The general shop warrant: definition, creation and essential information

Inventory financing is often a challenge for companies, tying up a significant proportion of their cash flow. However, these stored goods can become a financial lever thanks to a specific but sometimes little-known legal instrument: the general shop warrant. Far from being a simple acknowledgement of a deposit, this document enables credit to be obtained by offering the goods themselves as collateral. Understanding how it works, the conditions under which it is created and the information it must contain is essential if it is to be used safely and effectively.

Definition and legal nature of the general shop warrant

When a company deposits goods in an approved warehouse, known as a "general shop", it can request the issue of a special document in two parts: the receipt and the warrant. The receipt records the deposit and represents the right of ownership over the goods; it allows them to be sold or collected. The warrant is the part of the document that can be detached and given to a creditor (often a bank) to guarantee a debt, typically a loan.

This mechanism is based on the prior deposit of goods in a specialised establishment controlled by the authorities, thereby offering security to the creditor. It is a form of pledge on goods, but with important particularities. Legally, the general warehouse warrant combines two aspects:

1. It works like a paper instrumentMore precisely, a promissory note. This means that it records a promise to pay a sum of money on a specified date and that it can be circulated by endorsement.
2. It incorporates a real securityA pledge on the deposited goods. The surrender of the warrant to the creditor constitutes the constitution of this pledge.

This dual nature gives it its own legal regime, defined mainly in articles L. 522-24 et seq. and R. 522-20 et seq. of the French Commercial Code. These texts have their origin in old legislation (in particular a law of 1858 and an ordinance of 1945) but remain relevant. This "classic" warrant must be distinguished from other mechanisms with a similar name, such as the financial warrant (which is a stock market product) or the agricultural warrant (which follows a specific regime). It should also be noted that other forms of warrant, such as the hotel warrant or oil, were repealed in 2021 (by order no. 2021-1192 of 15 September 2021) because they were deemed obsolete.

Conditions of creation: who can issue a warrant and on what assets?

The status of the applicant

Only certain professionals may deposit goods in a general shop and, consequently, request the issue of a warehouse receipt. Article L. 522-1 of the French Commercial Code explicitly refers to industrialists, shopkeepers, farmers or craftsmen. This list appears to be restrictive, excluding in principle private individuals or liberal professions who do not have one of these qualities for the activity related to the assets deposited.

Goods eligible for warrantage

The same article L. 522-1 specifies that the deposit (and therefore the warrant) may only relate to raw materials, goods, commodities or manufactured products. They are therefore tangible movable assets intended in principle to be sold or transformed in the course of the depositor's professional activity.

The company's operating equipment (machinery, tools, vehicles, etc.) is in principle excluded from the scope of the general warehouse warrant. The distinction can sometimes be tricky for goods that are likely to be either sold (goods) or used on a long-term basis (equipment). Case law has accepted the warranting of such objects if they were presented as goods and the creditor could legitimately believe this.

An important point concerns fungible goodsThese goods are interchangeable (e.g. cereals of the same quality, bulk wine). Article L. 522-24, paragraph 2, of the French Commercial Code allows the depositor to replace the goods initially deposited with others of the same nature, type and quality. This substitution option is very useful to avoid blocking stock rotation. However, it is only possible if it is expressly mentioned on both the receipt and the warrant. Without this mention, the pledge would only apply to the goods initially deposited.

The question of ownership and containers

It should be noted that the depositor is not required to be the owner of the goods in order to validly warrant them. The pledge constituted by the warrant can therefore relate to someone else's property, which is an exception to the general law on pledges. Of course, this can give rise to disputes, for example if the true owner claims the goods. However, the bearer of the warrant in good faith will generally be protected.

One practical difficulty concerns containers (bags, barrels, bottles, etc.), which are not always the property of the depositor but may be leased. If the warrant does not mention this rental and the bearer is acting in good faith, the pledge is considered to cover both the contents and the container. To avoid disputes, it is preferable for the warrant to specify the location of the packaging.

The requirement of a real deposit and effective divestiture

The validity of the pledge constituted by the warrant is fundamentally based on the divestment of the debtor. The goods must be physically held by the general shop, acting as an agreed third party. Simply depositing the goods on the premises of the general shop is not sufficient as long as the depositor retains the full warrant receipt. It is the separation of the warrant and its delivery to the creditor, followed by its transcription (which we will discuss in another article), which effects the divestiture and renders the pledge enforceable.

This divestiture must be genuine. Case law has annulled warrants where the goods were stored in premises that admittedly belonged to the general shop, but were rented to the depositor himself, thus leaving him in physical control of the goods. Conversely, a deposit in premises belonging to the debtor but leased to the general shop could be valid, especially if the lease is made apparent, although this practice is not very common in France for general shops due to the constraints of administrative approval of the premises.

Contents of the warrant: essential information

Like all commercial instruments and security instruments, warrants must contain a certain number of compulsory details in order to be valid as such. Some of these details appear on the front (common with the receipt) and some on the back (specific to the issue of the warrant).

Information on the front

The front of the warrant must include the information that appears on the receipt and identifies the deposit. Article L. 522-24 of the French Commercial Code requires :

• The name, profession and address of applicant.
• La nature of the goods depositedand all the information needed to establish its identity (make, number, etc.) and to determine its use. value.
• The statement that the goods are insured against fire (an obligation for general shops, set out in article R. 522-20 of the French Commercial Code).

