Issue and transmission of warrants: endorsement, transcription and circulation

A general shop warrant is not simply a document recording a deposit and a claim. For it to really come to life as an effective guarantee and to be able to circulate as an instrument of credit, precise legal steps must be taken. How is this security actually issued? How is it publicised so that it can be used against third parties? And how can it then be transferred from one creditor to another? This article looks at these essential mechanisms: the initial endorsement that gives rise to the pledge warrant, the entry in the registers of the general shop that makes it 'visible' and enforceable, and the rules governing its subsequent circulation.

The first endorsement: the founding act of the warrant and pledge

It is essential to distinguish the very first endorsement on the warrant from any subsequent endorsements. This first endorsement is not a simple act of transmission; it is the very act which creates the warrant as a guaranteed payment undertaking and which constitutes the pledge on goods deposited.

Before this first endorsement (which is physically on the back of the title, as seen in our previous article), the document is only part of a receipt-warrant, potentially representing the goods but without creating a direct link between the depositor and a specific pledgee. It is by this act that the depositor, as subscriber, undertakes to pay the sum indicated on the due date to the designated beneficiary, and assigns the goods described on the front to guarantee this debt.

This endorsement must include the information we have detailed above (amount, due date, identity of the creditor, date, signature of the debtor). Simply handing over the paper without this formal endorsement would have no value in constituting the warrant or pledge. Case law is consistent on this point: simple manual tradition is ineffective.

Of course, this endorsement must be accompanied by the physical surrender of the warrant (or a secure electronic transfer for future dematerialised warrants) to the first creditor. It is this combination of writing (formal endorsement) and dispossession (delivery of the security representing the pledge) that completes the initial transaction.

Transcribing the first endorsement: an essential formality

Once the first endorsement has been made and the warrant handed over to the creditor, another step is absolutely necessary for the pledge to be fully effective vis-à-vis everyone: the transcription of this endorsement in the registers of the general shop.

Article L. 522-29, paragraph 3, of the French Commercial Code imposes this obligation on the first assignee (the creditor receiving the first endorsement). The text specifies that he must have the endorsement transcribed "immediately". This term should be understood as a strong incentive to be diligent, as any delay exposes the creditor to significant risks. In practical terms, the transcription consists of copying the essential information from the endorsement (identity of the creditor, amount guaranteed, due date) into the counterfoil register kept by the shop (paper or electronic register in accordance with the new article L. 522-27-1 of the French Commercial Code). The general warehouse must also mention on the warrant itself that the transcription has been made, indicating the date.

Why is this formality so important? It has several functions:

1. Advertising the pledge : It makes public the existence of the guarantee on the goods.
2. Information for third parties It enables anyone (in particular a potential buyer of the receipt or another creditor of the depositor) to know that the goods are pledged, for what amount and until what date.
3. Enforceability of the pledge This is the major legal consequence. Without transcription, the pledge exists between the depositor and the first creditor, but cannot be enforced against third parties.

The penalty for failure to transcribe is therefore formidable: unenforceability of the pledge. This means that a creditor holding an untranscribed warrant could not assert his preferential right over the goods if another creditor were to seize them, or if the depositor were the subject of collective proceedings. An old but still cited case law (Paris, 1 December 1866) thus ruled that a holder of a warrant that had not been transcribed could not prevent the sale of the goods following a seizure carried out by another creditor after endorsement but before transcription. Conversely, once the transcription has been made, the bearer is protected against such subsequent seizures.

Is there an exception in the event of bad faith on the part of the third party who knew of the existence of the warrant that was not transcribed? The law does not say. By analogy with what is accepted (sometimes criticised) in matters of land registration, it could be argued that the third party's bad faith could paralyse his right to rely on the failure to transcribe. But prudence dictates that the transcription should be made without delay.

As regards the timing of the transcription, although it must be made "immediately", there is no strict deadline. It can take place as long as the right exists. However, there is an absolute limit: article L. 622-30 of the French Commercial Code prohibits any transcription (as well as any registration of security interests in general). after the opening of a safeguard, receivership or compulsory liquidation procedure of the debtor (the warrant subscriber). A transcription made after this judgment would be ineffective and the pledge unenforceable against the collective proceedings. Hence the importance of speed.

What is the role of the general shop in this procedure? It is not the judge of the validity of the claim or the pledge. Its role is mainly that of a "recorder". It must check the formal regularity of the warrant presented for transcription but is not required to investigate the substance of the right. However, he may be held liable if he commits a fault, for example if he transcribes a warrant that is manifestly irregular or if he refuses a requested transcription without a legitimate reason. They may also be held liable if they initially issue a warrant receipt that is erroneous due to their own fault (e.g. an error concerning the verifiable quantity). It should be remembered that his checks on the intrinsic quality of the goods are limited, unless a sworn broker expressly requests an expert opinion (article 12 of the decree of 6 August 1945).

