The maintenance of the securities movement register – a critical issue when establishing security interests in securities.

Under French law, except in specific cases, the existence of shares in a non-listed company is established by their registration in an account in the name of their owner on a securities movement register. This registration is crucial as it also establishes ownership of these shares. All transactions related to the transfer of shares or concerning the share capital must also be recorded in this register. Therefore, a transfer of shares is only valid if it is registered in the securities movement register.

This document chronologically records all movements affecting all securities issued (shares, bonds, etc.) by the company in the context of its transactions involving transfers, donations, or contributions, among others. Pledges must also be recorded therein. This register, filed with the registry, must be maintained either by the company itself or by a person authorized for this purpose. Generally, the company manages the securities movement register itself.

Many financings are associated with a pledge of shares or stocks of the borrowing or issuing company and/or its subsidiaries. Creditors benefiting from such securities have, in principle (and outside of collective proceedings that hinder the exercise of securities

), the ability, in the event of a proven default, to "take the keys," meaning to take control of the company in order, if necessary, to sell the shares, transfer ownership of the company to a buyer, and recover their funds from the proceeds of the sale.

In France, as in the United Kingdom, the transfer of ownership of shares results from their registration in favor of the purchaser. However, while it is customary in the UK to include in financial documentation a power of attorney granted to the security agent to sign any necessary documentation on behalf of the shareholder or holder of shares to effect the transfer*, it is not uncommon in France for financial documentation to lack this provision. Creditors may then encounter resistance from the corporate officers of the debtor company to carry out the required registrations, thereby blocking the transfer of shares and consequently the repayment of the amounts owed to them.

Thus, a solution may lie in outsourcing, for example to the security agent, the maintenance of the securities movement register to ensure that the registrations and formalities required to be filed with the registry are completed without delay.

* Power accompanied (i) by signed "blank" transfer forms to allow the name of the assignee to be inserted, (ii) by the original certificates provided to the creditors / security agent at the time of the security interest creation, and (iii) by any potential amendment to the bylaws to remove any common practice that allows corporate officers to refuse to register the transfer in the register.