Formally initiated in May 2019 with the aim of completing the reform that took place in 2006, the new reform of the law on security interests is close to completion.

As early as June 2019, the French Civil Affairs and Seals Directorate (Direction des affaires civiles et du sceau) had sought the comments of the various stakeholders concerned (legal practitioners, economic circles, academics) by circulating the draft text drawn by the working group set up under the aegis of the Henri Capitant Association, chaired by Professor Michel Grimaldi, together with a questionnaire.

Continuing this approach, it invited them to comment on a document which presents and explains all the provisions of a preliminary draft ordinance resulting from the work done since then.

Below is a very synthetic presentation of the main changes announced.

While a revolution is not to be expected, which is not surprising given the major overhaul carried out in 2006, the reform that is taking shape is nevertheless accompanied by important changes.

Firstly, there are two innovations, relating to the creation, within the French Civil Code, of the assignment of receivable by way of security (cession de créance à titre de garantie) and the assignment of a sum of money by way of security (cession de somme d’argent à titre de garantie). In what way does the preliminary draft mark a very clear breakthrough in the field of security interests based on exclusivity, which is moreover relayed in the context of the pledge of receivable (nantissement de créance). The very broad opening of electronic means for the creation of security interests is also part of this innovative approach.

Beyond that, legibility and accessibility are reinforced. Two movements are contributing to this, one of fixing certain solutions that were hitherto uncertain, and the other, more profound, of extending the influence of general law, as evidenced by the abolition of various security interests deemed obsolete or inappropriate and the repatriation of numerous rules within the French Civil Code. From a similar perspective, we should also welcome the announced creation of a register of movable security interests (registre des sûretés mobilières), probably dedicated to all publicity, barring exceptions.

Finally, the protection of the guarantor and third parties has not been neglected. This is evidenced, for example, by the extension of certain rules to all personal guarantors (cautions) who are natural persons, the partial submission of security interests for third parties (sûretés réelles pour autrui) to the personal guarantee (cautionnement) regime, the new provisions relating to the opposability of exceptions (opposabilité des exceptions), or the transformation of special real estate liens (privileges immobiliers spéciaux) into legal mortgages (hypothèques légales).

What remains now are the substantive analyses, both approving and critical, that most of these changes will generate in the coming weeks and months.

There is also the other aspect of the reform, devoted to insolvency proceedings, the draft of which were also circulated by the French Civil Affairs and Seals Directorate: the new law on security interests will obviously have to deal with these new provisions […]

Read the full news flash in the document below

Author 

Antoine Hontebeyrie, Partner
Associate Professor of Law