LexInter | June 6, 2017 | 0 Comments


Complex or hybrid title

Combination of two or more types of “simple” transferable securities: shares, investment certificates , bonds and equity securities . The hybrid title gives vocation to the capital. This possibility, depending on the type of security, is either at the option of the creditor or that of the issuer. In the first case, it is a conversion option and in the second case an option of payment by repurchase in shares.

 Complex or hybrid titles are generally the result of practice

Article L 228 -91 sets the principle and the limits for the issuance of these complex securities. It has that

” The issue contract may provide that these securities and the equity or debt securities to which these securities give right may only be sold and traded together. In this case, if the security originally issued is a capital security, it does not fall into a specific category within the meaning of Article L. 225-99.
Capital securities may not be converted or transformed into securities representing debt. Any clause to the contrary is deemed not to be written.
the securities issued pursuant to this article may not be regarded as constituting a promise of action for the implementation of the second paragraph of Article L. 228-10. ”

” The issues of securities giving access to the capital or giving the right to the allocation of debt securities governed by article L. 228-91 are authorized by the extraordinary general meeting of shareholders in accordance with articles L. 225-129 to L. 225-129-6. This decides on the report of the board of directors or the management board and on the special report of the auditor . “

The capital to which the securities give access may be that of another company. Article L 228-93 provides that

A joint stock company may issue securities giving access to the capital of the company which directly or indirectly owns more than half of its capital or of the company of which it directly or indirectly owns more than half of the capital.
Under penalty of nullity, the issue must be authorized by the extraordinary general meeting of the company called to issue these securities and by that of the company within which the rights are exercised, under the conditions provided for in article L 228-92.

The possibility of subordination is provided for by article L 228-95 which provides that

 When issuing securities representing claims on the issuing company, including those giving the right to subscribe or acquire a security, it may be stipulated that these securities will only be reimbursed after payment of interest from other creditors. , excluding or including holders of participating loans and participating securities, notwithstanding the provisions of Article L. 228-36 of this code and those of Articles L. 313-13 et seq. of the Monetary and Financial Code.
In these categories of securities, an order of priority of payments may also be stipulated.

Complex or hybrid securities fall between pure debt securities and simple stocks, between pure debt and pure capital. If they are qualified as quasi-equity, they basically retain the characteristics, and the risks, of the debt, approaching capital only in rank. They constitute an insolvency risk for the issuer, which is reduced if they are securities redeemable at the sole discretion of the company and at any time, more significant if the redemption can only be made at specified deadlines. It constitutes a significant risk if the buyout depends on the decision of another company. When it is not a question of bonds redeemable in shares but of convertible bonds, the risk is the same as that of a traditional bond,

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