AUSTRIA Law and Practice

Contributed by: Markus Fellner, Florian Kranebitter and Mario Burger, Fellner Wratzfeld & Partners tration. The registration requirements depend on the type of securities. A pledge (Pfandrecht) and a security assignment (Sicherungszession) are possessory interests and thus cannot be registered.

Generally, the respective perfection steps depend on the asset qualification. A distinction has to be made between movable and immovable assets. No valid security interest will be created, if the necessary perfection steps are not properly met.

Perfection of Securities Shares

The type of entity (joint stock company or limited liability company) from which the shares will be pledged 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

In order to perfect the security interest over a bank account, there is a requirement to either set a book-entry (Buchvermerk) or notify the account bank.

Receivables

To perfect the pledge/assignment over receivables, there is a requirement to either notify the third-party debtor or to set a book-entry (Buchvermerk) in the pledgor’s/assignor’s respective books. Assignment of rights are generally subject to stamp duty in the amount of 0.8 % of the receivable, however, assignments of rights for the securing of credit securities are exempt.

Real estate

Security over real estate is perfected by registration of the mortgage in the Austrian land register (Grundbuch) after filing an application for registration together with a notarised deed of mortgage with the competent district court (Bezirksgericht). The registration will trigger fees in the amount of 1.2 % of the registered amount.

Movable assets

In general, perfection requires delivery to the pledgee or its custodian. Alternative methods are available in certain instances, eg, affixing placards identifying the secured party.

IP rights

In order to validly perfect the pledge over IP rights, the pledgor has to either register the pledged rights in the respective public register at the Austrian Patent Office (Österreichisches Patentamt) or, if the IP rights are not registered, set a book-entry (Buchvermerk) in its respective books.

5.4 Restrictions on Upstream Security Austrian Capital Maintenance Rules

In general, a company can guarantee or secure the obligations of another group company. However, due to the strict Austrian capital maintenance rules, a company guarantee or security of another group company may violate Austrian capital maintenance rules pursuant to Section 82 of the Austrian Act on Limited Liability Companies (GmbH-Gesetz – GmbHG) and Sections 52 and 65 et seq of the Austrian Stock Corporation Act (Aktiengesetz), in particular the capital maintenance rules (Kapitalerhaltungsvorschriften). The granting of upstream/side-stream loans, facilities, financings, guarantees (including the assumption of joint and several liability) or security interests is subject to limitations. A downstream guarantee or any other security to