The focus of this report will be the main Securitisation Law provisions that achieve a flexible and - at the same time - robust legal, regulatory and tax framework for the issuance of asset-backed securities, with a brief note on Covered Bonds, on the NPL Law and the New Société Anonymes Law.
SECURITISATION LAW
What are the main Securitisation categories under Greek law?
Trade Receivables
The Securitisation Law defines “securitisation of claims” as the transfer by way of sale of trade receivables from a transferor company (Originator) to a transferee company combined with the issuance and distribution through a private placement (only) of bonds by such transferee (Issuer). The repayment of the bonds is funded by (a) the income collected from the purchased trade receivables; or (b) loans, credit agreements or financial derivatives that the Issuer enters into. The bonds can be offered in Greece or abroad, whereas “private placement” is defined as distribution of the bonds to a limited circle of investors and up to a maximum of 150 persons.
Real Estate Assets
Similarly, “securitisation of real estate claims” is defined as the transfer by way of sale of real property from a transferor (Originator) to a transferee company (Issuer) combined with the issuance and distribution through a private placement (only) of bonds, with a nominal value of at least € 100.000 each, by such Issuer. The repayment of the bonds is funded by (a) the income and revenues collected from the operation or sale of such real property; or (b) loans, credit agreements and financial derivatives entered into by the Issuer.
What types of receivables may be securitised?
There is no restriction as to the type of trade receivables that are eligible for transfer under a securitisation. Such receivables may be any kind of claims for payment against any third party arising in the course of the business of the Originator, whether conditional, existing or future, provided that the latter are defined or definable; including among others any receivables by consumers, claims from services, loans and other banking products, consumable and pharmaceutical receivables of suppliers against public and private entities etc. Recently, the main types of receivables have been consumer and business loans. Additional purchase of receivables may be also permitted. However, in order for the securitization to serve its purpose the trade receivables should be easily liquidated and produce cash flows.
In relation to Real Estate Securitisation, any receivables from the management of or accruing from the securitised real property can be securitised. All collateral rights securing the securitised receivables (e.g. personal and proprietary security like guarantees, mortgages and pledges) are also transferred to the Issuer upon perfection (registration) of the receivables purchase agreement. Moreover, other rights related to the transferred receivables (e.g. to terminate, amend or create unilaterally a legal relationship under a contract) may also be transferred.
Which entities may qualify as Originators?
The Originator/ transferor of the securitised receivables can only be a “merchant” that has its principal place of business or residence in Greece or abroad, provided that it has a place of business in Greece. The notion of “merchant” under Greek law broadly includes all undertakings pursuing commercial activity and includes banks, which are the most common originators in Greek securitisations. The specific provision of the Securitization Law, i.e. that the Originator/ transferor can be a “merchant” that has its principal place of business or residence abroad, provided that it has a place of business in Greece, extends its application to foreign banks, with large volume trade receivables, acting in Greece though branches. Furthermore, the Securitization Law does not differentiate, but natural persons are excluded from its scope, since the nature of securitization is compatible only with legal entities who meet the conditions of a “merchant”.
Especially for Real Estate Assets Securitisation, the Originator can only be the Greek State, a Greek public enterprise (i.e. a State-owned company), a bank, an insurance company or any other company that is either 100% owed by such abovementioned entities or is listed on the Athens Exchange and its total assets exceed € 350,000,000.
What is a securitisation SPV?
