The European Lawyer

Austria Banking/Finance

11 Mar 2010

International Acquisition Finance - Austria

Editors: Binder Grösswang - Tibor Fabian and Stefan Tiefenthaler

1. MARKET
1.1 Who are the major players involved in acquisition and acquisition finance transactions?
In large scale M&A transactions international financial investors, usually hedge funds, have been very active in Austria during the last year. However, in one of the most prominent transactions a financial investor’s attempt to take over a major Austrian steel producing company failed and a strategic investor (voestalpine) acquired a majority of the shares.  International credit institutions and, increasingly, funds engage in the financing of these transactions.

1.2 Please specify any country specifics or typical target industries involved in acquisition financing transactions
The type and structure of Austrian acquisition financings is a mirror of the Austrian industrial landscape. The majority of Austrian businesses fall into the category of SME, and are very often family owned. Financing for deals involving such companies are mainly done by local banks, especially if the buyer is also a domestic entity. International banks take over the scene for transactions where large corporations are the targets, which are mostly bought by foreign investors, mainly private equity funds.
The main target industries with large volume transactions during the last few years were:

•  financial institutions;
•  telecom;
• steel production;
• construction and building materials; and
• real estate.

One of the largest transactions in 2007, partially financed by an international banking syndicate, was the acquisition of the BAWAG P.S.K. bank by the US-based hedge fund Cerberus and some Austrian investors for €3.2 billion.

2. DOCUMENTATION
2.1 Which law typically governs acquisition financing agreements? 
In the vast majority of acquisition finance transactions with an international background the loan documentation is governed by English law. Of course, particular transactions of a smaller scale may be governed by local Austrian law. Security packages are normally  governed by Austrian law.

2.2 Are there any ‘standards’ (such as LMA or others) that usually apply?
LMA standards are regularly used in international financial transactions. In transactions governed by Austrian law, ‘LMA-style’ documents have become more and more common.

2.3 Which language generally applies to acquisition finance transactions?
Particularly in cross-border/large scale transactions, the English language applies.

3. ACQUISITION/FINANCING STRUCTURES
Credit agreements have represented and still represent the most important instrument in terms of debt financing. More and more diverse financing products have been developed and are used in financing transactions with an Austrian background, such as mezzanine debt financing (‘subordinated debt’), including equity kickers, as well as hybrid instruments.

Typically an acquisition finance transaction will be structured by the establishment of a special purpose vehicle (SPV). The SPV is party to the purchase agreement and the financing documents and thus a sponsor’s liability is (to the extent it did not provide security in favour of the SPV) limited to its share in the SPV’s equity and is non-recourse. The SPV does not need to be an Austrian entity. Due to a favourable tax regime for holding companies in the Netherlands, SPVs are often Dutch companies.

3.1 Subordination of debt
Austrian law allows for subordination of debt (of all or part of creditor’s claims) by way of contractual arrangement (in an intercreditor agreement or the security documents). As an alternative, subordination may also be achieved by lending to group entities on different levels, since the creditor of a parent company, with regard to the assets of the subsidiary company, will necessarily be subordinated to the creditors of the subsidiary company (structural subordination).

However, limitations under capital maintenance rules (Kapitalerhaltungsvorschriften) or equity substitution rules (Eigenkapitalersatzvorschriften) may apply in such structures (see below).

4. REGULATED TARGETS
The acquisition of regulated targets (such as banks, insurance or telecommunication companies) may require the prior approval of a regulatory body or may be subject to notification requirements. Further, the granting of a security interest over a regulated target or the shareholding in it and/or the realisation of any such security in case of an event of default may involve such approval or notification requirements.

Under Austrian law, banking and insurance businesses are supervised by the Austrian financial market authority (FMA).

Under the Austrian Banking Act, the intention to acquire or to dispose of, directly or indirectly, a ‘qualified participation’ (ie, the direct or indirect holding of 10 per cent or more of the capital or the voting rights, or the possibility to exercise a significant influence over management – eg by way of supervisory rights set forth in loan documentation) in an Austrian credit institution has to be notified to the FMA. Within three months from the date of notification, the FMA may prohibit the proposed participation, if certain conditions are not fulfilled.

In the event that a required notification is not made, the FMA may take appropriate measures which may include: (i) a prohibition on the withdrawal of capital or profits or the distribution of capital or profits; (ii) appointment of a competent supervisor; (iii) prohibiting certain managers of the credit institution entirely or in part from managing the business; or (iv) the prohibition (entirely or in part) of the continuation of the business operation.

