securitisation 2016 - swiss legal advice that matters | pestalozzi … · 2017-04-25 · the...

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The International Comparative Legal Guide to:

A practical cross-border insight into securitisation work

Published by Global Legal Group, with contributions from:

A&L GoodbodyAssociation for Financial Markets in EuropeAli Budiardjo, Nugroho, ReksodiputroAshurst LLPBaker & McKenzie – SantiagoBell GullyBrodies LLPCaspi & Co.Cervantes SainzCuatrecasas, Gonçalves PereiraDrew & Napier LLCElvinger Hoss PrussenEstudio Beccar VarelaFreshfields Bruckhaus Deringer LLPFrost & Fire ConsultingGárdos Füredi Mosonyi Tomori Law OfficeK&L Gates Studio Legale AssociatoKing & Spalding LLP

King & Wood MallesonsLatham & Watkins LLPLECAPLevy & Salomão AdvogadosMaples and CalderMcMillan LLPNishimura & AsahiPestalozzi Attorneys at Law LtdRoschier Advokatbyrå ABSchulte Roth & Zabel LLPShearman & Sterling LLPSidley Austin LLPStibbeTsibanoulis & PartnersVerita Legal (K. Argyridou & Associates LLC)Vieira de Almeida & Associados – Sociedade de Advogados, R.L.Wadia Ghandy & Co.

9th Edition

Securitisation 2016

ICLG

WWW.ICLG.CO.UK

The International Comparative Legal Guide to: Securitisation 2016

General Chapters:

Country Question and Answer 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

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

5 Reviving Securitisation in Europe: the Journey Lengthens – Richard Hopkin, Association for Financial Markets in Europe 32

6 Albania Frost & Fire Consulting: Franci Nuri 36

7 Argentina Estudio Beccar Varela: Javier L. Magnasco & María Victoria Pavani 46

8 Australia King & Wood Mallesons: Anne-Marie Neagle & Ian Edmonds-Wilson 56

9 Belgium Stibbe: Ivan Peeters & Philip Van Steenwinkel 67

10 Brazil Levy & Salomão Advogados: Ana Cecília Manente & Fernando de Azevedo Peraçoli 78

11 Canada McMillan LLP: Don Waters & Rob Scavone 89

12 Cayman Islands Maples and Calder: Scott Macdonald & Christopher Wall 100

13 Chile Baker & McKenzie – Santiago: Jaime Munro Cabezas & Cristóbal Larrain Baraona 109

14 China King & Wood Mallesons: Roy Zhang & Zhou Jie 120

15 Cyprus Verita Legal (K. Argyridou & Associates LLC): Karolina Argyridou & Fotini Kaimaklioti 133

16 England & Wales Sidley Austin LLP: Rupert Wall & Rachpal Thind 142

17 France Freshfields Bruckhaus Deringer LLP: Hervé Touraine & Olivier Bernard 157

18 Germany King & Spalding LLP: Dr. Werner Meier & Dr. Axel J. Schilder 170

19 Greece Tsibanoulis & Partners: Emmanouil Komis & Evangelia Kyttari 185

20 Hong Kong King & Wood Mallesons: Paul McBride & YuCheng Lin 195

21 Hungary Gárdos Füredi Mosonyi Tomori Law Office: Erika Tomori & Péter Gárdos 208

22 India Wadia Ghandy & Co.: Shabnum Kajiji & Nihas Basheer 218

23 Indonesia Ali Budiardjo, Nugroho, Reksodiputro: Freddy Karyadi & Novario Asca Hutagalung 228

24 Ireland A&L Goodbody: Peter Walker & Jack Sheehy 238

25 Israel Caspi & Co.: Norman Menachem Feder & Oded Bejarano 250

26 Italy K&L Gates Studio Legale Associato: Andrea Pinto & 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

Mark Nicolaides, Latham & Watkins LLP

Sales Director Florjan Osmani

Account DirectorsOliver Smith, Rory Smith

Sales Support ManagerToni Hayward

EditorTom McDermott

Senior EditorRachel Williams

Chief Operating Officer Dror Levy

Group Consulting EditorAlan Falach

Group PublisherRichard Firth

Published byGlobal Legal Group Ltd.59 Tanner StreetLondon SE1 3PL, UKTel: +44 20 7367 0720Fax: +44 20 7407 5255Email: [email protected]: www.glgroup.co.uk

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Printed byAshford Colour Press LtdApril 2016

Copyright © 2016Global Legal Group Ltd.All rights reservedNo photocopying

ISBN 978-1-910083-91-8ISSN 1745-7661

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

DisclaimerThis 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.

Contributing Editor

Continued Overleaf

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]

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

WWW.ICLG.CO.UK416 ICLG TO: SECURITISATION 2016© Published and reproduced with kind permission by Global Legal Group Ltd, London

Chapter 38

Pestalozzi Attorneys at Law Ltd

Oliver Widmer

Urs Klöti

Switzerland

1.3 Government Receivables. Where the receivables contract has been entered into with the government or a government agency, are there different requirements and laws that apply to the sale or collection of those receivables?

