GERMANY Law and Practice Contributed by: Michael Josenhans, Lucas Lengersdorf and Karl Kuhn, Freshfields
ly by the general terms and conditions pledge ( AGB-Pfandrecht ) and is, as such, a “compet - ing secured party” relative to the private credit lenders. Secured hedging is common in private credit transactions. Unlike the cash pooling bank, hedge parties typically participate in the inter - creditor agreement but usually as “silent secured parties,” meaning they are formally co-secured, but generally do not have voting rights. 5.10 Bank Licensing The taking or holding of collateral is in principle not a licensable activity in Germany. If the security or collateral agent transfers mon - ies, this may qualify as a payment service which requires authorisation as a payment services provider. A security agent can hold collateral for the benefit of the lenders and, hence, no col - lateral needs to be retaken if the lender assigns its loan. 6. Enforcement 6.1 Enforcement of Collateral by Non- Bank Secured Lenders By law or pursuant to the relevant security agreement, the enforcement of German col - lateral is only possible if and once the secured claims have become due and payable. In many cases, security agreements contain (additional) conditions, requiring an event of default to have occurred and be continuing and/or the loan to have been accelerated. However, certain pre- enforcement securing steps are sometimes per - mitted without a due and payable claim as long as an event of default is continuing.
Enforcement by law generally requires the enforcing creditor to obtain an enforcement title in court. This requirement is often either waived (eg, in share pledges) or avoided by immediate submission to foreclosure (eg, in land charge deeds). The further enforcement procedure depends on the type of security, as follows. • A security assignment over claims is enforced by the secured party collecting any claims from the debtors. • A surety or guarantee is enforced by seeking a court title for payment against the guaran - tor. • A share pledge is generally enforced by way of a formalised public sale (ie, an auction). This is subject to a prior notice period typi - cally limited to five business days. After the secured debt has become enforceable, the pledgor and pledgee may also agree on a private sale – a forced private sale or appro - priation is not permitted. If the shares subject to the pledge are publicly traded, the shares may be sold in a sale by private agreement ( freihändiger Verkauf ) on the basis of their exchange price. • An account pledge is enforced by instruct - ing the account bank to pay any amounts standing to the credit of the account to the pledgee. • Land charges/mortgages are primar - ily enforced by way of public auction. This process can be expected to take at least 12 months. Where the charged real property generates income, it is also possible to place the property into forced administration and to use the generated income to pay down the secured debt – this is often quicker. In any event, the enforcement of a land charge
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