5. LISTED TARGETS
If the target is a listed company, an acquisition is to be effected in compliance with Austrian takeover law. The Austrian Takeover Act (Übernahmegesetz) requires, among other things, a public offer to be made to all shareholders upon the direct or indirect acquisition of control respectively of a controlling stake (principally 30 per cent) in a company listed on the regulated markets of the stock exchange (mandatory public offer). Therefore, the provisions of the Austrian Takeover Act may in particular impede the realisation of a pledge in shares of a publicly traded company or the granting of voting rights to a pledgee.

In the case of Initial Public Offerings the shareholders of the company going public are usually prevented from selling their remaining shares for a certain period of time, called the lock-up period. Any such contractual agreement on a lock-up period entered into with, eg, the bookrunners, should provide for a carve-out with respect to a sale of the shares by a pledgee having to realise such shares.
 
6. MEZZANINE DEBT AND INTERCREDITOR ARRANGEMENTS
In Austria, mezzanine loans are provided in the form of unsecured or subordinated loans (Nachrangdarlehen) combined with a high interest rate or an equity kicker. In such cases, the mezzanine creditors’ claims are subordinated to all other creditors’ claims. The relation between mezzanine creditors and other creditors may be provided for in an intercreditor agreement or the security documentation contractually subordinating the claims of the mezzanine creditors or by way of structural subordination described above.

Other mezzanine financing structures combine elements of equity and debt financing and therefore provide for various legal instruments such as:

• profit participating loans (‘partiarische’ Darlehen);
• profit participation rights (‘obligationenartige’ Genussrechte); and
• silent partnerships ((echte) stille Gesellschaften).

In the case of a profit participating loan or a profit participation right, the creditor is compensated through participation on the company’s profits and not by fixed interest payments. Commonly a maximum amount of profit participation is agreed upon. Payments made by the company to the creditor are tax deductible. In principle, earnings of the creditor resulting from such loans are subject to taxation in Austria. However, if the creditor is a non-Austrian company, earnings are often exempted from Austrian tax due to applicable double tax treaties.

In the case of a silent partnership the investor participates in the company by way of a capital contribution not disclosed to the public. The investor may participate in the profit and loss or only in the profit of the company. Payments made by the company to the investor are tax deductible. The earnings of the silent investor are subject to withholding tax on income from investment of capital in the amount of 25 per cent, subject to applicable double tax treaties.

6.1 To what extent are high yield bonds used in these transactions?
High yield bonds are, in contrast to mezzanine/hybrid financing instruments, not commonly used in acquisition financing transactions in Austria. However, hybrid bonds are beginning to play an increasing role, eg voestalpine partly financed the acquisition of the takeover of Böhler-Uddenholm with a hybrid issue of €1 billion.

6.2 Are there any specific issues related to mezzanine and intercreditor arrangements?
The subordination of debt may either be determined by contractual arrangement in an intercreditor agreement or by providing for first and second ranking pledges in the security documentation.
In any case, the financing documentation needs to restrict any controlling and voting rights of the junior lenders in order to avoid the situation where junior lenders may block a realisation of security by the senior lenders. In case the documentation provides for only one security agent acting on behalf of the junior lenders and the senior lenders, conflicts of interest may arise in this respect.

7. EQUITY KICKERS
Equity kickers are usually used in relation to companies that have the potential to strongly increase their value and in the case of short term financings, as an early exit otherwise may result in a low (interest) return on the debt financing. Generally, equity kickers are granted in the form of an exit payment depending on the valuation of the company or an option providing for the right to acquire shares of the company for a pre-arranged fixed price and date. Alternatively, equity kickers may be provided through the issuance of convertibles (Wandelanleihen).

From a company’s perspective equity kickers provide for a lower financing cost. The costs of equity kickers arise only when the increase of the company’s value is in fact realised. Depending on the legal form of the company, the financing of companies by way of equity kickers requires the approval of the shareholders.
 
8. SECURITY
Under Austrian law, for the valid granting of an accessory security interest (akzessorische Sicherheit) the validity and enforceability of the security interest depends on the existence of a valid claim of the beneficiary of the security. Therefore, a parallel debt structure is to be included in the financing documentation of syndicated loans in order to afford the security agent with the position of a creditor of the secured obligations, entitling it to enforce payment obligations in its own name.

