In 2006, an overhaul of the French statutory framework on security interests modernised considerably the ability to obtain, perfect and enforce security over both tangible and intangible assets. However, practice over the last fifteen years has evidenced several lacunae in the initial reform. In 2019, the omnibus “PACTE” Law, implementing an action plan for growth and transformation of enterprises, authorised the government to adopt by ordinance a further wide-ranging set of measures intended both to reinforce the effectiveness of guarantees and security interests and to render the use of French law more attractive in international transactions. Ordinance n° 2021-1192 (the Ordinance), based on suggestions made by legal scholars and practitioners and public consultation, was adopted on 15 September 2021 to accomplish such goals.


French law distinguishes between “autonomous guarantees” (garanties autonomes), the best-know of which is the first demand guarantee, and “ordinary” guarantees (cautionnements). While the autonomous guarantee is stronger because the guarantor may not raise defences to payment based on the underlying obligation, it may only be issued for a specific (or maximum) amount, and the use of cautionnements is therefore still widespread, particularly where the guarantor is a natural person. The new Ordinance makes several changes to the laws surrounding cautionnements:

  • While natural person guarantors continue to benefit from provisions protecting them by requiring their signature of the guarantee to be preceded by a manuscript statement acknowledging the scope of the guarantee, such protection is now extended to all such guarantees and not only those granted in favour of professional creditors. The language of the statement, which previously required the use of words taken literally from the relevant statutes, may now take any form which indicates sufficiently the scope of the guarantee, and the statement may (as in the case of security interests) be effected by electronic signature.
  • Both counter-guarantees (under which the counter-guarantor guarantees the beneficiary against non-payment by the primary guarantor) and “sub-guarantees” (under which the sub-guarantor guarantees the primary guarantor against non-reimbursement by the primary obligor of the amounts paid by the primary guarantor to the beneficiary) are given statutory recognition.
  • Issuers of cautionnements will henceforth be entitled to raise all defences to payment of the underlying obligor (and not only those inherent in the underlying obligation itself).
  • Professional creditors benefiting from a cautionnement granted by a natural person must warn such guarantor when the obligation of the underlying obligor is not adapted to the financial condition of such underlying obligor.
  • Similarly, if a cautionnement granted by a natural person to a professional creditor was, at the time it was granted, manifestly disproportionate to the income and property of the guarantor, it is reduced to the amount for which it could genuinely have been granted (this is actually less protective of the guarantor than previous provisions, which cancelled such guarantees entirely).
  • The obligation of professional creditors to make known to physical person guarantors no later than 31st March of each year the amount remaining due under the guarantor on 31st December of the prior year is maintained, but somewhat contradictory provisions in different statutes have been eliminated and centralized in the French Civil Code.
  • Security interests provided for the obligations of other obligors (sûretés pour tiers) are not considered to be cautionnements, meaning that certain conditions of form are not necessary for the granting of such security interests; however, such third-party security providers do benefit from certain protections granted to ordinary guarantors.

Security interests

The French laws on security interests over tangible and intangible assets (sûretés réelles) has been liberalised to permit security over additional assets, whilst at the same time eliminating forms of security that had survived the 2006 reform but were inconsistent with or contradictory to provisions created by that reform.

