![]() the security grantor’s assets minus debt minus statutory share capital). The rules applicable for providing upstream/side-stream security (collateral and guarantees) by limited liability companies require that payments to be made under a guarantee (or enforcement proceeds from the enforcement of collateral) do not exceed the security grantor’s free assets (i.e. In addition, stock corporations may not provide financial assistance (directly or indirectly) for the purchase of their own stock. Stock corporations may only grant upstream/side-stream security within strict boundaries, unless in an onlending situation, requiring the existence of a profit and loss transfer agreement with the major shareholder. Those restrictions do not have the effect to invalidate security but, if not adhered to, might cause the officers of the security grantor to be held personally liable. Yes, provided that for upstream and side-stream security (to holding and sister companies) certain restrictions apply (which are set out in the two following paragraphs). Can a company that is incorporated in your jurisdiction grant security over its future assets or for future obligations? +.Each of these agreements may be made in the English language. Pledging stock in a stock corporation may be made in written form (i.e. Shares in limited liability companies (and, in certain circumstances, partnership interests) are pledged under a pledge agreement which requires notarisation. ![]() Shares are usually pledged under a share or stock pledge agreement. The agreement may be made in the English language. Unlike an assignment, the pledge over receivables (including bank accounts) requires the notification of each of the third party debtors for the pledge to be valid. Third party debtors of trade receivables are, for practical purposes, usually not notified. While an assignment is valid without notice to the third party debtor, it enhances the position of the secured parties if the assignment is notified to the third party debtor. Receivables are either assigned or (in less frequent cases) pledged, usually in written form, unless exceptional circumstances require notarisation. Security over inventory is taken through a security transfer agreement, which needs to follow the same rules as set out for taking security over equipment. Security over equipment is taken through a written security transfer agreement which requires identification of the transferred assets either by way of reference to detailed building and site maps or lists setting out the items of inventory in an identifiable manner, e.g. Whether plant and machinery are captured by a land charge or require a separate transfer under a security transfer agreement depends on the prevailing circumstances of a particular site and the assets located on that site. Plant and machinery are either forming part of the real property (and will, thus, captured by the land charge) or are considered moveable assets (and security will be granted through a security transfer agreement which requires those moveable assets to be thoroughly identified, through asset lists, buildings and site maps or otherwise). Immediately enforceable land charges are granted (in a German language document) by the security grantor in front of a notary public and subsequently filed with the land register. Security over real property is in practice granted through immediately enforceable land charges (with land charges being preferable towards mortgages). While under certain circumstances German law governed receivables may be assigned under a foreign law governed security agreement this is an option which is rarely made use of. Security over assets located in Germany may only be granted under German law governed documents.
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