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The list of financial transactions included in the statutory concept for settling such financial transactions was updated to reflect the current status of financial services supervision. The list of financial transactions included in the scope of Sec. However, this update does not materially affect the prior list, which was considered to be non-exhaustive in any case. The core of the reform is the new paragraph 4 of Section InsO, which stipulates that counterparties may contractually agree on netting provisions that deviate from the statutory mechanism of termination and settlement of contracts regulated in Art.

The German legislator's explanation of this test is that the provision may not contradict the purpose of the statutory termination and settlement mechanism. This purpose allows parties to contractually agree on i the details of the termination of the contracts, ii the calculation of the claims for non-performance and iii the netting arrangements.

The new Section para. Firstly , the parties may agree that the effects of the netting arrangements contract termination and the emergence of a single compensation claim may be triggered prior to the opening of insolvency proceedings, in particular when a petition for the opening of insolvency proceedings is filed or when a reason for the opening of insolvency proceedings is present Vorliegen eines Insolvenzgrundes , e.

Secondly , the parties may agree to include those financial transactions of Sec. This explicitly clarifies that the parties may contractually deviate from the requirement of Sec. Thus the contractual termination may replace as regards timing the opening of the insolvency proceedings. Thirdly , the parties may — for the purposes of determining the market value of the replacement transaction — agree, that the point of time of the contractual termination replaces the commencement of the insolvency proceedings.

They can also agree for the replacement transaction to be executed by the 20th business day following the contractual termination in so far as this is required for a value-preserving transaction. In any case the parties may choose to select a point in time between the termination of the transaction and the fifth business day thereafter. It is also possible that the parties agree on a synthetic calculation of the market price based on several transactions, by way of an open, transparent and non-discriminatory auction process or by a financial model, which includes all factors relevant for determining the price and is consistent with recognized evaluation methodology for financial instruments.

The new law provides a more robust solution following the general administrative act by the Federal Financial Supervisory Authority, which was published on the same day as the BGH decision and intended to provide an interim solution. It also provides new opportunities for structuring the netting arrangements in the master agreements. The Association of German Banks Bankenverband will certainly collaborate with market participants to explore the opportunities provided by the new law and provide an update of the German Master Agreement for Financial Derivatives Transactions in the medium term.

We also expect new netting opinions to be required.


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Due to a special structuring of the law in three Articles, the amendments with respect to the possibilities to contractually deviate from the statutory concept have retroactive effect as of 10 June Art. Thus, the new law limits the effects of the decision of the Federal Court of Justice, which it considers to be one-sided when holding certain netting arrangements to be invalid, to transactions in which insolvency proceedings have already been initiated before the decision on 9 June For all other transactions the new law granting substantially more freedom to contractually amend the statutory termination concept needs to be applied.

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However, in order to take into account the interests of the debtor, the choice of law is limited by Art.

Insolvency Statute (Insolvenzordnung, InsO)

Consequently, it is disputed which laws are relevant for this question. In application of general German conflict of law rules and case-law, a prevailing opinion points to the law governing the receivables on this question. Other authors favour the law chosen in accordance with the Rome I Regulation or the law of the seller jurisdiction.

A minority view points to the law of the debtor jurisdiction in this regard. A court in Germany will, as a matter of German law, recognise such sale as being effective against the seller, the obligor and other third parties. Hence, a court in Germany will, as a matter of German law, generally recognise such sale as being effective against the seller, the obligor and other third parties. One limitation is that, under German conflict of law rules, it is disputed how the third-party effect is to be determined and a minority opinion points to the debtor jurisdiction see question 3.

Subject to the limitations applicable to the choice of law see question 2. A court in Germany would consider such sale as being effective against the seller, the obligor and other third parties, because, as described in question 3. Assuming that German law requirements are complied with, a court in Germany will consider such sale as being effective against the seller, the obligor and other third parties. This is because the German court will, with respect to the relationship between the seller and the purchaser, apply the law chosen by the seller and the purchaser pursuant to Art.

