Securitisation 2016 9Th Edition

ICLGThe International Comparative Legal Guide to: Securitisation 2016 9th Edition

A practical cross-border insight into securitisation work

Published by Global Legal Group, with contributions from:

A&L Goodbody King & Wood Mallesons Association for Financial Markets in Europe Latham & Watkins LLP Ali Budiardjo, Nugroho, Reksodiputro LECAP Ashurst LLP Levy & Salomão Advogados Baker & McKenzie – Santiago Maples and Calder Bell Gully McMillan LLP Brodies LLP Nishimura & Asahi Caspi & Co. Pestalozzi Attorneys at Law Ltd Cervantes Sainz Roschier Advokatbyrå AB Cuatrecasas, Gonçalves Pereira Schulte Roth & Zabel LLP Drew & Napier LLC Shearman & Sterling LLP Elvinger Hoss Prussen Sidley Austin LLP Estudio Beccar Varela Stibbe Freshfields Bruckhaus Deringer LLP Tsibanoulis & Partners Frost & Fire Consulting Verita Legal (K. Argyridou & Associates LLC) Gárdos Füredi Mosonyi Tomori Law Office Vieira de Almeida & Associados – K&L Gates Studio Legale Associato Sociedade de Advogados, R.L. King & Spalding LLP Wadia Ghandy & Co. The International Comparative Legal Guide to: Securitisation 2016

General Chapters: 1 Documenting Receivables Financings in Leveraged Finance and High Yield Transactions – James Burnett & Mo Nurmohamed, Latham & Watkins LLP 1 2 CLOs and Risk Retention in the U.S. and EU: Complying with the Rules – Craig Stein & Paul N. Watterson, Jr., Schulte Roth & Zabel LLP 8

Contributing Editor 3 US Taxation, Including FATCA, of Non-US Investors in Securitisation Transactions – David Z. Nirenberg, Ashurst LLP 14 4 The Transformation of Securitisation in an Evolving Financial and Regulatory Landscape – Bjorn Bjerke & Charles Thompson, Shearman & Sterling LLP 25

Mark Nicolaides, 5 Reviving Securitisation in Europe: the Journey Lengthens – Latham & Watkins LLP Richard Hopkin, Association for Financial Markets in Europe 32 Sales Director Florjan Osmani Country Question and Answer Chapters: Account Directors Oliver Smith, Rory Smith 6 Albania Frost & Fire Consulting: Franci Nuri 36 Sales Support Manager 7 Argentina Estudio Beccar Varela: Javier L. Magnasco & María Victoria Pavani 46 Toni Hayward 8 Australia King & Wood Mallesons: Anne-Marie Neagle & Ian Edmonds-Wilson 56 Editor Tom McDermott 9 Belgium Stibbe: Ivan Peeters & Philip Van Steenwinkel 67 Senior Editor 10 Brazil Levy & Salomão Advogados: Ana Cecília Manente & Rachel Williams Fernando de Azevedo Peraçoli 78 Chief Operating Officer Dror Levy 11 Canada McMillan LLP: Don Waters & Rob Scavone 89 Group Consulting Editor 12 Cayman Islands Maples and Calder: Scott Macdonald & Christopher Wall 100 Alan Falach 13 Chile Baker & McKenzie – Santiago: Jaime Munro Cabezas & Group Publisher Cristóbal Larrain Baraona 109 Richard Firth 14 China King & Wood Mallesons: Roy Zhang & Zhou Jie 120 Published by Global Legal Group Ltd. 15 Cyprus Verita Legal (K. Argyridou & Associates LLC): Karolina Argyridou & 59 Tanner Street Fotini Kaimaklioti 133 London SE1 3PL, UK Tel: +44 20 7367 0720 16 England & Wales Sidley Austin LLP: Rupert Wall & Rachpal Thind 142 Fax: +44 20 7407 5255 Email: [email protected] 17 France Freshfields Bruckhaus Deringer LLP: Hervé Touraine & Olivier Bernard 157 URL: www.glgroup.co.uk 18 Germany King & Spalding LLP: Dr. Werner Meier & Dr. Axel J. Schilder 170 GLG Cover Design F&F Studio Design 19 Greece Tsibanoulis & Partners: Emmanouil Komis & Evangelia Kyttari 185 GLG Cover Image Source 20 Hong Kong King & Wood Mallesons: Paul McBride & YuCheng Lin 195 iStockphoto 21 Hungary Gárdos Füredi Mosonyi Tomori Law Office: Erika Tomori & Printed by Ashford Colour Press Ltd Péter Gárdos 208 April 2016 22 India Wadia Ghandy & Co.: Shabnum Kajiji & Nihas Basheer 218 Copyright © 2016 23 Indonesia Ali Budiardjo, Nugroho, Reksodiputro: Freddy Karyadi & Global Legal Group Ltd. Novario Asca Hutagalung 228 All rights reserved No photocopying 24 Ireland A&L Goodbody: Peter Walker & Jack Sheehy 238 ISBN 978-1-910083-91-8 25 Israel Caspi & Co.: Norman Menachem Feder & Oded Bejarano 250 ISSN 1745-7661 26 Italy K&L Gates Studio Legale Associato: Andrea Pinto & Strategic Partners Vittorio Salvadori di Wiesenhoff 262 27 Japan Nishimura & Asahi: Hajime Ueno & Koh Ueda 275 28 Luxembourg Elvinger Hoss Prussen: Philippe Prussen & Marie Pirard 290 29 Mexico Cervantes Sainz: Diego Martínez Rueda-Chapital 301 30 Netherlands Freshfields Bruckhaus Deringer LLP: Mandeep Lotay & Ivo van Dijk 311 31 New Zealand Bell Gully: Murray King & Jennifer Gunser 326

Continued Overleaf

Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720

Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

WWW.ICLG.CO.UK The International Comparative Legal Guide to: Securitisation 2016

Country Question and Answer Chapters: 32 Portugal Vieira de Almeida & Associados – Sociedade de Advogados, R.L.: Paula Gomes Freire & Mariana Padinha Ribeiro 339 33 Russia LECAP: Elizaveta Turbina & Ivan Mahalin 353 34 Scotland Brodies LLP: Bruce Stephen & Marion MacInnes 364 35 Singapore Drew & Napier LLC: Petrus Huang & Ron Cheng 374 36 Spain Cuatrecasas, Gonçalves Pereira: Héctor Bros & Elisenda Baldrís 387 37 Sweden Roschier Advokatbyrå AB: Johan Häger & Dan Hanqvist 405 38 Switzerland Pestalozzi Attorneys at Law Ltd: Oliver Widmer & Urs Klöti 416 39 USA Latham & Watkins LLP: Lawrence Safran & Kevin T. Fingeret 428

EDITORIAL

Welcome to the ninth edition of The International Comparative Legal Guide to: Securitisation. This guide provides the international practitioner and in-house counsel with a comprehensive worldwide legal analysis of the laws and regulations of securitisation. It is divided into two main sections: Five general chapters. These chapters are designed to provide readers with a comprehensive overview of key securitisation issues, particularly from the perspective of a multi-jurisdictional transaction. Country question and answer chapters. These provide a broad overview of common issues in securitisation laws and regulations in 34 jurisdictions. All chapters are written by leading securitisation lawyers and industry specialists and we are extremely grateful for their excellent contributions. Special thanks are reserved for the contributing editor, Mark Nicolaides of Latham & Watkins LLP, for his invaluable assistance. Global Legal Group hopes that you find this guide practical and interesting. The International Comparative Legal Guide series is also available online at www.iclg.co.uk.

