GERMANY Law and Practice Contributed by: Michael Josenhans, Lucas Lengersdorf and Karl Kuhn, Freshfields
5. Guarantees and Security 5.1 Assets and Forms of Security
Movable Assets Security transfer agreements require the inclu - sion of certain details on the location or the identity of the assets and potential rights of third parties (eg, landlords, 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 deter - minable ( bestimmbar ) by an independent third party. Therefore, 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 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 Intellectu - al Property Office (EUIPO), and in such cases actual wet-ink signatures need to be exchanged. Receivables Security assignment agreements need special attention in the case of other/previous assign - ments of receivables by the assignor – eg, to a factoring provider. Obtaining the required infor - mation from the assignor is a key timing item. A notification of the debtor of the assigned receivable is not required to perfect the secu - rity. However, prior to receipt of a notification, transferred assets). Intellectual Property
A comprehensive collateral package will typi - cally comprise collateral over all of the obligors’ assets to the extent that the cost benefit ratio and the agreed security principles justify it. Although this scope may differ in certain trans - actions, the customary package offered in pri - vate capital financings consists only of share pledges to ensure the single point of enforce - ment (SPE), account pledges and assignments of certain receivables. Parallel debt structures are customarily used. Most security agreements have standard terms, leaving little room for negotiation. With few exceptions, security agreements can be execut - ed by simple exchange of signatures (electronic, if agreed between the parties). Shares/Interests/Stocks Pledges over shares in German limited liability companies (contrary to pledges over partner - ship interests and stocks) need to be notarised, incurring high costs. Attending the notarial meet - ing will usually require a power of attorney (certi - fied/legalised to the extent required). The perfection of a pledge requires that the rel - evant pledged entity be notified accordingly. In the case of certified stocks, the stock certificates need to be handed over or a substitute of such handover needs to occur. Sometimes, stock cer - tificates need to be endorsed. Bank Accounts The perfection of account pledges requires that the account bank be notified of the pledge.
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