As of April 2021, France is reported to have the  highest government debt in Europe, standing at EUR 2.67t  overtaking Italy as the continent’s biggest debtor and third biggest globally. However, France has a larger economy compared with Italy and its debt currently stands at 115 per cent of GDP, below Italy’s 160 per cent.

The report comes as France entered its third national lockdown at the end of March 2021 in response the COVID-19 pandemic. Analysts at investment bank Berenberg estimate that the latest restrictions, which are due to last four weeks, will cost the French economy GBP 12bn with output expected to fall 7 per cent.

France, like many European countries has ploughed billion of euros into propping up struggling companies with state-backed loans as well as helping them with rents and partial unemployment schemes. In August 2020, the country revealed an ambitious EUR 100bn recovery plan, described as “historic” by Prime Minister Jean Castex, to pull France out of its worst economic slump since World War II.

In April 2021, the French government effectively nationalized Air France-KLM by increasing its stake in the struggling airline by more than double to 28.6 per cent.  The capital hike was part of a EUR 4bn rescue package announced by the French government to help the airline which has suffered from the virtual global halt in travel amid the pandemic. It follows a EUR 10.4bn debt bailout for the group last year, which was backed by both the French and Dutch governments.

France, the euro zone's second biggest economy, is expected to start easing its nationwide lockdown as planned from early May in spite of the persistently high number of new daily infections and deaths and continued pressure on hospitals. 


We appreciate the assistance of Marta de Franciscis and Emmanuelle Naulais at Brown Rudnick, Paris Office with the following discussion on French, law, regulation and practice.


French law distinguishes between private law (droit privé), which governs the relationships between individuals or private entities, and public law (droit public), which applies to the relationships of public institutions among themselves and to the relationship between these public bodies and private entities.

This distinction is in addition to that between civil and criminal law. The main body of statutes and laws governing civil law are set out in the Napoleonic Code (Code civil des Français) (the "Civil Code"), established under Napoleon I in 1804 and the Code de Commerce, the French commercial code.

France amended the Civil Code and made minor reforms to the Insolvency Rules in 2016 in order to provide investors with greater flexibility when conducting business in France and also to gradually shift towards a more creditor-friendly legal framework.

As part of the transposition of the EU Restructuring and Insolvency Directive 2019/1023, the reform of French insolvency laws is expected to be implemented in 2021 by way of ordinance. Mainly relating to the voting process by classes of creditors on the draft safeguard or rehabilitation plan, this pending reform is expected to provide for the set-up of more homogeneous classes of creditors and the possibility, under certain conditions, which are still to be determined, to impose on dissenting classes a plan that was accepted by one class of creditors only (cross class cram down), similar to what is provided for in the context of a US Chapter 11. 

French law relating to security interests is also expected to be amended this year. Still under discussion, this reform is expected to simplify and clarify rules pertaining to security interests in the context of restructuring and insolvency proceedings. Two innovations should make their appearance: the creation, within the 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). Provisions relating to a better protection of guarantors and third parties are expected to be implemented as well. 


  • Banking licence required if a drawing occurs in France.
  • Transfer by way of English law assignment or French law (cession de créance) is commonplace.
  • Participation used where a revolving facility is traded or new funding is required but there is a risk of banking licence “look through”.
  • Interest paid to a non-French resident is generally free from withholding tax.
  • Notice by a bailiff (huissier) is no longer required for transfers under credit agreements entered into post-1 October 2016.


Conducting credit activity within the French territory where any drawing or rollover of advances occurs in France (by a French or foreign incorporated company) requires a banking licence pursuant to the French banking monopoly regulations. Non-compliance with such regulations may constitute a criminal offence, leading to a fine or imprisonment.

The banking licence requirement does not apply to advance paymentsextensions of payment termsproperty finance lease arrangement and intragroup treasury operations, pursuant to the French Monetary and Financial Code. Under certain conditions, loans to small companies outside of a group are also permitted.

Certain entities are exempt from the requirements of the French banking monopoly regulations, such as insurance and reinsurance companies, certain pension funds, UCITS and AIF.

Ordinance n°20171432, adopted on 4 October 2017 (the "2017 Ordinance"), introduced a new type of AIF into French law, the Organisme de Financement Spécialisé ("OFS"), which is permitted to acquire, grant and manage loans and is financed through the issue of shares, stocks or debt instruments (titres de créances). Importantly, the 2017 Ordinance also allowed foreign entities conducting activity similar to that of credit institutions, AIF, UCITS, OFS or securitization vehicles to acquire unmatured loan receivables from French credit institutions, AIF, UCITS, OFS or securitization vehicles.