Alan Falach LL.M. Group Consulting Editor Global Legal Group [email protected] Chapter 9

Belgium Ivan Peeters

Stibbe Philip Van Steenwinkel

(c) A range of actions are open to consumers to seek creditor 1 Receivables Contracts protection, including a procedure for debt rescheduling (collectieve schuldenregeling/règlement collectif des dettes), which may include obtaining from the competent court a 1.1 Formalities. In order to create an enforceable moratorium and/or a rescheduling and/or reduction of its debt obligation of the obligor to the seller: (a) is it debts including principal, interest and costs. necessary that the sales of goods or services are evidenced by a formal receivables contract; (b) are (d) Both credit consumers and residential mortgage borrowers invoices alone sufficient; and (c) can a receivable have the right to make an early repayment at any time, but “contract” be deemed to exist as a result of the statutory maximum amounts apply to prepayment penalties. behaviour of the parties? Breaches of provisions of the applicable credit or mortgage laws may entail the right of the borrower to repay the loan As a general principle, it is possible to create an enforceable debt without penalty and without interest or costs. obligation without a formal receivables contract. Invoices, an ongoing business relationship or any other way of exchanging 1.3 Government Receivables. Where the receivables consent between the parties can, depending on the factual contract has been entered into with the government or circumstances, be sufficient to evidence the debt obligation. a government agency, are there different requirements and laws that apply to the sale or collection of those Notwithstanding such general principle, the enforceability of the receivables? debt obligation will depend on ability to evidence its existence and its terms and conditions. Rules on evidence differ depending on Governments and government entities will typically be subject to the legal status of the parties involved. Between two commercial Belgian public procurement (overheidsopdrachten/marches publics) parties evidence can be provided by any means, including witnesses. legislation. Where sales are made to entities that are subject to Against a non-commercial party, a written document will be required Belgian public procurement rules, particular principles apply for the for any sale exceeding the value of EUR 375. sale of such receivables. It is not uncommon between commercial parties that sales are Such a receivable may only be assigned once there has been delivery documented solely by way of an invoice that includes a reference to of the merchandise or service due under the receivables contract. general terms and conditions of sale. The debtor of the receivable must be given notice by way of a bailiff’s notification or registered letter. Suppliers and contractors 1.2 Consumer Protections. Do your jurisdiction’s of the seller, as well as employees that have been involved in respect laws: (a) limit rates of interest on consumer credit, of the manufacturing of the merchandise or delivery of the service, loans or other kinds of receivables; (b) provide a will have certain priority rights on the receivable. statutory right to interest on late payments; (c) permit consumers to cancel receivables for a specified period of time; or (d) provide other noteworthy rights 2 Choice of Law – Receivables Contracts to consumers with respect to receivables owing by them? 2.1 No Law Specified. If the seller and the obligor do not (a) Maximum interest rates for consumer credits have to respect specify a choice of law in their receivables contract, the maximum allowed yearly cost percentages, which include what are the main principles in your jurisdiction that the interests and costs of the credit. Maximum variable will determine the governing law of the contract? interest rates for residential mortgage loans are set based on monthly reference rates published by the supervisory For civil or commercial contracts concluded as from 17 December authority. 2009, Regulation 593/2008/EC of 17 June 2008 (the Rome I (b) In general, for consumer credits specific interest for late Regulation) applies in determining the law governing the contract. payment can be charged if an applicable default rate is agreed and such rate cannot exceed 110% of the agreed normal For some categories of contracts, the governing law is outright interest rate. For residential mortgage loans late payment determined by the Rome I Regulation. For example, contracts for interest cannot be higher than 100.5% of the contractual the sale of movable assets or services are governed by the law of interest rate and can be applied only to the outstanding the country where the seller has its habitual residence. Contracts amount of principal. that do not fall in one of those categories are governed by the law

ICLG TO: SECURITISATION 2016 WWW.ICLG.CO.UK 67 © Published and reproduced with kind permission by Global Legal Group Ltd, London Stibbe Belgium

of the country where the party required to effect the characteristic performance has its habitual residence. However, if the contract is 2.4 CISG. Is the United Nations Convention on the manifestly more closely connected with another country than the one International Sale of Goods in effect in your jurisdiction? indicated by the aforementioned rules, the contract will be governed by the law of the country that is manifestly more closely connected with the contract. If the governing law cannot be determined using Yes, the CISG entered into force in Belgium on 1 November 1997. the aforementioned rules, the contract will be governed by the law with which it is most closely connected. 3 Choice of Law – Receivables Purchase The Rome I Regulation contains specific rules for consumer Agreement contracts, insurance contracts and individual employment contracts. Belgium Even if a contract is determined to be governed by foreign law, Belgian courts may apply overriding mandatory provisions of 3.1 Base Case. Does your jurisdiction’s law generally require the sale of receivables to be governed by Belgian law. A Belgian court may also apply mandatory provisions the same law as the law governing the receivables of the law of the country where the obligations arising out of the themselves? If so, does that general rule apply contract have to be or have been performed, in so far as those irrespective of which law governs the receivables (i.e., overriding mandatory provisions render the performance of the your jurisdiction’s laws or foreign laws)? contract unlawful. Belgian law does not require that the sale of receivables be governed 2.2 Base Case. If the seller and the obligor are both by the law governing the receivables. Such freedom of choice resident in your jurisdiction, and the transactions applies irrespective of the governing law of the receivables. giving rise to the receivables and the payment of the receivables take place in your jurisdiction, and the seller and the obligor choose the law of your 3.2 Example 1: If (a) the seller and the obligor are located jurisdiction to govern the receivables contract, is in your jurisdiction, (b) the receivable is governed there any reason why a court in your jurisdiction by the law of your jurisdiction, (c) the seller sells would not give effect to their choice of law? the receivable to a purchaser located in a third country, (d) the seller and the purchaser choose the law of your jurisdiction to govern the receivables No, there is no reason why a Belgian court would not do so. purchase agreement, and (e) the sale complies with the requirements of your jurisdiction, will a court in your jurisdiction recognise that sale as being effective 2.3 Freedom to Choose Foreign Law of Non-Resident against the seller, the obligor and other third parties Seller or Obligor. If the seller is resident in your (such as creditors or insolvency administrators of the jurisdiction but the obligor is not, or if the obligor seller and the obligor)? is resident in your jurisdiction but the seller is not, and the seller and the obligor choose the foreign law of the obligor/seller to govern their receivables Yes, the court will recognise the sale as being fully effective following contract, will a court in your jurisdiction give effect to notice of the sale to the debtor and with limited exceptions prior to the choice of foreign law? Are there any limitations such notification (as to such limitations, see question 4.2 below). to the recognition of foreign law (such as public policy or mandatory principles of law) that would typically apply in commercial relationships such as 3.3 Example 2: Assuming that the facts are the same as that between the seller and the obligor under the Example 1, but either the obligor or the purchaser receivables contract? or both are located outside your jurisdiction, will a court in your jurisdiction recognise that sale as being effective against the seller and other third parties As a general principle of the Rome I Regulation, Belgian courts (such as creditors or insolvency administrators of the will give effect to the choice of foreign law, subject to the following seller), or must the foreign law requirements of the rules: obligor’s country or the purchaser’s country (or both) (a) where all elements relevant to the situation at the time of the be taken into account? choice of law (other than the choice itself) are located in a country other than the country whose law has been chosen, Yes, the answer is the same as for question 3.2. the choice of the parties shall not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement; 3.4 Example 3: If (a) the seller is located in your (b) where all elements relevant to the situation at the time of the jurisdiction but the obligor is located in another country, (b) the receivable is governed by the law of choice of law (other than the choice itself) are located in one the obligor’s country, (c) the seller sells the receivable or more EU Member States, the parties’ choice of applicable to a purchaser located in a third country, (d) the seller law other than that of an EU Member State shall not prejudice and the purchaser choose the law of the obligor’s the application of provisions of EU law, where appropriate as country to govern the receivables purchase agreement, implemented in the EU Member State of the forum, which and (e) the sale complies with the requirements of cannot be derogated from by agreement; the obligor’s country, will a court in your jurisdiction (c) Belgian courts may apply certain overriding mandatory rules recognise that sale as being effective against the seller of Belgian or foreign law (other than the chosen law) as and other third parties (such as creditors or insolvency described in question 2.1 above; and administrators of the seller) without the need to comply (d) Belgian courts may refuse to apply foreign law provisions with your jurisdiction’s own sale requirements? that are incompatible with Belgian public policy (ordre public). The effectiveness against the seller and the obligor will be determined by the laws of the obligor’s country (including any

