[Reform of the law on security interests] The Order of 15 September 2021 reforming the law on security interests formalises the ruling previously handed down by the Court of Cassation (Mixed Chamber, 2 December 2005, No. 03-18.210), according to which a security interest granted to secure a third party’s debt does not constitute a suretyship. Consequently, this security is now covered by Article 2325 of the Civil Code within a chapter devoted to security interests in rem, as opposed to personal security interests and, in particular, suretyship.

However, the reform extends to security interests for the benefit of third parties certain rules governing suretyships, which are exhaustively listed, namely:

  • the duty on the part of the professional creditor to warn the surety, who is a natural person, where the principal debtor’s commitment is disproportionate to the latter’s financial capacity (Article 2299 of the Civil Code);
  • the obligation on the professional creditor to inform the guarantor, who is a natural person, annually of changes in the debt, to remind them of the term of the debt or their right to terminate the guarantee if it is for a fixed term (Article 2302 of the Civil Code) and to inform them of any payment defaults by the debtor (Article 2303 of the Civil Code);
  • the obligation on the primary guarantor to provide the sub-guarantor, who is a natural person, with the aforementioned information (Article 2304 of the Civil Code);
  • the right to object, enabling the guarantor to require the creditor, whether a trader or not, to pursue the principal debtor first (Articles 2305 and 2305-1 of the Civil Code);
  • following payment, the guarantor’s personal or subrogatory recourse against the principal debtor or the principal debtors jointly and severally liable for the same debt, or against the other guarantors (Articles 2308 to 2312 of the Civil Code);
  • where the guarantor has been unable to be subrogated to the creditor’s rights through the creditor’s fault, the guarantor’s discharge (Article 2314 of the Civil Code) to the extent of the loss suffered by the guarantor.

Creditors benefiting from such a security interest for the benefit of a third party must ensure they comply with the new obligations imposed on them in respect of their duty to provide information, including for contracts concluded before 1 January 2022, the date on which the reform came into force, insofar as, by way of exception, the provisions of Articles 2302 to 2304 of the Civil Code apply to security interests created before that date.

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