Bonding: new rules soon to come into force

An ordinance dated September 15, 2021, published in the Journal Officiel on September 16, reforms the law on sureties, which governs guarantees for the payment of receivables. The aim is to make it easier for businesses to obtain credit and financing, by simplifying and securing surety bonds. The new rules will apply from January 1, 2022. Find out what you need to know.

Grouping rules in the Civil Code

Whether it's a question of renting a home or granting a loan, surety bonds are governed by the old law on securities, which was first reformed in 2006.

Theordinance of September 15, 2021 reforming the law on sureties has brought new changes, starting with the grouping together of all the rules, hitherto scattered throughout the Monetary and Financial Code and the Consumer Code. They are now brought together in the Civil Code.

This grouping of rules means greater protection for the individual, as it is now applied to company directors and consumers alike.

The scattered nature of the rules also created a degree of legal uncertainty. Until now, the beneficiary of a surety bond - a banker, for example - could be required to inform the guarantor each year of the amount of the debt, on the basis of 3 different texts, each of which evoked a different sanction, and required a different content and date for the information. From now on, this information obligation will be based on a single text of the Civil Code.

In addition, the framework for surety bonds will be much stricter, with the French Civil Code stipulating precisely when a surety bond is payable, which should prevent many abuses.

Simplifying surety bonds and combating overindebtedness

Another new feature is that the guarantor will no longer have to fill in a whole page by hand to copy out the required information, which considerably increased the risk of litigation when there was a slight discrepancy between the model provided and the handwritten page.

From January 1, 2022, it will be possible to apply for a bond digitally, in a move to support the digital transformation of businesses.

Guarantees have been simplified, but also better protected: professional creditors, mainly banks, will be obliged to inform the guarantor if the debtor is committed beyond his or her financial capacity.

In addition, to prevent over-indebtedness, banks will be required to ensure that guarantors commit themselves in proportion to their financial capacity. If this is not the case, it will still be possible to be a guarantor, but only to the extent of one's ability.

Finally, the assignment of receivables, which involves transferring ownership of a claim to a third party, will no longer be reserved for banks and other regulated lenders, but will be open to all private lenders.