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Financing and secured loans in Austria
Various types of crowdfunding have become more appealing as an emergent option to conventional funding. The most important credit developments in Austria in recent years, however, mirror those in the credit environment across the European Union: new guidelines for the Loan Marketing Association; the on-going follow-up to the Third Basel Accord to reinforce banks' CRD.
Regulation Is secured credit granting a regulation in your jurisdictions? Pursuant to Section 1 (3) BWG, the signing of moneylending contracts and the granting of cash credits (i.e. credit business) are regarded as "banking business". Credit business" - which comprises both secured and uncollateralised credit - is a regular operation in Austria when operated on a commercially viable footing.
It is therefore possible that even the grant of a loan can be classified as a'commercial activity' and requires a bank license. Is there a particular set of regulatorial questions that a potential creditor should consider when agreeing or concluding a secured credit arrangement? Generally, a creditor must hold a bank license or an EU Passport when providing credit on a business by business terms.
Mortgagors are not required to obtain approval - however, if a mortgagor accepts a loan from a non-bank, this could be a " deposits transaction " that would need a license. Is there a particular set of regulatorial questions that a potential creditor should consider when agreeing or concluding a secured credit arrangement?
Licensed bankers can access and broker credit lines and must, inter alia, respect the Swiss Federal Law on Banks and Savings Banks and the EU Capital Requirements Directive (575/2013). Creditors who take out a secured loan with a consumer must also respect the Consumer Credit Act and the Mortgages and Real Estate Credit Act.
Those acts demand that the creditor specifically determines the debtor's eligibility and provides the creditor with details of the loan. Generally, only the brokering of credit institutions is not considered as 'lending'. The brokerage of mortgage or private credit by property broker, private credit and mortage broker as well as plant advisor is considered according to 1 Abs. 1 Nr. 18 b BWG as "banking activity" and releases thereby the demand to receive an appropriate bank license.
Who are the current secured funding vendors in your jurisdictions (e.g. global banking, domestic banking or non-banking)? As a rule, foreign and domestic bankers and insurers ensure secure funding in Austria. Does your legal system use customary commercial credit facilities for secured credit operations?
Besides the Civil Code, the Business Code and the Consumer Protection Act also concern credit lines. The Loan Market Association documents are usually used for the most part for the purposes of foreign loan contracts (i.e. foreign consortium loans). Syndications Are secured credit syndication arrangements typically used in your legal system? Syndicate loan contracts are usual for large investment deals (e.g. infrastructural, large scale restructurings and finance projects).
With a view to reducing risks and raising the necessary capital, several borrowers (mostly banks) who form a pool are granted credit. There are two kinds of revolving credit facilities under Austria legislation. For a potential debtor for whom only one counterparty is a banking institution, an in-house loan syndication provides a revolving credit facility. As a rule, one of the creditors is nominated as "Mandated lead arranger" and will: act on behalf of the pool, administer the revolving credit facility, maintain the collateral of the pool.
Loans provided by an outside underwriter are different because each of the investors involved becomes a contracting party to the borrowers so that each of the lenders receives collateral. It is, however, customary for only the designated lead arranger to be given the authority to act on account of the syndicate (as described above).
In your jurisdictions, does the Act allow collateral and warranties to be fiduciarily retained by a collateral fiduciary for the account of the bank consortium? The term "security trustee" is not recognised by Austria. Insofar as safety is regulated under the laws of Austria, special procedures must be followed in order to guarantee the safety's effectiveness.
A collateral right (e.g. a guarantee or a lien) cannot be segregated from the loan or the collateral right expires (the same is true for a novation). An escrow agent may retain additional collateral only for his portion of the loan. Therefore, it is customary in the industry to provide for a separate indebtedness for the securities fiduciary under securities laws under Austria.
To avoid violating the accessories rule, a collateral taker has a collateral right across the whole loan so that he can assert the collateral right in full (and not only in his part of the claim). The above does not apply to non accessories rights (e.g. guarantees).
Given that non-accessory and thus abstracted collateral rights are not linked to the loan in law, a collateral taker could keep this type of collateral right without a simultaneous demand if this is stipulated in the collateral document. Since most credit arrangements, however, contain collateral and collateral rights, a simultaneous demand for debts remains necessary.
Funding of SPE Is it customary for secured financial operations for SPE' (Special-Purpose Vehicles, SPVs) to use the funds to be funded for the safekeeping of financial instruments? As a rule, would collateral be provided for the SPV units or would creditors demand immediate collateral? SPV buys and owns the property and the creditors provide SPV with the loan necessary for the work.
