A new measure regarding the disposal of securities owned by a minor


We draw your attention to a measure related to disposals of securities that belong to minors set out in Ordinance No. 2015-1288 of 15 October 2015 relative to the simplification and modernisation of family law. This heading seems particularly inappropriate as, since 1 January 2016, any disposal of securities or financial instruments that belong to minors must first be authorised by the guardianship judge (juge des tutelles), which is new.

This Ordinance, which is in line with the Law of 16 February 2015 amending the legal administrative scheme for minor children, went almost unnoticed. Article 387-1.8 of the French Civil Code, which it creates, provides that the legal trustee may not, in the absence of the prior authorisation of the guardianship judge: "Proceed with an act that relates to securities or financial instruments within the meaning of Article L. 211-1 of the French Monetary and Financial Code if said act causes a major change to the content of the minor's assets, a significant depreciation of its capital value or a lasting alteration of the minor's prerogatives today or in the future. The authorisation determines the conditions of the act and, if applicable, the price or reserve price of said act."

Article 387-1 adopts the definition of acts of disposal set out in Decree 11 2008-1484 of 22 December 2008 under Article 496 of the French Civil Code. The prior authorisation of the court is required only for acts of disposal. But what is an act of disposal related to securities? The answer is not simple, as an act of disposal may at times be "de-qualified" as a simple administrative act when, in certain circumstances, the act has little impact on the content or value of the protected individual's assets.

Based on the Baylet case, (Cass. civ. 1, 12 Nov. 1998, No. 96-18041) one could reason that, if the situation involves the management of a portfolio of securities and replacing existing securities with new securities of the same type, the court's prior authorisation will not be necessary. However, if the disposal of securities and the reuse of the funds paid to purchase assets of a totally different nature are involved, or if the securities are contributed to a business, the act of disposal is indeed subject to prior authorisation.

And what if the securities are shared? The sharing of a minor's assets is no longer (surprisingly) subject to prior authorisation, but what if the assets shared are securities? In many cases, it is not easy to come to a conclusion and, when in doubt, it is wise to seek the guidance of the court.
We note that the measure does not seem very appropriate as it covers all securities, whether they are listed or not, and in the latter case, the price issue does not exist. Inversely, and somewhat inconsistently in terms of the protection of the assets of minor children, the measure does not target shares, while the disposal or contribution of a business also requires the guardianship judge's authorisation.