Everything you need to know about pledging

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Here is the long-awaited article on pledging. This legal term may seem obscure at first glance, but in reality, you've already encountered it in many investments. Even though its name sounds complex, it conceals simple practices: securing the commitments of stakeholders and protecting investors like you. To learn the difference between a pledge and a lien, who is affected by this mechanism, or what type of asset can be pledged, don't wait any longer and read on!

To learn more, consult our article on financial securities.

What is a pledge?

Before getting to the heart of the matter, let us present the definition of a pledge, as set forth in Article 2355 of the French Civil Code (Paragraph 1). “A pledge is the allocation, as security for an obligation, of an intangible movable asset or a set of intangible movable assets, present or future.”

If this statement leaves you perplexed, like when you hear a riddle from Père Fouras, that's perfectly normal! The rest of this article will help you see things more clearly and understand why this mechanism is so often used in your investments.

The different types of pledges

Most often, a pledge covers intangible movable property (receivables, patents, etc.), while a lien concerns tangible property (a car, jewelry, etc.). These security interests are adapted according to the nature of the asset used as collateral. At Enerfip, we generally use the following legal mechanisms.

Pledge of Securities Accounts

According to the French Monetary and Financial Code, in subsection 4: Pledge of Securities Accounts and Financial Securities, Article L211-20: “A pledge of a securities account is established, both between the parties and with respect to the issuing legal entity and third parties, by a declaration signed by the account holder. This declaration includes the information required by decree. The financial securities initially held in the pledged account, those substituted for them or supplementing them as security for the initial claim of the pledgee, in any manner whatsoever, as well as, unless otherwise agreed by the parties, their proceeds and income in any currency, are included in the basis of the pledge. Financial securities and sums in any currency subsequently credited to the pledged account as security for the initial claim of the pledgee pledged securities are subject to the same conditions as those initially listed and are considered to have been delivered on the date of the initial pledge declaration. The pledgee can obtain, upon simple request to the account holder, a certificate of pledge of securities account, including an inventory of the financial securities and sums in all currencies recorded in the pledged account on the date of issuance of this certificate.”.

If you didn't understand everything, that's normal; it was a bit long and dense. The Monetary and Financial Code isn't exactly the most accessible or fun thing to understand, unfortunately. However, you're in luck, because we're here to simplify it as much as possible to make it more understandable.

In short,a pledge of securities account is the pledging of a portfolio of financial securities (shares, etc.) issued by the account holder to a creditor as security. It is done via a pledge agreement with an attached declaration signed by the account holder stipulating that all securities registered or added subsequently are automatically included in the security, as are any income generated.

Pledging Receivables

After pledging securities accounts, let's now look at pledging receivables. So, what is it? It is a legal system in which the debtor of a receivable assigns one or more intangible movable assets (a sum of money such as future dividends, future rents, etc.) as security for the debt owed. Under this technique, it can be done for a fixed period and cover only a portion of the receivable, except in cases where it is indivisible.

Just like pledging securities accounts, pledging receivables can be limited in time. Furthermore, in the event of default, the secured creditor can directly assert their rights against the pledged receivables.

Pledging of Company Shares

Pledging company shares (SARL, SCI, civil law company, etc.) is a mechanism in which a shareholder gives their shares as security to a creditor. In practice, what does this mean? The person who owns the shares and pledges them is called the pledgor. They may or may not be the debtor. For example, a shareholder can pledge their shares in company A to secure the debt of company B.

For your information, company shares can be pledged multiple times to different creditors. In the event of default, the order of priority between them is determined by the date of the pledge: the first registered party has priority.

Who can be affected by a pledge?

Even if you've had some clues before, we'll tell you more here.

Whether you are a creditor or a debtor, you can be a legal entity or an individual. The parties involved in a pledge are:

• the pledged debtor: this is the one who owns the asset and pledges it as security;

• the pledged creditor: this is the one who benefits from the security by granting a loan or financing in exchange;
• The third-party debtor: In the case of a pledge of receivables, they may also be involved, as they are the one who owes money to the party providing the guarantee.

Pledges now hold no secrets for you!

And if, when viewing a project on our platform, you have any doubts about the backed guarantee, please do not hesitate to contact our Investor Relations team. They will be happy to answer your questions and provide you with all the necessary information to support you in your investment process.