Following the example of, among others, France, Italy and Spain, Securitisation Law introduced the concept of a Special Purpose securitisation Vehicle, i.e. an entity established solely for the purpose of securitising assets (SPV) to act as the exclusive transferee of the securitised assets and issuer of the asset-backed bonds. Such SPV may (but is not required to) be set up in Greece; although, especially for Real Estate Assets Securitisations the SPV is expressly required to be set up in Greece. Where SPVs are set up in Greece, they have to take the form of a company limited by shares (Greek société anonyme) and are primarily governed by the special provisions set out in the Securitisation Law taking precedence over the rules of general Greek company law (and from 01.01.2019 of the New Société Anonymes Law). SPVs incorporated under Greek Law have as primary corporate body the shareholders’ general assembly whilst management is carried out by the Board of Directors. Shareholders’ liability is limited to their contribution to the share capital of the company. Since a SPV is established solely for the purpose to act as the exclusive transferee of the securitised assets and issuer of the bonds, the Securitization Law specifically provides for non-application of the requirements regarding the minimum share capital of société anonymes. This is because the share capital of a SPV does not serve the purpose of protecting creditors; under securitization this purpose is served by the securitized claims. SPVs incorporated under Greek Law will issue asset-backed bonds, solely by a decision of the Board of Directors, in order to facilitate financing without the cumbersome process of a decision by the general assembly.
In any case, SPVs (Greek and non-Greek) must have registered shares; i.e. not issued to the bearer. Registered shares ensure the SPV’s independence against the Originator.
How are the securitised assets transferred?
The legal mechanism for the transfer of the receivables set in the Securitisation Law provides that transfers are effected by way of sale under the relevant Greek law rules (articles 513 et seq. and 455 et seq. of the Greek Civil Code), to the extent these do not conflict with the special Securitisation Law rules. The assets purchase agreement must be in writing and also include a statement that the sole purpose of the transfer is the securitisation transaction and a specification of the maximum amount of the receivables transferred or to be transferred. The transfer of the securitized assets is completed upon the completion of the perfection requirements (see below).
How is the “true sale” character of the transaction ensured?
The recognition of the need for “true sale” structures is apparent since a major objective of the Securitisation Law is to ensure the absolute disposition of the transferor’s title and interest in the securitised assets in a way that would be consistent with the nature of sale.
Hence, the Law itself expressly stipulates that the transfer of the securitised assets shall constitute an outright sale, that a fiduciary transfer of receivables is not permitted and that any conditional/fiduciary term to the contrary is not valid. It is permitted to adjust or defer the purchase price and to rescind the purchase agreement according to its terms and the general civil law rules, as well as to enter into a subsequent agreement for the re-purchase of the receivables.
Which are the perfection requirements for the transfer?
The provisions relating to perfection requirements are of particular importance for the securitisation Greek legal framework. Perfection of the securitised assets transfer is effected by registration in the public registry set up under Law 2844/2000 of a summary of the assets purchase agreement which includes its major provisions (Registration). Although the Securitisation Law mentions that the transfer must be notified by the SPV or the Originator to the debtors, said Law also expressly provides that notification is deemed to have occurred with the Registration; thereby successfully addressing the usual issues raised by the general assignment rules in relation to notification. In Real Estate Securitisations, the transferor must also register the real property transfer to the Land Registry and notify in writing the tenants and any other person that is contractually related to the owner of the property.
What is the effect of registration?
Upon Registration (or such later date as specified in the sale and transfer agreement) the transfer is valid and effective against all parties, notwithstanding any contractual agreement between the seller/Originator and the debtor of the receivables prohibiting or restricting such transfer.
Furthermore, on registration, all registrable and registered security interests accessory to the receivables, such as mortgages, can be transferred to the SPV.
What are the qualifications and role of the servicer?
The administration/collection of the receivables may be delegated by the SPV to the Originator or a credit or financial institution providing services within the EEA (Servicer), provided that the servicing agreement is executed in writing and appropriately registered in the public registry of Law 2844/2000. In case the debtors are consumers and the SPV is non-Greek, the Servicer must be established in Greece. The economic independence of the SPV should always be maintained even if the Originator is appointed as Servicer. To this end, the Servicer deposits all moneys collected from the securitised assets in an interestbearing bank account (Servicing Account) kept either with itself or with a credit institution with operations within the EEA.
How is the security of the creditors and the segregation of the assets achieved?
