Security Rights in Movable Assets Under Current French Civil Code

Abstract

The regime enacted by French Civil Code on security rights in movable assets has been amended by the Ordonnance 2006-346 (dated on Mars 23rd, 2006), in order to modernize, simplify and unify the codified law on this subject. Nevertheless, a large number of Acts regulatory of different special security rights on specific types of assets are still in force. The Code Civil provisions on pledge have been radically modified. On the one hand, the scope of assets able to be encumbered has been enlarged to comprise present, future and generic assets, corporeal (gage) and incorporeal (nantissement) assets, specially the right to the payment of money. On the other hand, the pledge, even in corporeal assets, may be created as a non-possessory security, but submitted to registration to be effective against third persons. The reform envisages new methods of enforcement of the security rights in case of default, such as the transfer of the ownership of the encumbered assets to the secured creditor ordered by the judge, or even the appropriation of encumbered assets by the creditor if it has been so agreed by the parties previously, since it has been abolished the traditional legal prohibition of predefault agreements on appropriation (pactum commissorium). The current Code Civil regulates as well another two types of security devices: the retention of ownership of the encumbered assets by the secured creditor and the trust for security purposes. This paper analyses the new legal regime, as well as the influence of insolvency laws on security rights in movable assets, and refer to the principles and rules on this subject envisioned by the DCFR.