The reform of security law strengthens property-based mechanisms. Ordinance 2021-1192 of 15 September 2021 extends their scope. These guarantees offer a decisive advantage: an exclusive right for the creditor, which is particularly effective in the event of insolvency proceedings.
The security trust: greater flexibility and efficiency
The security trust has existed since 2007. The new article 2372-1 specifies that "the obligation secured may be present or future; in the latter case, it must be determinable". This extension to future claims broadens the scope of its use.
Article 2372-2 removes the requirement to state the value of the assets transferred. This information sometimes complicated the drafting of deeds without providing any real protection.
The realisation of the trust becomes more flexible. Article 2372-3 adds a paragraph allowing the trustee to sell the property "at the price he considers, under his responsibility, to correspond to the value of the property" if the expert valuation does not find a buyer.
The same provision applies to property trusts (article 2488-3). These adjustments strengthen the practical effectiveness of the trust mechanism.
In insolvency proceedings, the trust is effectively resisted. Article L. 624-9 of the French Commercial Code protects the transfer of ownership that has already taken place. This means that the creditor is not subject to the competition of other creditors.
The assignment of receivables as security: a long-awaited breakthrough
The ordinance enshrines the assignment of receivables by way of security. This technique had been blocked by case law since 2006 (Cass. com., 19 Dec. 2006).
Article 2373 now authorises this assignment, referring explicitly to article 1321 of the Civil Code. The conditions of validity are minimal: "the secured claims and the assigned claims are designated in the instrument".
This mechanism transfers ownership of the debt immediately. It therefore offers greater protection than a simple pledge.
Article 2373-2 governs sums collected by the assignee before the secured debt falls due. These sums are kept as security "in an account opened in the name of the assignor".
Article 2373-3 states that "where the secured claim is paid in full before the assigned claim is paid, the assignor shall automatically recover ownership of the assigned claim". This automatic reversion preserves the ancillary nature of the security.
This new mechanism is in addition to the Dailly assignment reserved for credit institutions. It allows companies to use their receivables as collateral with any creditor.
The "assignment of a sum of money": legalized cash collateral
The ordinance enshrines the "cash pledge" under the heading "assignment of a sum of money as security". This common practice lacked a clear legal basis.
Article 2374 defines this mechanism: "Ownership of a sum of money, either in euros or in another currency, may be assigned as security for one or more present or future claims".
This assignment requires a written document stating the amount assigned and the secured claims (article 2374-1). It is enforceable against third parties "by delivery of the sum assigned" (article 2374-2).
Article 2374-3 allows the assignee to "freely dispose of the sum assigned, unless otherwise agreed". This freedom of use is a significant advantage over sequestration.
If the debtor defaults, the creditor uses the sum to pay its claim (article 2374-5). If the debtor performs its obligation, the sum must be returned (article 2374-6).
This mechanism offers the decisive advantage of immediate transfer of ownership, with no complex formalities.
Retention of title clarified
Retention of title remains a major guarantee. Article 2367 defines it as "the effect of a clause suspending the transferability of a contract until full payment of the obligation".
Article 2372 sets out what happens if the property is disposed of: "ownership is transferred to the debtor's claim against the sub-purchaser or to the insurance indemnity subrogated to the property".
A new paragraph provides an important clarification: "the sub-purchaser or the insurer may raise against the creditor the defences inherent in the debt as well as defences arising from his relationship with the debtor before he became aware of the deferral".
This rule puts an end to the much-criticised case law that prevented a sub-purchaser from raising objections against a seller with a reservation right.
In insolvency proceedings, retention of title remains particularly effective. Article L. 624-16 of the French Commercial Code allows movable assets to be reclaimed, even in the event of conversion.
Choosing security ownership: strategic analysis
Property-based guarantees offer maximum protection. They offer a number of advantages:
- No competition with other creditors
- Effectiveness in collective proceedings
- Simplified implementation procedure
- Protection against invalidity of the suspect period
They present certain constraints:
- Specific constitutive formalism
- Conditions of enforceability against third parties
- Restriction to identifiable assets
The choice between these different techniques depends on objective criteria:
- Type of asset to be secured (tangible personal property, receivable, sum of money)
- Need for the debtor to retain use of the property
- Qualification of parties (merchant, credit institution)
- Tax and administrative cost of the guarantee
The combination of several types of security remains possible and is often recommended. A surety bond can be a useful complement to a security interest limited to certain assets.
Our firm can help you structure effective property-based guarantees. Contact us for a consultation on your specific needs.
Sources
- Order no. 2021-1192 of 15 September 2021
- Civil Code, articles 2367 to 2374-6 and 2488-1 to 2488-5
- French Commercial Code, Articles L. 624-9 to L. 624-18
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