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3. Structuring and Documentation Considerations
Contributed by: Markus Fellner, Elisabeth Fischer-Schwarz, Veronika Seronova and Mario Burger, Fellner Wratzfeld & Partners
in-depth preparation over an extended period – in particular, fulfilling legal requirements for credit institutions and preparing an appropriate business plan for the regulator to review; •establishment of a branch (Zweigstelle) by a credit institution from another EU member state by way of “passporting” (ie, having the competent regulator from the home member state notify the requisite banking licence to the Austrian regulator); and •direct rendering of services under the EU freedom of services, which is the most common approach for non-Austrian banks who wish to commercially engage in the lending business in Austria without establishing a permanent presence.
Non-banks may generally only engage in the lending business in Austria if and to the extent that such activity does not require a banking licence for an Austrian entity – for example, via the acquisition of loan portfolios by special securitisation purpose entities.
In terms of absolute restrictions on granting loans, subject to the fulfilment of the regulatory criteria (see 2.1 Authorisation to Provide Financing to a Company), foreign lenders intending to provide debt financing to Austrian borrowers face no specific restrictions.
There are no legal impediments or restrictions on granting securities or guarantees to foreign lenders that deviate from the rules applicable to Austrian creditors.
3.3 Restrictions and Controls on Foreign Currency Exchange
There are no restrictions, controls or other concerns regarding foreign currency exchange that deviate from the rules that would apply to an Austrian creditor.
There are no restrictions on the borrower’s use of proceeds from loans or debt securities.
3.5 Agent and Trust Concepts
Austrian civil law implements agent and trust structures in Austria in the form of an agency agreement (Auftragsvertrag). This may be combined with the granting of a power of attorney (Stellvertretung), and it is also possible for a trustee to hold certain rights in its own name but for the account of a third party (trustor).
As a consequence, the documentation of loans governed by Austrian law frequently features agency and trust concepts in the form of customary security agency agreements.
A certain degree of complexity (and potential insecurity) is entailed by these structures, as Austrian civil law differentiates between socalled “accessory securities” (akzessorische Sicherheiten) and “non-accessory securities” (nicht-akzessorische Sicherheiten). The former provide for a stringent link between the existence/validity of the security and the underlying (secured) claim. By way of example, pledge (and mortgage) agreements are strictly accessory; therefore, any defect in the underlying legal relationship (such as the invalidity of the loan claim) would automatically result in the lapse
Contributed by: Markus Fellner, Elisabeth Fischer-Schwarz, Veronika Seronova and Mario Burger, Fellner Wratzfeld & Partners
of the relevant security right – as would the full redemption of the claim.
Structures providing for the grant of accessory security rights to a security agent, which typically hold parts of (but not the entire) loan claim, are customary in Austria. However, these have not been tested or expressly accepted by the courts.
This risk does not apply to so-called nonaccessory security, which includes the transfer of property for security purposes (Sicherungsübereignung).
These uncertainties are known by domestic – and widely accepted by foreign – participants in the Austrian lending market and the relevant qualifications are customarily included in enforceability opinions as a standard market practice.
3.6 Loan Transfer Mechanisms
Austrian civil law recognises the concept of assignment, pursuant to which lenders’ rights (but not obligations) may generally be unilaterally transferred from the original or former creditor (assignor) to a new creditor (assignee). However, there are regulatory limitations to this procedure stemming from the fact that Austrian banking secrecy (Bankgeheimnis) prohibits the disclosure of customer data by banks to third parties. Some exceptions apply (eg, for the conduct of legal disputes with a borrower or for the purposes of certain investigations by authorities) but these will generally not apply to performing loans.
Waiver and consent language – for example, permitting disclosure of information on a loan and lender to a potential syndicate partners or assignee – is therefore frequently used in nonconsumer loans and is standard market practice for loans designed for syndication. As this is not a satisfactory structure in practice (particularly in the case of performing loans), the entirety of any rights and obligations arising from a loan agreement may be transferred by way of transfer of contract (Vertragsübernahme); such transfer requires the consent of all parties involved. It is customary, however, that the loan documentation contain the relevant consent of the borrower in advance, which is permissible under certain circumstances.
Austrian law-governed security rights will typically transfer alongside the underlying legal relationships. Statuary law provides for a claim of the new lender to have any such security rights transferred from the former lender.
Specific to Austrian law is the possibility of a new creditor, with the consent of the borrower, redeeming outstanding debt with the former creditor, thereby causing (against payment) an ex lege transfer of any related security rights. This would, however, require that any such outstanding payments are due. As a result, this redemption (Einlösung) structure would typically not be a viable option in relation to performing loans. The method is frequently used in restructuring scenarios because it permits the swift and secure transfer of security rights.
As an alternative, Austrian law also permits risk transfer structures such as sub-participations, which do not result in a transfer of the position of the lender of record. However, this would not imply a technical transfer of a claim or security right.
3.7 Debt Buy-Back
Debt buy-back by a borrower or a sponsor is generally permitted under Austrian law, provided that either a repayment is due or voluntary early prepayments are permitted on a contractual
