Lawyer - Securities and guarantees

Securing your financial commitments is crucial, whether you are a company, a manager or an individual. The landscape of securities and guarantees, the essential mechanisms that protect creditors against the risk of non-payment, is a complex area of French law. Successive reforms, in particular the Order of 15 September 2021 (applicable from 1 January 2022), which completed the Order of 2006, have radically overhauled this area of private law. It is essential to understand the implications of these changes, particularly as regards debt recovery and the applicable procedure.

Whether you are seeking to obtain financing, conclude a major contract or simply ensure the recovery of a debt, understanding these tools is essential.

Our law firm, experts in the law of securities and guarantees and members of the Marseilles Bar, operates throughout France. We help you to understand the implications of the latest legislative developments, and to choose the most effective solutions to protect your interests.

I have to guarantee a debt or I've been asked to act as a guarantor: which commitment should I choose and what are the risks involved?

There is often confusion between surety bonds (simple or joint and several), stand-alone guarantees and letters of intent. Each mechanism has a very different scope and consequences for the policyholder.

Since the 2021 reform, the rules governing surety bonds, defined in article 2288 of the Civil Code, have been clarified. Its nature (civil or commercial) now depends on the nature of the debt guaranteed (new art. L.110-1 Commercial Code).

For guarantors who are natural persons, the formal requirements of article 2297 of the Civil Code, although simplified (the list of particulars has been revised), still require a clear statement of the undertaking, provided for by law and affixed by the guarantor "himself". 

Above all, protection is strengthened, in particular by the professional creditor's duty to warn if the principal debtor's commitment is unsuited to his financial capacities (art. 2299 C. civ.) and the principle of proportionality (art. 2300 C. civ.). 

Annual communication on the progress of the debt (art. 2302 C. civ.) is also an important condition. In the event of a life event (such as illness, disability or death), the existence of borrower's insurance or a guarantee covering the death of the borrower may prove crucial to the repayment of capital and interest. 

The conditions of cover and exclusions of cover under this insurance should be carefully examined by your lawyer.

Your lawyer can help you :

• Analyse the nature of the commitment, whether it is a one-off service or a long-term commitment.

• Understanding the scope of legal protections and the effect of each clause, including in the event of prescription or if there is a time limit. Our law firm's expertise extends to these complex analyses.

• Draw up or check clear, secure deeds to protect your family and your children, taking into account your income and your situation as a self-employed or employed person.

How can I effectively secure my receivables on moveable assets (stocks, equipment, receivables, goodwill)?

The multiplicity of security interests can make the choice complex. The Ordinance of 2021 simplified the rules governing pledges (art. 2333 et seq. of the Civil Code) and pledges. Retention rights and property retained or assigned as security are powerful tools. Publicity via the new single register (Decree of 29 December 2021, amending the Decree of 29 December 2021 on the register of transferable securities) is crucial for enforceability. The importance of dematerialising security interests and enshrining the assignment of common law claims as security should also be emphasised.

In the event of a debtor's default, certain securities, such as the right of retention (art. 2286 of the Civil Code), retention of title (art. 2367 of the Civil Code), or the security trust (art. 2372-1 et seq. of the Civil Code), offer superior protection. The assignment of a claim as security (art. 2373 et seq. of the Civil Code) and the new assignment of a sum of money (the former cash pledge, art. 2374 et seq. of the Civil Code) are powerful tools, particularly in the event of insolvency proceedings. The value of the assets and the interest rate are factors to be considered. The sale of the encumbered assets is often the ultimate recovery measure.

Your lawyer will guide you through :

• Choose the most appropriate security (pledge, collateral security, general or special movable liens, etc.).

• Optimise the ranking of your guarantee through rigorous advertising, including foreclosure if necessary.

• Effectively use these securities to recover your debt.

I'm financing a property or my debt relates to a building: how can I be really protected?

Mortgages are the king of real estate securities. The 2021 reform transformed special real estate liens into special legal mortgages (art. 2402 C. civ.), putting an end to retroactivity, a source of legal uncertainty (Fasc. 768 & 767). The status of sûreté réelle pour autrui (art. 2325 C. civ.) is clarified, applying certain rules that protect sureties. The creation of security interests by legal persons is simplified (art. 2326 C. civ.). Pledging of immovable property (formerly antichrèse) remains an option, albeit a rarer one. General property liens, such as those for legal costs or employees, remain important.

Your lawyer can advise you on :

• Structuring solid property guarantees.

• The new relationship between security in rem and surety bonds.

• Execution of guarantees and management of registrations.

My debtor is in difficulty: are my guarantees still effective? What happens to my preferential right?

The opening of collective proceedings (safeguard, receivership or compulsory liquidation) has a major impact on your securities and requires you to act quickly.

• Stopping registrations: it is crucial to publicise your securities BEFORE the opening judgment (art. L.622-30 C. com.). The judge and the court ensure that deadlines are met.

• Nullity of the suspect period (art. L.632-1 C. com.): certain acts, such as the provision of security for prior debts, may be nullified.

• Fate of guarantors: unified and reinforced protection.

• Classification of creditors: Article L.643-8 of the French Commercial Code establishes a precise order. The right of retention and security interests remain "outside the competition".

Your lawyer will often need to intervene quickly to protect your rights in this dispute. The juge-commissaire plays a central role in the procedure. A good knowledge of the French Commercial Code and the case law of the Cour de cassation (Civil Chamber or Commercial Chamber) is essential.

Your lawyer is essential for :

• Declare your claims within the deadline.

• Defend the validity of your securities and your ranking against other creditors.

• Represent you in classes of "affected parties" if the case so requires.

• Initiate any action required for recovery.

Your partner for secure commitments