68 WWW.ICLG.CO.UK ICLG TO: SECURITISATION 2016 © Published and reproduced with kind permission by Global Legal Group Ltd, London Stibbe Belgium

restrictions on assignment). The effectiveness against other third parties will be governed by Belgian law. 4.2 Perfection Generally. What formalities are required generally for perfecting a sale of receivables? Are there any additional or other formalities required for 3.5 Example 4: If (a) the obligor is located in your the sale of receivables to be perfected against any jurisdiction but the seller is located in another country, subsequent good faith purchasers for value of the (b) the receivable is governed by the law of the seller’s same receivables from the seller? country, (c) the seller and the purchaser choose the law of the seller’s country to govern the receivables The mere conclusion of a valid sale and assignment agreement is purchase agreement, and (d) the sale complies with sufficient to transfer receivables between a seller and a purchaser the requirements of the seller’s country, will a court in in a way which is also effective against third parties (other than the

your jurisdiction recognise that sale as being effective Belgium against the obligor and other third parties (such as assigned debtor and certain third parties with a vested right in the creditors or insolvency administrators of the obligor) receivables). without the need to comply with your jurisdiction’s In order to be enforceable against the assigned debtor, the assignment own sale requirements? needs to be notified to the assigned debtor or be acknowledged by it. As long as this has occurred, the debtor may validly discharge Yes, the Belgian courts will recognise the effectiveness of the sale in its obligations by payment to the assignor and will be entitled to accordance with the laws of the seller’s jurisdiction. invoke all types of defences which have accrued up to the date of the notification or acknowledgment. 3.6 Example 5: If (a) the seller is located in your Certain other third parties also benefit from an exception to the jurisdiction (irrespective of the obligor’s location), general rule that an assignment will be effective against them as (b) the receivable is governed by the law of your from the mere conclusion of the assignment. This is the case where jurisdiction, (c) the seller sells the receivable to a purchaser located in a third country, (d) the a same receivable is successively assigned to different assignees. seller and the purchaser choose the law of the The claim of the assignee that first notifies the assignment to the purchaser’s country to govern the receivables assigned debtor (or is first acknowledged by the assigned debtor), purchase agreement, and (e) the sale complies with will take priority provided such assignee acts in good faith. An the requirements of the purchaser’s country, will a assignment of a receivable will also not be effective against a third court in your jurisdiction recognise that sale as being party creditor of the assignor who has attached (saisi/beslag) the effective against the seller and other third parties receivable and has received payment, in good faith, from the debtor (such as creditors or insolvency administrators of the seller, any obligor located in your jurisdiction and any (also acting in good faith) prior to notification or acknowledgment third party creditor or insolvency administrator of any of the assignment. such obligor)? 4.3 Perfection for Promissory Notes, etc. What additional The effectiveness against the seller will be determined by the laws or different requirements for sale and perfection of the purchaser’s country. The effectiveness against the obligor apply to sales of promissory notes, mortgage loans, and other third parties will be governed by Belgian law (including consumer loans or marketable debt securities? any restrictions on assignment). Different methods and/or additional formalities may apply to the sale and transfer of specific types of receivables. 4 Asset Sales This is, inter alia, the case for sale and transfer of: (a) promissory notes (or other types of instruments whereby 4.1 Sale Methods Generally. In your jurisdiction what are a receivable is embedded in the instrument) whereby the the customary methods for a seller to sell receivables transfer of the receivables is achieved in the same way as the to a purchaser? What is the customary terminology – is transfer of the instrument, i.e. by endorsing the name of the it called a sale, transfer, assignment or something else? transferee on the instrument; (b) mortgage loan receivables which in principle require a The customary method to sell a receivable under Belgian law is by notarial deed that is registered with the fiscal administration making use of an assignment (cession de créance/overdracht van and transcribed at the relevant mortgage registry. The schuldvordering) governed by art. 1689 et seq. of Belgian civil code Belgian act of 3 August 2012 on certain measures facilitating (the BCC). Although these articles can be found in the section of the mobilisation of receivables in the financial sector (the the BCC governing sales, the assignment more generically refers Mobilisation Act) provides for a wide range of exceptions, however, which set aside these additional formalities in the to a technique to transfer receivables. An assignment can thereby case of a transfer of bank receivables secured by a mortgage occur within the context of a sale if receivables are transferred by or to different types of entities active in the financial against a price, but may also be used to transfer receivables for other sector. It is furthermore debated whether these requirements purposes (e.g. as a payment, as gift, etc.). apply if the seller has its habitual residence outside Belgium; Since 1994, the BCC allows for the organisation of an assignment (c) consumer loan receivables which can only be transferred to and sale of receivables which is valid between the parties (i.e. a limited number of licensed institutions. In order to make assignor/seller and assignee/purchaser) and effective against third the assignment enforceable against the assigned debtor, a parties (other than the assigned debtor and subject to limited other notification by registered letter is furthermore required unless exceptions, see question 4.2 below) solo consensus. This means the original credit provider in such case continues to service no other formalities are required for the transfer of the receivables the receivables. than a mere agreement of the parties on the receivables that are (d) invoices, insurance receivables and salary claims which are transferred and the transfer price. Both aspects need to be identified all subject to specific legislations. in, or be identifiable on the basis of, the assignment agreement.

