Liberalization Of The French Alternative Financing Regime

Author:Mr Reid Feldman and Hubert de Vauplane
Profession:Kramer Levin Naftalis & Frankel LLP
 
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During the year 2016, French regulation of alternative finance, including the crowdfunding regime established two years ago, has been liberalized in important ways: (1) by increasing the ceilings and expanding the types of financing permitted on crowdfunding platforms of a conseiller en investissements participatifs ("CIP"), a prestataire des services d'investissement ("PSI") or an intermédiaire en financement participatif ("IFP"); (2) creation of a new instrument for alternative finance, known as a "minibon", which is a kind of promissory note (bon de caisse); (3) clarification of certain rules applicable to CIPs; and (4) opening up lending to businesses by certain investment funds. The first two sets of measures result from ordinance n° 2016-520 of 28 August 2016 and decree n° 2016-1453 of 28 October 2016; the third set from changes in published positions and practice of the French financial markets regulator, the Autorité des Marchés Financiers ("AMF") during 2016 and from the regulation (arreté) of 12 October 2016; and the fourth from decree n° 2016-1587 of 26 November 2016.

In evaluating the impact of these measures, it should be borne in mind that French law sets out an unusually broad banking monopoly, which prohibits, subject to exceptions, any grant of credit, on a "habitual" basis, to businesses or individuals other than by licensed credit institutions (banks) or finance companies. Nevertheless, recent liberalization measures reflect the intent of French authorities to gradually extend the role of alternative finance in providing funding to businesses.

The liberalization of alternative finance in France fits into a broader trend, illustrated by EU Regulation n°2015/760 of 29 April 2015 on European long-term investment funds ("ELTIF"), under which certain alternative investment funds ("AIFs") can grant loans to companies directly;1 a new provision permitting loans among companies having certain business relationships, subject to stringent limitations;2 the ESMA opinion of 11 April 2016 advocating liberalization and harmonization of rules on financing of businesses by investment funds;3 and article 117 of the socalled "Sapin II" law which allows French authorities to adopt legislation relating to financing of businesses by funds and assignment to them of business loans.4

  1. Amendments to conditions for financing via internet platforms of by CIPs, PSIs and IFPs

    Decree n° 2016-1453, mentioned above, which entered into force on 31 October 2016, makes two modifications to the rules applicable to offerings of securities (shares and bonds) via internet platforms of CIPs or PSIs.

    First, the ceiling for offerings by any issuer during any 12-month period via such platforms, without a formal prospectus, has been raised to 2.5 million euros, provided that offerings of shares exceeding 1 million euros may not represent more than 50% of the issuer's share capital.5

    Second, whereas since 1 October 2014 only ordinary shares or plain-vanilla bonds could be offered on such platforms, decree n° 2016-14536 allows issuance...

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