Now on with the amendments to the law, parties to business transactions may use again as collateral, current and future intangible assets such as shares, accounts, patents, trademarks, copyrights.
The title of this article, worthy for an epic movie depicts
quite well the relief of professionals in the banking sector as
well as in the legal sector on the news that a draft law on
amendments on the Law on Securing Charges has been approved by the
Parliament on October 20, 2016 (law no. 101/2016).
For the sake of clarity, the Law on Securing Charges was doing the
quite well until the intervention of the legislator on 2013 that
striped off from the same an essential part of it.
Entered into force on 2000 the Law on Securing Charges has the
merits for introducing a swift system for the secured transactions.
The law provided shelter for banking institutions willing to expand
the portfolio of clients by financing them towards new types of
collateral that included inter alia also intangible assets (i.e.
shares in limited liability companies and/or nominal shares in
joint-stock companies, receivables, contractual rights, patents,
trademarks and service marks, copyrights, accounts, etc.). For this
purpose the legislator established a dedicated register, initially
administered by the Ministry of Finance and starting from 2009
granted into concession for administration by a private
entity.
On 2013, upon law 132/2013, the Law on Securing Charges experienced
some amendments that stripped away the same from paramount concepts
such as the 'intangible asset', 'instrument',
'bond' and 'accounts'.
Said amendments were approved simultaneously with the Law on
Payment System (no. 133/2013), which entered into force on 29 May
2013. It was expected that the law 133/2013 would fill the gaps
created by the amendments to the Law on Securing Charges, however
this proved to be not the case.
The Law on Payment System introduced the concept of the financial
collateral in line with the relevant EU Directives. The financial
collateral was defined as an instrument that can be used only among
legal entities. The individuals were clearly excluded by the
application of this instrument. At least one of the parties in the
financial collateral agreement would be the Republic of Albania,
the Bank of Albania, a foreign central bank, a local bank or
financial institution, a foreign bank or financial institution or
entity similar to a bank or financial institution, a settlement
agent, an operator or another local or international public
authority.
It remains unclear the purpose of intervention and the rationale
behind such a move from the legislator and other governmental
bodies that sponsored the initiative, however the effects of such
amendments were very tangible for sector professionals (banking,
legal, businesses, etc.).
In the aftermath of the amendments to Law on Securing Charges,
professionals started to discuss on possibilities to limit the
impact and continue to do business. To this effect, professionals
sought possible solutions in the provisions of the Civil Code on
non-possessory pledge, although advocating for the restatement of
abolished concepts. At the time, the main concerns of the (legal)
professionals were related to the modus operandi for taking
security interest over quotas in limited liability companies and
shares in joint stock companies, receivables, contractual rights,
etc., given the amendments to the Law on Securing Charges provided
no longer for such possibility.
In truth, the Civil Code at the time of the amendments, and of this
writing, provided for the possibility to take security interest
over intangible assets. Several articles of the code provide for
such possibility, however the applicability of the code provisions
in terms of perfection of the pledge and enforcement of the same
raised some concerns. Many professionals at the time argued on the
ambiguities of the code provisions requiring changes to the Civil
Code, with the purpose of clearing the path for the perfection and
enforcement of intangible assets, or at least restatement of the
abrogated provisions in the Law on Securing Charges.
The effects of the amendments occurred to the Law on Securing
Charges deteriorated also the country's indicators of Doing
Business 2015 (World Bank Group). The report of the World Bank on
the matter states that "Getting Credit: Albania weakened its
secured transactions system through an amendment to the Securing
Charges Law that does not allow intangible assets to be secured
with a nonpossessory pledge."
Under the above circumstances, emerged the latest initiative of the
Council of Ministers (Decision no. 365, dated 18.05.2016) on
proposal of the draft law "On some amendments and additions to
the law no. 8537, dated 18.10.1999 'On securing charges' as
amended", approved by the Parliament on 20th of October.
Based on the report that accompanied the draft law "...the
amendments of the law 8537/1999, through law 132/2013, have
produced a legal vacuum in the creation and perfection of the
collateral...". Therefore, continues the legislator the
purpose of the draft law is reinstating the abrogated terms into
force and returning the law at the state before the amendments of
the 2013.
To this effect, under the approved draft law, we rediscover the
terms such as intangible asset defined as any kind of asset being
not a thing, instrument or security (i.e. this is a new entry in
the definition) and consisting in intellectual property, accounts,
etc.
Additional amendments are the reformulation of the securing charge
definition, which includes the intangible asset and by this way is
defined as a real right on intangible asset or tangible movable
asset, whether present or future that secures one or more
obligations that arise before or after the securing agreement as
well as the reintroducing of the term sale of accounts in the
definition "transferee and transferor".
In conclusion, it has to be said that the approved draft law is
welcomed, considering that, it will bring order in house, easing
the uncertainties of the legal professionals that did build their
way out from the 2013 conundrum using the provisions of the Civil
Code on pledge security. The re-entry into force of the same
modalities for using intangible assets as collateral will allow the
parties in the transaction to choose the easier way for securing
the repayment of the obligations and the eventual enforcement
process.
The approval of the amendments to the law will certainly ease the
life at least for the banking and legal professionals and for the
parties engaging in business transactions, that will have a larger
and diverse pool of securities to choose from.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.