With respect to the third-party effect, the minority view pointing to the obligor jurisdiction might again stipulate requirements of such jurisdiction here. In your jurisdiction what are the customary methods for a seller to sell receivables to a purchaser? What is the customary terminology — is it called a sale, transfer, assignment or something else? German law distinguishes between the law of obligations Schuldrecht and property law Sachenrecht.

Consequently, a sale of receivables under German law involves, from a legal standpoint, the following transactions: first of all, the sales contract under which the seller undertakes to sell, and the purchaser undertakes to purchase, the receivables; the transfer of title to the receivables by the seller to the purchaser; and, strictly speaking as a third transaction, the transfer of the purchase price by the purchaser to the seller.

What formalities are required generally for perfecting a sale of receivables? Are there any additional or other formalities required for the sale of receivables to be perfected against any subsequent good faith purchasers for value of the same receivables from the seller? Strictly speaking, under German law no concept of a perfection of a sale exists, the closest equivalent being the effectiveness of the assignment see question 4.

Giving notice of the assignment to the obligor is not legally required. However, if the obligor is not notified of the assignment, the obligor may continue to be entitled to raise certain objections see question 4. German law generally does not recognise a good faith acquisition of receivables. What additional or different requirements for sale and perfection apply to sales of promissory notes, mortgage loans, consumer loans or marketable debt securities?

Promissory notes in other jurisdictions are often compared to German law Schuldscheine certificates of indebtedness. A Schuldschein evidences an underlying loan agreement but does not constitute a security in the sense of a transferable debt instrument as a matter of German law. Schuldscheine are transferred by assigning the underlying loan claim and, hence, no additional or different requirements apply to their assignment unless provided otherwise in the instrument. As a practical matter, the purchaser requires delivery of the debt certificates with regard to the assignment of the underlying loan.

Both kinds of security interest can be granted either in certificated or in non-certificated form. Mortgages have no practical significance. A land charge can be transferred by written assignment of the land charge and, as applicable, i in the case of a certificated land charge, delivery of the land charge certificate, or ii , in case of a non-certificated land charge, registration of the transfer with the competent land register.

Most land charges in Germany nowadays are in non-certificated form. The required registration of the transfer with the land register may trigger significant costs. Further, a seller may want to avoid a registration with the land register in order to prevent the obligors from obtaining knowledge of the sale. Therefore, the seller sometimes holds the land charges as a trustee for the purchaser. However, whether such trust agreement will be recognised in case of insolvency of the seller is not clear. For that reason, the German Banking Act Kreditwesengesetz — KWG contains special provisions for refinancing register transactions which allow for the creation of insolvency remote trust arrangements.

Unless a seller continues to exclusively deal with the relevant consumer borrower, such seller is generally obliged to notify the consumer borrower of an assignment providing certain details. Bearer securities are transferred by way of an agreement between the seller and the purchaser to transfer ownership and the delivery of the securities to the purchaser. Registered securities are transferred by way of assignment of the rights evidenced by them. Instruments made out to order are transferred by an agreement between the seller and the purchaser to transfer ownership, endorsement and delivery of the instrument to the purchaser.

To the extent that debt securities are certificated in global form and deposited with a clearing system, delivery of the securities is evidenced by a corresponding book-entry. Whether or not notice is required to perfect a sale, are there any benefits to giving notice — such as cutting off obligor set-off rights and other obligor defences? However, prior to a notification of the assignment to the debtor and also, but generally speaking to a lesser degree, where the obligor was previously notified , statutory debtor protection provisions apply which give the debtor, inter alia , a set-off right in relation to claims it has against the assignor.

