GREECE Law and Practice Contributed by: Ioannis Charalampopoulos, Daphne Kasimati, Afroditi Kazani and Ioanna Exarchou, Machas & Partners
The target company should record in the liabilities sec- tion of its balance sheet a non-distributable reserve in the amount equal to the financial assistance to be provided. 5.5 Other Restrictions Stamp duty might be applicable for granting the guar- antees or security, depending on whether the secured credit triggers stamp duty. Giving a guarantee or secu- rity in connection with a non-bank loan agreement might give rise to payment of a stamp duty. 5.6 Release of Typical Forms of Security A security interest is an ancillary or accessory right. That means that security rights are dependent on the underlying obligation they secure. Therefore, the security right is automatically extinguished if the debt is discharged. To publicise the release of the security, certain for- malities should be followed. The process is relatively straightforward, but it may vary slightly depending on the type of asset and the specific security involved. If a security interest has been registered with a com- petent authority, such as a land registry, cadastral office, or the Unified Electronic Pledge Registry, it is necessary to either deregister the interest or update the registry to reflect the change in the beneficiary of the security interest. The release of any type of security may also include the execution of a written agreement between the pledgor and the pledgee, confirming the repayment or discharge by other means of the secured obligation. 5.7 Rules Governing the Priority of Competing Security Interests The Greek code of civil procedure has detailed rules governing the priority of competing security interests. These rules come into play if the auction proceeds are insufficient to cover the claims of all creditors. Accord- ing to the said legislation, claims may come with privi- leges of the following types, which in turn determine the class of the respective creditors: • claims established by operation of law come with a general privilege;
• claims created due to a pledge or mortgage come with a special privilege; and • unsecured claims come without privilege. Regarding the allocation of proceeds in an auction procedure, a distinction should be made based on when the respective debt obligations arose. For secured debts incurred before 17 January 2018, Greek law provides that the proceeds from the sale of collateral in bankruptcy are allocated after deducting bankruptcy costs and top-priority claims. In particular, 65% goes to secured creditors, 25% to creditors with general privilege (such as the tax authorities, social security funds, and employees), and 10% to unse- cured creditors. If any of these creditor categories are not present, the distribution is adjusted accordingly. On the other hand, for secured debts created on or after 17 January 2018, and provided the collateral was initially unencumbered and properly registered, the order of payment prioritises certain employee claims, followed by secured creditors. Within each class of creditors, payment follows the absolute priority rule: whoever registered its security earlier gets paid first. The priority of claims among a group of lenders or between two separate groups of lenders can be con- tractually varied by entering into a subordination or inter-creditor agreement. This is a common practice in syndicated loans or mezzanine finance structures involving different debt tranches. Contractual subordination provisions should remain effective in the insolvency of a borrower incorporated in Greece so long as they do not alter the statutory ranking of creditors and do not conflict with mandato- ry provisions of the law. As such, claims with a general privilege (eg, unpaid social security contributions) may override any contractual subordination. Furthermore, the insolvency administrator may challenge certain transactions if deemed detrimental to creditors. 5.8 Priming Liens In the context of a securitisation transaction, a statu- tory pledge over the business receivables is estab- lished for the benefit of the bondholders over the receivables and the collections of the receivables.
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