Droit financier & produits dérivés


Les produits dérivés correspondent à l'appellation de marché de ce que définit le Code monétaire et financier comme étant les contrats financiers. Il peut s'agir de swaps ou d'options par exemple. 


Ils se distinguent des titres financiers qui peuvent par exemple représenter un droit de créance contre la personne qui les émet. C'est le cas des obligations.




Corporate law (SAS), coup d’accordéon (increase in share capital) and temporary measure


On 04 January 2023, the French Cour de cassation (financial, commercial and economic chamber (F-B)) stated that the reduction to zero of the share capital can only legally be made on the condition that a subsequent increase in share capital amounting to, at least, the minimum legal or contractual share capital.


Applying articles L.210-2 and L.224-2 of the French commercial Code, the French supreme Court draws the lines of what is named the coup d’accordéon (accordion effect), a metaphor referring to the two cumulative operations leading to an in fine increase in share capital after a reduction of it to zero. Initially used to save the company (see Usinor case dated 17 May 1994, 91-21.364 – B, cited in inter alia Traité de droit des affaires G. Ripert, R. Roblot by M. Germain, V. Magnier Les sociétés commerciales, LGDJ, T2, 23 ed 2022, n°1019 p.718 et seq. and in a nutshell Droit commercial et des affaires, D. Legeais, Sirey, 29 ed 2023, n°601 p.333), this cumulative operation is now more widely associated with a change in the partners allowing new partners to join the company in the event of significant loss (by law total equity (capitaux propres) valuated less than 50% of the share capital, to avoid the dissolution of the company). 


As to this specific case, the legal practitioner will take into account that the cancellation of the whole operation was initiated by a shareholder in référé (summary judgment) before the commercial Tribunal, with an ephemera success, such Tribunal decided with innovation to retain the decrease of the share capital to zero but to temporary suspend the increase.


Fortunately, the French Cour de cassation maintains the mechanism composed of the two operations, evidencing the indivisible feature of the coup d’accordéon in a positive way (the two operations cannot be separated), when, in other contexts, the cancellation of one operation cancels a subsequent operation (group of contracts).

It should however be observed that article L.224-2 states that the sanction of dissolution is not automatic as any interested party has to ask for the dissolution of the company before the commercial judge (and as a regularization is possible before the judge states on the dissolution case). This possibility of regularization may be the reason leading the initial commercial judge to have decided to temporarily suspend the subsequent increase of the share capital.


It remains to be seen if and how this legal corporate scheme of coup d’accordéon may be alternatively contractually replicated with the new threshold of 1 euro of the share capital applicable to selected companies only. The operation would consist in the reduction to 1 euro of the share capital and in a subsequent increase of the said share capital to refund the company (see S. comments of S. Sylvestre Dalloz Actualités, Le quotidien du droit dated 21 February 2023). This would apply to SARL and SAS for example, but the question remains to determine if the same indivisible feature would follow.


The thought may be fed by the fact that such an indivisible feature is necessary to refund the company and to therefore protect its creditors. In this perspective, it is hard to imagine how a reduction of the share capital to 1 euro would not be followed by a subsequent increase (the contrary would lead to a bankruptcy, or at least to a material weakening of the company). However, since this operation would not fall within the article L.224-2 legal scheme, a suspension of one of the two operations (the subsequent increase for example) may be contemplated as a temporary measure on a case-by-case basis, as the function of the commercial judge is to be pragmatic and as this temporary measure only aims at putting the process on hold, without cancelling the whole process. In addition, preventing a commercial judge from ruling a temporary measure in any events would lead to bind such judge without any legal exceptions, such situation leading to an illegality.


A temporary measure of suspension may be contemplated for example in the event of necessity of regularization or ratification of the contractual replicated scheme.

It would be for the parties to challenge such temporary measure and for the judge to decide, as decided by the supreme Court with this decision dated 04 January 2023, to bind the two operations and to follow the current case law based on the article L224-2 (or not).


Up to date 21 February 2023


Swaps and non-divisible contractual scheme (ensemble contractuel indivisible)


On 08 September 2021, the French Supreme Court dealing with private matters (Cour de cassation) ruled a remarked decision relayed by economic specialized press (see Sophie Rolland, Les Echos dated 18 November 2021 « Swaps de taux : un arrêt de la Cour de cassation sème le trouble chez les professionnels du financement »).