The warrant holder's right of retention

Once the warrant has been validly issued and the first endorsement has been recorded, the bearer creditor benefits from a right of retention on the goods deposited. This is a direct and logical consequence of the pledge thus created and made enforceable.

In practical terms, this means that the operator of the general shop, informed of the existence of the pledge by the transcript, must refuse to return the goods to the bearer of the receipt if he presents himself alone, without being able to prove that the claim guaranteed by the warrant has been paid. The warrant holder thus "holds" the goods through the intermediary of the general shop.

However, this right of retention is subject to a number of limitations and adjustments:

• It ceases if the bearer of the receipt pays the claim guaranteed by the warrant or deposits the amount with the general warehouse (mechanism provided for by article L. 522-30 of the French Commercial Code, which we will detail in the following article).
• It does not prevent the replacement of fungible goods by equivalent goods, if the right of substitution has been validly stipulated in the title (see previous article).

Transfer of the warrant by subsequent endorsements

The first endorsement and its transcription give rise to the pledge warrant. But the warrant, as a commercial instrument, was intended to be able to circulate. This principle of circulation was also applied to other instruments.former stock guarantees such as the oil warrant. The first creditor may need cash before maturity and wish to transfer the warrant to a third party (for example, his own bank, at a discount).

This transmission is carried out by new endorsementsThese are known as "subsequent" endorsements. Unlike the first endorsement, these subsequent endorsements do not create anything new; they simply transfer the security and the rights attached to it. Consequently, they obey the general rules governing the endorsement of commercial paperas defined in Articles L. 511-8 et seq. of the French Commercial Code. The legislation specific to warrants is silent on these endorsements, confirming the application of ordinary law.

Conditions and form of subsequent endorsements

The substantive requirements (capacity, consent, cause) are the same as for any legal act and any exchange undertaking. As regards form, the requirements are much more flexible than for the first endorsement:

• It is not necessary to repeat all the details of the first endorsement.
• A blank endorsement (simply signed by the endorser on the back) is perfectly valid. It transforms the security, until the next registered endorsement, into a de facto "bearer" security, transferable by simple delivery.
• A partial endorsement (for only part of the sum) is null and void, as it is for other bills of exchange.

Types and effects of subsequent endorsements

Several types of subsequent endorsement are possible, with distinct effects:

1. Translative endorsement This is the most common case. It transfers ownership of the claim recorded in the warrant to the new holder (the endorser), as well as all the rights attached to it, including the security interest (the pledge) on the goods. The endorser becomes jointly and severally liable for payment vis-à-vis subsequent bearers. Above all, an endorsee acting in good faith benefits from the principle of joint and several liability.non-invocability of exceptions (art. L. 511-12 C.com): the principal debtor (the subscriber) will not be able to raise against the subscriber the defences that it could have raised against the first creditor (for example, a problem relating to the initial cause of the debt). This is a major advantage of the circulation cambiaire. Transmission of the warrant entails transmission of legal "possession" of the goods, held by the warehouse on behalf of the rightful bearer. If the warrant is discounted by a bank, the remitter who receives the credit does not lose his right of pledge for all that and will be able to enforce it if the warrant returns unpaid.
2. Endorsement of power of attorney (or "for collection"): By this endorsement (bearing a statement such as "valeur en recouvrement"), the holder gives a third party (often his bank) a mandate to collect the warrant on the due date on his behalf (art. L. 511-13 C.com). The agent may exercise all the rights attached to the warrant, including requesting the sale of the goods in the event of non-payment, but may not transfer the instrument other than as a new power of attorney.
3. Pignorative endorsement (or "value as security"): This involves pledging the warrant itself to secure another debt (art. L. 511-13 C.com). This practice is possible but seems to be little used for general warehouse warrants, whose main interest is already as a pledge on goods.

Transcription of subsequent endorsements: a simple option

While the transcription of the first endorsement is an obligation for the pledge to be enforceable, the transcription of subsequent endorsements is an obligation for the pledge to be enforceable. purely optional. Article L. 532-36 of the French Commercial Code (relating to the loss of warrants) implicitly refers to this, and legal writers unanimously accept this possibility.

What is the advantage of having a subsequent endorsement transcribed? Essentially practical: it enables the new holder to make yourself officially known of the general shop and, consequently, of the bearer of the receipt. This can facilitate communications and in particular payment (voluntary or in advance). However, the absence of a transcription of a subsequent endorsement in no way affects its validity or the enforceability of the rights it conveys.

The validity and effectiveness of a warrant depend crucially on compliance with the rules governing endorsement and transcription. A mistake can render your warrant ineffective. To secure the transfer or acquisition of warrants, our firm can provide you with the following services expertise in commercial law. Contact us for more information.

Sources

• Commercial Code, in particular articles L. 511-8 to L. 511-13, L. 522-29, L. 522-30, L. 532-36, L. 622-30.
• Law no. 2024-537 of 13 June 2024 (mention for electronic register art. L. 522-27-1 C.com).
• Decree no. 45-1754 of 6 August 1945 (article 12 for expert appraisals).