LIECHTENSTEIN Trends and Developments Contributed by: Christoph Bruckschweiger, Benedikt König, Philipp Benda and Magdalena Marxer-Friedrich, paragraph 7
are now reaching their maturity dates. This naturally raises the question for investors which legal measures can be taken if their investment appears to be at risk. Liechtenstein offers an attractive platform for issuers, particularly those from neighbouring countries, due to its connections both to the European Economic Area and to Switzerland. In typical structures, the issuer is domiciled in Liechtenstein and raises funds through a bond issuance, which are subsequently channelled to companies responsible for implementing the pro- ject – the ultimate borrower (hereinafter the “Project Company” or the “Project Companies”). Liechtenstein is quite attractive because Bonds are minimally regulated, allowing for a liberal approach to structuring Bond issuances. The primary legal frame- work to be observed is European prospectus law, adopted in Liechtenstein by virtue of its EEA mem- bership. In addition, relevant provisions of loan law (stated in the Liechtenstein Civil Code (ABGB)) apply. Trends and development This lack of detailed legal regulation, while offering flexibility, also gives rise to challenges and potential disputes between issuers and investors, particularly in the event of payment defaults or financial difficulties affecting either the issuer or the ultimate borrower, the Project Company. The current global economic environment has intensified the pressure on Project Companies, which may result in their inability to meet obligations to the issuer. As a consequence, the issuer may be unable to make interest payments or repay principal to investors. In such circumstances, the interests of the parties are inherently in conflict, making disputes all but inevita- ble. Investor For investors, the fundamental question is how to recover invested capital and/or obtain the expected interest payments if the issuer ceases to make pay- ments. This issue is particularly delicate, as it depends not only on the solvency of the issuer but primarily on that of the Project Company – the entity that ultimately utilises the funds raised through the Bond.
Furthermore, Project Companies are often located abroad, which introduces additional cross border complexity. Given the intricacy of Bond structures and the variety of issues that may arise, there is no standard solu - tion for addressing payment defaults. Investors are strongly advised to seek legal advise at the first signs of difficulty in order to identify the most appropriate course of action for their specific case. It is essential that a dispute resolution strategy be developed and implemented at an early stage. In making such decisions, the contractual documenta- tion – most notably the securities prospectus – plays a decisive role for the investor and, in particular, for their legal counsel. It is equally important to assess both the likelihood of success and the risks associated with any chosen dispute resolution strategy. For example, investors, together with their legal coun- sel, must decide whether to initiate contentious civil proceedings against the issuer if payment obligations are not met. In this context, the statute of limitations on the investor’s claims is a critical consideration, as properly filed litigation may interrupt the limitation period. Alternatively, investors may engage directly with the issuer to resolve the dispute through an out-of-court settlement. In doing so, particular care must be taken to ensure that claims do not become time-barred and that the investor’s interests are fully protected under any proposed solution. Legal advice at this stage is therefore essential to avoid potential “traps”. If out-of-court discussions with the issuer prove pro- ductive but immediate payment is not feasible, Liech- tenstein’s legal framework also provides the instru- ment of an “enforceable deed”, which can serve as an effective remedy in such situations. Issuer Naturally, in the event of payment difficulties, the interests of the issuer do not align with those of the investor. While the issuer is the immediate debtor to the investor, it is often not directly responsible for the payment defaults. Rather, liability typically rests with
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