B/K B/K Brenner & Kollegen International Insolvency Lawyers Secured Transactions under the European...

B/KB/KBrenner & Kollegen

International Insolvency Lawyers

www.bbrenner.com

Secured Transactions under the European Insolvency Regulation

(EIR)

Brenner, Secured Transactions... Case Study

Suppliers‘R.O.T.

-Stock- book debts-equipment

-deposit

Bank‘s Global Securities

Brenner, Secured Transactions... EIR Art. 4

Principle: lex fori concursus1. Save as otherwise provided in this Regulation, the law

applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened,...

2. The law of the State of the opening of proceedings shall determine ... in particular:

(a) - ...

(d) - conditions for a set-off

(m) - voidability of legal acts


Exception: Rights in Rem (R.I.R.)

1. The opening of insolvency proceedings shall not affect the rights in rem of creditors or third parties in respect of tangible or intangible, moveable or immoveable assets ... belonging to the debtor which are situated within the territory of another Member State at the time of the opening of proceedings.

2. (in particular):

(c) the right to demand the assets from ... anyone having possession ... contrary to the wishes of the party so entitled;


Exception: R.O.T.

1. The opening of insolvency proceedings against the purchaser of an asset shall not affect the seller‘s rights based on a R.O.T. where at the time of the opening of proceedings the asset is situated within the territory of a Member State other than the State of opening of proceedings.

2. ...

Brenner, Secured Transactions... UNCITRAL GuidelinesWorking Group VI

UNCITRAL aims at SME‘s need of credits

• Asset-backed financing gives SME‘s an easier and less costly access to credits

• In exchange: strengthen efficiency of securities on moveables (opposability against 3rd parties)

• Enforce transparency and publicity of such securities*

• Banks‘ and suppliers‘ credit securities should be treated equally

• Encourage multiple securitisation by the same asset

• Ensure enforceability in other countries.

Brenner, Secured Transactions... UNCITRAL GuidelinesWorking Group VI

*UNCITRAL Recommendations:• Securities should be made opposable towards 3rd

parties as a general effect (incl. assignments)

• States should grant super priority in insolvency proceedings

• But: clear rules for priority transparency by public register of ass. of book

debts

• Strict lex rei sitae-rule for goods on transit should be amended:

Law of State of origin / State of final destination should be applicable

Brenner, System of securities...

su p p lie r's es ta te :

- R e te n tio n o f t it le

d e b to r's e s ta te :

- a ss ig n m t. o f rece ivab le s,- tra n sfe r o f o w ne rsh ip

e s ta te o f th ird pe rso n s:- g ua ra n ties- d eb e n tu res

- b on ds ...

- su p p lie rs- a sse t-b a cke d c re d ito rs

- b u ye r o f N P L 'sb a n ks


Suppliers‘R.O.T.


-deposit


Brenner, Secured Transactions...

German Insolvency System

1. Abolition of all preferential rights (Insolvency Act 1999)

2. R.O.T. and Collateral securities no part of the debtor‘s estate (R.O.T.) collaterals give priority rights Exception: collaterals are voidable

(3-months-period)

Brenner, Collateral Securities...

Securities‘ System on movables

1. ROT (= Eigentumsvorbehalt, EV)

2. Collateral securities on movables• Transfer of ownership by way of security

(= Sicherungsübereignung, SÜ)

• assignment of receivables by way of sec.(= Sicherungsabtretung, SAbtr)

3. Guaranties, debentures, bonds, ...

Brenner, Collateral Securities...

Securities‘ System

1. R.O.T. a) simple version (= goods are still in stock)

b) extended version• Permission to sell property

+• Assignment of receivables

Brenner, German Securities‘ System...

German Securities‘ System

1. ROT (= Eigentumsvorbehalt, EV)/Test: Did parties agree upon it

• in time? (at closing of contract)• in the proper way? (no formal

requirements) Is there proof ? („always get it in writing!“) Can you identify the goods? :-(


Who has got to prove what:

Supplier / Owner • original ownership*• Delivery

Administrator/liquidator• Payment (i.e. automatic passing of title)


*original ownership:

Problem: mixed stock Supplier / owner can‘t even prove

original ownership on certain goods

Therapy: transfer of all title to „suppliers‘ pools“

Association owns 100 % of stock No identification necessary any more


Securities‘ System

1. R.O.T. a) simple version (= goods are still in stock)

b) extended version

• Permission to sell property

against

• Assignment of future receivables


R.O.T. „extended version“(Assignment of certain unidentified, future receivables)

• No formal requirements• Opposable to third parties (admin., factor)• Preferential towards banks-assignments• But: Restricted to special receivables

Problem: identification!

Therapy: see „suppliers‘ pools“


Competing securities

Supplier‘sR.O.T.

-stock-receivables

BanksGlobal securities

Landlord‘slien

-Preferential, but-Identification necessary

-not preferential but-Global :-)

- secondary


Suppliers‘R.O.T.


-deposit


Dortmund Public Hearing 14. June 2006

in re:

Podolski vs. Zurawski

in re:

B/KB/KBrenner & Kollegen

International Insolvency Lawyers

www.bbrenner.com

B/K B/K Brenner & Kollegen International Insolvency Lawyers Secured Transactions under the European...

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