Although they are sometimes overlooked by entrepreneurs, savings bonds are a highly flexible legal tool for cash management. The legal framework for these instruments, which has been radically modernised over the last decade, has clarified their nature and conditions of use, making them an attractive alternative to traditional bank financing. Navigating the legal framework for financial instruments can be complex. Our firm, with its strong practice in banking and finance lawWe offer a comprehensive overview of this instrument, from its definition to its tax and practical implications. This article explores the characteristics of savings bonds, comparing them with other instruments such as the different types of bank depositsto give you a clear view of their strategic utility.
What is a cash voucher? Definition and legal developments
Historical origins and current legal framework (decree-laws, laws, ordinances)
The bon de caisse has its roots in a long-standing regulatory framework, initiated by a decree-law of 1937. Historically, it was a negotiable instrument, which could be either a promissory note or a bearer note, used to secure a short- or medium-term loan. This configuration, which made it possible to preserve the anonymity of the subscriber, has evolved with the reforms. Ordinance 2016-520 of 28 April 2016 marked a major turning point by radically redefining the savings bond. Article L. 223-1 of the French Monetary and Financial Code now describes them as registered and non-negotiable securities. This change puts an end to the anonymous nature of the voucher to enhance transparency and legal certainty.
Key features and benefits for business financing
In its modern form, the savings bond is a security that evidences a merchant's commitment to repay a loan by a set deadline. For the issuing company, it is an excellent way of obtaining liquidity and adjusting cash flow flexibly, outside the traditional credit channels. The issue is made directly to subscribers, with no intermediation required, which simplifies the process. For credit institutions, issuing savings bonds provides a stable source of savings and an effective guarantee instrument.
Savings bonds compared with competing financial instruments
The savings bond coexists with other financing tools that may seem similar. It differs from the traditional loan, governed by the Civil Code, where the repayment claim is transferable via a mechanism (the assignment of the claim) that used to be more cumbersome. Its main competition comes from negotiable debt securities (TCN), such as commercial paper. Prior to the reforms, there were significant differences in terms of authorised issuers and maturity periods. Although the regime for negotiable debt securities has also been modernised, bringing it closer in some respects to that for savings bonds, distinctions remain, leaving the latter with their own field of application, particularly for structures that do not have access to the more regulated and standardised negotiable debt securities markets, which are more akin to the mechanisms of securitisation.
The legal nature of savings bonds: clarification of their classification
Rejection of the classification of securities and negotiable instruments
The legal nature of savings bonds has long been the subject of debate. Case law has firmly ruled out its classification as a security. Unlike bonds, savings bonds are not fungible; they are not issued in series for a predefined total amount, but as and when required. Each bond has its own characteristics, in particular its interest rate, which prevents it from being traded on a stock market. Similarly, the characterisation of vouchers as instruments of commerce, which had been envisaged for a time by certain court rulings, has been abandoned. The 2016 reform, by defining it as a "non-negotiable" security, put an end to this discussion once and for all.
The classification of IOUs and its implications
The Cour de cassation (French Supreme Court) has ruled that a savings certificate is simply an acknowledgement of debt. This classification is fundamental because it determines the way in which they are circulated. As it is no longer a negotiable instrument that can be transferred by simple tradition (hand delivery) or endorsement, the savings bond can only be assigned in accordance with the rules governing the assignment of claims under ordinary law, as set out in articles 1321 et seq. of the French Civil Code. This implies specific formalities, in particular notification to the debtor (the issuer of the voucher) for the assignment to be enforceable against it.
The legal regime for the issue of savings bonds
Who can issue savings bonds? Eligibility requirements
The issue of savings bonds is not open to everyone. Article L. 223-2 of the French Monetary and Financial Code reserves the right to issue savings bonds to credit institutions and individuals or companies that are merchants and have already drawn up the balance sheet for their first financial year. The purpose of this seniority requirement is to ensure that the issuer is financially sound. On the other hand, finance companies are formally prohibited from issuing bonds, which is in line with the logic of the banking monopoly. This derogation from the monopoly for commercial companies is one of the special features of the scheme, offering an alternative form of direct financing without contravening the exceptions to the banking monopoly.
Term and interest rate conditions
The legal framework imposes precise time limits. A savings bond may not be issued for more than seven years. The interest rate is, in principle, freely set by the parties. However, this freedom is restricted by the ban on usury. The agreed rate must not exceed the legal thresholds, a fundamental protection for the borrower. Failure to comply with regulation of wear and tear may result in severe penalties for the issuer.
Specific rules for public offerings
When a company plans to issue savings bonds by way of a public offering, i.e. by soliciting a wide circle of investors through advertising or canvassing, stricter conditions apply to protect savings. In particular, the issuer must prove that it has been in business for a longer period, by presenting a balance sheet for its third financial year. These rules are designed to ensure greater transparency and better information for potential subscribers.
Penalties for non-compliance with issuing conditions
Failure to comply with the issuing rules is subject to civil and criminal penalties. In civil law, any irregularity may lead to the cancellation of the warrants issued. Under criminal law, although many offences have been decriminalised, the dissemination of an inaccurate balance sheet during a public offering remains punishable. In the event of a public offer, breaches of disclosure requirements may also be punishable by criminal penalties. sanctioning powers of the AMF.
Circulation, guarantee and payment of savings bonds
The terms of circulation of the warrants (registered, non-negotiable, assignment of claim)
Since the 2016 reform, the circulation of bons de caisse has been governed entirely by their nature as registered and non-negotiable securities. Ownership of a savings bond is no longer transferred simply by handing over the security, but must follow the formalities for the assignment of a civil claim. The transfer must be evidenced in writing. To be enforceable against the issuer of the voucher, it must be notified to the issuer or the issuer must take note of it. This change has made the transfer more secure while at the same time making it more formal.