8.1 What are the common forms of security structures and packages that can be granted over property/assets?
A security interest over movable property/assets may be created by pledge (Pfandrecht) or security assignment (Sicherungszession) and over immovable property by entering into a mortgage agreement (Hypothek).

The most common form of security granted in the context of acquisition financing transactions in Austria is the pledge of shares in joint stock companies (Aktiengesellschaften – AG) or limited liability companies (Gesellschaften mit beschränkter Haftung – GmbH).

In addition, receivables, bank accounts kept in Austria and intellectual property rights (patents, trade marks or designs as well as internet domains) are regularly pledged to the financing banks.
Due to the costs involved (see below), mortgages over real estate are commonly not part of a security package. Further, the granting of a security over machinery, commodities, inventory or vehicles is also commonly not part of a security package due to the legal restraints in relation to the perfection of any such security interest.

In order to create a valid pledge in tangible assets such as machinery, commodities, inventory or vehicles, possession of the pledged property has to be transferred to the pledgee or a third party, which holds possession in the pledged assets on behalf of the pledgee. However, very often such transfer of possession is not commercially feasible for the pledgor as it needs to be able to dispose of the pledged assets in its ordinary course of business and is therefore not included in the security packages. Under very limited circumstances a security interest in such assets may alternatively be perfected by attaching plates, marks or other signs to the assets evidencing the creation of a security interest.

Pledges over intangible assets, such as shares, bank accounts, receivables or internet domains, are perfected by delivering a notice of the pledge to the relevant third party (Drittschuldner- verständigung). If, however, the pledged rights, eg shares or third party claims, appear in the pledgor’s books or its list of open receivables, a book entry (Buchvermerk) indicating the creation of a pledge does also suffice for the perfection of the pledgee’s security interest.

A security assignment creates a security interest in the borrower’s monetary third party claims and most of its other rights. If assigned for security, the assigned claim is held by the assignee on trust and may only be enforced if the borrower is in default in relation to the secured obligations.

A mortgage creates a security interest over immovable property. Security over immovable property is created by entering into a mortgage agreement and perfected by registration of the mortgage in the Austrian Land Register (Grundbuch) after filing an application for registration together with a notarised deed of mortgage with the competent district court (Bezirksgericht).

Lastly, non-accessory guarantees and sureties may serve as security. However, as sureties (in contrast to guarantees) are, principally, subject to Austrian stamp tax, they are not commonly used in financings.

8.2 Are there any limitations on security (eg up-stream or cross-stream guarantees)?
Principally, Austrian capital maintenance rules (Kapitalerhaltungsvorschriften) prohibit the granting of up-stream or cross-stream security by a company. According to these rules, shareholders are only entitled to net profits in accordance with the financial statements of the relevant company, subject to a shareholders’ resolution resolving a distribution (ie, declared dividends) and liquidation proceeds.
The infringement of these rules results in the invalidity of the security vis-à-vis the lenders where the lenders had knowledge or were negligently unaware of the infringement. Usually, banks engaged in the setting-up of the finance structure are considered to have knowledge.

However, up-stream or cross-stream security may be permissible if: (i) the security provider has a genuine self-interest in providing the security (a mere group interest not being sufficient); (ii) the security provider disposes of an adequate (full) right of recovery against each of the entities, the obligations of which are secured in case of realisation of the security; (iii) the security provider’s management does not have doubts about the ability of the entities to fully meet their repayment obligations; and (iv) the security provider’s corporate existence would not be in danger if the security was realised. For example, a genuine self-interest exists when the loan secured is on-lent to a company providing an up-stream guarantee.

8.3 Are there any other issues that might cause difficulties regarding the granting of security?
Austrian Stamp Tax
Particular emphasis is generally put on a transaction structure to avoid Austrian stamp duty. In particular, the following agreements and security documents principally trigger Austrian stamp duty under the Austrian Stamp Duty Act (Rechtsgebührengesetz), although certain exceptions apply:

•  Loan agreements (including inter-company loan agreements) are subject to stamp duty in the amount of 0.8  per cent of the loan amount, if the borrower may draw the loan amount once or in case of revolving loans with a term of up to five years. In all other cases, stamp duty on loan agreements is 1.5 per cent of the loan amount.
• Stamp duty on assignment agreements amounts to 0.8 per cent of the consideration (Entgelt) and in case of assignments by way of security, the secured amount or (if lower) the value of the assigned claim.
• Deeds of mortgage are subject to 1.0 per cent stamp duty of the amount in the deed.
• Stamp duty on suretyships is 1.0 per cent of the amount secured.

