Collateral trust

Collateral Trust, the most robust form of pledge under French law

Fiducie is an operational tool with no equivalent in terms of risk-mitigation:

  • Its enforceability rests on the transfer of the full ownership from the settlor to the trustee.
  • The establishment of a fiducie is fiscally neutral and involves reduced taxation and transaction costs.
  • The fiducie is totally bankruptcy-remote. It is kept isolated from the trustee’s own property, from all other fiducies and protected from any alienation by the grantor or its creditors.
  • The scheme is very flexible as several assets, including liabilities, may be grouped within the same fiducie.
  • It is managed according to a tripartite convention which details the rights and obligations of the parties. Its execution does not require any outside intervention.

Because collateral trust is such a strong risk-mitigation tool, it offers lenders the possibility to get a contained exposure to more complex cases.

In the event of default of the settlor / borrower :

  • Trust assets are transferred to the beneficiary with no delay and without requiring any legal action.
  • The lender can not be forced into granting debt write-offs.
  • The lender backed by assets in the trust is senior over all other creditors including privileged creditors.