AUSTRIA Law and Practice

Contributed by: Markus Fellner, Florian Kranebitter and Mario Burger, Fellner Wratzfeld & Partners

In addition, under Austrian law most collateral is strictly accessory and therefore depends on the validity of the underlying secured obligations. The beneficiary of the collateral must have an independent claim to the secured obligations at all times.

The collateral will cease, if accessory collateral, such as sureties or pledges, would become separate from the underlying secured obligation. Under Austrian law, the concept of a collateral trustee is regularly used.

Overview of the Common Securities Shares

The pledge of shares in limited liability companies or joint stock companies is the most common form of security granted in Austria. The type of entity from which the shares will be pledged is important, as it will determine the perfection mode for the pledge. The shares of a joint stock corporation are deemed physical assets. Thus, the pledge is perfected by either physical transfer (in the case of bearer shares) or by endorsement of the share certificate and physical transfer (in the case of registered shares). Pledges over shares are perfected by delivering a notice of the pledge to the relevant third party.

Bank accounts

The credit balance of bank accounts is pledged under an account pledge agreement or a financial collateral arrangement under the Austrian law implementation of the Financial Collateral Directive, which will be either a security financial collateral arrangement or a title transfer financial collateral arrangement.

Receivables

Security over receivables can be taken by way of a pledge or an assignment of the contractual rights for security purposes (Sicherungsz- ession). The main difference is that, in the case of a pledge, the pledgee is granted the right to preferential satisfaction out of the proceeds, while in the case of an assignment the assignee becomes the “owner” of the claim holding it on trust for the assignor for security with the purpose of obtaining preferential satisfaction. Technically, an account pledge is a pledge of the receivables which the customer has in relation to its bank account. Consequently, the account pledge follows the rules of a pledge over receivables and must be perfected by notifying the bank of the pledge or adequate markings in the pledgor’s records and accounts (Buchvermerk). Usually trade receivables, insurance receivables or intra group receivables are pledged or assigned.

Real estate

Real estate includes (i) land, (ii) objects permanently attached to the land (unselbständige Bestandteile), such as buildings, which cannot be subject to separate ownership, except for buildings on third party’s land (Superädifikate), and (iii) accessories that server the economic purpose of the real property.

A mortgage (Hypothek) is the only form of security for real estate. A mortgage is the right granted to a creditor concerning a debt to obtain preferential satisfaction from real estate if the debtor does not meet its payment obligations. The existence of a mortgage depends on the actual existence of the underlying debt which the mortgage secures.

IP rights

The most common types of intellectual property for which security is granted are:

• patents;

• trade marks;