  • Pledges of tangible moveables (gages) may henceforth also cover fixtures (meubles immobilisés par destination). This makes such pledges ideal for movables, typically of a significant value, which are ultimately affixed to property classified as immovables, such as turbines, transformers, solar panels and other equipment for wind farms, solar power plants and industrial and mining equipment.
  • In the case of fungible assets, while the law previously provided that assets held by the pledgor and the pledge over which was perfected by filing could be sold by the pledgor as long as they were replaced by the same quantity of equivalent assets, this has now been extended to pledged fungible assets over which the pledgor had relinquished possession to the pledgee.
  • The granting of cash collateral, which had been widely practiced but which lacked legislative underpinning, has now been firmly ensconced in French Civil Code. Moreover, rather than being characterised as a simple pledge over cash, the security has been defined as an outright transfer of title to the cash by way of security (remise d’espèces en garantie), which will mean that the beneficiary will have added protection in the event that the collateral is created during what would otherwise have been a potentially dangerous “hardening” period.
  • Various special forms of security which had lost their relevance due to prior changes in the law have been eliminated. This is the case for pledges over equipment and machine tools (nantissement d’outillage et équipement), pledges over inventory (gage des stocks) and petroleum warrants (warrants pétroliers), all of which can now be created using the more general pledge over movables. More generally, an artificial distinction between “civil” pledges and “commercial” pledges has also been abolished.
  • Pledges over receivables (nantissement de créances) with different ranking have now been recognised (the ranking of creditors is determined by the date of the pledge instrument). While perfection of such pledges against the obligor of the receivables continues to be effected by notice to such obligor, the prior rule under which following such notification, payments of the pledged receivables must be made directly to the pledgee has been tempered by recognition of the common practice under which notice of perfection alone may be followed afterwards by a separate notice of enforcement of the pledge, with the pledgor being entitled to continue to receive payment of the pledged receivables until such second notice is sent.. Pledges of future receivables take effect as soon as the pledge instrument is signed, rather than only upon such receivable coming into existence.
  • The ability to grant security assignments of receivables (cessions de créances à titre de garantie) has been considerably augmented. Prior to adoption of the Ordinance, such assignments could (outside of securitisation transactions) be granted only to licensed or “passported” credit institutions and finance companies and then only to secure direct granting of credit by such entities to the security assignor. This had several consequences. First, other lenders who were permitted to provide credit in France outside of the “bank monopoly” could not benefit from such assignments. Second, many obligations that did not constitute direct granting of credit, such as guarantees and derivative transactions, could not be secured by such assignments. Finally, only “professional” receivables could be the subject of such security assignments. The French Cour de Cassation ruled in a notable 2007 case that any attempt to create a “civil” security assignment of receivables outside of such statutory constraints would be automatically recharacterised as a pledge of receivables rather than as an assignment. The Ordonnance rectifies this by expressly permitting the “civil” assignment of receivables by way of security, in the same manner as “ordinary” outright assignment of receivables under the Civil Code.
  • The pledge of going concern (nantissement du fonds de commerce), a pledge over a “bundle” of assets under which a business operates (including business material and equipment, intellectual property rights, leasehold rights and goodwill) has been simplified. Prior to the Ordinance, filing of the pledge was required not only with the Registry of Commerce and Companies with jurisdiction over the registered head office (siège social) of the pledgor, but also that of every branch of the pledgor (unlike England, France does not have a centralised nationwide Companies House). Under the Ordinance, only filing with the Registry with jurisdiction over the registered head office will ne necessary. In addition, the previous deadline of 15 days from signature for filing has been dropped.
  • Pledges of company share accounts (nantissements de comptes-titres) have also been liberalised. Prior to the Ordinance, there was, for technical reasons, some doubt as to whether pledges with different rankings were valid; this has now been rectified, with priority being determined by the date of the relevant declarations of pledge. In addition, simultaneous pledges of associated dividend accounts have been rendered optional, a welcome change since French banks have often been reluctant to open such dividend accounts for foreign shareholders.
  • The French law on fiduciary transfers (fiducies) has been modified so that fiduciary transfers used for the purpose of creating security (fiducie à titre de garantie) no longer requires an estimate of the value of the asset being transferred for such purposes.
  • Real estate mortgages may, following the Ordinance, be created over future real estate, and the rules governing rechargeable mortgages have been tightened. Since real estate mortgages normally extend automatically to fixtures, and since, as mentioned above, it is now possible to create pledges over fixtures, priority between the two is determined by the date of filing of the underlying security.
  • The Ordinance also refers to the creation of a unified register for the filing of most security interests. This will be effected by subsequent government decree, expected to occur no later than 1st January 2023. Note that certain security interests do not need to be filed in order to be perfected: this is the case for pledges of tangible moveables, which can be perfected by physical dispossession of the pledgor of the relevant asset as an alternative to filing, and both security assignments and pledges of receivables.

Entry into force

  • The Ordinance will enter into force on 1st January 2022, although as mentioned above the creation of the unified security interest register will occur no later than 1st January 2023.



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