Whilst it is usual to organise a financing operation in this way and provide collateral for SPV stocks, creditors usually also provide collateral for SPV stocks in order to prevent them from being structurally subordinated and to give third parties third parties third parties the right of use. Volatility varies depending on the lender's credit ratings and the size of the loan, while the benchmark interest rates usually depend on the loan denomination.
EURIBOR (Euro Interbank Offered Rates ) is the most commonly used benchmark exchange price in Austria. A different benchmark exchange rates is often applied for overseas currencies (e.g. the London Interbank Offered Rates for Pounds). Is there a regulator's limit on the interest rates that can be applied to credit from banks?
Interest on arrears for credit granted to consumers may not be more than 5 percent above the interest rates stipulated. The credit facility usually provides that the total interest payable by the debtor is the benchmark interest plus the stipulated spread. Thus, according to a rigorous reading of the credit contract, the interest rates charged by the borrowers could also be low and the lenders could actually receive less than the margins or have to charge the borrowers.
Since this is an important topic for the credit industry, several legal proceedings are underway. Using and creating warranties Are warranties used in your jurisdictions? Guaranties are common in Austria and are provided by an arrangement between the guarantee holder and the recipient or by the guarantee holder's one-sided statement.
There are two kinds of guarantees under Swiss law: a private guaranty or a contract of suretyship - the suretyship bonds to meet certain liabilities of the obligor in case of delay (§ 1346 BGB). It is an additional collateral and therefore requires: an abstracted warranty - the sponsor commits to paying a certain amount under the warranty at the recipient's official demand ( Section 280a BGB).
According to 1346 para. 2 BGB, warranties and guaranties must normally be given in written form (i.e. autographed by the parties). Section 1 para. 6 BWG, however, stipulates that banks do not have to provide written warranties, so that a person's name is not required on the documents.
As a rule, abstract warranties are only given for a certain time. Does legislation influence or limit the provision or enforcement of warranties in your jurisdictions (e.g., up-stream warranties)? Transferable Securities provided for the purpose of a loan by a Participating Interest to its parents or affiliates (i.e., collateral or advance securities) may be null and void when qualified as "repayment of limited regulatory capital" (Sections 82 of the Limited Liability Companies Act and 52 of the Stock Corporation Act).
Therefore, warranties or guarantee contracts and all other types of interests within a group can only be provided to a member or to a subsidiary of the member on market conditions. Describe the most commonly used ways to structure the priorities of your liabilities and collateral. Liabilities are divided into the following strata, beginning with the lower repayment preference in the bankruptcy proceedings: Shareholders' funds; hybrids (e.g. convertibles ); lower-ranking (e.g. subordinated) liabilities (e.g. subordinated) liabilities (e.g. subordinated); primarily secured liabilities (e.g. secured credit).
Loans can be provided as collateral (e.g. in a mortgages or a pledge) or personally. Specify the real estate for which the real estate is pawned or repledged and specify the liability for which the real estate is pawned or repledged sufficiently in the agreement on which the mortgages or liens are underlie.
The personal collateral comprises an undertaking by a third person other than the Mortgagor. Are there any tax, stamping tax or other charges to be paid when a loan, surety or interest is granted or enforced? Foreign exported juridical acts may also be liable to Austria stamping tax.
Tax on stamps is either imposed if both contracting partners are resident in Austria or if the documentary evidence of the transactions is delivered to Austria in its initial or certified copy format, provided that; a statutory commitment is taken over from the legislative instrument or carried out in Austria.
There are no tax or stamping charges on the provision of a loan or guarantee. Nevertheless, to grant a loan, guarantee or other guarantee, the bank charges an internally generated fee. Guarantee contracts and mortgage payments that are not related to a loan are subject to a 1% stamping tax. Orders that are not tied to a loan are subject to stamping tax at a level of 0.8%.
Additionally, a 1.1% entry charge of the mortgages applies for the entry of a security right over real property in the land register. Applicable Legislation Is it more customary for domestic legislation to regulate the conditions of investment documents, or is the legislation of another country often chosen by the party (e.g. British or New York law)?
Usually, the relevant legislation is often tied to the bank that grants the loan. It is forbidden to depart from the laws of the countries in which the consumers are situated if the other legal system has a lower degree of consumers consent (EU Regulation 593/2008 and Act on Consumers' Protection).