This decision (Cour de cassation, civ., 1, 08 September 2021, 20-14.201), albeit non-published (inédit) on the Bulletin de la Cour de cassation, is important as to its impact on the financial field and by the use of the concept of non-divisible contractual scheme (ensemble contractuel indivisible). 


The contractual scheme put in place is quite widely spread: a loan hedged by a rate interest swap entered into between a bank and a real estate civil company (SCI - Société Civile Immobilière). In this contractual scheme, the SCI, which corporate purpose is to acquire real estate, entered into a loan agreement with a floating interest rate (namely Euribor 1M plus 1% per year), such loan being hedged by the same bank, this later paying Euribor 1M and receiving a fixed rate of interest of 3.73%. It has to be stressed that the position of the SCI was not fully hedged as a delta of 1% per year remained to be paid by the SCI under the loan. From a strictly legal standpoint two separate agreements were entered into by the same parties: the loan and the swap, resulting in the bank receiving 3.73% plus 1% per year.


This case arose due to the contractual reimbursement before maturity of the loan by the SCI after the real estate being sold by the SCI. In terms of sequences, from a chronological standpoint, the SCI sold the real estate, contractually reimbursed the loan which triggered the unwind of the swap. The question raised to the Court was the existence of an unwind cost under the swap in addition to the cost associated with the reimbursement of the loan before maturity.


The Court of appeal of Paris, with a decision dated 27 November 2019, ruled that no amount shall be paid as to the unwind of the swap and ruled that the amount of 175,000€ (paid by the SCI in respect of the unwind costs plus legal interest as of 10 July 2014 – under penalty payment (astreinte)) shall be reimbursed to the SCI. In this context, the bank seized the French Cour de cassation, with the view of cancelling this reimbursement and receiving what it considers the contractual unwind costs.


The French Cour de cassation ruled that the Court of appeal of Paris rightly deducted, by the contractual terms and the behavior of the bank a manifest willingness, as to the borrower, to enter into an indivisible contractual scheme composed of the loan and the swap, with the cancellation of the first (the loan) resulting in the caducity of the second (the swap), the bank being obliged to pay back the unwind costs associated with the swap. 


This concept of contractual scheme (initially groupe de contrats) is commonly used by French case law and was named and revealed in France by French doctrine (firstly Bernard Teyssié, Les groupes de contrats, LGDJ 1975 cited in Droit des obligations P. Malaurie, L. Aynès, P. Stoffel-Munck LGDJ 11 ed. N°494 and A. Bénabent, Droit des obligations LGDJ e.g. 15 ed. N°330 et seq.) and is in line with the position of the French Cour de cassation, as described by the French doctrine (see Droit des obligations P. Malaurie, L. Aynès, P. Stoffel-Munck op. cit. N°495: «The unity of the group is easily admitted when the contracts are entered between the same parties or by the intermediary of the same pilot company». Other authors (Droit civil Les obligations Y. Buffelan-Lanore, Virginie Larribau-Terneyre), 17 ed. N°997 et seq. states that when the goal of the parties is the achievement of a global contractual operation using several contracts, reference is made to a contractual scheme (ensemble contractuel). For these later authors, « these contractual schemes are now a reality which is used by case law all the more than contracts are more and more driven by economy » (Droit civil Les obligations op.cit. N°998). 


Ordinance Macron N°2016-131 dated 10 February 2016 (as ratified by Law N°2018-287 adopted on 11 April 2018, with an entry into force on 1 October 2018) gives the possibility for the judge to use the caducity (caducité), giving rise to the end of a contract with a potential halo effect on the contractual scheme, as a whole (not to mention the latitude for the judge to allow restitutions). 


In this perspective, article 1186 alinea 2 of the French civil Code (as created by Ordinance Macron), states that «When execution of several contracts is necessary to the achievement of a single operation and when one of them disappears, other contracts which performance is then impossible by this disappearance and those for which the performance of such disappeared contract was a condition precedent of the willingness of one party are caduc »Alinea 3 of such article states that « Caducity however only applies if the counterparty against which the caducity is opposed knew the existence of the single global operation when his willingness was given »


As such, it can be argued that there is no specificity applied in the fields of capital markets, as common civil principles and rules apply the same way, whereas ordinance Macron excludes derivatives (contrats financiers) from the unforeseen theory (théorie de l’imprévision), secular in administrative law and new in civil law (article L211-1 of the French monetary and financial Code), avoiding a potential disruption of the international recognized existing legal scheme based on the material adverse change (MAC) provisions. 


