LUXEMBOURG Law and Practice Contributed by: Vassiliyan Zanev and Natalja Taillefer, Loyens & Loeff Luxembourg S.à r.l.
6.4 Construction of Bankruptcy-Remote Transactions A Luxembourg SPE governed by the Securitisa - tion Law can also hold the securitised assets as a fiduciary for the investors, under the Fiduci - ary Law. A Luxembourg fiduciary arrangement ( fiducie ) results in a separate fiduciary estate distinct from the personal estate of the fiduciary (or other fiduciary estates held by such fiduci - ary) and the assets forming part of the fiduciary estate can be seized only by the creditors whose rights relate to such estate, including in the case of bankruptcy or liquidation of the fiduciary. Given that bankruptcy remoteness is mostly a factual matter, Luxembourg opinions would nor - mally be issued only with regard to the validity of the non-petition, limited recourse and subor - dination provisions. 6.5 Bankruptcy-Remote SPE As mentioned in 6.2 SPEs , securitisation under - takings need to be set up under – and need to comply with – the Securitisation Law to be able to benefit from its protection. As bankruptcy remoteness is mostly a factual matter, the following criteria generally need to be satisfied (and the relevant provisions are includ - ed as standard in the issuance and corporate documentation of an SPE) for an SPE to be suf - ficiently protected against the risk of bankruptcy: • restrictions on corporate object and activities in the articles of association of the SPE and in the issuance documents are meant to ensure that the SPE will not engage in any transac - tions other than the relevant securitisation transaction; • debt limitation provisions in the issuance documents are meant to limit the number of
creditors that may potentially file for insol - vency of the SPE; • independent directors and separateness covenants in the securitisation documents are meant to mitigate the risk of potential consolidation of the SPE with any other entity (including the originator); and • security interests over the securitised assets of the SPE are meant to give the investors a priority over such assets vis-à-vis other credi - tors. The securitisation documentation and/or the constitutional documents of an SPE would usu - ally also include standard non-petition, limited recourse and subordination provisions, which are expressly recognised by the Securitisation Law. Any proceedings initiated in front of a Lux - embourg court in breach of non-petition provi - sions will be declared inadmissible. The Securitisation Law includes statutory sub - ordination rules that determine the rank of vari- ous instruments that can be issued by an SPE. This order of priority may be overridden by the constitutional documents of, or any agreement entered into by, the SPE and any proceedings initiated in breach of either such default water - fall, or the overriding provisions, will be declared inadmissible.
7. Tax Laws and Issues 7.1 Transfer Taxes
There is in principle no Luxembourg stamp duty or registration tax on the transfer of financial assets, unless such transfer would be made by means of notary deed or the transfer agreement would be voluntarily registered in Luxembourg (or annexed to a document that is subject to mandatory registration).
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