ICLG TO: SECURITISATION 2016 WWW.ICLG.CO.UK 69 © Published and reproduced with kind permission by Global Legal Group Ltd, London Stibbe Belgium

4.4 Obligor Notification or Consent. Must the seller or the 4.6 Restrictions on Assignment – General Interpretation. purchaser notify obligors of the sale of receivables in Will a restriction in a receivables contract to the order for the sale to be effective against the obligors effect that “None of the [seller’s] rights or obligations and/or creditors of the seller? Must the seller or the under this Agreement may be transferred or assigned purchaser obtain the obligors’ consent to the sale without the consent of the [obligor]” be interpreted as of receivables in order for the sale to be an effective prohibiting a transfer of receivables by the seller to sale against the obligors? Whether or not notice is the purchaser? Is the result the same if the restriction required to perfect a sale, are there any benefits to says “This Agreement may not be transferred or giving notice – such as cutting off obligor set-off assigned by the [seller] without the consent of rights and other obligor defences? the [obligor]” (i.e., the restriction does not refer to rights or obligations)? Is the result the same if the Belgium restriction says “The obligations of the [seller] under In order for a sale and assignment to be enforceable against the this Agreement may not be transferred or assigned by assigned debtor, the assignment must be notified to or acknowledged the [seller] without the consent of the [obligor]” (i.e., by the assigned debtor (see question 4.2). Unless contractually the restriction does not refer to rights)? provided otherwise, consent from the assigned debtor is however not required. Under Belgian law, a receivable is a claim, i.e. a personal right of Whereas the sale and assignment of receivables is valid between the a creditor against a debtor resulting from a contractual relationship. parties and effective against third parties (other than the assigned A receivable is, in principle, freely assignable unless statutory debtor – see question 4.2 above) as from the mere conclusion of assignment restrictions exist or a receivable is considered to be the assignment agreement, the notification of the assignment to the inituitu personae, i.e. specifically linked to the person of the creditor. assigned debtor may be delayed for commercial reasons. Parties may however contractually restrict the freedom to assign In such case, the debtor may validly continue to discharge its receivables existing between them. In this respect, only the obligations by payment to the assignor and will be entitled to invoke following provision should be construed as a restriction prohibiting all types of defences, including set-off rights, until such time as the the transfer of receivables: “None of the [seller’s] rights or assignment is notified to or acknowledged by it. obligations under this Agreement may be transferred or assigned without the consent of the [obligor].”

4.5 Notice Mechanics. If notice is to be delivered to obligors, whether at the time of sale or later, are 4.7 Restrictions on Assignment; Liability to Obligor. If any there any requirements regarding the form the notice of the restrictions in question 4.6 are binding, or if the must take or how it must be delivered? Is there any receivables contract explicitly prohibits an assignment time limit beyond which notice is ineffective – for of receivables or “seller’s rights” under the receivables example, can a notice of sale be delivered after the contract, are such restrictions generally enforceable sale, and can notice be delivered after insolvency in your jurisdiction? Are there exceptions to this rule proceedings against the obligor or the seller have (e.g., for contracts between commercial entities)? If your jurisdiction recognises restrictions on sale or commenced? Does the notice apply only to specific assignment of receivables and the seller nevertheless receivables or can it apply to any and all (including sells receivables to the purchaser, will either the seller future) receivables? Are there any other limitations or or the purchaser be liable to the obligor for breach of considerations? contract or tort, or on any other basis?

The form of the notice of an assignment is not subject to any specific The effectiveness of contractual assignment restrictions towards formalities. For evidentiary purposes, a notice by registered letter third parties has long time been debated under Belgian law. In legal may in certain circumstances, however, be recommended (e.g. doctrine, two major views exist: one view argues that such clauses are in case there is a risk competing claims may be exercised on the not effective against third parties; another view argues that receivables receivables, see question 4.2). only exist in the way they are formed between the contractual parties Although there is no published case law confirming this, authoritative and that therefore a non-assignment provision that is an integral part of legal writers take the view that notice can still be validly given after the receivables contract should also be effective against third parties. the start of insolvency proceedings. Based on the recently enacted amendments to the BCC relating There are no requirements as to the content of the notice. What the to security rights in rem on movable assets, Belgian law seems to assigned debtor needs to be notified of is the fact of the assignment have taken the view that contractual assignment restrictions are not of the receivable, not the content of the assignment agreement. effective against third parties, but an assignee may be held liable as Provided the assigned debtors of the receivables are known, the an accomplice to another party’s contractual breach if it knowingly notice can relate to any and all existing and future receivables of an assists such party in breaching a contractual assignment restriction. assignor (see, however, question 4.11). 4.8 Identification. Must the sale document specifically identify each of the receivables to be sold? If so, what specific information is required (e.g., obligor name, invoice number, invoice date, payment date, etc.)? Do the receivables being sold have to share objective characteristics? Alternatively, if the seller sells all of its receivables to the purchaser, is this sufficient identification of receivables? Finally, if the seller sells all of its receivables other than receivables owing by one or more specifically identified obligors, is this sufficient identification of receivables?

As a general principle under Belgian law, the object of the sale

70 WWW.ICLG.CO.UK ICLG TO: SECURITISATION 2016 © Published and reproduced with kind permission by Global Legal Group Ltd, London Stibbe Belgium

and assignment must be identified or identifiable. A global sale A question that still remains under debate, however, is whether the and assignment of all existing and future receivables is deemed assignment of future receivables will also be effective to transfer sufficiently identifiable. Also, a sale and assignment ofall ownership to receivables which only come into existence after the receivables other than those owed by one or more specifically seller has been declared bankrupt. identified obligors should be sufficiently identifiable.

4.12 Related Security. Must any additional formalities 4.9 Respect for Intent of Parties; Economic Effects on be fulfilled in order for the related security to be Sale. If the parties describe their transaction in the transferred concurrently with the sale of receivables? relevant documents as an outright sale and explicitly If not all related security can be enforceably state their intention that it be treated as an outright transferred, what methods are customarily adopted sale, will this description and statement of intent to provide the purchaser the benefits of such related Belgium automatically be respected or will a court enquire into security? the economic characteristics of the transaction? If the latter, what economic characteristics of a sale, if any, Pursuant to art. 1692 BCC, a sale and assignment of receivables might prevent the sale from being perfected? Among also includes all ancillary items (accessoires/bijhorigheden) of such other things, to what extent may the seller retain: receivables. These ancillary items include, inter alia, all rights and (a) credit risk; (b) interest rate risk; (c) control of collections of receivables; or (d) a right of repurchase/ title of the assignor to the benefit of any guarantees, privileges, redemption without jeopardising perfection? pledges and mortgages. For mortgages, see, however, the additional formalities which may impact on the assignment of the receivables The description of a transaction by the parties thereto as an outright secured by such mortgages set out under question 4.3 above. sale is one element that will be taken into account by a court when the characterisation of the transaction would be challenged before such 4.13 Set-Off; Liability to Obligor. Assuming that a court. This could, for example, occur if an assignment of receivables receivables contract does not contain a provision would be contested on the basis that it would not constitute a sale whereby the obligor waives its right to set-off against of such receivables but rather the creation of a security interest over amounts it owes to the seller, do the obligor’s set-off the receivables. The statement that the transaction is an outright sale rights terminate upon its receipt of notice of a sale? At any other time? If a receivables contract does would, however, not prevent the relevant court from reviewing the not waive set-off but the obligor’s set-off rights are characterisation of the transaction, where the court would conclude terminated due to notice or some other action, will that this characterisation as sale does not correspond to the real either the seller or the purchaser be liable to the intention of the parties. Although there is no pre-determined list obligor for damages caused by such termination? a court would look at in order to determine whether a transaction constitutes an outright sale, elements that a court would likely take In accordance with § 1295 of the BCC, the assigned debtor is no into account to include, without limitation: (i) whether credit risk longer entitled to invoke any set-off rights in respect of which the to the assigned debtor is effectively transferred to the purchaser or conditions were only satisfied after the assignment was notified to, whether the purchaser retains recourse for such credit risk on the or acknowledged by, it (including the condition that the respective seller; (ii) whether the purchaser has any option rights to resell the claims of the assigned debtor and the seller which are to be set-off are receivables to the seller; (iii) whether the seller has any option rights due and payable). Set-off rights in respect of which all conditions to repurchase the receivables from the purchaser; and (iv) the level were satisfied prior to such notification or acknowledgment remain of the purchase price paid to the seller. unaffected by the notification or acknowledgment of the assignment. Furthermore, in accordance with § 1298 of the BCC, the assigned 4.10 Continuous Sales of Receivables. Can the seller debtor is no longer able to invoke set-off rights, the conditions agree in an enforceable manner to continuous sales of which are only satisfied following the insolvency of the seller of receivables (i.e., sales of receivables as and when unless the claim of the assigned debtor and the claim of the seller they arise)? Would such an agreement survive and are closely connected. continue to transfer receivables to the purchaser In respect of bank receivables, the Mobilisation Act has further following the seller’s insolvency? clarified the limitation on set-off rights and confirmed set-off is no longer possible following notification of the assignment or the Yes, provided the sale and assignment agreement allows one to insolvency of the seller, regardless of whether claims are closely identify the receivables that are sold. connected or not. Such agreement will not, however, survive the seller’s insolvency. Upon being declared bankrupt the seller will, by operation of law, lose the power to administer its asset and hence will no longer be 5 Security Issues entitled to sell its receivables as from such date.