The import of this case law on the capital markets, as a whole, remains to be determined. It is common practice that a bank offers a package composed of a loan and a hedge, resulting in the corporate paying a fixed interest amount and be covered against the increasing of a floating rate (to be paid under the loan). In this perspective, the case law of the French Cour de cassation may be applied with possible adjustments, offered by French regulation i.e. cancellation (nullité), resolution (resolution), caducity (caducité) of contract(s) and / or non-divisible contractual scheme (ensemble contractuel non divisible) with retroactive effect or not (article 1187 of the French civil Code). 


It is reasonable to think that this case law may rather be considered as a reference for market participants rather than a decision not subject of amendments or evolution depending on the context of the case. If this is common practice that a bank be at the same time the lender and the hedger, it cannot be excluded that a corporate may enter into a hedge agreement with another bank. In this perspective, a non-divisible contractual scheme (ensemble contractual non divisible), may also be characterized. 


Another question is the import of this decision on other non-divisible contractual schemes. This case law should apply to OTC derivatives (forward) or derivative admitted on markets (futures). In addition, it cannot be excluded as well that the hedging bank (or the corporate) has also entered contracts with other financial institutions. Should a non-divisible contractual scheme have an impact on other transactions, and on other non-divisible contractual schemes, such other transactions and other non-divisible contractual schemes may have to be unwind (or assigned), potentially ad lib.  


As alinea 3 of article 1186 of the French civil Code states that « Caducity however only applies if the counterparty against which the caducity is opposed knew the existence of the single global operation when his willingness was given »other legal tools will have to be used by the judge.


Considering this, the current tools provided for by French regulation (e.g. caducity, nullity, resolution), as amended by Ordinance Macron put the judge in a situation to rule efficiently the cases brought before his Court (with also the possibility to declare a contractual relationship not enforceable against third parties – inopposabilité, or to declare a provision of a single contract of the non-divisible contractual scheme as non-written – clause reputée non écrite).


In this perspective, a distinction can be proposed based on the identification of the relevant contracts underpinning the non-divisible contractual scheme. When the judge can easily identify these contracts and can ‘close’ the non-divisible contractual scheme, a solution should be given accordingly (based on the current legal tools). If this is not the case (the end of the non-divisible contractual scheme cannot be identified), the parties may have indirectly to contractually apply a pragmatic decision of the judge, negotiating with their counterparties, based on the ratio decidendi of the case and inter alia article 1186 of the French civil Code alinea 3. 


One should be confident on the pragmatism of the French Cour de cassation (especially the commercial Chamber), not only to apply the French civil Code (and French regulation, as a whole), but also previous case law architecture, based on concepts created and revealed by French doctrine.  


Up to date as of 08 September 2021.


Corporate Authorisations and Capital Markets Law in France


The French Code de commercehas recently been amendedby ordinance N° 2017-970 dated 10 May 2017. In this perspective, Article L. 228-40 of the Code de commerceis amended in the view of widening the scope of delegation of powers. This is the main purport of the reform. The new Article L. 228-40 is now drafted as follows:


 “The Board of Directors, the Management Board, the manager or the managers are capable of deciding or authorising the issue of bonds, except if the Articles of Association reserve this power to the general meeting or if the general meeting decides to exercise such power. 


The Board of Directors or the Management Board may delegate to any persons of its choice, the necessary powers to carry out, within a period of one year, the issue of bonds and to determine the terms and conditions. 


Designated persons report to the Board of Directors or the Management Board under conditions determined by these bodies.”.


The new regime of delegation applicable to limited companies is now synchronised with the regime applicable to credit institutions (banks) (établissements de crédit). This allows the possibility to delegate to any persons (and not only to a specific person provided for in former Article L. 228-40, such as a member of the Board of Directors), the power to carry out the contemplated bond issue. The term person(s) used in Article L. 228-40 is generally understood as individual(s). This construction is consistent with market practice, even if, from a French law perspective, a literal interpretation could lead to the possibility for a person within the meaning of French law (i.e. an individual or a legal entity) to carry out the contemplated bond issue.