Pursuant to the Securitisation Law protection provisions:
- The Servicing Account where the collected monies are deposited is segregated from the Servicer’s and the deposit bank’s property (if the Servicer is not a bank).
- All collected monies, any assets or securities delivered to the Servicer as collateral for the benefit of the bondholders are not subject to seizure or attachment or set-off rights for counterclaims or restriction by itself or its creditors and do form part of its insolvency estate.
- Upon Registration the holders of the asset-backed bonds and other securitisation creditors, such as swap counter-parties, liquidity providers etc. (the securitisation creditors) acquire a statutory security interest over the receivables and the Servicing Account, securing full payment and discharge of any claims relating to the bonds and the SPV’s operational expenses and other obligations. Such claims rank ahead of any statutory preferential creditors, including tax authorities.
- No other pledge or encumbrance may be effected on the securitised assets, until the security is released.
- Similarly, no further transfer, usufruct or security is permitted on the securitised real property, unless it is in compliance with the terms of the original asset purchase agreement.
Can the initiation of insolvency proceedings affect the transfer of the assets?
The Securitisation Law explicitly provides that upon Registration the transfer of the securitised assets cannot be challenged by any insolvency proceedings of the Originator, the SPV, any security provider or the Servicer. This protection holds true also for all future claims even if these came to existence after the initiation of the relevant proceedings.
Are there any exemptions from data protection/confidentiality rules?
The Securitisation Law provides for exemptions from banking confidentiality and data protection laws to allow for the assets to be transferred free of any requirements to obtain the consent of the debtors or the Data Protection Authority. For the purposes of the securitisation only, the general duty of bank confidentiality does not apply between the Originator and the SPV or the SPV and its creditors, since it would be practically impossible to obtain their prior consent.
Are there any special taxation provisions in relation to securitisations?
Finally, the Securitisation Law includes significant provisions aiming at tax efficiency.
Among others, the Law provides that:
- the transfer and collection of the receivables, as well as the loans, credit agreements and the financial derivatives that the SPV enters into;
- the transfer of real property to and from the SPV and its re-transfer to the transferor/ noriginator; and
- the profits realised from the transfer of receivables, the execution of loans, credit agreements and financial derivatives, any collateral agreements or, under certain conditions, real property, are exempted from any direct or indirect tax, duty, contribution, levy, right or other encumbrance, subject only to any applicable VAT or withholding tax and any charges that may be payable to the securities depositary of the Athens Exchange.
The registrations required are subject to minimal fixed registration duties. Notarial fees and duties in connection with the notarisation of any document or agreement in the context of the securitisation are capped.
COVERED BONDS ISSUES BY GREEK BANKS
What are “covered bonds” under Greek law?
As already mentioned “Covered Bonds” is a particular category of bonds, which is the subject of a special legal and regulatory framework, the provisions of Securitisation Law being supplementary only. In particular, said special framework allows banks to issue (directly or through a special purpose vehicle) covered bonds with preferential rights in favour of their holders thereof and certain other creditors over a cover pool comprised by certain eligible assets.
Legal framework
The legal basis for Covered Bond issues is art. 152 of Law 4261/2014, as in force (the Covered Bonds Law). Pursuant to such Law, secondary legislation has been enacted to set out the regulatory framework regulate with respect to the issuance of covered bonds, notably Bank of Greece Act nr. 2620/28.8.2009 as in force (the Secondary Legislation). Although the Covered Bonds Law is supplemented by the Securitisation Law, it includes significant deviations from it. Moreover, the Covered Bond Law supersedes general provisions of law contained in the Civil Code, the Code of Civil Procedure and the Bankruptcy Code.
Which are the structures of Covered Bond issues?