5.1 Back-up Security. Is it customary in your jurisdiction 4.11 Future Receivables. Can the seller commit in an to take a “back-up” security interest over the seller’s enforceable manner to sell receivables to the ownership interest in the receivables and the related purchaser that come into existence after the date of security, in the event that an outright sale is deemed the receivables purchase agreement (e.g., “future by a court (for whatever reason) not to have occurred flow” securitisation)? If so, how must the sale of future and have been perfected? receivables be structured to be valid and enforceable? Is there a distinction between future receivables that No, it is not. arise prior to or after the seller’s insolvency?

Belgian law allows for an effective sale and assignment of future receivables provided such receivables are sufficiently identifiable.

ICLG TO: SECURITISATION 2016 WWW.ICLG.CO.UK 71 © Published and reproduced with kind permission by Global Legal Group Ltd, London Stibbe Belgium

(c) security over insurance would typically involve the drawing 5.2 Seller Security. If it is customary to take back-up up of a supplement to the policy providing for a pledge or security, what are the formalities for the seller assignment to the creditor or appointing the creditor as loss granting a security interest in receivables and related payee or beneficiary. security under the laws of your jurisdiction, and for such security interest to be perfected? 5.6 Trusts. Does your jurisdiction recognise trusts? If not, This is not applicable in Belgium. is there a mechanism whereby collections received by the seller in respect of sold receivables can be held or be deemed to be held separate and apart 5.3 Purchaser Security. If the purchaser grants from the seller’s own assets until turned over to the

Belgium security over all of its assets (including purchased purchaser? receivables) in favour of the providers of its funding, what formalities must the purchaser comply with Belgian law does not have a general legal concept of trust. in your jurisdiction to grant and perfect a security However, although the position is not entirely clear, it is broadly interest in purchased receivables governed by the recognised that an insolvency official of the seller should turn over laws of your jurisdiction and the related security? collections of sold receivables coming in, in the accounts of the seller after the bankruptcy, provided that he is made of aware of Receivables can be pledged under Belgian law by entering into a the assignment and the amounts remain sufficiently identifiable. In receivables pledge agreement on the basis of which the pledged practice, commingling risk can be mitigated by taking a pledge on receivables can be sufficiently identified. As from the entry into the the collection account(s) of the seller. receivables pledge agreement, the pledge is valid and enforceable against third parties, including creditors generally and insolvency officials of the pledgor, but not against the obligor of the pledged 5.7 Bank Accounts. Does your jurisdiction recognise receivable nor against any other assignee that would give prior escrow accounts? Can security be taken over a bank notice to the obligor. The pledge will only be enforceable against account located in your jurisdiction? If so, what is the typical method? Would courts in your jurisdiction the obligor as from the notification to or acknowledgement by the recognise a foreign law grant of security (for example, pledgor of the pledge. In respect of future receivables, the pledge an English law debenture) taken over a bank account will only be valid and enforceable as from the origination or located in your jurisdiction? acquisition by the pledgor of the future receivable. Belgian law recognises escrow accounts as a contractual construct, 5.4 Recognition. If the purchaser grants a security interest but does not protect the beneficiary against the insolvency of the in receivables governed by the laws of your jurisdiction, owner of the escrow account (except in limited circumstances such and that security interest is valid and perfected under as a lawyers’ or notary public’s third-party account). the laws of the purchaser’s country, will it be treated A pledge over bank accounts is typically granted by way of a pledge as valid and perfected in your jurisdiction or must additional steps be taken in your jurisdiction? over the receivables owed by the account bank. According to Belgian private international law, the property Yes it would be recognised and no additional steps would be law aspects of the security, which include the effectiveness and required, if the purchaser has its habitual residence (see below) in enforceability of the pledge against third parties, are governed by the that jurisdiction at the time of the creation of the security interest law of the habitual residence of the pledgor. Therefore, foreign law and under their governing law the receivables are not subject security over a bank account located in Belgium will be recognised by to limitations (contractual or statutory) as to their assignment Belgian courts provided that the pledgor is located in the jurisdiction or as to creation of a security interest. However, in order to be that governs the security. For example, Belgian courts will recognise enforceable against the obligors of the receivables, notification or an English law security interest on a Belgian bank account if the acknowledgement would be required (see question 5.3 above). grantor of the security is located in England. Arguably, a similar approach should be applied to security assignments or declarations of trust under the laws of that jurisdiction. 5.5 Additional Formalities. What additional or different requirements apply to security interests in or connected to insurance policies, promissory notes, 5.8 Enforcement over Bank Accounts. If security over mortgage loans, consumer loans or marketable debt a bank account is possible and the secured party securities? enforces that security, does the secured party control all cash flowing into the bank account from As is the case for a sale and assignment (see question 4.3), additional enforcement forward until the secured party is repaid in full, or are there limitations? If there are limitations, formalities may apply to the vesting of security interest over specific what are they? types of receivables: (a) security over mortgage loans and consumer loans is typically The beneficiary of a pledge on a bank account is entitled to control granted by way of a pledge over receivables subject to the bank account and to enforce the pledge by applying the cash on the requirements as set out under question 5.3 above. For mortgage loan receivables, the pledge in principle also the pledged account against the secured obligations. requires a notarial deed that is registered with the fiscal administration and transcribed at the relevant mortgage 5.9 Use of Cash Bank Accounts. If security over a bank registry. The exceptions introduced by the Mobilisation Act account is possible, can the owner of the account (as listed in question 4.3) apply; have access to the funds in the account prior to (b) security over promissory notes would require a pledge enforcement without affecting the security? agreement and the transfer of the promissory notes to the pledgee or a third party acting for its account; Yes, they can.