In certain situations, it may be possible to structure a loan transfer to fall outside of the territorial scope of the French regulations, provided that the transaction is concluded between two non-French entities, by way of assignment governed by English law and outside of France i.e. funds are not to be made available or used in France.


The main methods of loan transfer are:

(i) by way of an English law assignment;

(ii) French law cession de créance, which is similar to an English law assignment in that it assigns rights but not obligations; or

(ii)French law cession de contrat which assigns the rights and obligations of an existing lender to the new lender.

It is possible to become a lender of record in respect of a fully funded and matured term loan using an English law assignment or a French Law cession de créance without triggering a banking licence requirement. However, transfers effected by way of English law novation may trigger a banking licence requirement and may be at risk of losing rights to security in French insolvency proceedings.

In respect of loans where there are future obligations to lend, such as revolving loans or a new money facilities, to avoid triggering banking licence requirements, trade settlement is effected by way of participation

cession de créance is valid without borrower consent (unless consent is expressly required under the credit agreement), provided it is in writing. The cession de créance will be enforceable:

(i) against the borrower on the date of notification of assignment; and

(ii) against third parties on the date the contract is signed.

If the borrower has provided consent in advance of the assignment, notice to or acknowledgement from the borrower is not necessary. However, this is subject to any specific consent requirements in the credit agreement. In any event, the borrower is often notified as  a precaution  to ensure enforceability and transferability of any collateral which may secure the debt being assigned.


Since the introduction of a legal regime creating a security agent in 2017, a security agent can be appointed for the purpose of taking, registering, managing and enforcing security it holds in its name for the benefit of the creditors.

The rights and properties acquired by the security agent must be held separately from its own assets to prevent them from being seized other than in relation to claims arising from the security agent's conservation or management. Provided the security agent is a French entity, the commencement of safeguard, reorganisation, judicial liquidation or professional reinstatement proceedings will bear no effect on the assets held in its capacity as security agent. The security agent may, without the need of a special power of attorney from the creditors, carry on any action to protect their interests and file any proof of claim.

Under the French fiducie trust arrangement, a party may transfer, by way of security, ownership of identified assets (including shares), rights or security interests (existing or future) to a fiduciaire to hold in a segregated estate until the obligations under the underlying credit agreement have been discharged. In transferring ownership and creating a segregated estate, the fiducie creates an insolvency-remote structure. Interestingly, in 2019 the then holding company of French womenswear brand Camaïeu opened safeguard proceedings as a strategy to prevent enforcement of the fiducie on its shares in Camaïeu. Although the safeguard was ultimately withdrawn, the case serves an important reminder that credit agreements and the fiducie trust arrangement need to be carefully assessed to ensure that the fiduciaire has rights to all the security in the form and substance expected by the creditors.

Parallel debt structures are also sometimes used in secured syndicated facilities. Under a parallel debt structure, instead of covenanting to pay the secured obligations to the beneficiaries under the trusts, the obligor acknowledges a separate debt of the same amount to a security agent. Such parallel debt is incurred as a security for repayment of the principal debt and is deemed to be reduced in the same proportions if and to the extent that the principal debt is repaid.

In Belvedere S.A. (Cour de Cassation, Com., 13 September 2011, No. 10-25533), the French Supreme Court upheld the validity of such parallel debt structures.


A French insolvency administrator, a creditors' representative (mandataire judiciaire) or the criminal prosecutor may challenge any transaction which is not in the best interests of the company for up to 18 months from completion of the transaction until the opening of insolvency proceedings. 

An English law novation may have the effect of re-setting the applicable hardening period.


Interest paid to a non-French resident is generally free from withholding tax. However, if such payments are made to a non- cooperative state i.e. countries which France considers not to apply international standards with respect to exchanges of tax information such as Panama, the Seychelles, and the British Virgin Islands, withholding tax applies at a rate of 75 per cent.


Formal notification to, or written acknowledgment from, the borrower is sufficient for the transfer of the receivable to be enforceable.

Notice by a bailiff (huissier) is no longer required for credit agreements, including assignment agreements, entered into post-1 October 2016, regardless of whether a loan agreement was executed prior to that date.


The AMF, the French financial markets authority, has observed a significant increase in the number of SPACs preparing their listings on the Paris stock exchange since the beginning of 2021. The French legal framework and regulatory requirements enable the listing of SPACs to be welcome in Paris, all the while providing appropriate investor protection.

