The new civil assignment of a claim by way of security

The reform thus puts an end to established case law of the Court of Cassation, which prohibited the assignment of a claim as security ‘except in the cases provided for by law’ and traditionally reclassified this legal transaction as a pledge of a claim. Such an assignment could previously only be carried out by professionals in the form of a ‘Dailly assignment’ (Court of Cassation, Commercial Division, 26 May 2010, No. 09-13.388).

It is now possible to assign claims, whether present or future, as security for a debt on the basis of the general law governing the assignment of claims. The creation of this new security is straightforward. It will suffice to draw up a written document, the validity of which is not subject to the mandatory requirements applicable to a ‘Dailly assignment’. The document must specify the secured claim and the claim created.

The assignment takes effect retroactively from the date of the instrument and becomes enforceable against third parties on the date of the assignment instrument; it becomes enforceable against the assigned debtor upon notification or acknowledgement by the debtor. It is only from the date on which the assignment becomes enforceable against the debtor that the assignee enjoys an exclusive right to payment.

Three scenarios may arise:

• In the event of default, any sums paid in respect of the assigned claim shall be set off against the secured claim, provided that the latter is due and payable.
• If, on the date of payment of the assigned claim, that secured claim is not yet due, the creditor must retain the sums received in accordance with the conditions laid down for a cash pledge – a form of fiduciary security that is already well established in practice and has also been enshrined in the reform. In this case, the right of ownership over the claim that had been transferred by way of security is transferred to those sums, thereby converting the security into a cash pledge.
• Where the secured claim is paid in full before the assigned claim is settled, the assignor automatically regains ownership of the claim.

This new security is codified in Articles 2373 to 2373-3 of the Civil Code.