All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

Formerly represented by a paper certificate that conferred a tangible nature, the securities issued in France and subject to French legislation have been dematerialized since the Finance Act of 30 December 1981 , which came into force on 3 November 1984 . The paper certificates have been replaced by account entries, meaning they must be registered either in a securities account held by the issuer or by one of the intermediaries mentioned in points 2 to 7 of Article L. 542-1 of the Monetary and Financial Code , or in a shared electronic recording system (blockchain) . Since 1 October 1982, holders of previously issued securities can only exercise the rights attached to their securities if they have been presented to the issuing legal entity or an authorized intermediary for account registration . Five years after the publication of Decree No 83-359 of 2 May 1983 , issuing legal entities had to sell the rights corresponding to unpresented securities, with the proceeds of the sale being consigned until possible restitution to the rightful owners .

The purpose of dematerialization was to combat tax fraud and reduce management costs for issuing companies . Before the Finance Act of 30 December 1981, there were two categories of financial securities with distinct regimes: bearer securities, which did not allow for the identification of their owners as they were anonymous and transferred hand-to-hand like banknotes, and registered securities, which were recorded in the registers of the issuing company. Eighteen months after the publication of Decree No 83-359 of 2 May 1983 mentioned above, issuers were required to register in accounts the registered securities listed in their registers and close these registers . The deposit, at that date, of registered certificates with an authorized intermediary constituted a tacit mandate of administration under Article 4 of the decree . From the same date and within a period of three and a half years, authorized intermediaries had to reproduce in administration accounts the securities registrations corresponding to the registered certificates they held in deposit and send said certificates to the issuers for justification . Holders of registered securities were notified by the issuer of the account registration procedures for their securities no later than one year after the publication of the decree, and, if applicable, upon receipt of their registration request on the transfer register . Consequently, shareholders of a company requesting the registration of their securities in accounts were not required to present them to the company to continue exercising the rights attached to them, as long as the company's shares, registered since its creation, had originally been recorded in an account held by the company in the name of their owners .

Dematerialization has not ended the distinction between bearer securities and registered securities, but only led to the disappearance of any physical form of bearer securities, since, from 3 November 1984, all marketable securities, regardless of their form, must be registered in an account or in a shared electronic recording system in the name of their owner . By maintaining the category of “bearer securities,” the legislator intended to preserve the anonymous nature of these securities, although the anonymity of their owners is not absolute . The distinction between the two concepts persists only when it comes to determining the account holder. Indeed, when the securities account is held by the issuer or when the financial securities are registered by the issuer in a shared electronic recording system, they take the registered form . When the securities account is held by an intermediary mentioned in Article L. 211-3, the financial securities take the bearer form .

Since dematerialization, all marketable securities are transferred by account-to-account transfer or by registration in an electronic recording system . Consequently, no one can claim, for any reason, a marketable security whose ownership has been acquired in good faith by the holder of the securities account in which they are registered or by the person identified by the shared electronic recording system . Article 2276 of the Civil Code, which states that in matters of movable property, possession is equivalent to title, does not apply to marketable securities, whose transfer follows a specific regime . Thus, the classification of breach of trust, which can apply to the misappropriation of dematerialized marketable securities, is established when the custodian performs acts of disposition on the securities received in deposit, without the consent of their holder, resulting in a change of possession .

There are exceptions to the principle of dematerialization: it does not apply to bonds issued before 3 November 1984, redeemable by drawing lots, nor to perpetual annuities on the State, held in registered form, issued before this date . Furthermore, the dematerialization of securities is only mandatory for those issued in France: it does not apply to those issued in other countries and subject to foreign legislation.

Law No 81-1160 of 30 December 1981 on finance for 1982, Art. 94 II, Official Journal of 31 December 1981, and D. 83-359 of 2 May 1983 issued for the application of Article 94-II of the finance law for 1982 and relating to the regime of marketable securities, Official Journal of 3 May 1983.

Decree No 83-359 of 2 May 1983 mentioned above, Art. 10.

Decree No 83-359 of 2 May 1983 mentioned above, Art. 11.

Cass. com., 13 January 1998, LawLex202200005863JBJ.

CMF, Art. L. 211-16. - See, for an illustration, Versailles, 10 June 2010, LawLex202300005713JBJ, considering that the proof of the pledging of dematerialized securities is established by notification and not by possession, since their transfer is materially impossible.

CA Paris, 11 January 2018, LawLex202300005699JBJ; 5 July 1990, LawLex202300005712JBJ.

Among which: credit institutions established in France; investment firms established in France; legal entities whose members or partners are indefinitely and jointly liable for debts and commitments, provided that these are the aforementioned institutions or firms; legal entities established in France whose main or sole purpose is the custody or management of financial instruments, as well as those whose exclusive purpose is to manage one or more collective occupational retirement institutions; the Public Treasury; the Bank of France; the Post Office; the issuing institute of the overseas departments; the overseas issuing institute; the Caisse des Dépôts et Consignations; and under conditions set by the general regulation of the Financial Markets Authority, credit institutions, investment firms, and legal entities whose main or sole purpose is the custody or management of financial instruments that are not established in France.

Cass. crim., 30 May 1996, LawLex202200011407JBJ.

Commercial Code, Art. L. 228-1, para. 6 and Monetary and Financial Code, Art. L. 211-3, para. 1.

Law No 81-1160 of 30 December 1981 aforementioned, Art. 94, II.

Decree No 83-359 of 2 May 1983 mentioned above, Art. 13.

Cons. constit., 27 January 2012, LawLex202200009156JBJ.

Specifying that “[a] holder of registered securities may appoint an authorized intermediary to manage their account opened with an issuer. In this case, the entries on this account are reproduced in an administration account maintained by an authorized intermediary, and the holder undertakes to give orders only to the latter.”

67. Dematerialization of securities