The conventional pledge of a business is stipulated in a contract between the owner of the business and a creditor. This guarantee is generally used to enable the merchant to obtain credit from banking institutions. But it can also be used in the context of participatory financing.


Definition & role

The pledge of a business is governed by articles L. 142-1 and following of the Commercial Code. It is a real security without dispossession of the debtor which offers its beneficiary (the pledgee) a preferential rightthe advantage of being paid in priority to the debtor's other creditors, and a droit de suiteThis is the prerogative of the creditors to exercise their right on an asset in any hand.

The beneficiary of this security is therefore entitled not only to be paid in priority to the debtor's other creditors, but also to seize the pledged business in the hands of the sub-purchaser, particularly in the event of an assignment or transfer of the business.


Effects

The business pledge contract is recorded either by an authenticated deed or by a private deed, registered within thirty days of the date of the constitutive deed.

The privilege resulting from the pledge contract is established by registration in a public register kept at the commercial court where the business is operated.

Finally, the rank of pledgees is determined by the date of their registration, and the time of registration will be decisive for creditors who registered on the same day.


Justin KOTTIN
- Legal Officer at Raizers

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