72 WWW.ICLG.CO.UK ICLG TO: SECURITISATION 2016 © Published and reproduced with kind permission by Global Legal Group Ltd, London Stibbe Belgium

6 Insolvency Laws 6.4 Substantive Consolidation. Under what facts or circumstances, if any, could the insolvency official consolidate the assets and liabilities of the purchaser 6.1 Stay of Action. If, after a sale of receivables that is with those of the seller or its affiliates in the otherwise perfected, the seller becomes subject to insolvency proceeding? an insolvency proceeding, will your jurisdiction’s insolvency laws automatically prohibit the purchaser from collecting, transferring or otherwise exercising Belgian law does not have a concept of bankruptcy consolidation. ownership rights over the purchased receivables (a Consequently, a Belgian purchaser company can only be declared “stay of action”)? If so, what generally is the length of bankrupt itself if it meets the relevant criteria, i.e. (i) sustained that stay of action? Does the insolvency official have inability to pay its debts as they become due, and (ii) no possibility Belgium the ability to stay collection and enforcement actions to obtain further credit. There is case law, however, on the basis of until he determines that the sale is perfected? Would which the bankruptcy of the parent company could legally provoke the answer be different if the purchaser is deemed to the bankruptcy of the subsidiary if there is substantial commingling only be a secured party rather than the owner of the receivables? of assets and liabilities between these two entities in such a way that the companies can no longer be clearly distinguished as separate No, the start of insolvency proceedings against the seller should entities. not affect the exercise by the purchaser of its ownership rights over the receivables which were sold and assigned to it prior to the start 6.5 Effect of Insolvency on Receivables Sales. If of such proceedings. Provided the characterisation of an outright insolvency proceedings are commenced against sale is not challenged (see question 4.9), the purchased receivables the seller in your jurisdiction, what effect do those will fall outside of the insolvent estate and the purchaser will, proceedings have on (a) sales of receivables that would otherwise occur after the commencement of upon notification of the seller, be entitled to collect the receivables such proceedings, or (b) sales of receivables that only directly from the assigned debtor. come into existence after the commencement of such proceedings? 6.2 Insolvency Official’s Powers. If there is no stay of action under what circumstances, if any, does Upon being declared bankrupt a seller will lose by operation of law the insolvency official have the power to prohibit the power to administer its asset. the purchaser’s exercise of rights (by means of Hence a seller will no longer be entitled to sell receivables as injunction, stay order or other action)? from the date of the bankruptcy declaration (see question 4.10 above). The effect of a bankruptcy declaration on the sale of future In case of an outright sale, the insolvency official will not have the receivables that only come into existence after the seller being power to prohibit the purchaser’s exercise of rights. declared bankrupt, remains under debate (see question 4.11 above).

6.3 Suspect Period (Clawback). Under what facts or 6.6 Effect of Limited Recourse Provisions. If a debtor’s circumstances could the insolvency official rescind or contract contains a limited recourse provision (see reverse transactions that took place during a “suspect” question 7.3 below), can the debtor nevertheless be or “preference” period before the commencement of declared insolvent on the grounds that it cannot pay the insolvency proceeding? What are the lengths of the its debts as they become due? “suspect” or “preference” periods in your jurisdiction for (a) transactions between unrelated parties, and (b) transactions between related parties? No case law or other official guidance is available on this issue. Generally, practitioners expect that if appropriately-drafted, limited The sale of receivables could be challenged if completed during recourse provisions apply to all material liabilities of the debtor the suspect period (période suspecte). A necessary condition for entity, the conditions for bankruptcy could not be met since this a bankruptcy order (faillietverklaring/déclaration de faillite) is would mean that debt will only be due and payable to the extent that the company must be in a situation of cessation of payments sufficient assets or funds are available. (staking van betaling/cessation de paiement). In principle, the cessation of payments is deemed to have occurred as from the date of the bankruptcy order. The court issuing the bankruptcy order 7 Special Rules may determine that the cessation of payments occurred on an earlier date if there are serious and objective indications that such was the 7.1 Securitisation Law. Is there a special securitisation case. Such earlier date may not be earlier than six months before law (and/or special provisions in other laws) in the date of the bankruptcy order, save in certain circumstances. The your jurisdiction establishing a legal framework length of the suspect period is not different for transactions between for securitisation transactions? If so, what are the unrelated parties and transactions between related parties. basics? A sale entered into during the suspect period may be declared Belgian law provides for a special legal framework for securitisation ineffective against the mass of creditors of the bankrupt party if (i) transactions. Such framework provides for (i) dedicated special the counterparty under the transaction was aware (or should have purpose entities for securitisation, (ii) particular provisions to been aware) of the cessation of payment and the sale is prejudicial enhance the possibilities for securitisation of certain types of to the mass of creditors, and/or (ii) the value given by the bankrupt receivables (in particular, loan receivables), and (iii) provisions company substantially exceeded the value received in consideration. to enhance the possibilities for securitisation or mobilisation Finally, any sale entered into to the fraudulent detriment of the mass more generally (e.g. covered bonds, secured funding, etc.) of loan of creditors is not effective against the mass of creditors, regardless receivables. The provisions dealing with the institutional framework when they took place.

ICLG TO: SECURITISATION 2016 WWW.ICLG.CO.UK 73 © Published and reproduced with kind permission by Global Legal Group Ltd, London Stibbe Belgium

(which date back in essence to 1994) are currently set out in the Act of 3 August 2012 on collective investment institutions under EU 7.4 Non-Petition Clause. Will a court in your jurisdiction Directive 2009/65/EF and institutions for investment in receivables give effect to a contractual provision in an agreement (even if that agreement’s governing law is the law (the UCITS Act). Various provisions to enhance securitisation of another country) prohibiting the parties from: (a) and mobilisation generally were introduced and updated by the taking legal action against the purchaser or another Mobilisation Act (see question 4.3). person; or (b) commencing an insolvency proceeding against the purchaser or another person? 7.2 Securitisation Entities. Does your jurisdiction have laws specifically providing for establishment of The validity and enforceability of such provision is debatable under special purpose entities for securitisation? If so, Belgian law to the extent such clauses could be deemed to conflict Belgium what does the law provide as to: (a) requirements for with public policy considerations. The validity and enforceability establishment and management of such an entity; (b) of clauses that limit the right to seek the liquidation or bankruptcy legal attributes and benefits of the entity; and (c) any are, however, expressly recognised for agreements entered into by specific requirements as to the status of directors or SICs. shareholders?