In addition, the purchaser will be subject to any amendments of the underlying receivables contract or other transactions relating to the receivable, such as a waiver or deferral of payments entered into by the seller and the obligor. Furthermore, prior to a notification, the debtor may fully discharge its payment obligation by way of payment to the assignor. However, even where the obligor was previously notified, it may generally raise against the purchaser all the objections it had against the seller at the time of the sale. Where the sold receivable is a consumer loan, the seller generally has an obligation to notify the consumer of the assignment and to provide certain information about the purchaser; any violation of such obligations does not affect the effectiveness of the sale and assignment of the receivable, but may entitle the consumer to claim damages.

An obligor cannot, however, effect such set-off where a the obligor knew of the assignment at the time of acquiring its claim against the assignor, or b where such claim of the obligor i did not become due until after the obligor had acquired such knowledge, and ii matures after the claims of the assignee. On this basis, even where the obligor is aware of the assignment where either a it acquired its counterclaim against the seller before it obtained such knowledge, or b such counterclaim against the seller is due before the receivable owed by the obligor is due, it may continue to offset the assigned receivable against its counter-claim against the seller.

Receivables governed by German law can generally be sold and assigned without the consent of the obligor, except where the underlying receivables contract contains a prohibition on assignments. Such a prohibition will usually be explicit, but can also be implied in the underlying receivables contract. According to a decision by the German Federal High Court Bundesgerichtshof — BGH , neither German data protection laws nor general bank secrecy obligations constitute an implied prohibition on assignment. However, according to a decision of the German Federal High Court, an implied prohibition on assignments does exist where the confidentiality of the data to which the receivables in question relate is protected by criminal law e.

Please note that there are exceptions to this rule for loan receivables where a credit institution is the creditor, i. If notice is to be delivered to obligors, whether at the time of sale or later, are there any requirements regarding the form the notice must take or how it must be delivered?

Is there any time limit beyond which notice is ineffective — for example, can a notice of sale be delivered after the sale, and can notice be delivered after insolvency proceedings have commenced against the obligor or the seller? Does the notice apply only to specific receivables or can it apply to any and all including future receivables?

Are there any other limitations or considerations? Pursuant to German law, as described in question 4. There are generally no specific form requirements regarding the notice. However, specific requirements may be contractually agreed or may apply, in specific circumstances, by statutory law. The first alternative prohibits the transfer of receivables by the seller to the purchaser. While less likely, the prohibition in the third alternative may also be interpreted e. If any of the restrictions in question 4.

Are there exceptions to this rule e. If your jurisdiction recognises restrictions on sale or assignment of receivables and the seller nevertheless sells receivables to the purchaser, will either the seller or the purchaser be liable to the obligor for breach of contract or tort, or on any other basis? Contracting parties may enter into binding prohibitions on assignments under German law, with the exception that the parties are merchants in respect of commercial transactions see question 4. Sellers, in general, will be liable to the obligor for any financial damages in case of any violation of such assignments.

Must the sale document specifically identify each of the receivables to be sold? If so, what specific information is required e. Do the receivables being sold have to share objective characteristics?

Abfallentsorgungspflicht nach Insolvenzeröffnung - Insolvenzrecht Dresden TV

Alternatively, if the seller sells all of its receivables to the purchaser, is this sufficient identification of receivables? Finally, if the seller sells all of its receivables other than receivables owing by one or more specifically identified obligors, is this sufficient identification of receivables? According to German law, the receivables to be sold and assigned must be sufficiently identifiable bestimmbar. If the parties describe their transaction in the relevant documents as an outright sale and explicitly state their intention that it be treated as an outright sale, will this description and statement of intent automatically be respected or is there a risk that the transaction could be characterised by a court as a loan with or without security?

If recharacterisation risk exists, what characteristics of the transaction might prevent the transfer from being treated as an outright sale? The prevailing view is to apply the principles that have been established by German courts for distinguishing true or genuine factoring from untrue or non-genuine factoring.