Whilst it is customary in the case of cross-border deals to adopt a different legal option than Austria - such as British credit companies legislation - it is uncommon to adopt US legislation for such a deal. Limitations Are there limitations on lending by or the provision of collateral or guarantee to non-resident creditors?
No express rule exists for the provision of credit by non-resident creditors or for the provision of collateral or guaranties to non-resident creditors. Is there any control on currency that restricts payment to a non-resident creditor under a paper, bond or loan contract? According to the Currency Act and the related provisions, however, information on these credit institutions must be provided regularly by external creditors to the National Bank.
There are, however, no other currency checks limiting payment to non-resident creditors under a securities instrument, surety or loan contract. Collateral arrangements Is it possible to establish a collateral right over all the company's financial instruments? Assuming so, would a lump-sum collateral arrangement be sufficient or is a lump-sum collateral arrangement necessary for each kind of financial instrument?
Generally in Austria, the speciality rule applies to collateral securities, so that a right of lien over all a company's property is not permissible. Collateral can only be provided for specific financial instruments. Therefore, each collateralised financial instrument must be separately designated in the collateral arrangement and every financial instrument requires performance.
Equities of a corporation may be secured by a right of lien, whereas the corporation's total property may not be collateralized. Collateral may be provided for more than one financial instrument in a collateral arrangement, but perfecting is necessary for each financial instrument separately.
Pursuant to Austria, the principles of the dead pledges apply to moveable goods. It is the appropriate perfect method, as there is no deposit registry in Austria. Pledging is only effective if the ownership to be pawned is handed over personally to the pawn creditor. Pledging may only be carried out by means of a statement (i.e. by affixing plaques, markings or other symbols on the asset showing the collateral to the public) if the actual supply is not possible or appropriate.
The pledging of claims or interests may take place either by notification to the obligor or by marking the debtor's bank details to indicate when and in whose favor the pledging took place. In the case of real estate, the collateral contract must be certified in written and notarial form in order to enter a lien in the land registry.
What are the procedures for disclosing collateral on the most commonly used types of asset? Transferable instruments expire spontaneously upon full and absolute fulfilment of the secured commitment. Under certain circumstances, however, the transferable Securities must be discharged when the transferable document matures or the contracting partners decide to do so.
In addition, all additional collateral rights will expire if a loan is new. If, however, the formation of the collateral necessitates a physically transferred asset, those asset must be transferred back to the former pledgee after repayment of the secured claim. Any characters used to perfection a pawn that are unfit for bodily transmission must be deleted.
An encumbrance on real estate shall exist as long as it is entered in the land register despite performance of the secured covenants. If the secured liabilities are fulfilled, the creditor must give a request for deletion of the mortgages, which the landlord of the pledged real estate must submit to the land registry office in order to cancel the mortgages.
As of the date of cancellation, the hypothec expires. Property Can collateral be provided for property? And if so, what are the most commonly used securities for property and what is the process? Mortgages are the only way to secure your property. Hypothec " is the right given to a lender in respect of a liability to obtain privileged repayment from immovable property if the borrower fails to fulfil its financial obligation.
Whether a mortgages exists will depend on the real nature of the basic obligation that will secure the mortgages. In order to issue a hypothec, the hypothecary and the hypothecary must conclude a hypothecary agreement. In order to manage the security right over real property, it must be entered in Annex C of the corresponding land register record.
This right of lien is created on the day of registering. Several mortgages can be entered on a property, the precedence being defined by the date on which the entries in the land register are filed. You can register a mortgag as a "regular mortgage" for a set amount that includes a percent of interest, an interest on arrears and a set amount of incidental expenses.
As an alternative, a hypothec can be entered as a "maximum mortgage" with a limit for credits, guarantees or losses made. Secured liabilities under a ceiling amount hypothec may fluctuate over the life of the hypothec, whereby the amount actually secured is the amount due that the borrower owes from period to period.
Furthermore, a "simultaneous mortgage" (i.e. a loan covering more than one plot of land) may be provided for certain operations. Machines and plants Can securities be provided for machines and plants? And if so, what are the most commonly used types of collateral for this type of ownership and what is the process?
In Austria, the provision of securities for machines and plants is permissible and widespread. Due to the fact that Austria's legislation follows the principles of deal commitment, the demands on supply methods other than those of a physicist are strictly regulated. If, however, it is unreasonable to supply the asset materially, the lien can be perfect by a token supply.