The Covered Bonds Law provides for the following types of issue:
-
Direct issue: the bonds are issued by a bank and:
-either the segregation of the cover pool is effected by a statutory pledge over the cover pool assets; or
-the covered bonds are issued by the bank and are guaranteed by a special purpose vehicle (SPV), which acquires the assets cover pool - Indirect issue: the bonds are issued by an SPV being a subsidiary of a bank, which acquires the cover pool assets from the said bank and are guaranteed by the same bank.
Which are the main features of Greek Covered Bonds issues?
A basic overview of the main Greek Covered Bonds legal and regulatory provisions could be as follows:
- Placement. Unlike the Securitisation Law, the Covered Bonds can be offered introduced to the public and/or listed to regulated markets.
- Trustee. The Bondholders’ Representative (also referred to as “Trustee” in the Covered Bonds Law) may be a bank or a subsidiary company of a bank passported for services in the EEA and, in contrast to the Securitisation Law, the said Representative will only be liable towards bondholders for wilful misconduct and gross negligence, unless otherwise provided in the bond terms.
- Cover Pool. The assets included in the cover pool may be receivables from loans, credit facilities and (supplementary) from financial derivative instruments, deposits with credit institutions and securities, as specified by the Bank of Greece. In the Secondary Legislation, the Bank of Greece has defined the cover pool eligible assets, set out requirements as to their substitution and replacement by other eligible assets, the ratio of the collateral assets to the value of the covered bond issued, the Loan to Value ratio for certain assets, etc.
- Registration. Claims included in the cover pool are set out by the Issuer and the Trustee and registered in a summary form with the public registry of Law 2844/2000. The form of the Registration form is defined by Ministerial Decree.
- Statutory Security. Bondholders and certain other creditors named as secured creditors in the terms of the bonds (e.g. the Trustee, the Servicer and financial derivatives counterparties) are secured by a statutory proprietary security interest over the cover pool.
- Protection. In all other respects, the Covered Bonds Law protects the bondholders and other transaction creditors by introducing various provisions analogous to those of the Securitisation Law with respect to preferential treatment in case of attachment of insolvency, ensuring attachment and/or bankruptcy remoteness of the assets in the cover pool and the servicing account.
RECENT DEVELOPMENTS – THE NPL LAW
Which types of loans fall under the scope of the Revised NPL Law?
The NPL Law provides that any claims receivables under loan or credit agreements granted or having been granted by credit or financial institutions, except for loans granted by the Depository and Loans Fund, fall under its scope. The NPL Law does not introduce any distinction concerning the nature of the loans and the credit agreements falling under its scope. Therefore, and subject to specific interpretative regulatory acts issued by the Bank of Greece (BoG), any kind of loan and credit agreements are included in its framework (i.e. bond loans issued in accordance with the New Société Anonymes Law, overdrafts, consumer loans, SME loans and loans guaranteed by the Greek State).
Furthermore, the NPL Law provides for the management and acquisition of loans or credits granted by credit or financial institutions not only of non-performing but also for performing loans or credits without restriction for the latter to be managed or acquired by Debt Management Companies for Loans and Credits (D.M.C.L.C.) and Debt Acquisition Companies for Loans and Credit (D.A.C.L.C.), respectively.
Are bond loans covered by the scope of the Revised NPL Law?
Even though the provisions of the NPL Law specifically mention bond loans that the application of the bonds loan framework is not affected by the NPL Law the spirit of the NPL Law does not take into account the specific features of such loans, as for example the provisions setting out the mechanics and conditions for the acquisition of loans and the tax provisions, as well as the lack of any provision relating to the issues that may arise in case of transfers of bonds to a D.A.C.L.C. especially in connection to the Bondholder Agent (the D.A.C.L.C. may not act as Bondholder Agent). Nevertheless, this should not lead to the conclusion that bond loans are excluded from the ambit of the NPL Law. In this respect, it seems appropriate that the NPL Law should apply to bond loans mutatis mutandis, taking into account the special provisions of the New Société Anonymes Law in relation to bond loans and the provisions of the Securitization Law as far as the tax exemptions and capped costs provisions are concerned (hence, for example in case of bond loans, no Law 128/1975 contribution / levy should be payable by the D.M.C.L.C., and the Securitization Law’s tax exemptions and caps in relation to registration and other costs should apply).
