LIECHTENSTEIN Law and Practice Contributed by: Bernhard Rankl, Nicolai Binkert and Alexander Appel, Schurti Partners Attorneys at Law Ltd
Movable Assets Movable assets are also pledged under a pledge agreement that does not require any formalities. As a general principle of Liechtenstein pledge law, physi- cal assets subject to a pledge must be handed over to and remain with the pledgee ( Faustpfandprinzip ) as a perfection requirement. Alternatively, if the assets are with a third party, the pledge may also be per- fected by instructing the third party to hold the asset on behalf and for the benefit of the pledgee. It should be noted that a determinable, coherent set of assets (eg, a warehouse) can be made the subject of a pledge agreement, but the perfection requirements have to be fulfilled for every single asset in the set, meaning that the set of assets cannot be pledged as a whole. Obviously, this can have a significant impact on the practicality of pledges. Real Estate Security over real estate located in Liechtenstein is taken in the form of a mortgage ( Grundpfandver- schreibung ) or mortgage certificate ( Register-Schuld- brief ). Compared to the other types of collateral, the documentation for a mortgage or mortgage certificate is strongly formalised and only the template agree- ment published by the Liechtenstein Office of Justice ( Amt für Justiz ) can be used. In addition, the signa- tures of the parties have to be notarised. The agree- ment is then filed and registered with the Liechtenstein Land Register ( Grundbuch ). 5.2 Floating Charges and/or Similar Security Interests Floating charges or other universal or similar “catch- all” security interests over all the current and future assets of a company are not permitted under Liech- tenstein law. The assets to be charged must be clearly identified, or at least identifiable, and security cannot be created over a generic, volatile pool of assets. It should also be kept in mind that Liechtenstein law requires a perfection step for each single asset so that a security interest over an aggregation of assets (eg, a warehouse) may not be created uno actu. 5.3 Downstream, Upstream and Cross- Stream Guarantees The most relevant and prevalent legal forms in Liech- tenstein for commercial purposes (ie, the company
have been pledged and registering the pledge in the share register of the company. Pledge agreements in relation to unsecuritised shares must be concluded in writing. The interests in an establishment, called “founder’s rights” ( Gründerrechte ), cannot be pledged but can only be assigned for security purposes (Liechtenstein law explicitly prohibits the creation of a pledge over founder’s rights). The security assignment agreement does not require any specific formalities. The security is perfected by handing over a founder’s rights cer- tificate to the assignee and by notifying the establish- ment of the assignment. Bank Accounts Security over bank accounts is typically created in the form of a pledge established under a bank account pledge agreement which must be in writing but is not subject to any further formal requirements. The general terms and conditions of Liechtenstein bank accounts usually provide for a (first-rank) pledge over all assets credited or otherwise transferred to accounts held with that bank. When pledging these bank accounts, the aforementioned pledges should be either waived or subordinated to the pledge of the pledgee. The pledge is then perfected by notifying the relevant account bank(s) of the pledge. Receivables The common security package also comprises secu- rity over receivables (in particular trade receivables and intra-group receivables). Receivables may either be pledged or assigned for security purposes. From a lender’s perspective, the latter is more advantageous, and thus more frequently used, as the full title to the receivables is transferred to the lender and is not only a limited right in rem. The lender is, however, limited in disposing of the receivables as any disposal out- side of an enforcement scenario would be a violation of the security agreement resulting in potential dam- age claims of the assignor. The security assignment is perfected by notifying the respective debtor of the assignment. Neither receivables pledges nor security assignments are subject to any formalities other than that the underlying agreements must be in writing.
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