The UCITS Act provides the framework for the creation of two 7.5 Priority of Payments “Waterfall”. Will a court in your types of institutions for investing in receivables: first, a company jurisdiction give effect to a contractual provision in an for investing in receivables (vennootschap voor belegging in agreement (even if that agreement’s governing law is the law of another country) distributing payments to schuldvorderingen/sociétée d’investissement en créances) (hereafter parties in a certain order specified in the contract? SIC) and second a mutual fund for investing in receivables. In practice the SIC is always used. Such SIC: Such provisions will be recognised as binding on the creditors that (a) may only commence its activities following a registration have agreed to such provisions. In order to secure the enforceability with the Federal Ministry of Finance; against other creditors and officials of an insolvency of the debtor of (b) must only invest in receivables, subject to a principle of risk such payments, it is advisable to create an effective security interest diversification; over the assets of the debtor and to include the “waterfall” in such (c) may only be funded by institutional or professional investors, security arrangements. provided that, save for certain exceptions, it has at least two investors; (d) may have its securities listed on a regulated market, provided 7.6 Independent Director. Will a court in your jurisdiction that adequate selling restrictions are included in the issuing give effect to a contractual provision in an agreement and placement documentation; (even if that agreement’s governing law is the law of another country) or a provision in a party’s (e) enjoys a particular tax status, under which it does not pay organisational documents prohibiting the directors corporate income tax (except for gratuitous advantages from taking specified actions (including commencing received or disallowed expenses) and enjoys broad an insolvency proceeding) without the affirmative exemptions from withholding tax on interest collections vote of an independent director? and from VAT on all its management related expenses (see section 9 below); Such provisions may be included in agreements and/or organisational (f) can benefit from a range of special Belgian law provisions documents. However, depending on the type of action, the type of to facilitate the sale of (loan) receivables (incl. assignability, company and the way the company is otherwise organised, such exemption of formalities, protection against set-off, etc.); and provisions may not be enforceable against third parties. A particular (g) is, in practice, funded either (principally) through the issuance point of attention is the statutory obligation on directors, under their of asset-backed securities or under a limited recourse credit personal liability, to file for bankruptcy if the conditions for such line (in most cases granted by a separate issuing vehicle). proceedings are in fact met. Shareholders must also be institutional or professional investors. No particular requirements apply to directors, except where the SIC would invest in residential mortgage loans, in which case it will 8 Regulatory Issues need to obtain a licence.

8.1 Required Authorisations, etc. Assuming that the 7.3 Limited-Recourse Clause. Will a court in your purchaser does no other business in your jurisdiction, jurisdiction give effect to a contractual provision in will its purchase and ownership or its collection an agreement (even if that agreement’s governing law and enforcement of receivables result in its being is the law of another country) limiting the recourse of required to qualify to do business or to obtain any parties to that agreement to the available assets of licence or its being subject to regulation as a financial the relevant debtor, and providing that to the extent institution in your jurisdiction? Does the answer to of any shortfall the debt of the relevant debtor is the preceding question change if the purchaser does extinguished? business with other sellers in your jurisdiction?

Yes, provided such provision and agreement are otherwise valid and The purchase of receivables is in itself not a licensed activity in enforceable under the governing law and subject to insolvency laws Belgium. The acquisition of certain specific types of receivables that may be applicable to the creditor, whose rights of recourse are will however require the purchaser to obtain a licence. This is the subject to the contractual limitation. case for the acquisition of mortgage loan receivables, for which the purchaser will need to have a licence as a provider of mortgage credit under Book VII of the Belgian Code of Economic Law. For certain types of institutions (such as mobilisation vehicles under

74 WWW.ICLG.CO.UK ICLG TO: SECURITISATION 2016 © Published and reproduced with kind permission by Global Legal Group Ltd, London Stibbe Belgium

the Belgian Mobilisation Act) reduced requirements may however apply. The transfer of consumer loan receivables is only allowed to 9 Taxation a limited number of entities (including, inter alia, licensed consumer credit providers under Book VII of the Belgian Code of Economic 9.1 Withholding Taxes. Will any part of payments on Law or a Belgian securitisation vehicle). receivables by the obligors to the seller or the The answer remains the same regardless of whether the purchaser purchaser be subject to withholding taxes in your jurisdiction? Does the answer depend on the nature does business with other sellers in Belgium. of the receivables, whether they bear interest, their term to maturity, or where the seller or the purchaser 8.2 Servicing. Does the seller require any licences, etc., is located? In the case of a sale of trade receivables at a discount, is there a risk that the discount will be

in order to continue to enforce and collect receivables Belgium following their sale to the purchaser, including to recharacterised in whole or in part as interest? In the appear before a court? Does a third party replacement case of a sale of trade receivables where a portion of servicer require any licences, etc., in order to enforce the purchase price is payable upon collection of the and collect sold receivables? receivable, is there a risk that the deferred purchase price will be recharacterised in whole or in part as interest? The amicable collection of receivables owed by consumers is a regulated activity in Belgium if performed for the account of third Interest payments on loan receivables made by Belgian resident parties. The activity is subject to the registration requirements of the obligors or Belgian establishments of foreign obligors, or through Ministry of Economic Affairs in accordance with the provisions of the intervention of a Belgian financial intermediary, are generally the law of 20 December 2002 relating to the amicable collection of subject to a 27% Belgian interest withholding tax. Belgian debts due by consumers. Other servicing activities are, in principle, domestic tax laws, however, provide for a full exemption from not subject to any licence requirement. Belgian withholding tax for interest payments made to the benefit of Belgian resident corporations (including financial institutions 8.3 Data Protection. Does your jurisdiction have laws and securitisation vehicles) and of Belgian establishments of restricting the use or dissemination of data about or foreign corporations. Moreover, the tax treaties that Belgium has provided by obligors? If so, do these laws apply only concluded with Luxembourg, the Netherlands, Germany, the United to consumer obligors or also to enterprises? Kingdom and the United States of America currently provide for a full exemption from Belgian withholding tax on interest payments The Belgian Data Protection Act of 8 December 1992 governs the made to enterprises that are tax residents of the aforementioned processing of personal data. Personal data is defined as all data countries (subject to certain conditions). relating to an identified or identifiable individual person. The Non-interest-bearing receivables as a rule do not trigger any Belgian definition is very broad and not only covers data on consumers, withholding tax (possible interest for late payment generally not but on any individual person. If a transfer of a receivables entails being considered as actual “interest” for withholding tax purposes). the transfer of personal data (not necessarily related to the assigned debtor, but also, for example, relating to an employee of a corporate In the event that trade receivables are sold at a discount, such debtor), the rules of the Belgian Data Protection Act will apply. discount is generally regarded as a capital loss realised by the The processing of personal data is only permitted on certain originator rather than as an interest payment made by the latter. Even permissibility grounds, including following the consent of the data though, depending on the concrete circumstances, a characterisation subject. of the discount as an interest payment cannot be totally excluded, such characterisation could only effectively trigger Belgian interest withholding tax if (i) the originator is a Belgian resident entity, and 8.4 Consumer Protection. If the obligors are consumers, (ii) the purchaser is a non-Belgian entity that is a resident of any will the purchaser (including a bank acting as country other than Luxembourg, the Netherlands, Germany, the purchaser) be required to comply with any consumer protection law of your jurisdiction? Briefly, what is United Kingdom and the United States of America. required? A deferred purchase price is typically not considered as an interest payment for Belgian tax purposes. In the case of a sale and assignment of consumer loan receivables, the purchaser will not be subject to any additional consumer protection 9.2 Seller Tax Accounting. Does your jurisdiction require rules other than those already applicable to the receivables prior to that a specific accounting policy is adopted for tax the assignment and sale (as to which, we refer to question 1.2). purposes by the seller or purchaser in the context of a securitisation? 8.5 Currency Restrictions. Does your jurisdiction have laws restricting the exchange of your jurisdiction’s No, it does not. currency for other currencies or the making of payments in your jurisdiction’s currency to persons outside the country? 9.3 Stamp Duty, etc. Does your jurisdiction impose stamp duty or other documentary taxes on sales of receivables? No, it does not. There is no transfer tax, stamp duty or other documentary tax on the assignment of receivables (unless the assignment is voluntarily registered with a Tax Registration Office, in which case a nominal stamp duty of EUR 50 per registered document is due).