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  7. Pursuant to German case law, true sale factoring requires that the credit risk relating to the debtor of a receivable must be transferred to the purchaser who must not have the right to take recourse to the seller if such credit risk materialises. However, as a general rule, a seller may retain some part of the credit risk corresponding to historical default rates and enforcement costs without triggering potential recharacterisation risks.

    It is recognised that a certain limited level of credit enhancement may be provided by the seller but there is no definitive guidance as to what level of retention of credit risk is still acceptable. Can the seller agree in an enforceable manner to continuous sales of receivables i. However, such agreements will not survive the insolvency of a seller. Hence, the transfer of receivables will not be continued. Can the seller commit in an enforceable manner to sell receivables to the purchaser that come into existence after the date of the receivables purchase agreement e.

    If so, how must the sale of future receivables be structured to be valid and enforceable? Under German law it is possible to assign receivables prior to the time they come into existence future receivables by way of a corresponding sale and assignment agreement between the seller and the purchaser.

    Special care must be taken to ensure that an assignment of future receivables complies with the German principle of specificity Bestimmtheitsgrundsatz. Pursuant to case-law, this requires for future receivables that, at the time a receivable comes into existence, it is sufficiently identifiable bestimmbar , i. If a receivable comes into existence after the opening of insolvency proceedings against the seller, the seller is no longer entitled to dispose of its assets, including by way of a transfer of receivables.

    In practice, it can be difficult to determine whether or not a receivable actually constitutes a future receivable e. Must any additional formalities be fulfilled in order for the related security to be transferred concurrently with the sale of receivables? If not all related security can be enforceably transferred, what methods are customarily adopted to provide the purchaser the benefits of such related security? To the extent that related security can be transferred by way of mere agreement between the seller and the purchaser, there are generally no additional formalities to be complied with.

    However, e. At any other time? With respect to any waiver of set-off rights and of other defences by the obligor, the enforceability of such waiver needs to be considered. What methods are typically used in your jurisdiction to extract residual profits from the purchaser?

    Similar to other jurisdictions, inter alia , tax and true sale consequences the latter generally being more problematic than in other jurisdictions — see question 4. Profit may be extracted, e. If it is customary to take back-up security, what are the formalities for the seller granting a security interest in receivables and related security under the laws of your jurisdiction, and for such security interest to be perfected? It is not customary in Germany to create such back-up security see question 5.

    If the purchaser grants security over all of its assets including purchased receivables in favour of the providers of its funding, what formalities must the purchaser comply with in your jurisdiction to grant and perfect a security interest in purchased receivables governed by the laws of your jurisdiction and the related security? The general rules of the creation of security interests under German law also govern the security interests granted in the purchased receivables by a purchaser.

    Such granted security interests must be sufficiently identified or identifiable and can be granted in the form of a pledge or a security assignment. The pledge of a receivable is created by an agreement between the pledgor and the pledgee. In addition, the underlying obligor must be notified. The security assignment is created by an agreement on the transfer of the receivable for security purposes between the assignor and the assignee. With the effect of such assignment, legal ownership to the receivables is transferred. Although there is no requirement for notification to the obligor, certain objections such as rights of set-off or counterclaim arising from its relationship with the assignor may be raised by the obligor prior to notification of the security assignment.

    An assignment for security purposes is generally adopted in practice. This is because the requirement for a notification to the obligor can be avoided. However, inter-company receivables and bank accounts are the exceptions thereof since the notification to the obligor in this case does not cause any significant issues. Security interests over inventory and other movable assets are usually granted by means of security transfer as opposed to a pledge which is impracticable as it would require the transfer of actual possession of the assets to the secured party.

    See also question 4. The grant of security is generally subject to the same conflict of laws rules as the assignment of receivables see question 3. What additional or different requirements apply to security interests in or connected to insurance policies, promissory notes, mortgage loans, consumer loans or marketable debt securities?

