interest, which should be looked at simultaneously with upstream guar- antees, as the same rules apply to both, is restricted under French law by the fact that the granting of any such upstream security should fall within the corporate interest ( intérêt social ) of the grantor. Acting outside the corporate interest of the company may lead the manager to mis- use corporate assets ( abus de biens sociaux ), which is a criminal offence (see below for a more detailed analysis). The corporate interest must be assessed individually for each company; the group interest is not sufficient in itself to justi- fy the corporate interest of any given member thereof. In light of such principles, the practice has established a limitation of upstream security (and guarantee) consisting of the fact that the secured amount (and therefore, the exposure of the guarantor) should be limited at any time to the amount borrowed under the secured financ- ing made available to its parent company and on-lent to that company or its subsidiaries and
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