FRANCE Law and Practice Contributed by: Arnaud Fromion, Frédéric Guilloux and Pierre-Benoît Pabot du Châtelard, Clifford Chance
4.4 Tax Incentives There are no particular tax incentives available for foreign private credit lenders lending into France. 4.5 Non-Bank Status Non-bank lenders may be deprived of the ben - efit of double-tax treaties (particularly where the entity lending the funds is not subject to corpo - rate income tax locally). This may trigger with - holding tax issues that would be dealt with within the relevant financing documentation. The typical French security package for private credit transactions involves a single point of enforcement under a securities account pledge agreement pursuant to which the issuer/bor - rower pledges its shares in its immediate sub - sidiary (ie, the target in the case of an acquisi - tion) as well as a receivables pledge agreement over intragroup receivables held by the issuer and a bank account pledge agreement by the issuer. The securities account pledge agreement requires a specific account to be opened where distributions will flow; this step is usually com - pleted upon closing but could be postponed to post-closing. 5.2 Floating Charges and/or Similar Security Interests 5. Guarantees and Security 5.1 Assets and Forms of Security There is no equivalent of a floating charge or other universal or similar security covering all or most of the assets of a company under French law. All private credit providers active in France are now used to taking security by way of separate pledges over the relevant assets. In addition, the French Civil Code recognises the possibility of creating security over future assets
provided that they can be sufficiently identified and determined. However, creating security over potential future assets is not allowed. 5.3 Downstream, Upstream and Cross- Stream Guarantees As described in 5.1 Assets and Forms of Security , the typical security package does not involve any security other than a securities account pledge, a receivables pledge and a bank account pledge granted by the issuer, and private credit is generally not extended to sub - sidiaries of the issuer given the complexity that it would create in bond documentation. Guarantor coverage is not a feature of French private credit transactions. Therefore, downstream, upstream and cross-stream guarantees are generally not granted in this type of transaction in France. As a general rule, security proceeds cannot benefit creditors that are not identified benefi - ciaries of such security interest, but loss-shar - ing arrangements can always contractually be As far as the acquisition tranche of a private credit transaction is concerned, financial assis - tance would apply and prohibit the target from guaranteeing or granting security to secure the relevant tranche. As far as other tranches, including capex lines are concerned, as mentioned in 5.1 Assets and Forms of Security , the trend is that no security or guarantee is required to be granted by the target. 5.5 Other Restrictions The provision of guarantees or security by a company carrying out business in France does not automatically require a prior consultation implemented between the lenders. 5.4 Restrictions on the Target
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