GERMANY Law and Practice Contributed by: Michael Josenhans, Lucas Lengersdorf and Beatrice Zobel, Freshfields
handed over or a substitute for such handover needs to occur. Sometimes, stock certificates need to be endorsed. Bank Accounts The perfection of account pledges requires that the account bank be notified of the pledge. Movable Assets Security transfer agreements require the inclusion of certain details on the location or the identity of the assets and potential rights of third parties (eg, land - lords, suppliers or factoring providers). Obtaining the required information on those details from the security provider is a key timing item. 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 which 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 on the same document. 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 mort - gage itself is a standard document containing only a formal description of the security right to be estab - lished. Therefore, a related security purpose agree - ment needs to be concluded. This agreement 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 registry, incurring additional costs. Land charges and mortgages can be certified or uncertified. In the case of an uncertified land charge or mortgage, the secu - rity only becomes valid upon its entry into the land registry. 5.2 Floating Charges and/or Similar Security Interests A floating charge typically describes an instrument which creates security over non-constant assets changing in quantity and quality. However, German law requires that a security interest relate to determi - nable assets such that these assets are identifiable by a third person. A floating charge would not be com - patible 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). 5.3 Downstream, Upstream and Cross- Stream Guarantees It is generally possible for any entity to provide down - stream, upstream and cross-stream guarantees or security. However, if the guarantee/security provider is a German limited liability company or a limited part - nership with a limited liability company as its gen - eral partner, upstream and cross-stream guarantees/ security may result in personal and criminal liability for the management directors, to the extent that the
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