Fiducie is the French equivalent to the Trust in English law. It is a contract by which the Settlor (le Constituant) transfers the legal ownership of assets or rights, present or future, to a Trustee (le Fiduciaire), who keeps that property isolated from his own estate and acts in a pre-agreed manner to the benefit of another party (le Bénéficiaire).
Fiducie is a very flexible and robust legal scheme for mitigating risks, notably credit exposure. Whether used as a Security Trust or a Management Trust, fiducie can be structured to serve numerous applications in the realm of corporate and asset transactions. It is now commonly used to secure all types of financing operations, restructurings and turnarounds, corporate transactions and control of governance. The traditional distinction between Security Trust and Management Trust must also be put into perspective, the practice tending to combine these two objectives, particularly for complex operations or those aimed at performing actions before the occurence of an event of default.
A credit risk mitigation tool par excellence, fiducie has become a must-have for all lenders exposed to complex, uncertain and volatile environments.
A great deal of contractual freedom is granted by the legislator to the parties of a Fiduce to determine the assets transmitted to the Trustee (shares, real estate, receivables, goods, intellectual property, rights, cash…) and the mission assigned to him. The mission can be simple (holding securities ahead of an event of default, holding cash as escrow, etc.) or can involve much heavier responsiblities (actively managing assets, selling a block a listed company,…), making the Fiducie a sophisticated solution in the derisking of the most complex operations.
Management Trust
Management Trust consists in the transfer of a property to the Trustee with the view to managing it for the good of the Beneficiary. The goal is to isolate an asset in order to secure an existing or potential liability or to steer its cash-flows and value to pre-agreed uses.
Security Trust
Security Trust aims at securing financing trought a bankruptcy-remote scheme. The borrower transfers an asset to the Trustee in order to guarantee the reimbursement of its debt. After repayment, assets are returned to the borrower. In case of default, they are used to repay the lender.