The AMF issued a communication on the matter on 15 April 2021 stating the following:

  • Euronext, Paris’ regulated market has a professional segment. Given that this segment is dedicated to qualified investors, it is a suitable listing place for SPACs, which initially mainly target such qualified investors.
  • French law offers a broad range of possibilities for implementing the usual mechanisms of listed SPACs and thus meets the specific needs of sponsors, whilst offering investors an appropriate level of protection. The various possibilities offered by French law include:

(i) the preference share system makes it possible to create shares with specific rights and to make a distinction, within the framework of a SPAC, between the shares subscribed by sponsors and those offered to investors (e.g. redeemable preference shares);

(ii) the possibility to issue warrants (bons de souscription d’actions) and to launch capital increases reserved for a class of persons gives SPACs the flexibility to raise additional funds that may be needed to finance the IBC (initial business combination);

(iii) SPACs can place funds raised during the IPO in escrow until the completion of the IBC, through the establishment of an escrow agreement.  

  • The AMF has practical experience in these transactions. Prospectuses can be examined, within an efficient timeframe and in English, if the issuer so wishes.
  • When examining prospectuses for the IPO of SPACs, the AMF takes into account the specific features of SPACs while ensuring that investors are properly protected, in accordance with its missions.  

To date, only two SPACs have been listed on Euronext with a third in the pipeline with a capitalization of EUR 250m to EUR 300m. It is thus too early to measure the success of SPACs in France and their future weight in the IPO market. 


Eurogroup president Paschal Donohoe reiterated, on 16 April 2021, the importance of convergence of national corporate insolvency frameworks in the Euro area. The European Commission (“Commission”) has indicated in a policy perspective paper that central elements to be analysed for the purposes of such convergence will include, among others, the definition of what constitutes a state of insolvency,  avoidance/claw-back actions to replenish the insolvency estate in case of fraudulent or not-at-arm’s-length transfers, and the ranking of claims.

The Commission also stated that, if its feasibility assessment on recurrent insolvency benchmarking exercise concludes that such an exercise is desirable and possible, then a proportionate mandatory reporting obligation may be introduced for banks across Member States. The Commission’s Consultation Period concluded on 26 March 2021, and a further update is due in the second quarter of 2022.

The LMA submitted its feedback on the initiative on 9 December 2020, stating that it would support proposals for harmonization on insolvency triggersconditions for avoidance and effects of claw back and directors’ duties and response to imminent insolvency. The LMA also recommended that an area for consideration should be the rules applying to the transfer of undertakings when a transfer is ordered in the context of cross-border insolvency proceedings.



Greensill Capital, the parent entity of Greensill Capital UK Ltd (“GCUK”), entered administration on 9 March 2021, a day after GCUK entered administration in the United Kingdom. GCUK specialises in financing invoices; however, the bulk of its revenue is concentrated around five customers, including GFG Alliance (“GFG”).

A key feature of the relationship between Greensill Capital and GFG is loans against sales which had not yet occurred, a practice known as “future accounts receivable finance”. These claims were booked as assets for Greensill Bank, a German entity owned by Greensill Capital. BaFin, the German regulator that oversaw Greensill Bank, expressed concern at the level  of reliance by Greensill Bank on GFG-linked assets. BaFin asked Greensill Bank to reduce its exposure to GFG. This development, along with issues regarding the expiration of insurance coverage for loans made by Greensill Capital to clients such as GFG  led to questions about credit quality. 

In turn, Credit Suisse Group AG (“Credit Suisse”) suspended redemptions from funds that invested in Greensill Capital products. Credit Suisse’s exposure to Greensill Capital centres around USD 10bn worth of securitized loans bought through four supply-chain finance funds. Since Greensill Capital’s collapse, Credit Suisse has confirmed that it is making repayments to investors. A statement on 13 April 2021 detailed that, following a disbursement of USD 1.7bn, the overall amount repaid up to that point was USD 4.8bn. The funds were suspended on 1 March 2021. An update on 26 April 2021 confirmed that exposure to entities connected to GFG comprise 45 per cent of the face value of the outstanding notes across the four funds as of 31 March 2021.

