Legal uncertainty is bad for business. Securities are the answer. These guarantees protect the creditor against the risk of insolvency of the debtor and ensure the performance of obligations.
The legislator overhauled this area in 2006 and again in 2021. These reforms modernised a system that had become ill-adapted to today's economic needs.
Security law reforms: simplification and modernisation
Order no. 2006-346 of 23 March 2006 created a fourth book in the Civil Code, devoted to securities. This reform separated personal sureties (Title I) from real sureties (Title II).
Fifteen years later, Order no. 2021-1192 of 15 September 2021 has been added to this system. The Civil Code is once again the central source of security law. The major innovations include :
- Dematerialisation of all securities
- Recognition of the assignment of receivables as security
- Consolidation of provisions on surety bonds
- Admission of pledges on buildings by destination
- Making mortgages more effective
Three decrees dated 29 December 2021 implemented this order, in particular by creating a register of movable securities.
Types of security: personal and real
Personal sureties
A personal surety gives the creditor recourse against a third party. The third party undertakes to pay if the principal debtor defaults.
The typical example is a surety bond. The guarantor guarantees another person's debt with his or her own assets. Article 2287-1 of the Civil Code defines personal sureties. These are supplemented by autonomous guarantees and letters of intent.
Security interests
A security interest assigns a specific asset to guarantee a debt. The creditor can seize the asset in the event of non-payment.
Article 2329 of the Civil Code lists the following security interests in movable property :
- Movable liens
- Pledging tangible movable property
- Pledging intangible movable property
- Property retained or assigned as security
To this list must be added the right of retention, the legal nature of which remains controversial. The Court of Cassation has refused to classify it as a security (Cass. com., 20 May 1997), while recognising it as a real right enforceable erga omnes.
The summa divisio of security interests in movable and immovable property
The Civil Code distinguishes between security interests based on whether the collateral is movable or immovable.
Article 2329 lists the movable securities while article 2375 lists real estate securities (liens on real estate, mortgages, pledges on real estate, ownership of real estate).
This distinction structures the organisation of Book IV of the Civil Code. But it is not absolute.
The limits of this classification: multi-purpose securities
Some securities are either movable or immovable. Others are both.
The doctrine speaks of "polyvalent" sureties as opposed to "monovalent" sureties (M. Dagot, 1999). For example :
- Security can be taken over movable or immovable property
- Certain general liens encumber both the movable and immovable property of the debtor
Despite these overlaps, the legislator has maintained the traditional distinction. This leads to redundancies. For example, the articles on movable property held as collateral (art. 2372-1 to 2372-5) are virtually identical to those on immovable property (art. 2488-1 to 2488-5).
Sources of security: conventional, legal or judicial
Security interests arise from a variety of sources:
- Conventional sureties : resulting from the agreement of the parties (pledge, conventional collateral)
- Legal security The law imposes certain obligations to protect certain creditors.
- Liens are always legal (art. 2330 C. civ.)
- The right of retention is provided for in article 2286 C. civ.
- Judicial sureties : ordered by the judge
- Judicial pledging (art. 2355 al. 2 C. civ.)
- Only "businesses, shares, corporate units and securities" may be pledged by court order (CPC, art. L. 531-1).
The classification of security interests has major practical implications. It determines their ranking in the event of competition between creditors. Creditors with exclusive security interests (right of retention, property security) take precedence over other creditors. Article L. 643-8 of the French Commercial Code, enacted by the Order of 15 September 2021, establishes a precise hierarchy of creditors in the event of insolvency proceedings.
The assistance of a lawyer is essential if we are to navigate this complex system and choose the right safety solution for each situation.
Sources
- Civil Code, articles 2284 to 2488-12
- Order no. 2006-346 of 23 March 2006 on securities
- Order no. 2021-1192 of 15 September 2021 reforming the law on securities
- Decree no. 2021-1887 of 29 December 2021 on the register of transferable securities
- Article 2329 of the Civil Code on movable sureties
- Article 2375 of the Civil Code on security interests in immovable property
- Cass. com. 20 May 1997, no. 95-11.915
- M. Dagot, "Sûretés monovalentes et sûretés polyvalentes", JCP N 1999, 381.
- M. Bourassin, "Sûretés mobilières et sûretés immobilières, une véritable summa divisio?", RD bancaire et fin. 2014, dossier 34, no. 5.
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