Abstract guarantees and other security agreements such as pledges in moveable assets are not subject to stamp duty.

In order to avoid the obligation to pay stamp duty, certain stamp tax avoidance schemes have been developed. Any such avoidance scheme requires a careful drafting of the finance documents. Further, these schemes, and particularly the most common technique of executing and keeping the financing documentation outside of Austria, bears the risk of a subsequent imposition of stamp tax during the term of a financing if documents (including emails) providing evidence of the existence of a finance transaction are sent to, brought into or produced in Austria.

Equity Substituting Security
Another issue in relation to the granting of security may arise if security is granted by a shareholder. If such security is granted during a ‘crisis’ of the subsidiary it may be considered as substitute equity under the Austrian Equity Substitution Act (Eigenkapitalersatzgesetz, EKEG – please see also question 12.1 below).

In such case the beneficiaries of the security are entitled to or, as the case may be under certain circumstances, obliged to, request the realisation of the shareholder’s security prior to demanding a repayment of the secured liabilities from the subsidiary. Further, the shareholder may not be entitled to seek recourse from its subsidiary after the security granted by it has been realised.

In case the subsidiary has to make repayments without a prior realisation of the shareholder’s security having taken place, the subsidiary may be entitled to request the shareholder to make the repayment on its behalf up to an amount corresponding to the value of the security granted.

9. CORPORATE THIN CAPITALISATION RULES
In Austria there are no specific thin capitalisation rules or safe harbour debt/equity ratios. In general a debt/equity ratio of 4:1 is accepted by the tax authorities. The debt/equity ratio is measured on a consolidated basis. In the case of a leveraged acquisition, this usually means that the debt incurred by the SPV has to be consolidated with the already existing debt of the target. The debt finance interest for the acquisition of a target may be deductible for income tax purposes.

10. FINANCIAL ASSISTANCE
(See also 8.3 above.)
Under Austrian law the repayment of capital to shareholders (of limited liability companies, stock corporations or partnerships where only such entities are unlimited partners) is generally not permissible. Shareholders are only entitled to: (i) net profits in accordance with the financial statements of the relevant company, subject to a shareholders’ resolution resolving a distribution (ie declared dividends); and (ii) payments in the course of a formal reduction of statutory capital and liquidation proceeds. In this case every shareholder can permissibly pledge its claim to dividends. Consequently, the provision of up-stream or side-stream security by a company would be considered (an illegal) repayment of share capital. It follows that the amount the secured creditor(s) would receive under such security may be limited. Up-stream security over a company’s assets is therefore possible only when limited to the amount of dividends.

An illegal repayment of share capital will lead to the invalidity of the legal transaction (ie, the security provider may reclaim any excess payment made under the security) and can lead to the personal liability of the members of the security provider’s management board. In theory, the invalidity of the security does not affect the third party. However, if the third party had knowledge or was negligently unaware of the breach of corporate law, the invalidity of the security will also be effective vis-à-vis the third party.

10.1 To what extent are target assets/cash flows accessible?
There are corporate law limitations on the accessibility of target assets and cash flow, mainly arising under the limitations of the capital maintenance/financial assistance rules.
See also 8.3 and 10.1 above.

10.2 Are debt push-down structures allowed under Austrian law?
In general, debt push-down structures are possible if they are conducted in the form of reorganisations, such as mergers (Verschmelzungen), demergers (Spaltungen) or contributions (Einbringungen) (on a tax neutral basis) between the target company and the acquisition company.
Alternatively, the acquiror may compensate the acquisition costs with the operative costs of the target company (in the tax group).

11. DIRECTORS’ LIABILITY
In general, directors or board members (Geschäftsführer oder Vorstand) are liable if they intentionally or negligently violate their duties and if such violations result in damages to the corporation. In general, the directors’ duties and liabilities are towards: (a) the company; (b) the shareholders; and (c) third parties.

The liability of the directors depends on the duties they have, some of those duties are specifically regulated, others are of a more general nature. Specific liabilities of directors under the law primarily arise if the director (the following list is by no means comprehensive):

• permits repayments or distributions of capital to be made to shareholders, including without limitation payment of interest, payment of dividends in violation of statutory restrictions or acquisition or redemption of or taking of security over shares;
• makes incorrect statements vis-à-vis the Commercial Register in connection with the establishment of the company or a capital increase;
• allows payments at a time when the corporation is no longer in a position to fulfil all of its payment obligations or overindebtedness has been ascertained;
• does not ensure correct bookkeeping and internal controlling;
• does not prepare the financial statements;
• does not file for bankruptcy when necessary.

