Written under the supervision of Caroline EMERIQUE GAUCHER, Notary Public
In partnership with the Master 2 Droit du patrimoine professionnel (223), Université Paris-Dauphine
L'order no. 2015-1288 of 15 october 2015 simplifying and modernising family law was intended to lighten the rules of legal administration, but its implementation has been a contrario made more complex. The transfer of securities by legal guardians now requires the authorisation of the guardianship judge, whereas at the end of the donation before transfer, the minor holds liquid assets in his or her estate, which are essentially risk-free.
By Laura DE CASALTA, Master 2 Professional Wealth Law, Master 2 Wealth Management and Private Banking
L'order no. 2015-1288 of 15 october 2015pursuant to the Enabling Act No. 2015-177 of 16 February 2015The French law on the legal protection of minors and the rules applicable to gifts prior to the transfer of securities have been radically amended.
Procedure for donation before sale
A parent holding a portfolio of securities with a high capital gain makes a gift of it to his or her child. As the gift wipes out the capital gain, only the gift tax has to be paid. The child then holds assets in his or her estate that are inherently risky because their value may fluctuate. The child, represented by his or her legal guardian, will sell these securities, taking the value at the time of the gift as the acquisition price. As the transaction is carried out over a relatively short period of time, the fluctuation in value is small, so that on resale the capital gain recorded is minimal or even nil. At the end of the transaction, the minor holds a risk-free asset, namely cash. The parent has passed on part of his or her estate under advantageous tax conditions, while at the same time securing the estate of his or her offspring.
System applicable before the Order
When both parents exercised parental authority, the system of pure and simple legal administration applied. When only one parent had parental authority, the system of legal administration under judicial supervision applied.
According to thearticle 389-5 of the French Civil CodeThe principle of co-management was applied to acts of disposal, with the exception of certain acts listed in section 3.e paragraph for which the authorisation of the guardianship judge was required.
This list does not include the sale of shares belonging to a minor under pure and simple legal administration. The sale of shares was an act of disposal that the parents had to carry out together, but without the authorisation of the guardianship judge.
System applicable since the Order
Firstly, the Order abolished the systems of pure and simple legal administration and administration under judicial supervision in favour of a single system of legal administration (ord. n° 2015-1288, 15 oct. 2015, art. 3) to eliminate differences in treatment between single-parent and two-parent families. From now on, the sole legal administrator may carry out acts of administration relating to the minor's property alone. In the presence of both parents, one parent may perform the administrative act alone because of the legal presumption of agreement between the two administrators (C. civ., art. 382-1). With regard to disposals of the minor's property, the parent exercising parental authority alone may perform these acts without seeking authorisation from the guardianship judge. If there are two of them, the legal guardians will have to carry out the disposals together, and in the event of disagreement between them, the guardianship judge will be asked to authorise the disposal (C. civ., art. 387).
However, the Civil Code retains a list of serious acts set out in Article 5 of the Code.article 387-1 of the Civil Code. With regard to these acts, the legal administrator must first seek the authorisation of the guardianship judge, in particular for any act involving transferable securities or financial instruments (within the meaning of theArticle L. 211-1 of the Monetary and Financial Code) which would have the effect of altering the content or depreciating the value of the minor's assets, or diminishing the powers of the minor (C. civ., art. 387-1 8°.). Under the new legal administration regime, the sale of shares held by the minor is therefore subject to authorisation by the guardianship judge. However, the length of the delay between the gift made to the child and the parents' authorisation to sell the securities may make the transaction inadvisable.
Strict interpretation of the article
L'article 387-1 8° of the Civil Code covers all acts". relating to transferable securities or financial instruments within the meaning of theArticle L. 211-1 of the Monetary and Financial Code ". The financial instruments defined in this article of the Monetary and Financial Code include financial securities, in particular equity securities issued by joint stock companies, but do not include shares. Consequently, as the article sets out an exhaustive list and is therefore to be interpreted strictly, it seems to us that while judicial authorisation must be sought for transactions involving securities, it should not be required for shares in companies.
To be taken into account in a more global reflection
Business owners wishing to change the corporate form of their company should be aware of the opportunities that may arise from adopting a company whose capital is made up of shares, in order to pass on their assets to their descendants.
A practical tool: the third-party administrator
His intervention
L'Article 384 of the Civil Code provides that property given or bequeathed to a minor and administered by a third party is not subject to the provisions of legal administration. However, the text is silent on the designation of the third party, leaving greater freedom to the disposing party, with the exception of the father and mother, who may not designate themselves as third party administrators..
Its powers
The third-party administrator's powers are freely defined by the deed of gift or will. Failing that, they have the powers of the legal administrator. The deed may therefore provide for greater powers than those conferred by the legal administrator. The third-party administrator may be granted powers of disposal without the prior authorisation of the guardianship judge. They may therefore carry out all acts of disposal and administration on behalf of the minor. The precise nature of these acts may also be defined in the deed of gift. To safeguard the interests of the child's assets, the notary may include in the deed the appointment of a management controller, as well as a system of guarantees and penalties in the event of default by the third-party administrator.