What is a Debt Management Company for Loans and Credits (D.M.C.L.C.) and a Debt Acquisition Company for Loans and Credit (D.A.C.L.C.)?
The management of any claims receivables under loan or credit agreements shall be undertaken only (a) by companies registered in Greece, in the form of société anonymes, or (b) by companies registered in a member state within the EEA. The D.M.C.L.Cs, seated in Greece, are governed by the NPL Law and the provisions of New Société Anonymes Law. . D.M.C.L.Cs are considered to be financial institutions. Their shares must be registered and should have a minimum share capital of € 100.000 at all times, unless there is an action plan for the termination of its activities approved by the Bank of Greece (BoG). The acquisition of claims receivables under loan or credit agreements may only take place by (a) companies registered in Greece, in the form of société anonymes, provided that their corporate purpose includes acquisition of loans and credit claims, or (b) companies registered in a member state within the EEA, provided that their corporate purpose includes acquisition of loans and credit claims, or (c) companies registered in third countries that have the discretionary power to establish a branch office in Greece and their corporate purpose includes acquisition of loans and credit claims, under the following conditions:
- their seat in not in a country, which has a preferential tax regime,
- their seat is not located in a non – cooperative country as these countries are specified to the regulatory acts issued under the provisions of the Greek Income Tax Code.
Are there any other requirements for D.M.C.L.Cs and D.A.C.L.Cs?
D.M.C.L.Cs must be licensed and supervised by the BoG. The licensing procedure includes, among other, the filing of: (a) Articles of Association with all amendments; (b) the identity of persons (physical and legal entities) participating directly or indirectly a percentage or voting rights equal or exceeding 10% in the share capital of the company (i.e. legal entities and persons exercising control over the company as defined in Law 4261/2014 (the Greek Banking Law)); (c) the identity of all natural persons and legal entities exercising control over the applicant company under a written agreement or other agreement or by common acts within the meaning of Greek Banking Law; (d) the identity of the members of the board of directors or the managers; (e) questionnaires completed by the persons under (b), (c) and (d) evaluating their capacity and suitability criteria on the basis of criteria issued by BoG; (f) organizational structures, business plans and reports describing the methods and basic principles that will be applicable for the management of claims, as well as any other additional information that the Bank of Greece may consider appropriate. Finally, D.M.C.L.Cs must submit a comprehensive detailed report describing the principles and methodology which will ensure the successful restructuring of loans and present debt restricting methods as an alternative to enforcement proceedings in accordance with the Greek legislation, the EU legislation and the Banking Code of Conduct, taking into account special features for natural persons – borrowers classified as members of a socially vulnerable group.
The NPL Law specifically provides the ability to D.M.C.L.Cs to obtain a licence from BoG in order to grant new loans or credit to borrowers whose loans and/or credit manage, with the sole purpose of refinancing their loans or for corporate restructuring purposes of the respective borrowers by virtue of a specific restructuring plan agreed between the parties and subject to the prior consent of the beneficiary of the claims. All these new loans and credits shall be considered to be banking loans and credits governed by Greek law and shall be subject to the exclusive jurisdiction of the Greek courts. Furthermore, these new loans and credits will be burdened with the fee of article 1 of Law 128/1975, for the payment of which D.M.C.L.Cs are liable.
Licence to D.M.C.L.Cs to grant new loans and credits is subject the following conditions:
- the D.M.C.L.C. has already deposited in cash and in a bank account of a Greek credit institution (for companies incorporated in Greece) or of any credit institution (for companies incorporated in a country of the EEA) the amount of € 4,500,000 as minimum share capital,
- the D.M.C.L.C. complies with the rules and decisions of the BoG.
