Managing large stocks often represents a logistical and financial challenge for companies. Whether raw materials, agricultural produce or manufactured goods are involved, their secure storage and possible recovery for financing are major concerns. In this context, the general shop offers a structured solution governed by French law. It is not simply a place of storage, but an authorised entity that not only enables goods to be stored in optimum conditions, but also enables them to be used as a medium for credit transactions through the issue of specific securities. This article explores the nature of these establishments, the strict conditions under which they are set up, the supervision to which they are subject and the various ways in which their operation can come to an end. For a broader overview, see our essential guide…
What is an approved general shop?
The French Commercial Code defines general shops as warehouses where "manufacturers, traders, farmers or craftsmen store raw materials, goods, commodities or manufactured products". This definition, taken from article L. 522-1, underlines the diversity of economic players that can use these services. It is important to understand that a general shop is not an ordinary warehouse. Although it is a private company, its operation is subject to approval by the administrative authority, in this case the Prefect. This official approval distinguishes it from simple logistics service providers and gives it particular credibility.
This hybrid nature - private initiative under public control - explains its dual purpose. On the one hand, the general shop performs an essential logistical function: the storage and preservation of deposited goods. It often has specially adapted facilities, some of them highly technical (such as cold stores, which are subject to specific regulations), to ensure that the quality of the goods is maintained. On the other hand, and this is its major specificity, it facilitates financial transactions. By issuing negotiable securities called incoming-warrant-receiptsThe general shop enables depositors to mobilise the value of their stocks, for example to obtain bank loans, without having to physically move the goods. This is a significant way of boosting companies' cash flow.
Setting up a general shop: a strict procedure
Starting a general shop business is not something you can improvise. The legal framework is designed to guarantee the security and reliability of these establishments for depositors and potential creditors. As specified in article L. 522-2 of the French Commercial Code, the creation of a general shop is subject to authorisation granted by prefectoral decree. This authorisation is not automatic and requires a solid file to be compiled.
Potential operators, whether natural or legal persons, must provide a set of supporting documents detailed in article R. 522-1 of the French Commercial Code. In addition, under article R. 522-3, the Prefect has the power to require any additional document to verify the identity, character and financial situation of the applicant. This prior verification is a guarantee of reliability for future users.
A particular situation concerns companies that wish to operate a general shop while at the same time carrying out other commercial activities or speculating on the types of goods they propose to receive. Normally, article L. 522-5 prohibits this combination of activities in order to avoid conflicts of interest. However, article L. 522-11 provides that an exemption may be granted on an exceptional basis, if justified by the interests of local commerce. In this case, the procedure is more cumbersome: the application must be more widely publicised (posted and published in legal gazettes, in accordance with article R. 522-6) and a specific additional guarantee must be provided, separate from the basic guarantee.
In any event, all authorised operators must provide a security deposit. The amount of the bond, set by article R. 522-10 of the French Commercial Code, is proportional to the storage area, but is subject to minimum and maximum limits. This bond serves as a financial guarantee. It can be set up in various ways, as detailed in article R. 522-11: deposit of money or securities at the Caisse des dépôts et consignations, bank guarantee, or even mortgage on a property of sufficient value.
The importance of this authorisation procedure is underlined by the penalties for non-compliance. Opening and operating an establishment issuing negotiable instruments on goods (warrant type) without the required authorisation is punishable under criminal law. Article L. 522-38 of the French Commercial Code provides for a fine of up to €6,000 and one year's imprisonment, or one of these two penalties only. The court may even order publication of the judgment at the expense of the convicted person. This demonstrates the legislator's desire to protect users from unregulated operators.
Operations under constant administrative control
Initial approval is only the beginning of the monitoring process. General shops are subject to ongoing supervision by the authorities, mainly by the prefect of the department in which they are located. The purpose of this control is to ensure that the operation complies with legal and regulatory rules at all times. Article L. 522-22 of the French Commercial Code sets out this general principle of control.
In concrete terms, as specified in article R. 522-16, the Prefect (or his delegated departments) has a permanent right of access to the premises of the general shop. He may carry out any checks and investigations deemed necessary. This power of inspection is an essential guarantee for depositors, as it enables them to check storage conditions, the proper handling of documents and compliance with procedures.
Operators also have a duty of transparency towards the authorities. Each year, they must send the prefecture a detailed report on their activities over the past year, as required by article R. 522-18. If the business is run by a company, the Prefect must be notified within one month of any change in the company's management (chairmanship, management) (article R. 522-16).
A central element of control is the strict keeping of specific registers, in addition to the usual accounting books of any trader. Article R. 522-24 of the French Commercial Code requires a register book to be kept for receipts and warrants issued, as well as a counterfoil book to record certain financial deposits required by law. These registers, which must be signed and initialled, enable precise traceability of transactions and securities in circulation, thus facilitating administrative checks.
How does the operation of a general shop come to an end?
A general shop may cease trading for a number of reasons, each of which is regulated by law to protect the interests of depositors and ensure continuity of service if deemed necessary.
The first scenario is the transfer of the establishment. As the operating licence is personal, simply transferring the business is not enough. As stipulated in article L. 522-3 of the French Commercial Code, the transferee must obtain his or her own prefectoral approval, using the same procedure as for a new establishment. This ensures that the new operator also meets the conditions of good character and financial standing.
The operator may also decide to cease trading voluntarily. This decision is not immediate. They must give six months' notice and inform the Prefect, in accordance with article L. 522-4. If the disappearance of the general shop is likely to harm local economic interests, a continuity measure may be put in place. At the request of the public prosecutor, the president of the judicial court may appoint a provisional administrator to temporarily manage the establishment.
Lastly, the business may be forced to cease trading by the withdrawal of authorisation. This administrative sanction, provided for in article L. 522-39 of the French Commercial Code, may be temporary or permanent. It is imposed by the authority that granted the authorisation (generally the prefect) after hearing the operator and obtaining the opinion of the professional bodies. The grounds for withdrawal are typically repeated breaches of the laws and regulations governing general shops, or simply a de facto cessation of activity for at least two years.
The consequences of withdrawal of approval are serious. As in the case of voluntary cessation, a provisional administrator is appointed by the courts to manage the situation. If the withdrawal is definitive and the continued operation of the business is deemed important for local trade, the administrator's powers may extend to organising the sale of the business and equipment by public auction. This forced sale, governed by article R. 522-25, is intended to enable a new authorised operator to take over the business.
Setting up or using a general shop involves navigating a precise regulatory framework. To help you secure your operations or assess your options, our firm can provide you with a advice on commercial law. Contact us to discuss your situation.
Sources
- Commercial Code, in particular Book V (Commercial Instruments and Guarantees), Title II (Other Commercial Instruments), Chapter II (Warrants). Articles L. 522-1 to L. 522-40 and R. 522-1 to R. 522-25 (subject to current numbering).
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