Expert Analysis: Has the trust-trust already proven effective in practice?

Gilles Podeur: To our knowledge, the existing trusts have not, to date, given rising to significant litigation. This in itself is a positive point. It seems to us that, as a result of the various reforms, the applicable texts fully ensure its robustness and therefore do not require a jurisprudential interpretation: all the essential subjects are expressly dealt with, whether we are talking about the problem of contracts in progress, participation in creditors’ committees, or nullities of the suspect period.

To our knowledge, an interesting ruling deserves to be cited: this is a decision of the Paris Court of Appeal of 4 November 2010, which recalled the obvious, namely that property placed in trust does may not be assigned as part of an assignment plan.

In addition, the trust-trust has been used on a number of occasions in restructurings (for example, an ad hoc terms of reference or in conciliation), precisely because it provides reassurance to the creditors who benefit from them, much more than most traditional sureties.

Finally, the trust has already become commonplace in the online gaming sector, where it allows to secure the assets of players in a simple and effective way.

Experts Analysis: If we now take the borrowers’ point of view, has not the trust become a “too” effective security? Does he still have a chance to recover even though he has transferred the ownership of property necessary for his activity to a trust?

Gilles Podeur: That’s a very good question. In 2007, the creation of the trust sparked fears on the part of corporate law professionals in difficulty. Would the trust sound the death knell for restructurings in amicable procedures or safeguard procedures?

This debate is outdated today.

On the one hand, because the law has been adapted to achieve a balanced result. The effectiveness of the trust has been fully preserved, but specific provisions also give the debtor a chance to recover. In particular, it is stipulated that if the property placed in trust is necessary for the exploitation (more exactly, if the debtor retains its use or enjoyment), then the opening of the collective proceedings cannot justify, as such, the assignment by the trustee of the assets placed in trust.

On the other hand, the existence of the trust has, on the contrary, made it possible to find a technical solution that avoids the opening of a collective procedure in certain crisis situations, where donors were willing to make efforts, but at the same time condition of having effective security. More generally, the possibility of offering creditors effective securities always facilitates access to credit.