"`html
When you think leasingWhen we think of leasing, the image that often springs to mind is that of financing professional vehicles or industrial machinery. However, this financial tool is much more versatile. Did you know that it is possible, under certain conditions, to finance the acquisition of your offices, or even a business or company shares, using this method?
The nature of the asset you wish to finance has a direct impact on the feasibility and structure of the leasing transaction. This article explores the diversity of eligible assets, from the most common to the most specific, highlighting the special features and points to watch out for in each category.
Leasing tangible assets: the classic case
This is the most common and simplest application of leasing. It covers a wide range of tangible movable assets that are essential to the activities of many businesses.
Equipment and tools
Machine tools, agricultural equipment, site equipment, fleets of commercial vehicles, IT equipment... The list goes on. As long as these assets are intended for professional use, they can be the subject of a leasing contract governed by the French Monetary and Financial Code. As we saw in our previous article, it is the business use of the asset that determines the application of this specific regime, and not its intrinsic nature.
Special case of mixed-use property
This question often arises in the case of assets that may have dual use, such as a passenger car used by an executive for both business and personal travel. The rule is as follows: as long as the use is not exclusively If the use is purely personal, the contract potentially comes under professional leasing governed by the French Monetary and Financial Code. If the vehicle is to be used purely for private purposes, then the contract is a lease with an option to purchase (LOA) governed by the French Consumer Code, with its specific protective rules for private individuals. This distinction is important because the legal regimes differ significantly.
Property leasing: financing your business premises
Leasing is not limited to movable property. It is also a solution for financing business propertyThis applies to both existing premises and construction projects.
Buildings constructed
You can use leasing to finance the acquisition of existing offices, warehouses, factories or business premises. The mechanism is similar to that of equipment leasing: the lessor buys the building you have chosen and leases it back to you with a promise of final sale. This is an attractive option for acquiring premises without immediately committing a large amount of equity capital.
Buildings to be constructed: specific arrangements
Financing the construction of buildings through leasing is common but more complex. There are two main scenarios, defined in article L. 313-7, 2° of the French Monetary and Financial Code:
- The lessor buys the land and finances the construction: The financial institution acquires the land on your instructions and then finances the building work, which you generally oversee. The leasing contract covers both the land and the building.
- You own the land: If your company already owns the land, you can lease it to the lessor under a building lease or, more rarely, a long lease. It is then the lessor, as lessee of the land, who finances the construction of the buildings. It owns the buildings for the duration of this specific lease (often 20-30 years). At the end of the construction lease, your company, as the owner of the land, automatically becomes the owner of the buildings through accession. In this arrangement, the leasing contract itself relates solely to the buildings being financed.
These arrangements involve more elaborate legal relationships and require particular care when drafting contracts.
Land registration: an important step
As with any long-term property transaction, property leases with a term of more than twelve years must be published in the Land Registry. This formality, governed by the decree of 4 January 1955, is essential if the contract is to be enforceable against third parties (for example, if the lessor sells the property).
Financing intangible assets: more complex transactions
In theory, leasing can also be applied to certain intangible assets, but these transactions raise legal and practical difficulties that make them rarer or more specific.
A business or craft business: an option that is rarely used
The law provides for the possibility of financing a business or craft establishment through leasing (article L. 313-7, 3° of the French Monetary and Financial Code), with the aim of facilitating business transfers. The idea is that the lessor buys the business and leases it back to the operator with an option to buy.
However, this formula is rarely used in practice. Why is this? Mainly because of the high risks for the lessor. The value of a business depends enormously on how well it is managed by the operator (the lessee). In the event of difficulties and non-payment of rent, the business risks losing a large part of its value, making the "guarantee" of ownership illusory for the lender.
In addition, leasing of business assets is subject to the restrictive rules of the lease management (Commercial Code, art. L. 144-1 et seq.). In particular, article L. 144-7 makes the lessor jointly and severally liable with the lessee for the operating debts incurred by the lessee during the first six months. Imagine the risk of a financial institution having to pay its lessee's suppliers! In addition, the lessee is jointly and severally liable for all direct taxes relating to the business. These legal and tax constraints (rent deductibility is limited) explain the reluctance of financiers.
Intangible elements of the business
The law also allows leasing of certain intangible assets of the business, such as the leasehold rights. Specific rules apply in this case, particularly concerning the right to renew, which in principle belongs to the lessor (article L. 313-7, 2° paragraph 2 of the CMF, derogating from article L. 145-8 of the French Commercial Code). The financing of patents or trademarks through leasing is also possible, but remains marginal.
Shares: making it easier to take over a business?
Introduced more recently (article L. 313-7, 4° CMF and L. 239-1 to L. 239-5 of the French Commercial Code), share leasing is designed to help individual buyers acquire SMEs. The financier buys the shares and leases them back to the buyer with a purchase option.
However, its application is limited by strict conditions: it only applies to registered shares in unlisted companies (subject to corporation tax), the lessee must be a natural person, the company's articles of association must allow it, and double approval (from the lessor as buyer and the lessee as lessee) is often required. What's more, the tax regime is not particularly attractive. As a result, this mechanism remains underdeveloped.
Software: between hardware and service
Financing software through leasing raises a real legal headache. The problem stems from the very nature of software: is it a 'good' that can be bought and owned like a machine, or is it more a right of use granted via a licence, more akin to a service?
- For a specific software developed on a bespoke basis, if the development contract provides for a complete transfer of copyright to the funder, leasing could be considered.
- For a software package (standard software), the supplier generally grants a simple, non-exclusive and limited user licence. In this case, the financier is not actually buying the software "asset", but rather a right of use that it is "re-letting". Legally, this is a far cry from the strict definition of leasing.
Some consider that the purchase concerns the copy physical or digital ownership of the software, distinct from the intellectual property, which would make leasing possible. Others dispute this analysis. Case law has not clearly settled this question of classification, even though there have been disputes concerning transactions involving hardware and software. Caution is therefore called for.
Lease-back: turning your assets into cash
An interesting variant is sale-leaseback, or lease-back. The principle is reversed: your company sells an asset that it already owns (a building, a machine, etc.) to a leasing company, and at the same time, this company leases it back to you under a leasing contract.
The main objective is to generate cash by monetising a fixed asset, while continuing to use it. It is a tool for managing cash flow or financing new projects.
Beware of the risks, however: if the transaction is used solely to conceal serious financial difficulties, it may be requalified or the lessor may be held liable if it was aware that the transferring company was in a state of suspension of payments. Sale and leaseback must form part of a sound financial strategy.
In conclusion, leasing offers a wide range of possibilities, but each type of asset has its own specific features. While tangible movable assets and property form the core of this practice, the financing of intangible assets such as business goodwill, company shares or software remains complex and sometimes legally uncertain. The very structure of the transaction, particularly for real estate under construction or sale and leaseback, requires appropriate contractual engineering.
The type of asset greatly influences the feasibility, risks and contractual terms of your lease. Before committing yourself to a transaction, particularly one involving non-standard assets, an in-depth legal analysis is essential to safeguard your interests. Our firm is at your disposal to assist you in this approach.
Sources
- Monetary and Financial Code: in particular articles L. 313-7, L. 313-10, R. 313-3 et seq.
- Commercial Code: in particular articles L. 144-1 et seq. (management leases), L. 145-8 (right to renewal), L. 239-1 et seq. (share leases).
- Intellectual Property Code (for software).
- Decree no. 55-22 of 4 January 1955 reforming land registration.
" `
EN 
FR