The general obligations of directors can be summarised as: (i) the duty to properly manage the corporation; (ii) the duty to co-operate with other directors or managers of the corporation; and (iii) the duty of loyalty.

The standard of care of a director is the care of a diligent businessman in a leading position entrusted with the administration of funds belonging to other people. Such duty of care is measured by an objective standard.

11.1 Are there any other concerns that exist in an acquisition finance context?
Financings with an Austrian link may require a banking licence under the Austrian Banking Act (Bankwesengesetz – BWG). Whereas banks domiciled in the EU can take advantage of the single passport principle, banks from other countries and funds who normally do not carry a banking licence, cannot. For those entities it is important to ascertain whether an Austrian banking licence is required, as the bank (apart from running the risk of being fined) will not be entitled to claim interest and fees if it does business without a licence.

There are no clear-cut criteria in the law when a financing is considered to fall within the BWG, but in a recent decision of August 2006, the Austrian Supreme Court for the first time addressed the applicability of the BWG in an international context. A Swiss bank that had failed to obtain a licence granted loans to an Austrian resident through the procurement of an Austrian subsidiary. Pursuant to the Supreme Court, one element to establish sufficient connection with the Austrian territory for the purposes of banking licensing requirements would be an offer to provide the financial services or the acceptance of the offer taking place in Austria, thus establishing contractual obligations within Austria. In addition to the legal ties, the court also took factual connections with the Austrian territory into consideration, which were, in particular in connection with credit business, the following:

• a credit made available via an Austrian bank account;
• a credit used to finance a purchase of real estate located in Austria;
• Austrian real estate used as collateral;
• investors presented with a concept systematically redeveloped for activities in Austria;
• establishment of the contact following the initiative of the bank, whereas it is irrelevant whether the bank personally sets certain steps in Austria or a third party entity acts as an agent for the bank.

The Supreme Court discussed the few available comments in Austrian literature, but unfortunately failed to evaluate the plausibility of these comments, only alluding in its findings to the many territorial links to ascertain the BWG’s applicability in the present case. It remains to be seen how the Austrian Supreme Court will rule in more ambiguous cases.

12. LENDERS’ LIABILITY
Pursuant to the Austrian Equity Substitution Act (Eigenkapitalersatzgesetz, EKEG) a lender who is granted extensive rights of control over the borrower together with decisive influence on the borrower’s business in the loan agreement or any related security document may, for the purposes of the act, be qualified as a shareholder of the borrower. A loan made by such a lender to a borrower which is in a ‘crisis’ is considered as equity subordinated to the claims of all secured and unsecured creditors of such subsidiary.

Relevant circumstances considered a ‘crisis’ are:

• illiquidity (ie, inability to meet financial obligations);
• overindebtedness (ie, negative equity, if accumulated losses exceed nominal capital and capital reserves); or
• thin capitalisation (ie, an equity ratio of less than eight per cent in conjunction with a fictional debt redemption period of more than 15 years). The equity ratio is the percentage of equity plus untaxed reserves to total assets, each to be calculated pursuant to the financial statements prepared in accordance with the Austrian Commercial Code. Therefore, it depends on the accounting treatment of securities provided, or the long-term deposits made, by third parties whether and to what extent they have an impact on the equity ratio.

When such a ‘crisis’ situation is at hand, the lender’s loan is considered equity of the company for the duration of the crisis and any repayment of such loan may be considered an illegal repayment of capital.

13. LEGAL OPINIONS
Generally, it is standard practice to provide a legal opinion on the due execution of the foreign law governed documents by the Austrian parties to them and on the enforceability of the Austrian law governed agreements, particularly the security package. Enforceability opinions always contain carve-outs with respect to mandatory provisions of law and with respect to enforceability (other than in relation to security interests granted) where a contracting party is insolvent.

Further, legal opinions on stamp tax due under the finance documents contain wide carve-outs in relation to the provisions of the Austrian stamp tax act. Lastly, any opinion confirming there is no requirement for an Austrian banking licence very often must be based on factual circumstances which may not be the case (see 11.2 above).