On 20 April 2021, creditors voted to liquidate Greensill Capital’s Australian business; liquidation commenced on 22 April 2021. The decision follows the report issued by Grant Thornton, Greensill Capital’s administrators, on 15 April 2021 recommending that the company be put in liquidation. According to the report, Greensill Capital’s secured creditors include Credit Suisse (AUD 117m) and The Peter Greensill Family Co. Pty. (AUD 78m). Unsecured creditors include Softbank (AUD 1.49bn). The Association of German Banks also submitted  a contingent claim worth EUR 2bn and a district court in Court confirmed that it had opened insolvency proceedings for Greensill Bank on 16 March 2021.  In addition, Greensill Capital is reported to have intercompany loan valued at USD 777m receivable from GCUK.

A US pension fund filed a lawsuit on 16 April 2021 against Credit Suisse over its risk exposure to clients including Greensill Capital.

Another asset manager, GAM Investmentsclosed its Greensill-connected supply chain finance fund, which managed assets valued at USD 842m,  on 2 March 2021

Greensill Capital Inc, a US subsidiary of GCUK, filed notice on 15 April 2021 that it aimed to push back various deadlines related to the disposal of its subsidiary Financity Corp. The new date for the sale hearing was listed as 12 May 2021


The Voting Support Agreement (“VSA”) for NMC Health’s restructuring plan was published on 16 April 2021, along with a credit pack published on the same date (“Credit Pack”). The administrators stated that executing the VSA will be critical in ensuring that the June 2021 deadline in the restructuring plan will be successful. By executing the VSA, unsecured creditors will be bound to support the restructuring in general. Under the plan submitted by the administrators, lenders will each receive a portion of USD 2.5bn HoldCo Facilities. The plan will be implemented in the form of a Deed of Company Arrangement, which is available in the context of an Abu Dhabi Global Markets Court (“ADGM”) administration.

In a lender call on 8 April 2021,  the administrators for NMC Health confirmed that the company is on track to exit its ADGM-mandated administration within H1 of 2021. The bar date for the lodging of creditors’ claims was set for 30 April 2021. Six proceedings in the Dubai International Financial Centre had been stayed, while the Abu Dhabi Courts have stayed seven proceedings. Another twenty-five actions were ongoing before onshore courts in relation to types of cases such as supplier claims.

In the Credit Pack, the administrators outlined that NMC Health stands to be the claimant for various fraud claims, with damages estimated to be over USD 4bn. To pursue the claims, the administrators have identified that upwards of USD 100m are needed. As of 16 April 2021, discussions were ongoing with several third-party litigation funders.

VALLOUREC GROUP S.A. ("Vallourec")

Vallourec is a Paris-based company specializing in the manufacture of steel pipe products for industrial application, including in the oil and gas industry.

On 20 April 2021, Vallourec’s shareholders approved the implementation of the financial restructuring provided for under the draft safeguard plan by an 85 per cent majority. Edouard Guinotte, chairman of the management board, commented that the approval was a “key milestone” in the company’s recovery.

The next steps of the financial restructuring involve obtaining antitrust and foreign investment clearances and approval of the draft safeguard plan by the Commercial Court of Nanterre. There is also a planned launch of a EUR 300m rights issue for the benefit of the shareholders, fully backstopped by certain creditors, after the approval of the French Financial Markets Authority on the prospectus. According to the indicative timetable currently contemplated, Vallourec aims to implement all transactions provided under the financial restructuring plan by the end of June 2021.

RALLYE S.A. ("Rallye")

French holding company Rallye, chaired by Jean-Charles Naouri, operates a chain of retail stores through its various subsidiaries. These include its primary asset Casino which represents 98 per cent of Rallye’s consolidated net sales. Rallye has an international presence, serving customers in France, Latin AmericaPoland, and Asia.

In March 2021, indebted Rallye announced that it had entered into exclusive negotiations with French property group Financière Immobilière Bordelaise for the sale of the entire share capital of sports equipment unit Groupe Go Sport for a symbolic price of EUR 1 without any representation and warranties given by Rallye. 

Completion of the sale is subject to the waiver by the Paris Commercial Court of the non-transferability of Go Sport Group shares, and the agreement of Go Sport Group banks to maintain and amend their current outstanding loans.

If the deal proceeds, the sale could be completed before the end of June. Go Sport was acquired by Rallye in 1990 and generated revenue of EUR 625m in 2019.

In March 2020, the Paris Commercial Court approved safeguard plans for Casino’s parent companies Rallye, Fonciere Euris, Finatis and Euris, whose combined debts stood at EUR 3.3bn.


Please contact Louisa WattIden AslAndrew Baker or Reena Patel with any queries regarding this month's Trade Alert.