    Security interests over such assets can also be granted by way of a formal pledge or a security assignment of receivables. Security interests over debt securities which are treated as movable assets under German law booked to a custody account are normally created by way of a pledge. The additional requirements described in question 4. The specific terms of the underlying assets may stipulate additional transfer requirements, which will have to be satisfied regularly for the creation of security interests as well.

    For example, the creation of security interests over claims arising from insurance policies will often require the consent or at least the notification of the insurer. Does your jurisdiction recognise trusts? The English and U. Typically, a pledge of the collection account will be used to create such security interest.

    Usually, the obligor will not be notified of the assignment and the seller is authorised to continue collecting the receivables. The seller should be required to ensure that all collections will be directly paid into such collection account pledged in favour of the purchaser. In cases of payments from such collection accounts being made to the purchaser, clawback rules will apply see question 6.

    However, often such a pledge will be junior to other security interests created over such account, as account pledges are customary in Germany. In such a scenario, a purchaser would need to ensure that cash transfers to the purchaser account occur as frequently as possible and the collection authority of the seller is revoked as early as possible collections can then be redirected to an account of the purchaser after notification of the assignment and new account details to the underlying obligor.

    Does your jurisdiction recognise escrow accounts? Can security be taken over a bank account located in your jurisdiction? If so, what is the typical method? Would courts in your jurisdiction recognise a foreign law grant of security for example, an English law debenture taken over a bank account located in your jurisdiction? German law recognises escrow accounts. In order to create a security interest over a bank account located in Germany, the account is typically pledged in favour of the collateral taker. It is not recommended to establish a foreign law security interest over a German bank account as it is very uncommon and creates unnecessary difficulties from a conflicts of law perspective especially where the foreign law security does not meet the requirements of a pledge under German law and German account banks which need to be notified of a pledge will likely try to refuse to participate in any cash sweep mechanism in this context.

    If security over a bank account is possible and the secured party enforces that security, does the secured party control all cash flowing into the bank account from enforcement forward until the secured party is repaid in full, or are there limitations? If there are limitations, what are they? German account pledge agreements often contain arrangements pursuant to which a pledgee can take control of the account prior to actual enforcement of the pledge.

    Such arrangements are permissible under German law and can take the form of a mere account blockage i. If insolvency proceedings have been opened with respect to the pledgor, the account agreement between the pledgor as account holder and the account bank will automatically terminate by statutory law.

    In order to gain access to the monies standing to the credit of the account, the pledgee will need to enforce the account pledge. In the insolvency of the pledgor, an account pledge will generally give the pledgee a right of separate satisfaction with respect to the monies standing to the credit of the account at the time of opening of insolvency proceedings.

    If security over a bank account is possible, can the owner of the account have access to the funds in the account prior to enforcement without affecting the security? The account pledge agreement may provide that the pledgor as account holder may continue to dispose over the funds in the account prior to the occurrence of a trigger event without affecting the pledge itself. However, any funds debited from the account by the pledgor will no longer be available to the pledgee.

    If so, what generally is the length of that stay of action? Does the insolvency official have the ability to stay collection and enforcement actions until he determines that the sale is perfected? Would the answer be different if the purchaser is deemed to only be a secured party rather than the owner of the receivables? There is no general stay of action in relation to receivables effectively sold and transferred to the purchaser. Although this is not reflected in the wording and there is no case law on point, it appears to be the prevailing view in legal literature that this provision should not apply in relation to receivables which had been effectively sold and transferred by the seller to the purchaser by means of a proper true sale.

    Moreover, upon the opening of final insolvency proceedings, the purchaser of the receivables may only collect the receivables if the transaction is not recharacterised as a secured loan transaction. In case of a recharacterisation, the assignment of the receivables could be treated as a security assignment secured loan. In such a case, the purchaser would not have a segregation right Aussonderungsrecht but only a right for preferential treatment Absonderungsrecht in which case the insolvency administrator would be entitled to collect the respective receivables and to deduct a certain haircut from the collection proceeds see question 4.