The use of savings bonds as collateral (pledge and hypothecation)
Savings bonds are an excellent security instrument. As receivables, they can be pledged as security for intangible assets. For example, a bank granting credit to a company can ask for a pledge of a savings bond issued by the same bank in favour of the company. This technique makes it possible to secure repayment of the loan by assigning a certain and liquid claim to guarantee the transaction.
The impact of insolvency proceedings on circulation and claims
The opening of collective proceedings (safeguard, receivership or judicial liquidation) against the holder of a savings bond affects its circulation. If the voucher has been pledged, the pledgee has a right of retention that gives it a privileged position. In the event of insolvency proceedings against the issuer (e.g. a bank), the holder of the voucher must declare his claim. Proof of ownership is facilitated by the registered nature of the security, which avoids the difficulties of claiming ownership that existed in the days of anonymous warrants.
Payment security and repayment terms
The savings certificate is paid on the agreed due date. The debtor is the issuer of the voucher, and the creditor is the person in whose name the voucher is entered in the issuer's register. The 2016 reform, by requiring the vouchers to be registered in the name of the holder, has made the payment process considerably more secure by eliminating the risk of payment to an illegitimate holder. Redemption is generally in cash, but early redemption clauses may be included in the issue contract.
The statute of limitations on actions for payment of savings bonds
An action for payment of a cash voucher is subject to the ordinary statute of limitations in commercial matters. The Court of Cassation has confirmed that, since a cash voucher is an acknowledgement of debt issued by a trader in the course of his business, the time limit for bringing an action for payment is five years, in accordance with article L. 110-4 of the French Commercial Code. This period begins to run from the due date of the voucher. It is possible for the parties to contractually provide for a shorter period, but not to extend it.
Taxation of savings bonds: a restrictive regime
Tax treatment of bank bonds (proceeds, capital gains, redemption premiums)
The taxation of income (interest, premiums) generated by savings bonds is complex. For individuals, interest is subject to a single flat-rate withholding tax (PFU) of 30 % (12.8 % income tax and 17.2 % social security contributions), with the option of being taxed on the progressive income tax scale. The days of tax anonymity, when you could avoid income tax by paying a higher flat-rate withholding tax, are over.
Tax treatment of bonds issued by non-banking companies
The tax regime is broadly similar whether the issuer is a bank or another commercial enterprise. Income received by legal entities is included in their taxable income and is subject to corporation tax under ordinary law. The harmonisation of tax rules is designed to ensure neutrality in the choice of issuer.
Tax aspects and the fight against money laundering
Removing the anonymity of savings bonds is directly in line with measures to combat money laundering and the financing of terrorism. By making securities registered, the legislator has strengthened the traceability of financial flows. Issuers, in particular credit institutions, are subject to the following requirements due diligence and the fight against money launderingincluding precise identification of the subscriber. All suspicious transactions must be reported to Tracfin.
Minibonds: an ephemeral innovation in participative financing
The role of minibonds in crowdfunding (before they were abolished)
Introduced by the 2016 Order, minibonds were a special category of savings bond designed for crowdfunding. They enabled companies to raise funds directly from the public via approved online platforms. The aim was to provide a secure legal framework tailored to the specific features of crowdlending.
The legal and technological specifics (blockchain) of minibonds
Minibonds departed from the general regime for savings bonds on several points. In particular, they could be issued in series with identical rights, and their circulation could be recorded via a shared electronic recording device, such as a blockchain. The aim of this technological innovation was to make it easier and more secure to trade these securities on financing platforms.
The reasons for and consequences of abolishing the minibond regime
The minibond regime was abolished by an ordinance of 2021. This was due to changes in the general framework for participative financing. The possibility now offered to legal entities of lending directly via platforms has made the specific minibond system less relevant. Their abolition marked the end of a brief but innovative legal experiment.
Solent avocats: your expert partner in financial instruments law
Mastering financing instruments such as savings bonds is a strategic asset for the growth and stability of your company. Whether you are a manager looking to diversify your sources of finance or an investor wishing to understand the guarantees attached to your investments, a precise legal analysis is essential. With its recognised expertise in banking and finance lawOur firm can help you structure your transactions, secure your contracts and defend your interests. For an in-depth analysis of your situation and tailored advice, contact our team of lawyers.
Frequently asked questions
What is the difference between a savings bond and a bond?
The main distinction lies in their fungibility. Bonds are fungible securities, issued in series with identical characteristics (same nominal value, same interest rate, same maturity), which enables them to be quoted on the stock exchange. Savings bonds are non-fungible securities, issued individually with their own conditions, and are therefore not negotiable on a market.
Can an SARL issue savings bonds?
Yes, an SARL that is a merchant and has drawn up a balance sheet for its first financial year may issue savings bonds. This is a notable exception, as SARLs are traditionally prohibited from issuing most securities publicly.
What is the limitation period for payment of a cash voucher?
An action for payment of a savings certificate is time-barred after five years. This period is that of the ordinary commercial statute of limitations (article L. 110-4 of the French Commercial Code), because the sales voucher qualifies as an acknowledgement of debt.
Do minibonds still exist?
No, the specific legal regime for minibonds was abolished by Order no. 2021-1735 of 22 December 2021. This category of savings bonds, created for equity crowdfunding, was deemed obsolete following changes in crowdfunding regulations.
What are the tax obligations associated with savings bonds?
Interest and capital gains generated by savings bonds are taxable. For individuals, they are subject by default to the flat-rate withholding tax (PFU) of 30 %. For companies, the income is included in their taxable income and subject to corporation tax.
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