Such a literal construction would imply the possibility for another company, for example for a company within the same group of the issuer, to carry out a bond issue. Such a construction, although not being currently in line with market practice of corporates or banks, cannot be excluded. In practice, this would lead to the possibility for an issuer to administratively externalise the carrying out of the bond issue and, why not, to the possibility for a specific dedicated entity to be created within a group of companies or banks to bear the administrative burden of the bond issue. This might be interesting for companies or banks which are contractually structured as a group of companies, with the funding being separately managed.   


In practice, this amendment allows members of the issuer, typically members of the funding department, to carry out bond issues. Such members do not longer have to be at the same time members of the Board of Directors as this is, to a certain extent, considered as useless for the single purpose of carrying out bond issues decided by the Board of Directors. In addition, asking a member of the Board of Directors to carry out bond issues may lengthen the issuance process due to his potential non-availability. 


It has also to be emphasised that Article L. 228-40 maintains the concept of delegation of powers only, this being in line with market practice. However, in theory, it can be considered that a delegation of signature is also possible, as new Article L. 228-40 does not prohibit it. 


Up to date 17 August 2018.


Characterization of obligation


On 23 November 2017, the French Cour de Cassation (second civil room of the French Supreme Court dedicated to private cases) ruled, by a literal and traditional construction of Article L. 213-5 of the French monetary and financial Code, that the characterization of bond (obligation) is not conditioned on the guarantee of repayment at par.


Bonds that are not capital guaranteed remain nevertheless bonds.


In the previous instance, on 21 June 2016, the French Court of appeal of Paris ruled, on the contrary, that repayment at par was included as an essential feature in the concept of bond (obligation). This position was held to protect consumers, in a context where they have subscribed for life insurance based on non-capital guaranteed products, and they have not get back, at least, what they have invested.


It has to be mentioned that insurance companies are sometimes sellers in the secondary market of bonds (obligations i.e. titres financiers), that the market calls structured products. This implies that the performance of the bond is linked to an underlying which can be volatile and sometimes the capital invested is not guaranteed. In a way, non-capital guaranteed structured obligations can economically be similar to derivatives (contrats financiers) and this may result in massive losses. In such circumstances, the insurance company has to ensure, when such bonds / structured products are sold to consumers repackaged as life insurance, that the advisory and the information obligations are fully complied with. 


When we are in presence of bonds that are not capital guaranteed, the characterization of bond is then not only crucial for insurance companies but also for issuers, subscribers, and holders for other regulatory purposes. The current position of the French Cour de cassation will reassure the bond market as a whole.


Up to date 23 November 2017. 


Contract law: ordinance N°2016-131 dated 10 February 2016, unforeseen theory and capital markets. 


Law N°2018-287 ratifying ordinance N°2016-131 dated 10 February 2016 related to contract law and evidence was adopted on 11 April 2018 (with an entry into force on 1 October 2018).

The law not only ratifies the ordinance but also amends certain of its provisions. In this perspective, the law contains a very important article which excludes derivatives (contrats financiers) and transactions over securities (opérations sur titres) from the unforeseen theory (théorie de l’imprévision). In a nutshell, the unforeseen theory allows a party to ask a judge to amend or to rescind the contract in the event of a material adverse change of his economic situation (i.e. when it becomes extremely expensive for a party to perform the contract).

The exclusion is applicable to the transactions mentioned in I to III of Article L211-1 of the French monetary and financial Code. This therefore includes securities (e.g. shares, bonds, units of UCITS) and derivatives (e.g. forward, future, swaps, credit default swaps, options).

The importance of this exclusion has to be stressed as it strengthens the capital markets legal safety, as a whole. Correlatively, it also avoids a potential disruption of the international recognized existing legal scheme based on the material adverse change (MAC) provisions. 

Up to date 8 August 2018.


Increase in share capital (employee share schemes)

The French Supreme Court related to private matters (Cour de cassation) ruled as a ratio decidendi on 28 November 2018 that the single vote on the resolution related to an increase in share capital reserved to employees is considered satisfactory to regularize an increase in share capital not subject to a vote on a preceding general meeting. This allows the possibility for a general meeting to ratify an increase in share capital reserved to employees (due to the relativity of the nullity – nullité relative).

