FRANCE Law and Practice Contributed by: Arnaud Fromion, Frédéric Guilloux and Pierre-Benoît Pabot du Châtelard, Clifford Chance
6. Enforcement 6.1 Enforcement of Collateral by Non- Bank Secured Lenders French collateral can be enforced in respect of bank-secured lenders, provided that the liability that is secured thereunder is due and payable (either after a non-payment event of default or further to an acceleration on the ground of the occurrence of any other event of default). As detailed in 6.5 Timing and Cost of Enforce- ment , there are three enforcement options under French law: (i) a court awarding the secured assets to the secured creditor by means of a court order following a valuation by a court- appointed expert (judicial foreclosure), (ii) the sale of the asset by way of a public auction ordered by means of a court order (public auc - tion), and (iii) the secured creditor appropriating the secured asset to itself in accordance with the provisions of the relevant security agreement. The method that is usually chosen to enforce security in France is the private foreclosure referred to in paragraph (iii) above, which is typically considered as the swiftest process as it allows the parties to agree, under the terms of their security agreement, the terms of the enforcement (in this respect, the time delay to transfer the shares and the name of the valuation expert can be pre-agreed by the parties in the pledge agreement). However, in case of suspension of payment ( cessation des paiements ) of the security gran - tor, any security granted by it would be frozen. The considerations for non-bank private credit providers are the same as those for credit institu - tions. The main point is to ensure that the secu -
tressed scenario. Security packages do not gen - erally extend to the bank account used for cash pooling purposes, and in any event, the bank operating the cash pooling would benefit from a legal lien ensuring priority over cash standing to the credit of such account. As far as hedging is concerned, hedging banks are usually required to accede to the intercredi - tor agreement to benefit from security. In terms of access to proceeds of security in the waterfall, hedging liabilities in relation to private debt facili - ties are usually treated pari passu with private debt liabilities and similarly and as the case may be, hedging liabilities in relation to super senior debt will be treated pari passu with super senior revolving lenders. 5.10 Bank Licensing There are no specific licensing or limitations in the taking or holding of collateral generally. There are two ways to structure security packag - es in the French market: either liens are granted directly to each lender and a security agent is appointed to act on their behalf, or the security is held by a security trustee as sole beneficiary of the security. Both regimes are used in the French market (noting that the latter is not as well-used, due to the fact that it has been recently imple - mented). If a loan is assigned, security does not need to be retaken. Under French law, security follows the liabilities that it secures, so it is automatically transferred to the relevant transferee. There is no need for credit lenders to address such limitations.
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