Constitution and perfection of collateral arrangements
Insolvency aspects of collateral arrangements
Beneficiary of collateral
Remedy for potential conflict with depository
Rights attached to the collateral
Constitution and perfection of collateral arrangements
Insolvency aspects of collateral arrangements
Beneficiary of collateral
Remedy for potential conflict with depository
Rights attached to the collateral
Since the entry into force of the Financial Collateral Act of 15 December 2004 (the "Collateral Act") implementing Directive 2002/47/EC on financial collateral arrangements as regards linked systems and credit claims (the "Collateral Directive"), financial collateral arrangements have benefitted from increased flexibility and legal certainty in Belgium.
This past quarter end once again reminded us that the economy remains weak and borrowers who have managed to hang on for the past three or four years are running out of staying power. The topic again arose - what to do when a borrower files bankruptcy? Faced with the prospect of throwing good money after bad, some lenders bury their head in the sand and simply wait it out, often with terrible results. Others charge ahead aggressively and run up large legal bills that are not justified by the amount of the obligation or the difficulty of recovery.
On 16 September 2011 the Netherlands Supreme Court rendered an important judgment regarding the exercise by a bank of its right to reverse a direct debit (LJN BQ873 SNS Bank/Pasman q.q.). In light of this judgment it can be concluded that, in principle, a bank may exercise its right of reversal not only if the direct debit caused the account to be overdrawn or (if an overdraft facility has been granted) the limit to be exceeded, but also if the bank will, as a result of the debtor/payer's bankruptcy, be unable to recover the claim resulting from the direct debit.
The United States Bankruptcy Court for the Central District of California recently held that the filing of a bankruptcy petition by a borrower can void a trustee sale even where the petition is filed after the trustee sale, so long as the borrower files the petition before the execution of the trustee's deed upon sale. In re: Gonzales 2011 WL3328508 (Bkrtcy. C.D.Cal. August 1, 2011).
1. Introduction
This newsletter discusses the draft legislative proposal for a Financial Institutions (Special Measures) Act (Wet bijzondere maatregelen financiële ondernemingen; "Intervention Act") that was recently published for consultation along with a draft explanatory memorandum and a document containing specific questions. The draft proposal would broaden the powers of the Dutch Central Bank (De Nederlandsche Bank; "DNB") and the Minister of Finance to intervene at financial institutions that are experiencing "serious problems".