    In relation to a potential order a stay of action during preliminary insolvency proceedings see question 6. Moreover, German insolvency courts may have the right to issue an order entitling a preliminary insolvency administrator to collect receivables over which security was granted by way of a security assignment which might also be relevant in case the transaction was recharacterised as secured loan.

    After the opening of final insolvency proceedings, no stay of action is possible if the sale of receivables qualifies as a true sale. In case of recharacterisation of a transaction as a secured loan transaction, no formal stay of action is required as only the insolvency administrator would have the right to collect the respective receivables see question 6. Under the German Insolvency Code Insolvenzordnung — InsO , an insolvency administrator of the seller the originator may rescind or reverse transactions clawback in relation to the assignment of rights of the receivables during the applicable suspect period — its length can be from one month to 10 years prior to the insolvency filing.

    Similar to many other jurisdictions, any clawback under these rules is not at the discretion of the insolvency court, but is governed by statutory rules. Transactions voidable pursuant to these rules in particular without limitation include the following:.

    In case the other party has agreed to a payment agreement with the debtor or granted any other form of payment facilitation, it will be presumed that it did not have knowledge of imminent insolvency at the time of the transaction. Voidability is excluded if the contract was concluded more than two years prior to the petition for commencement of the insolvency proceedings or if the other party had no knowledge of the intention of the debtor to harm creditors. As some of the most relevant statutory provisions on challenge of transactions require that the counterparty of the assignor had knowledge of the fact that the assignor was unable to make payments at the time the legal act e.

    With the exception of directly harmful transactions cf. A comparable corporate relationship would exist if the insolvent debtor is controlled by the other party. Whether this is also the case for an affiliate of the other party does have to be determined in each individual case. As a general rule, the granting of a guarantee by a party that is a related party of the insolvent debtor seller should generally not render a true sale transaction between a seller and purchaser a related party transaction.

    Under what facts or circumstances, if any, could the insolvency official consolidate the assets and liabilities of the purchaser with those of the seller or its affiliates in the insolvency proceeding? If the purchaser is owned by the seller or by an affiliate of the seller, does that affect the consolidation analysis? No consolidation of assets and liabilities of the purchaser, with those of the seller or its affiliates, exists under German insolvency law. These recently introduced provisions are, however, limited to procedural questions, such as improving and requiring coordination between insolvency officials of the various group companies, and mainly aim at increasing the chances of a successful restructuring of the group companies.

    A consolidation of assets and liabilities is not provided for under this or any other applicable German law. If insolvency proceedings are commenced against the seller in your jurisdiction, what effect do those proceedings have on a sales of receivables that would otherwise occur after the commencement of such proceedings, or b on sales of receivables that only come into existence after the commencement of such proceedings?

    As a general rule, an insolvency administrator may elect whether to accept or reject the performance of so-called executory contracts, i. This may affect transactions involving the sale of future receivables. In order to prevent such cherry-picking risk for revolving securitisations, each sale under a master agreement should be structured as an independent transaction. If the insolvency administrator elects performance of the underlying executory contracts between the insolvent seller and its debtors obligors , any future payments by such obligors would fall into the insolvency estate and could not be segregated or collected by the purchaser.

    If the insolvency administrator rejects the performance of the underlying executory contract, future receivables would not become due. In order to exclude such risks, the securitisation transaction would generally have to be structured such that the insolvency administrator would not have an election right in relation to the underlying contracts. Leases and leasing agreements over movable assets entered into by the seller originator as lessor are not subject to the election right of the insolvency administrator if the acquisition of the leased movable assets was financed by a third party and that third party has been granted security by way of a security transfer of the leased movable asset.

    There is no clear guidance for scenarios in which the lessor is not identical to the owner of the leased movable asset, which is not uncommon in the German leasing market. Whether or not the receivables under such lease agreements qualify as future receivables depends on the facts and circumstances in the individual case, in particular the terms of the applicable lease agreements.