France has a legal framework covering securitization since 1988. Law No. 88-121 is the main legislation providing for the establishment of special purpose vehicles (SPVs)
, the issuance of securities and receivables in France
. The main reason this law was enabled was to allow French financial companies
to sell mortgage-secured receivables.
Ever since, the law was amended and thus improved several times since 1988. Our company formation consultants in France
can offer complete information on the legal regime applicable to SPVs
Foreign investors who want to open special purpose vehicles in France can rely on the support of our local consultants who can explain them all the legal requirements they need to meet.
The main features of the SPV in France
Foreign companies and investors
who want to open special purpose vehicles in France
must respect a few laws. Among these, the Civil Code and the Monetary and Financial Law which was amended in 2017.
Under these laws, French SPVs have specific characteristics, among which we mention the following:
it is created with the purpose of reducing and isolating the financial risk of the parent company;
it is set up as a separate entity which also help it reduce its risks in case the parent company undergoes bankruptcy;
it will have its own balance sheet which will be filed separately with the French authorities;
it can also be used as a holding company with the purpose of securing debts.
How to set up a special purpose vehicle in France
The French SPV
follows the general accepted principles of special purpose vehicles around Europe and that is a subsidiary
established in order to reduce bankruptcy risks of the shareholder who can only be a foreign company. In 2008, the government enabled two forms for a French SPV
- the FCT (mutual securitization funds) which allows for the securitization of any type of receivables and insurance risks;
- the SDT (securitization entities) which can only take the form of a limited liability company and which very advantageous in the context of international taxation agreements.
While the SDT
is a corporation considering its registration form, the SPV
established under the form of a FCT
is a co-ownership with no legal personality. The FCT
is a collective investment scheme which can be set up by a fund manager and custodian. The FCT
will have no shareholders, capital, employees or management board. On the other hand, the SDT
will be opened through registration with the French Companies Registrar
. Both types of French SPVs
must be registered with the Financial Markets Authority.
Specialized financing entities in France
Under the new law that was enabled in 2018, both FCTs and SCTs have been grouped under specialized financing entities (OFS) which can allow private investors to invest in a wider variety of receivables. Among these, we mention debts, loans and commercial receivable.
The new special purpose vehicles
can be registered in France
with a transparent structure or as co-ownerships with purpose of acquiring receivables and extending loans. The other purpose of the new legislation is to provide a clearer framework with respect to the true sale transfer of the assets to the buyer and the reduction of the risk incurred by the seller.
French SPVs registered under the new legislation are also allowed to hold other assets which grant it the right to operate as an Alternative Investment Fund (AIF) which falls under the EU Directive on Alternative Investment Fund Managers.
We can help you set up a SPV
, however, if you are interested in starting another type of business
, we can also assist you open a company in France
in any other industry.
Securitization bodies in France
Considering that SPVs fall under the Securitization Law, they will fall under the supervision of the French Financial Markets Authority (AMF). The regulatory body is in charge with the licensing and management regulations applicable to such entities.
One of the main requirements is for the SPV to be administered by a licensed fund management company
. With respect to the licenses to be obtained by the SPV, these are not subject to specific licensing criteria and they do not need to apply for any permit themselves. Special requisites must be met when issuing public offers which implies submitting a prospectus with the AMF.
When setting up a SPE in France, one must make sure that the management company and the custodian are licensed by the AMF.
With respect to the custodian of the French SPV
, it can be a local financial or credit institution or a French branch
of a bank located in Europe. Its main role will be to administer the receivables, collect the money generated by the assets, prepare and file reports regarding the activity of the SPV. The reports will be submitted with the management company.
Our French company formation specialists can offer more information on the licensing requirements applicable when creating a SPV.
Types of receivable and securities issued by SPVs in France
According to the Financial Markets Authority in France, the following types of receivables can be sold by SPVs
- bank loans;
- commercial and lease receivables;
- exiting or future receivables;
- debt instruments, such as non-performing and defaulted receivables;
- future cash flows.
With respect to the securities that can be sold through a SPV in France are residential and commercial loans, but non-mortgaged assets can also be securitized. Among these, we mention credit card balances, consumer and motor vehicle loans, and leases.
Taxation of SPVs in France
One of the most important advantages of French SPVs
is their taxation
. The FCT
is not subject to any transfer or documentary taxes, or to the stamp duty if it is not registered with the local tax authorities. If it is, it will be subject to a nominal tax. Receivable traded by French SPVs
on the capital markets will also be exempt from any withholding taxes, as they are tax neutral.
The securitization market in France
- in 2017, France was the 2nd largest securitization market in Europe after the UK;
- the total value of newly issued of securitized receivables was 36.9 billion euros in 2017;
- by comparison, the value of the receivables issued by the entire EU was 235 billion euros;
- the taxation of income derived from securities and receivables is set at a 75% withholding tax on interests remitted in a country wtih which France has no tax agreement.
For complete information on the advantages of setting up special purpose vehicles in France
, do not hesitate to contact our company incorporation representatives
. You can also rely on our company formation services
provided in France