ICLG TO: SECURITISATION 2016 WWW.ICLG.CO.UK 75 © Published and reproduced with kind permission by Global Legal Group Ltd, London Stibbe Belgium

If sold receivables are secured by mortgages over land, such transfer normally triggers a registration tax of 1%, to be calculated on the 9.5 Purchaser Liability. If the seller is required to pay value nominal amount of the mortgages as a result of the need to draw added tax, stamp duty or other taxes upon the sale of receivables (or on the sale of goods or services up and register a notarial transfer deed. The broad exceptions from that give rise to the receivables) and the seller does this requirement under the Mobilisation Act avoid such registration not pay, then will the taxing authority be able to make duties from being triggered (see questions 5.5 and 7.1 above). claims for the unpaid tax against the purchaser or against the sold receivables or collections? 9.4 Value Added Taxes. Does your jurisdiction impose value added tax, sales tax or other similar taxes on The Belgian VAT Code contains a number of provisions pursuant sales of goods or services, on sales of receivables or to which a purchaser could be held jointly and severally liable for Belgium on fees for collection agent services? any VAT that becomes due upon a supply of goods or services and that remains unpaid by the seller, in particular in cases where the A transfer of receivables that is deemed to take place in Belgium, seller does not duly comply with applicable invoicing requirements. for the purposes of VAT, should be exempt from Belgian VAT. A Appropriate due diligence and eligibility criteria can avoid this issue. specific point of attention in this respect is the VAT treatment of In cases where the transferred receivables qualify as a branch of any discount that would be applied on an assignment of receivables. business, the purchaser could also be jointly and severally liable Indeed, if the purchaser would, as part of or following the purchase for any outstanding income tax, VAT and social security arrears transaction, perform certain services and that any agreed discount of the (Belgian) seller. But again, this joint and several liability intends to compensate for these services (e.g. assumption of credit mechanism can be avoided provided that a special tax certificates risk, collection of receivables, funding and liquidity services), procedure is complied with. the discount may be (wholly or partially) subject to Belgian VAT. This would typically not be the case in most securitisation-type transactions as opposed to factoring type transactions. 9.6 Doing Business. Assuming that the purchaser conducts no other business in your jurisdiction, Debt collection services are generally subject to VAT in Belgium (as would the purchaser’s purchase of the receivables, its opposed to certain other types of financial services, for which a VAT appointment of the seller as its servicer and collection exemption could be available). agent, or its enforcement of the receivables against the obligors, make it liable to tax in your jurisdiction? It should be noted, however, that the Belgian VAT Code provides for a specific exemption of VAT for certain types of services rendered to an SIC. According to circular letter n° 3/2007 (dated 15 February The purchaser would be liable to corporate tax in Belgium only if 2007) of the Belgian tax authorities, this exemption only covers it would be (deemed to be) a resident of Belgium for income tax management services that are specifically for collective investment purposes, or if it were to have a permanent establishment in Belgium. institutions and that relate to the management of such institutions In relation to a properly structured securitisation transaction, the fact or of their assets (including the forced or unforced collection of that the Belgian seller performs collection services for the benefit their receivables), and not to services that are of a mere material or of the foreign purchaser would typically not be seen as creating a technical nature. permanent establishment of the foreign purchaser in Belgium.

76 WWW.ICLG.CO.UK ICLG TO: SECURITISATION 2016 © Published and reproduced with kind permission by Global Legal Group Ltd, London Stibbe Belgium

Ivan Peeters Philip Van Steenwinkel Stibbe Stibbe rue de Loxum/ Loksumstraat 25 rue de Loxum/ Loksumstraat 25 1000 Brussels 1000 Brussels Belgium Belgium

Tel: +32 2 533 53 26 Tel: +32 2 533 51 66 Email: [email protected] Email: [email protected] URL: www.stibbe.com URL: www.stibbe.com Belgium Ivan Peeters’ expertise and experience focus on the complex areas in Philip Van Steenwinkel focuses on banking and financial law, capital financial transactions (including structured finance and securitisations, market transactions, structured finance transactions (securitisations, banking, secured or asset-based lending, and debt capital markets) covered bonds, trade receivables financing and derivatives), secured combined with the necessary expertise in the regulations applicable lending, and real estate financing. He acts for a wide range of financial to financial institutions and credit institutions in particular. Ivan assists institutions and corporates. Philip has a unique track record for various financial institutions, investment banks and corporates with a wide types of structured finance transactions, including, securitisations range of, often innovative, securitisations, other capital market-related relating to all major asset classes. Next to transactional aspects, financings, and complex financial restructurings. He also advises Philip also deals with financial regulation issues. both Belgian and foreign financial institutions on financial regulations, Philip was also a member of the Stibbe team that participated in the securities laws, various types of financial master agreements, and preparations for the Belgian legal framework for covered bonds. Prior securities clearing and settlement. to joining Stibbe in 2007, Philip worked as an associate in the debt Ivan is well-respected as an authority in banking and finance law in capital markets and structured finance practice of a magic circle law Belgium and was a member of various working parties that were set firm in Brussels and New York. up by the Belgian government to update Belgian laws and regulations on finance, collateral, and securities. He also took a leading role in designing and drafting the Belgian covered bond legislation.

From our main offices in Amsterdam, Brussels and Luxembourg, together with our branch offices in Dubai, Hong Kong, London and New York, we handle our clients’ complex legal challenges both locally and cross-border. Since its inception over 100 years ago, our leading Brussels office has grown into the largest firm in the Belgian legal landscape with more than 150 lawyers, including 30 partners. Our dedicated, multidisciplinary teams have long-standing experience in assisting our clients and acting as their trusted business advisor. Additionally, many of our lawyers are academics who are involved in ground-breaking legislative work. Our clients range from multinational and national corporations and financial institutions to government organisations and other public authorities. We handle their transactions, disputes and projects across a broad spectrum of sectors including energy, real estate and construction, industrials and chemicals, retail and consumer goods, life sciences, and telecommunications, media and technology.

ICLG TO: SECURITISATION 2016 WWW.ICLG.CO.UK 77 © Published and reproduced with kind permission by Global Legal Group Ltd, London Other titles in the ICLG series include:

■ Alternative Investment Funds ■ International Arbitration ■ Aviation Law ■ Lending & Secured Finance ■ Business Crime ■ Litigation & Dispute Resolution ■ Cartels & Leniency ■ Merger Control ■ Class & Group Actions ■ Mergers & Acquisitions ■ Competition Litigation ■ Mining Law ■ Construction & Engineering Law ■ Oil & Gas Regulation ■ Copyright ■ Outsourcing ■ Corporate Governance ■ Patents ■ Corporate Immigration ■ Pharmaceutical Advertising ■ Corporate Recovery & Insolvency ■ Private Client ■ Corporate Tax ■ Private Equity ■ Data Protection ■ Product Liability ■ Employment & Labour Law ■ Project Finance ■ Enforcement of Foreign Judgments ■ Public Procurement ■ Environment & Climate Change Law ■ Real Estate ■ Franchise ■ Shipping Law ■ Gambling ■ Telecoms, Media & Internet ■ Insurance & Reinsurance ■ Trade Marks

59 Tanner Street, London SE1 3PL, United Kingdom Tel: +44 20 7367 0720 / Fax: +44 20 7407 5255 Email: [email protected]