GERMANY Law and Practice Contributed by: Michael Josenhans, Anouschka Zagorski and Christina Banz, Freshfields
3. Structuring and Documentation 3.1 Restrictions on Foreign Lenders Providing Loans The banking licence requirement applies both to domestic lenders and to foreign lenders equally. Cer- tain exemptions may apply for EU institutions that hold a banking licence in their home jurisdiction and that are supervised by competent authorities in their home jurisdiction within the EU. These institutions may passport their banking licence to Germany if they fulfil the relevant requirements. Generally, the licence requirement applies if foreign lenders wish to provide services to customers who are considered German residents. One exemption to this rule (“reverse solicitation”) applies if the customer seeks out the foreign lender explicitly and the foreign lender does not market or advertise their services to German customers as such. 3.2 Restrictions on Foreign Lenders Receiving Security Generally, foreign lenders may receive security or guarantees in the same way as domestic lenders. The receipt of real estate security might have certain tax implications for foreign lenders. 3.3 Restrictions and Controls on Foreign Currency Exchange Germany has not implemented foreign currency con- trols, except for reporting obligations in the case of incoming or outbound payments regardless of cur- rency. However, banks and payment institutions are required to freeze assets of persons subject to EU sanctions lists. This affects all assets – including funds – regardless of currency. Funds subject to an asset freeze are required to be reported to the competent authorities, which is Deutsche Bundesbank in Ger- many. 3.4 Restrictions on the Borrower’s Use of Proceeds By law, no restrictions on the use of proceeds arise, other than for non-compliance with sanctions or other applicable public laws and the financial assistance/ capital maintenance requirements described in 5.3
Downstream, Upstream and Cross-Stream Guaran- tees and 5.4 Restrictions on the Target . 3.5 Agent and Trust Concepts In syndicated financings, it is market standard to implement an agency and security agency concept. The trust concept is not recognised in Germany. To allow the security agent to hold certain types of secu- rity, a parallel debt concept would be included in the financing documentation. 3.6 Loan Transfer Mechanisms Loan claims can be transferred to a new lender by way of a transfer of rights and claims ( Vertragsübernahme ) or by way of an assignment of claims ( Abtretung ). Transfer of Rights and Claims The usual way to trade out of and into a syndicated loan is by transferring all rights and claims of an exist- ing lender to a new lender. The new lender not only assumes the right to demand principal and interest from the borrower but also assumes funding commit- ments and other obligations of a lender. Assignment of Claims In situations where no more obligations remain on the part of the lender (eg, in the case of non-performing loans), loan claims are usually assigned from the exist- ing lender to the new creditor. Transfer of Security In both scenarios, certain security (“accessory” secu- rity, particularly pledges and mortgages) will, by law, transfer together with the secured claim. A novation of loan claims should therefore be avoided. In respect of other security (the “non-accessory” security, particu- larly security transfers, security assignments and land charges), the existing and the new lender would need to expressly transfer the security to the new lender, and in some cases certain actions from the security grantor could be required. To avoid this, such secu- rity is granted only to the security agent in order to secure the parallel obligations of the debtor towards the security agent, and therefore does not need to be transferred.
170 CHAMBERS.COM
Powered by FlippingBook