The legal concept that may be considered as underpinning the ratio decidendi is the French appearance theory: the ratification is being made possible by the subscribers (employees) having legitimately believed that the increase in share capital was regularly made. This is in line with the spirit of company law to allow ratification as much as possible to ensure legal safety. 

Up to date 28 November 2018.


Jerôme Kerviel trader’s case – Court of Appeal of Paris dated 19 December 2018 – labor decision 


On 19 December 2018, the French Court of Appeal of Paris (RG 16/09186) stated that the dismissal of Jerôme Kerviel, French trader from SGCIB (Société Générale Corporate and Investment Banking), the investment bank of Société Générale is fair (on the basis of a gross negligence – faute grave). 


This overrules the decision (jugement) of the Conseil de Prud’hommes (French jurisdiction dedicated to labour law) dated 7 June 2016, whereby the dismissal was considered unfair (i.e. without a material and true reason) (cause réelle et sérieuse). In this first instance, Jerôme Kerviel obtained not only €100,000 because of the unfair dismissal but also (i) €20,000 due to the vexatious nature of the dismissal, (ii) €18,083.32 as regards to compensation in lieu of notice(indemnité compensatrice de préavis), (iii) €1,808.33 in relation to unpaid vacation pay (congés payés), (iv) €13,609.23 in connection with conventional severance pay (indemnité conventionnelle de licenciement) and (v) €300,000 as to the unpaid bonus for 2007 (plus €2,000 in relation to article 700 of the French Code de procédure civile). 


The ratio decidendi of the Court of Appeal of Paris is based on the characterization of the conduct of Jérôme Kerviel during his contract. The blames in the letter of dismissal are considered grounded by the Court of Appeal of Paris (even if previously been ruled purged due to the knowledge of them by the employer). In particular, the blame considered crucial by the Court is the taking of directional positions (i.e. at a highest analyzed value), while at the same time going over authorization (€50 billion for an authorization of €125 million for the whole desk only).


The Court of Appeal of Paris states however that the wilful misconduct (faute intentionnelle) is not characterized: Jérôme Kerviel did not mean to cause the loss of the estimated circa €5 billion. The position of the Court is in line with the statements of Jérôme Kerviel who considered himself as being part of a spur gear (as mentioned in his book “L’engrenage, mémoire d’un trader”). This decision gives a warning to the traders: taking inconsiderate risks could lead to a dismissal (with maybe prison), and at the same time a balance: a bank which loosens internal regulations (or admits implicitly / explicitly / or maybe intentionally some inappropriate derogations) cannot fully blame a trader. 


The ratio decidendi of the Court of Appeal of Paris is also grounded on the force of res judicata(for res judicata pro veritate habetur autorité de la chose jugée). This means that, once the decision is final, such a decision is considered as representing the judicial truth. Jérôme Kerviel was indeed convicted with offences (délits pénaux) by a distinct decision of the French Cour de cassationdated 19 March 2014 (Ch. Crim.pourvoi12-87416). In this respect, the Court of Appeal of Paris qualifies the force res judicataprinciple, as absolute. As a consequence, other civil French pending decisions are to be linked (and bound) by the decision of the French Cour de cassation. In this perspective, the conviction of the trader by the French Cour de cassationinflues on, and binds the decision of the Court of Appeal of Paris, ruling the labor decision.


It should however be considered that the absolute feature of the force res judicata, as stated in the ruling of the Court of Appeal of Paris, should be subject to challenge. As such, since any legal concept, even considered as absolute, are, in a democratic country, subject to other legal concepts tempering (within the meaning of qualifying) such absolute rights. 


It should also be considered that this characterization by the Court of Appeal of Paris is more in line with what would be acceptable in a context where the bank is considered as being itself in default, since being itself convicted by the French banking regulator – Commission Bancaire for the lack of control and monitoring of the trading systems. 


In light of this, the Court of Appeal of Versailles ruled on 23 September 2016 (room 9 – RG 14/01570) (ruling by a review of the case decided by the French Cour de  Cassationdated 19 March 2014 (Ch. Crim.pourvoi12-87416)) that Jérôme Kerviel is only partially responsible for the prejudice caused to the Société Générale and convicts him to pay €1 million only (instead of circa €5 billion). 


Up to date 19 December 2018.










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