Furthermore, D.M.C.L.Cs have the obligation to prepare their financial statements in accordance with the IFRS.
It should be noted that when D.M.C.L.Cs grant new loans or credit to borrowers whose loans and/or credit manage secured with mortgages and/or pledges over moveable and immoveable assets that were not previously subject to security their ranking as creditors is enhanced. This applies only to new loans or credit and new collateral acquired after 18.01.2018.
D.M.C.L.Cs are subject to all applicable AML legal and regulatory obligations. They must comply with the provisions of the Banking Code of Conduct, with the consumer protection loan (when they manage loans and credits granted to persons qualified as “consumers” in the sense of the relevant legislation) and the rules applying for granting new loans and credits. As already mentioned under above, D.M.C.L.Cs are considered financial institutions for all legal and regulatory intends and purposes.
It should be noted that the NPL Law does not set similar licensing procedure for the D.A.C.L.Cs. Even though, the entire market will be supervised and regulated by BoG, D.A.C.L.Cs may acquire any claims receivables under loans and credit agreements only under the precedent condition that a management assignment agreement has been executed between a D.M.C.L.C. and a D.A.C.L.C. licensed and supervised by the BoG. This condition applies for any further transfer. The rights arising from the claims receivables may only be exercised through a D.M.C.L.C. and the claims receivables are considered to be banking assets even after the completion of the transfer.
How management of the claims receivables is assigned to D.M.C.L.Cs?
The management of claims receivables under loan and credit agreements may be assigned to D.M.C.L.Cs by virtue of a written management agreement. The agreements for the assignment of the claims management must include at least the following: (a) a description of each claim (and its non – performance stage in claims of claims receivables arising from non – performing loans or credits); (b) an outline of the management actions that will be under management (i.e. legal or account surveillance, collection, negotiating etc.); and (c) the management fee, which, in no case, can be undertaken by the debtor whose debt will be managed. BoG is responsible for the preliminary review of these agreements before they enter into force.
D.M.C.L.Cs are entitled to initiate any legal proceedings and to proceed with any other judicial measures for the collection of claims held under management as well as to commence, appear or participate to pre – insolvency rehabilitation procedures, insolvency procedure, debt settlement and special administration procedures in accordance with Law 4307/2014. Since, D.M.C.L.Cs participate as a non – beneficiary party in all court proceedings any judgement binds the beneficiary of the claim.
Which are the perfection requirements for the sale and transfer of claims receivables under loans and credit agreements?
A summary of the sale and transfer agreement, containing its main terms, must be registered to the public book of Law 2844/2000. Following such registration, the relevant borrower and, if applicable, any guarantor should be notified by any appropriate means. Payment to the credit institution or the financial institution which sales and transfer the relevant claims prior to the notification releases the borrower against the assignor and those having rights from the application of the provisions of this law. D.M.C.L.Cs undertake to pay the fee of article 1 of Law 128/1975 from the date the relevant agreement was registered to the public book of Law 2844/2000.Finally, fiduciary transfer of claims of the credit institution or of the financial institution is not allowed and any fiduciary term is not valid.
It should be noted that acquisition of claims receivables under loans and credit agreements can also take place through Securitization, as described above. Even though the sale and transfer of claims receivables under loans and credit agreements under the NPL Law and the Securitization procedure resemble, the main difference between the two acquisition mechanisms is the registration to the public book of Law 2844/2000, as in the context of Securitization such registration is compulsory only for the assignment of the claims and replaces any need of notification to the borrower. On the contrary the NPL Law establishes a system of double disclosure of the acquisition of claims receivables, i.e. registration the public book of Law 2844/2000 and notification to the borrower.
Furthermore, in order for the acquisition of claims receivables to be valid, under the NPL Law, D.A.C.L.C. must executed a management assignment agreement with a D.M.C.L.C., licensed and supervised by the BoG and in case the D.A.C.L.C. acquires claims of non – performing loans the debtors should be notified extra judicially according to the Banking Code of Conduct.