14. POST-ACQUISITION RESTRUCTURINGS
Common techniques with regard to post-acquisition restructurings are mergers and demergers. Generally, the preferred legal form involved is that of a limited liability company (GmbH).

14.1 To what extent are squeeze-outs permitted?
According to the Squeeze-Out Act (Gesellschafter-Ausschlussgesetz) which applies to limited liability companies as well as stock corporations, the majority shareholders are entitled to ask the shareholders’ assembly to pass a resolution on the squeeze-out of the minority shareholders on the level of shareholdings. Consequently, if such a shareholders’ resolution is passed and registered with the commercial register, the shares of the minority shareholders are automatically transferred to the majority shareholder for adequate cash compensation. A shareholder qualifies as a majority shareholder if it (including its affiliated companies) holds at least 90 per cent of the issued share capital of the company. The shareholders’ resolution can be passed with a simple majority.

Before the shareholders’ assembly, the management board of the company and the majority shareholder together have to provide a report on the envisaged squeeze-out. Such a report has to include, among other things, the proposed cash compensation for the minority share-holders, as well as a statement on the adequacy of the cash compensation. Consequently, the adequacy of the cash compensation has to be reviewed by an expert, appointed by the competent court, upon the request of the management board and the majority shareholder.

The articles of association of a company may provide that a squeeze-out is not permissible or that the majority shareholders have to own more than 90 per cent of the stated capital. Further, under certain circumstances a reorganisation by way of squeeze-out may be illegitimate and therefore invalid.

15. DEBT RESTRUCTURING
In practical terms it is rather difficult to conduct out-of-court debt restructurings if there is more than one (major) lender involved, because the consent of all relevant involved parties is required for any such debt restructuring.

In terms of in-court proceedings, Austrian law provides for composition proceedings (Ausgleichsverfahren), which focus on debt relief for the debtor while preserving its business. During such proceedings the debtor remains responsible for administering its property, but is barred from performing certain legal acts or entering into certain kinds of transactions (eg disposal of real estate). Moreover, all transactions are supervised by a court-appointed administrator.

15.1 What rights of control do creditors have in the case of the opening of insolvency proceedings?
The opening of bankruptcy procedures generally requires an application of the debtor or one of its creditors. Only in a few cases, eg if composition procedures fail, the court may open bankruptcy procedures ex officio. If the conditions for the opening of bankruptcy proceedings are met, the debtor is obliged to file an application for opening the proceedings without undue delay, and, at the latest, within 60 days from the debtor’s knowledge of its insolvency.

In general, the entire process is in the control of the receiver, who is appointed by the court. The primary task of the receiver is the realisation of the bankruptcy estate and the settlement of creditors’ claims. The order in which creditors are paid in the borrower’s insolvency primarily depends on the time of perfection of security interest over the borrower’s assets before the opening of insolvency proceedings, which is decisive for the ranking of the secured creditors. A valid and enforceable security interest entitles the secured creditor (Absonderungsgläubiger) to preferential and full satisfaction ahead of all unsecured creditors (Konkursgläubiger) which, in turn, rank ahead of all subordinated creditors (nachrangige Gläubiger). To the extent that a lender is not fully secured by valid security and, therefore, suffers a shortfall in the borrower’s insolvency, it can claim the shortfall as an unsecured creditor of the insolvent borrower. The creditors’ rights are mainly limited to the right to be heard.

Generally, foreign creditors are treated equally with Austrian creditors during bankruptcy proceedings taking place in Austria. Foreign creditors are free to file the same applications and notifications of claims as Austrian creditors. However, they must appoint a person residing in Austria who has the power to act on behalf of the foreign debtor.

15.2  Shopping for insolvency regimes
The implementation of the EC Regulation on Insolvency Proceedings (1346/2000/EC) created an uniform transnational insolvency regime. Consequently, a CoMI-clause normally prevents the relevant parties from changing their centre of main interest, and they are also not allowed to transfer assets from one country to another in order to get into a better position (‘forum shopping’).

16. ENFORCEMENT OF SECURITY
Mortgages and pledges are generally enforceable with court assistance. However, if agreed upon in the security agreement, an out-of-court enforcement by the beneficiary of the security itself is permitted. An enforcement with court assistance may be lengthy (ie, at least several months, depending on which legal steps the pledgor takes during the respective enforcement proceedings).

Claims and receivables assigned for security purposes may be collected by the assignee itself upon the occurrence of certain trigger events (eg, event of default) as set forth in the respective assignment agreement.