The pledge of corporate shares is a security interest frequently used to guarantee the payment of a debt, in particular in financing, restructuring, or debt collection operations. It allows the creditor to obtain a guarantee over corporate rights, without becoming the owner of the assets of the company concerned.
This article presents in a detailed manner the legal regime applicable to the pledge of corporate shares, distinguishing according to the nature of the pledged securities: shares in SARLs, shares in civil companies, and shares in companies limited by shares (SA and SAS).
1. General concept of the pledge of corporate shares
Corporate rights may be allocated as security for an obligation, for the benefit of a creditor, through the mechanism of a pledge (French Civil Code, Articles 2333 to 2350). This security interest may notably relate to:
-
shares in civil companies;
-
shares in SARLs;
-
shares in public limited companies or simplified joint-stock companies.
Each type of company is subject to specific rules, both in terms of formal requirements and in terms of the effects of the pledge.
It is essential to emphasize that the pledge of corporate shares confers no direct right over the corporate assets. The value of the security depends exclusively on the economic value of the corporate rights, which itself is linked to the financial situation and prosperity of the company.
In so-called “closed” companies, characterized by the absence of an organized market for the shares, the enforcement of the pledge may prove difficult, or even ineffective, in the event of default by the debtor.
2. Pacte commissoire and limits related to approval
The pledge may be accompanied by a pacte commissoire, allowing the creditor to become the owner of the pledged shares in the event of non-payment of the secured debt (French Civil Code, Article 2348).
However, where the shares are subject to an approval procedure (in particular in SARLs and civil companies), the effectiveness of the pacte commissoire depends on obtaining such approval either prior to or after enforcement, which constitutes a major point of attention for the creditor.
3. Pledge of SARL shares
3.1 Conditions of validity
A partner in a SARL may pledge all or part of his or her shares. This pledge is governed by the general rules applicable to pledges over movable property, in accordance with Articles 2333 to 2350 of the French Civil Code, applicable to intangible movable property other than receivables (French Civil Code, Article 2355, last paragraph).
On pain of nullity, a written instrument is required. The deed must specify:
-
the secured debt;
-
the number of pledged shares;
-
the identification of the pledged shares
(French Civil Code, Article 2336).
Where the shares form part of the matrimonial community between spouses, the consent of both spouses is mandatory, even if only one of them is a partner (French Civil Code, Articles 1422 and 1424).
3.2 Registration of the pledge
The pledge of SARL shares must be registered with the register of movable securities and related transactions (French Commercial Code, Articles R. 521-1 and R. 521-2, 2°).
The competent registry is that of the commercial court where the company whose shares are pledged is registered (French Commercial Code, Article R. 521-5, paragraph 5).
3.3 Approval by the company
Approval by the company is not a condition for the validity of the pledge. However, in the absence of approval, the purchaser of the shares at a forced sale must be approved in the same manner as any third-party transferee, which reduces the effectiveness of the security.
Article L. 223-15 of the French Commercial Code allows the partners to be consulted on the proposed pledge. Consent to the pledge entails approval of the transferee in the event of forced enforcement, unless the company chooses to repurchase the shares after the transfer in order to reduce its share capital.
Silence by the company for three months following notification of the pledge project constitutes tacit approval (French Commercial Code, Article L. 223-14, paragraph 2).
4. Pledge of shares in a civil company
4.1 Form and registration
In the absence of specific provisions, the pledge of shares in a civil company is governed by the rules applicable to pledges over movable property (French Civil Code, Article 1866).
The pledge must be registered with the register of movable securities (French Commercial Code, Articles R. 521-1 and R. 521-2, 2°), with the registry of the court having jurisdiction over the place of registration of the company (French Commercial Code, Article R. 521-5, paragraph 5).
Where the shareholder is married under a community property regime, the consent of the spouse is required (French Civil Code, Articles 1422 and 1424).
4.2 Approval by the partners
Prior approval by the partners is not required for the validity of the pledge. However, in the absence of approval, the purchaser at a forced sale may face opposition in the form of dissolution of the company or substitution by the company or another partner (French Civil Code, Article 1867).
Where the pledge includes a pacte commissoire, approval should expressly cover judicial or contractual attribution of the shares, as well as auction sales.
4.3 Enforcement of the pledge
In the event of default, the creditor may:
-
initiate a forced sale of the shares by auction;
-
apply to the court for attribution of the pledged shares up to the amount of the claim, based on an expert valuation
(Court of Cassation, 3rd Civil Chamber, 23 October 1974, No. 73-12.024).
5. Pledge of shares in SA and SAS companies
5.1 Creation of the pledge
The pledge of shares is generally created through a pledge over a financial instruments account. It is enforceable against both the issuing company and third parties by the sole declaration signed by the account holder (French Monetary and Financial Code, Article L. 211-20, I).
Notification to the issuing company is not required for enforceability (Court of Cassation, Commercial Chamber, 20 June 2018, No. 17-12.559; 30 November 2022, No. 20-23.554).
5.2 Mandatory contents of the pledge declaration
The declaration must be dated and include the information required by Article D. 211-10 of the French Monetary and Financial Code, including:
-
identification of the parties;
-
the secured claim;
-
identification of the pledged account;
-
the nature and number of the securities.
5.3 Securities recorded in a DEEP
Shares recorded in a distributed electronic recording system (DEEP) may also be pledged (French Monetary and Financial Code, Articles L. 211-20, VII and R. 211-1), under the same conditions as securities recorded in a traditional account.
5.4 Rights of the secured creditor
The secured creditor benefits from a right of retention over the securities and sums recorded in the pledged account (French Monetary and Financial Code, Article L. 211-20, IV).
The creditor may also obtain, upon request, a certificate detailing the assets recorded in the pledged account (French Monetary and Financial Code, Article L. 211-20, I).
5.5 Approval and enforcement
Where the articles of association provide for an approval clause, it applies to the purchaser of the shares upon enforcement. Consent given by the company to the pledge project constitutes approval of the transferee in the event of forced enforcement (French Commercial Code, Article L. 228-26).
The creditor may enforce the pledge eight days after serving formal notice, unless another period has been agreed (French Monetary and Financial Code, Article L. 211-20, V).
Conclusion
The pledge of corporate shares is a powerful but technically complex security interest. Its effectiveness depends on strict compliance with statutory formalities, registration requirements, and approval mechanisms specific to each corporate form.
Need assistance to secure or enforce a pledge?
The partner lawyers of DebtCollectionFrance.com assist creditors and investors in the structuring, registration, and enforcement of pledges over corporate shares, in accordance with French law.
👉 Contact us for a personalized legal analysis and a secure debt recovery strategy.
