LIECHTENSTEIN Law and Practice Contributed by: Bernhard Rankl, Nicolai Binkert and Alexander Appel, Schurti Partners Attorneys at Law Ltd
Court Proceedings If enforced in court proceedings, the respective asset is sold in the course of a public auction in accordance with the provisions of the Liechtenstein Enforcement
contrarius – ie, by physically re-transferring the assets and documents handed over to the security agent (eg, share certificates, powers of attorney), notifying third parties (eg, account banks and third-party debtors) of the security release, deletion of register entries (eg, share register) and re-assignment of receivables and/ or founder’s rights to the company. 5.7 Rules Governing the Priority of Competing Security Interests When it comes to the ranking of multiple security inter- ests, Liechtenstein law follows the principle of prior- ity, meaning that the security interest validly perfected first will prevail and rank ahead of any other security interest subsequently established in respect of that asset. Contractual arrangements that deviate from this principle by setting a ranking of competing secu- rity interests are valid under Liechtenstein law. How- ever, it is unclear whether an insolvency administrator would be bound by and uphold such an agreement. 5.8 Priming Liens The most material security interests that arise by operation of law and that rank ahead of any other (registered) security (even without registration in the Liechtenstein Land Register) are for the benefit of the state and municipalities for taxes, building insurance companies for their insurance premium claims, and claims of public undertakings (eg, land improvements) attributable to the property. The first-ranking pledge of account banks (see 5.1 Assets and Forms of Security ), although not arising by operation of law, should also be mentioned in this context. 6. Enforcement 6.1 Enforcement of Collateral by Secured Lenders As a general rule, a lender can enforce its collateral when the secured claim falls due. Security interests are either enforced in court proceedings or, if agreed by the parties, by out-of-court enforcement.
Act ( Exekutionsordnung ). Out-of-Court Enforcement
Depending on what has been agreed between the parties, the out-of-court enforcement can take place by public auction, private sale or a so-called self- entry, where the asset is not sold to a third party, but acquired by the lender itself. Enforcement by self- entry is generally only permitted where the asset has an easily determinable market or exchange price. As a general rule, when enforcing the security interest, the lender must take into account and consider the interests of the security provider, which means that the lender must sell the asset at the best possible price. If the asset does not have a market price, such as share interests in unlisted companies or property, independent valuations must be obtained to ensure that the asset is not sold at a below-market price. Any surplus, meaning the amount of enforcement pro- ceeds exceeding the secured obligation, will have to be handed over to the security provider. Being a member of the EEA, Liechtenstein has also transposed the Financial Collateral Directive (Direc- tive 2002/47/EC) into national law. If the requirements under the directive are met, and if the parties agree to establish the security in the form of financial col- lateral, the security taker will have, inter alia, the right to appropriate the asset. 6.2 Foreign Law and Jurisdiction Under Liechtenstein law, the law governing the agree- ment may be freely chosen by the parties (subject to certain limitations) as far as contractual aspects are concerned ( Vertragsstatut ). However, this does not apply to the law governing the creation, extinc- tion and the content of rights in rem. It is therefore standard market practice that assets that are located in Liechtenstein are pledged under a Liechtenstein law governed security agreement which then stipulates the respective perfection steps to be taken in compli- ance with Liechtenstein law.
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