How are the debtors protected?
The NPL Law explicitly prohibits the erosion of any substantive and/or procedural rights of the debtor and the guarantor, if applicable, whose claims are to be managed under a management agreement or sold and transfer under a sale and transfer agreement. Furthermore, the unilateral amendment of any term of the initial agreement as well as of the interest rate is not allowed. In case of performing loans bearing a fluctuating interest rest no additional interest can be imposed by the D.M.C.L.Cs. Finally, D.M.C.L.Cs may cooperate with Companies Informing Debtors for Debts in Arrears, which operate according to Law 3758/2009, or companies with a relevant scope that operate in a Member State of the EU or the EEA.
Which are the innovative provisions of the NPL Law?
The wider scope of the NPL Law provides for the management and acquisition of loans or credits granted by credit or financial institutions not only of non-performing but also for performing loans or credits without restriction. Hence, the claims of loans or credits agreements to be transferred or assigned are not regulated by BoG in any way. Furthermore, the regime provides for much anticipated tax provisions and provisions similar to the Securitization Law regarding the assignment of claims in order to facilitate such transfers.
Introducing a much lighter supervisory regulatory framework (other than in respect of the provision of new loans by D.M.C.L.C.), compared to the one applying for credit and financial institutions, NPL Law introduces legal entities, whose activities resemble to credit and financial institutions activities, without the legal and share capital requirements that the latter must meet.
What are the tax provisions of the NPL Law?
The NPL Law provides that capital gains from the transfer of loans and credits to a D.A.C.L.C. is subject to income tax on the basis of the general provisions of the Income Tax Code. The same apply to any further transfer of the loans and credits. In contrary with the Securitization Law, that provides exemptions from any direct or direct tax, the NPL Law specifically provides that management agreements and sale and transfer agreements are subject to VAT. Furthermore, providing incentives to the D.M.C.L.Cs the Revised NPL Loan exempts the latter from stamp duties when granting new loans and credits (but bear the contribution of Law 128/1975). In addition, interest paid under loans that the D.A.C.L.Cs acquire or that the D.M.C.L.Cs grant is exempt form withholding tax. Finally, a fixed amount of € 2,500 shall be payable for any registration of a sale and transfer agreement to be made under the NPL Law in any public book or record kept at a Land Registry, a Pledge Registry or a Cadastral Office, excluding any other burden, fee or duty.
RECENT DEVELOPMENTS – THE NEW SOCIÉTÉ ANONYMES LAW
What are the most important amendments introduced by the New Société Anonymes Law regarding bond loans?
The New Société Anonymes Law clarifies that a bond loan still qualifies as such when it is incorporated into a single bond or when there is a single bond holder. Furthermore, the New Société Anonymes Law provide for the release of bond loans interest. This provision is applicable to all bond loans without any distinction depending on the qualification of the bondholders (i.e. physical persons or legal entities).
In alignment with the international market practice, the New Société Anonymes Law introduces new financial tools such as “payment in kind bonds”, which are bonds that are given to the bondholders instead of paying them interest. Moreover, the New Société Anonymes Law introduces the “perpetual bonds”, which are bonds without an explicit expiry date and finally the “catastrophe bonds”. The catastrophe bonds provide that no interest or capital is paid if a risk arises, usually a natural disaster, which is not covered by the insurance market.
Conclusion
It is safe to argue that the NPL Law has provided for an appropriate regime for the relevant market to be developed. Following its introduction, numerous companies have obtained the necessary license from BoG to operate in the said sector. The New Société Anonymes Law on bond loans does not introduce any material changes to the previous regime. Its provisions are aligned with the international market practice and it resolves matters heavily disputed in the last few years regarding the nature of a bond loan and the applicability of its favorable regime (exemption from stamp duty, registration fees etc.).
