LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Hawa Mahamoud and Eva Jean, GSK Stockmann
following its registration in the shareholders’ regis- ter of the company that issued the pledged shares; • in view of the general rights of (first-ranking) pledge, lien, set-off or retention banks usually have (pursuant to their general terms and conditions) on bank accounts, a pledge over a bank account is perfected upon its notification and acceptance by the bank with which the pledged bank account is maintained; the relevant bank usually signs an acknowledgement of the pledge, which is standard to contain a waiver of its aforementioned general rights of pledge, lien, set-off or retention over the relevant bank account; and • through a pledge over receivables, upon the mere conclusion of the pledge agreement; however, the debtor of the pledged receivables will be dis- charged while making payments to the pledgor unless it has been notified of the existence of the pledge over the receivables to the benefit of the pledgee. With respect to a transfer of title by way of security, the pledgee transfers the ownership in relation to the financial instruments and/or receivables to the ben- eficiary until the secured obligations have been dis- charged, triggering the obligation of the beneficiary to retransfer the financial instruments and/or receivables to the pledgor. The transfer of title by way of security will be perfected against the debtor and third parties upon its execution by the pledgor and the beneficiary. However, the debtor of the transferred receivables will be discharged while making payments to the pledgor unless the debtor has been notified of the existence of the transfer of title over the receivables to the benefit of the pledgee. Security Governed by the Civil Code and Other Special Laws The creation of a security right over immovable prop- erty or aircraft requires the realisation of a number of formal requirements. The security right can be created only through a notarial deed, which has to be regis- tered with the tax administration and relevant publicly held mortgage register. Meeting those formalities is costly and might take time. Equally formal and expensive is the creation of a secu- rity right over ongoing business concerns, which has
to be witnessed in a written contract and registered in a mortgage registry. The collateral will comprise all the tangible and intangible assets of a business, as well as half of its outstanding shares. Guarantees Guarantees and suretyships are perfected by the mere conclusion of the relevant agreement creating such security. 5.2 Floating Charges and/or Similar Security Interests The creation of a floating charge interest over the assets of a company is not possible under Luxem- bourg law, pursuant to the Luxembourg law principle of prohibition to secure future or after-acquired assets. The Luxembourg law concept that is closest to a float- ing charge is the pledge over ongoing business con- cerns referred to in 5.1 Assets and Forms of Security . In addition, the Collateral Law provides for the pos- sibility of creating securities over all financial instru- ments of a pledgor, even those that will be acquired and/or issued in the future. Hence, it is common that borrowers grant to their lenders a security package comprising pledges on certain financial instruments and claims held by such borrowers and governed by the Collateral Law. The perfection of pledges will depend on the type of collateral, as described in 5.1 Assets and Forms of Security . Furthermore, under Luxembourg law, security inter- ests with respect to future assets are, in principle, considered a promise to pledge ( promesse de gage ), to deliver the future assets and to create in the future the security interest as long as the assets are not in possession of the pledgee of the third-party holder. As an exception to the Luxembourg law principle of pro- hibiting the securing of future or after-acquired assets, it is possible to agree (by way of contract) to pledge future or after-acquired assets once they have entered into the ownership of the pledgor and are transferred into the possession of the pledgee or a third-party holder pursuant to a pledge agreement.
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