Although the texts do not explicitly mention it, practice and logic dictate that it should include the date of deposit and the signature of operator the general warehouse. To enable correct valuation, the title should also indicate any duties on the goods (customs duties, indirect taxes) and known storage costs. The status of the containers (rental, if any) should also be indicated for the sake of clarity.

Information on the back: the deed of issue

On the back is the formula that transforms the paper into a warrant binding the debtor and constituting the pledge. The standard form often begins with "Good for transfer of this warrant to the order of M..., residing at..., as security for the sum of... payable on...". In addition to the name "warrant", five items of information are essential, based on article L. 522-29 of the French Commercial Code and the nature of the instrument:

1. Le amount of secured debt It must show the total amount owed to the creditor, including capital and interest until the due date. The reason for the debt (loan, sale on credit, etc.) does not have to be mentioned.
2. La expiry date It sets the repayment term. A demand warrant is hardly conceivable as it would deprive the pledge of its interest.
3. Le name, profession and address of the beneficiary creditor The warrant must be in registered form or to order. It may not be bearer, to enable the holder of the receipt to know to whom to offer payment to release the goods.
4. La issue date date: this is the date of the first endorsement, which marks the effective creation of the warrant. It is important for verifying the capacity of the signatory at that date and the absence of collective proceedings.
5. La signature of debtor (subscriber) Although it is omitted from the legal list, it is obviously essential for the commitment. The signature of the subscriber of a promissory note must, in principle, be handwritten, with the use of a claw being reserved for subsequent endorsers.

Penalties for failure to mention

What happens if a mandatory statement is missing? The law is silent on this point. In practice, general shops use pre-printed forms and check for formal regularity before transcribing, which limits the risks. Nevertheless, if an essential statement on the reverse side were missing, the document would probably be void as a warrant. It could possibly be valid as a simple promise to pay if the conditions are met, but the question of the survival of the pledge is more uncertain. The omission of a statement on the front (concerning the deposit) would also render the warrant null and void, but the instrument could perhaps retain the value of an ordinary promissory note if the statements on the back are complete. In the event of false information (e.g. on quantity or quality), the rules of ordinary law (simulation, fraud, error) would apply, without prejudice to the possible liability of the general shop if it was at fault in its checks.

Optional information

As with other commercial paper, additional clauses may be added to the warrant, provided they are not incompatible with its nature.

• Not to order" clause The warrant is naturally transferable by endorsement. However, the subscriber may wish to limit its circulation by adding the words "not to order" or equivalent. In this case, the instrument can only be transferred by means of a conventional assignment of debt (art. L. 511-8, para. 2 C.com), which is less flexible and deprives the assignee of the protection afforded by the unenforceability of defences.
• No-charge" or "free return" clause This clause exempts the bearer from having a protest drawn up in the event of non-payment in order to preserve his rights of recourse against the endorsers. Its validity in the case of warrants is debated in academic circles, and its practical value seems limited, since the sale of goods (which requires formalities) is the first stage in recovery. It could mainly be used for subsidiary chamber actions.
• Downstream Payment of the warrant may be guaranteed by a third party who acts as a guarantor. The guarantee is given on the warrant itself ("bon pour aval...") or by separate deed, in accordance with article L. 511-21 of the French Commercial Code.
• Substitution clause As mentioned above, it is essential to allow the replacement of fungible goods deposited (art. L. 522-24 C.com). It must be drafted precisely, often according to a model provided by the standard regulations for general shops.

The digital age: the electronic warrant

Faced with the increasing dematerialisation of securities and exchanges, the legislator recently paved the way for electronic warrants. Act no. 2024-537 of 13 June 2024, aimed at increasing business financing and the attractiveness of France (known as the "Attractiveness" Act), created a new category of "transferable securities" that can exist in electronic form.  

Article 14 of this law defines a transferable security as a "a writing which represents an asset or a right and which gives the bearer the right to demand performance of the obligation specified therein as well as the right to transfer that right".. Article 17 specifies that the receipt and general warehouse warrant fall into this category.

From now on, receipt and warrant "may be drawn up, signed, transferred, amended and stored in electronic form under the conditions laid down in Articles 15 and 16 of Law No. 2024-537 of 13 June 2024".. These conditions are intended to guarantee the reliability of the electronic process used, in particular for the identification of the parties and the integrity of the document. The counterfoil register kept by the general shop to record issues and transcriptions (art. L. 522-25 and L. 522-27 C.com) must also be kept in electronic form in accordance with reliable procedures to be specified by decree of the Conseil d'État (new article L. 522-27-1 of the Commercial Code).

The new article L. 522-27-1 lays down an important rule: there can be no mixing of media for the same deposit. If the receipt is electronic, the warrant must also be electronic. Conversely, an electronic warrant cannot be issued if the corresponding receipt is on paper. This innovation should simplify and speed up the use of warrants, but will require changes to the practices of general shops and financial operators.

The creation of a warrant is governed by precise rules. To secure your stock financing operations, our firm can help you to implementation and verification of these securities. Contact us for an analysis of your situation.

Sources

• Commercial Code, in particular articles L. 522-1, L. 522-24 to L. 522-34, L. 511-8, L. 511-12, L. 511-21, L. 622-7, L. 622-30, R. 522-20 to R. 522-24.
• Law no. 2024-537 of 13 June 2024 aimed at increasing business financing and the attractiveness of France (articles 14 to 17).
• Order no. 2021-1192 of 15 September 2021 reforming the law on securities.
• Ordinance no. 45-1744 of 6 August 1945 on general shops (codified).
• Decree no. 45-1754 of 6 August 1945 containing public administration regulations for the application of the ordinance relating to general shops (codified).