GERMANY Law and Practice Contributed by: Michael Josenhans, Anouschka Zagorski and Christina Banz, Freshfields
lords, suppliers or factoring providers). Obtaining the required information on those details from the security provider is a key timing item in this respect. No perfection requirements exist. However, the transferred assets need to be clearly determinable ( bestimmbar ) by an independent third party. There- fore, close attention needs to be paid to a sufficiently detailed description of the location of the transferred assets or, if necessary, other features that set the transferred assets apart from others (eg, by way of labelling the transferred assets). Intellectual Property Intellectual property (IP) rights can be assigned or pledged for security, depending on the exact type of IP and its registration. Security rights over IP need not (but should) be registered with the competent registry to protect the lenders’ interests. Note that electronic signatures are not sufficient in the event that the IP includes trade marks registered with the European Union Intellectual Property Office (EUIPO), and in such cases actual wet-ink signatures need to be exchanged. Receivables Security assignment agreements need special atten- tion in the case of other/previous assignments of receivables by the assignor – eg, to a factoring pro- vider. Obtaining the required information from the assignor is a key timing item. A notification of the debtor of the assigned receivable is not required to perfect the security. However, prior to receipt of a notification, the debtor can effectively settle the receivable by way of payment to the assign- or. Notifications are therefore common in respect of intra-group receivables and receivables towards pro- fessional parties (eg, insurances or report providers) but, for confidentiality reasons, typically not in respect of customers. Real Estate Security over immovable assets is provided by way of land charges or mortgages. The land charge or mortgage itself is a standard document containing only a formal description of the security right to be
established. Therefore, a related security purpose agreement needs to be concluded that includes all other provisions, such as the security purpose and enforcement triggers. The land charge or mortgage itself needs to be notarised and registered in the land register, with both giving rise to potentially substantial additional costs. Land charges and mortgages can be certified or uncertified. In the case of an uncertified land charge or mortgage, the security only becomes valid upon its entry in the land register. Asset Tokenisation Of considerable potential, but far from being fully realised in practice, is the tokenisation of collateral. According to forecasts, up to 10% of all assets could be represented by tokens by 2030. The tokenisation of illiquid assets such as private equity or real estate is considered especially promising, as ownership rights can be documented efficiently, transparently and in a tamper-proof manner, which is expected to enable the automated and rapid transfer of collateral as well as precise traceability in the event of defaults or real- locations. Despite technical and regulatory hurdles, it can be assumed that, with further development of the techni- cal infrastructure and clearer regulatory requirements, practical implementation and market acceptance will increase significantly in the coming years. 5.2 Floating Charges and/or Similar Security Interests A floating charge typically describes an instrument that creates security over non-constant assets changing in quantity and quality. However, German law requires that a security interest relate to determinable assets such that these assets are identifiable by a third per- son. A floating charge would not be compatible with these requirements. Nonetheless, in a manner similar to a floating charge, German security usually covers all existing and future assets of a certain type (which is possible for all of the security types mentioned in 5.1 Assets and Forms of Security , except for land charges/mortgages).
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