Such cases allow the attachment of discs, symbols or other symbols to the asset in order to provide public proof of the deposit. Claims Can collateral be provided for claims? And if so, what are the most commonly used types of collateral for this type of ownership and what is the process? Collateral that is provided for claims is usual for credit facilities (e.g. collateral for an employee's salary).
Such claims may be secured by pledging or assigning. Enforceability is conditional on transfers and pledges: notice to the third person. Available-for-sale securities Can collateral be provided for existing securities? And if so, what are the most commonly used types of collateral for this type of ownership and what is the process?
Collateral can only be provided via the use of finacial instruments. and Held-to-maturity investments are marketable investments that are traded on principal market places, such as: a spot product, a derivatives contract, a contract to obtain or dispense cash or another type of investment. The pledging may be effected by means of either actual physically delivered goods or by notice and instructions to the Custodian to keep the transferable security as a lien.
In Austria, the necessary method of pledging stocks of a public limited liability enterprise will depend on the nature of the stocks concerned and the manner in which the pledging is demonstrated. In the event that the equities are kept in a custody account, notice shall be given to the depositor who shall retain the equities as a lien. In addition, the issuer will be informed of the pledging, which will be entered in the shareholders' registry.
Even though interests in a private company with restricted liabilities do not qualify as "financial instruments" within the meaning of Section 1 (6) of the German Securities Supervision Act, they may still be secured (e.g. pledged). As a rule, such pledging is carried out by notifying the managers of the corporation. Is it possible to provide collateral in the form of liquid assets?
And if so, what are the most commonly used types of collateral for this type of ownership and what is the process? It is possible to pawn your money in the form of a deposit, provided that it is paid into a giro transfer at the time of the pawn. IP Can collateral be provided on IP?
And if so, what are the most commonly used types of collateral for this type of ownership and what is the process? IP may be secured by an interest, the most frequent of which is an IP lien or cession. In the case of a patent, trademark or design, a pledging or transfer is effected by entry in the patent, trademark or design register of the Austrian Patent Office.
Furthermore, intellectual property can not be the object of interest as it is not assignable. The right to use a copyrighted work may, however, be pledged or assigned. The contract in these cases establishes the pledging or transfer; further perfecting is not necessary. What are the joint enforceability triggers for credits, safeguards and collateralisation?
Conditions under which a creditor can obtain a loan vary depending on the terms of the contract. In principle, it is stipulated that a creditor can call a loan due at any point after a delay in payment has arisen, unless it is rectified or cancelled within a certain extension of one year. As a rule, a warranty can be called when the secured receivable is due and has not been fully repaid by the borrowers.
An interest can only be enforceable if the secured commitment is unsettled, due and payable. 3. The creditor must in any case inform the respective guarantor in writing of any intention of execution within a suitable time limit (the stipulated minimal time limit is usually one week). Such notification and extension shall not be necessary if the collateral provider has suspended or denied payment or has applied to open bankruptcy procedures or if such procedures have been initiated.
Consumers protection legislation contains special limitations on the enforceability of credit for consumers. Which are the most commonly used means of enforcing? Collateral and guarantee will be enforceable as follows. Hypothecaries A hypothecary is usually enforceable by a judge through: open auctions. As an alternative, the interested party can reach agreement (in the respective safety document) on out-of-court settlement - either through a bid or a purchase.
Movables Movables A lien on a moveable object can be asserted by a court of law selling it at court or by a personal seller if the object has a stock list or stock list value. Equities or savings certificate A pledging of equities or savings certificate with an stock list or stock list value can only be carried out through personal selling, not through tender.
Otherwise, they may be auctioned by open market or, depending on the assessment, sold privately. IP protection can be enforceable by the collateral taker through either open bid or closed bid. An secured lender who profits from a lien, assigned title or mortgages has the right to receive discrete and privileged payment.
Creditors shall have the right to obtain their collateral unless assertion would endanger the survival of the business. If so, the claimant shall be precluded from asserting his right to claim his guarantee for a period not exceeding six and a half years, unless this would cause significant injury to the claimant personally or economically.
Insofar as the revenue is not sufficient to meet all secured claim of creditsors, the secured creditsors shall be considered as uncovered creditsors for their open claim. Lower-ranking lenders are remunerated after uncollateralised lenders (the receivables of a borrower are considered lower-ranking - e.g. if the loan is considered as a replacement for equity).