SINGAPORE Law and Practice Contributed by: Lee Xin Mei, Cheryl Tan, Eugene Lee and Benjamin Liew, Rajah & Tann Singapore LLP
payments to the originator as the party legally entitled to receive the same; • the originator can grant each underlying debtor a good discharge for payments when it receives the relevant moneys from such debtor; • any rights of set-off which accrue in an underlying debtor’s favour against the origina - tor before notice is given to that underlying debtor of the receivables purchase agreement and the transactions contemplated therein will bind any person(s) equitably entitled to the relevant moneys; • if the originator were to assign the benefit of the receivables to a third party acting in good faith, and for value and without notice of any person(s) equitably entitled thereto, and such third party gave notice of their interest to the relevant underlying debtor before such person(s) so equitably entitled did so, such third party would gain priority over the inter - ests of such person(s) equitably entitled; and • in order to bring proceedings against an underlying debtor, the SPE would have to join the originator in the proceedings against the underlying debtor as a co-plaintiff and if the originator does not consent to being joined as a co-plaintiff, then as a co-defendant. True Sale Under Singapore law, the courts have recog - nised that financing transactions may be effected equally in the form of a secured loan or by means of a legal sale. The key in the interpretation of the legal nature of a transaction is the intention of the parties, as inferred from the documenta - tion, rather than the economic consequences of a documented transaction. This means, for a legal true sale analysis, it is assumed that the transaction is that which is inferred from documents so long as there is no
sham or façade and parties do not act inconsist - ently with the transaction documents. A transac - tion will only be held to be a sham if the extrinsic evidence shows that the parties concealed the true nature of the transaction or by their conduct replaced it with some other agreement. Whilst there is generally no one clear touchstone by which a transaction would be treated as a sale rather than a secured loan, generally where the originator retains any equity of redemption of the receivables or retains the risks of losses incurred on the transferred assets in the case of a re-sale by the SPE, this tends to be more indicative of a secured loan transaction instead. It is generally agreed that any one of the factors below would not in itself be inconsistent with a sale transaction. • The originator continuing to service and col - lect the receivables following the transfer of the receivables to the SPE (in fact this is fairly common for securitisation transactions in Singapore). • Credit enhancement mechanisms such as the entry by the originator into arm’s length derivative transactions with the SPE. • The originator holding a degree of credit risk as first loss position. • A deferral of part of the purchase price pay - able by the SPE to the originator. • The obligation of an originator to repurchase receivables in certain limited circumstances (such as breach of warranty or a “clean-up call”, as opposed to a general repurchase right). It would be usual to request a true sale opinion to be delivered in connection with a Singapore securitisation transaction in Singapore.
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