There are no different requirements and laws relating to receivables of the government and government agencies. However, receivables against the government and government agencies relating to public assets (Verwaltungsvermögen) are protected against enforcement by third parties. Receivables relating to private assets (Finanzvermögen) of the government and government agencies, on the other hand, are not immune against enforcement.

2 Choice of Law – Receivables Contracts

2.1 No Law Specified. If the seller and the obligor do not specify a choice of law in their receivables contract, what are the main principles in your jurisdiction that will determine the governing law of the contract?

The Swiss Statute on Private International Law (PIL) of 18 December 1987 provides that, in the absence of an explicit choice of law, the contract will be governed by the law of the state with which it is “more closely connected” (Art. 117 para. 1 PIL). It is presumed that the closest connection exists with the state where the party called upon to provide the “characteristic performance” of the contract has – at the time of conclusion of the contract – its ordinary residence or, if the contract was concluded in the exercise of a professional or commercial activity, where such party has its place of business. In particular, the following shall be considered the characteristic obligation: (a) the obligation of the alienator, in contracts of alienation;(b) the obligation of the party transferring the use of a thing or a

right, in the case of contracts concerning the use of a thing or a right;

(c) the service performed, in the case of mandates, work and labour contracts, and similar service contracts;

(d) the obligation of the custodian, in custodial contracts; and (e) the obligation of the guarantor or the surety, in guaranty or

surety contracts. There are specific provisions regarding certain types of contracts that precede these rules as leges speciales. In particular the following contracts are involved:■ The sale of movable property is governed by The Hague

Convention of 15 June 1955 on the Law Applicable to

1 Receivables Contracts

1.1 Formalities. In order to create an enforceable debt obligation of the obligor to the seller: (a) is it necessary that the sales of goods or services are evidenced by a formal receivables contract; (b) are invoices alone sufficient; and (c) can a receivable “contract” be deemed to exist as a result of the behaviour of the parties?

In order to create an enforceable debt obligation of the obligor, it is not required that the sales of goods or services are evidenced by a formal receivables contract. Under the contract rules of the Swiss Code of Obligations (CO), a contract may not only be entered into in writing, but also orally or based on the implied conduct of the parties (behaviour). By taking the parties’ conduct into account, an invoice may constitute evidence of a contract.

1.2 Consumer Protections. Do your jurisdiction’s laws: (a) limit rates of interest on consumer credit, loans or other kinds of receivables; (b) provide a 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 to consumers with respect to receivables owing by them?

The Swiss Consumer Credit Act and its implementing ordinance provide that the maximum interest rate (including commissions and other costs) for consumer credit (typically loans) may not exceed 15 per cent per annum. Outside the applicability of the Consumer Credit Act, federal case law provides for a maximum interest rate of 18 per cent per annum. If an obligor is in default in discharging the receivables of the seller, the receivables bear a default interest of 5 per cent per annum (Art. 104 CO). The obligor has the right to cancel the consumer credit (loan) within seven days after the conclusion of the consumer credit contract. Cancellation must be made in writing. Another noteworthy right of the consumer is that claims for payment against consumers may only be brought before the competent court in the country of residence of the consumers.

ICLG TO: SECURITISATION 2016 417WWW.ICLG.CO.UK© Published and reproduced with kind permission by Global Legal Group Ltd, London

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contracting parties to freely choose the governing law. For the purpose of this general principle, the Swiss PIL provides that contracts are subject to the law chosen by the parties (Art. 116 para. 1 PIL). This applies also where only one of the parties is located Switzerland and the parties chose the foreign law of the party located outside Switzerland. However, there are several general restrictions and limitations to the right to freely elect the governing law under Swiss law: (a) First, the election of a foreign law has to relate to an

international matter. With regard to internationality, the determination as to whether there is an international element or not is to be made on a case-by-case basis. However, Swiss courts are rather reluctant to disregard the parties’ conscious election of foreign law if the case at hand has at least some international element.

(b) The application of provisions of foreign law is precluded if it would produce a result which is incompatible with Swiss public policy (ordre public). Pursuant to the jurisprudence of the Swiss Federal Supreme Court, an extremely unfair result is required to overrule Swiss public policy. However, the escape clause of the Swiss public policy applies only if there is a link to Switzerland in the particular case. The main areas of application of this clause are in the law of persons and in family law.

(c) The election of foreign law is not recognised in case of mandatory provisions of Swiss law. For certain types of contracts, the PIL contains mandatory rules regarding the choice of the governing law. As to commercial relationships, the election of foreign law can be excluded or limited, in particular in the area of consumer protection, employment laws and product liability (see question 2.1 above).

2.4 CISG. Is the United Nations Convention on the International Sale of Goods in effect in your jurisdiction?

Yes. Switzerland adopted the UN Convention on Contracts for the International Sale of Goods (CISG) of 11 April 1980 as per 1 March 1991. Pursuant to Art. 1 para. 1 CISG, the convention applies to contracts of sale of goods between parties whose places of business are in different states: (i) when the states are contracting states; or (ii) when the rules of private international law lead to the application of the law of a contracting state. The CISG provides the substantive sales law for contracts regarding the international sale of goods, insofar as it contains provisions settling such matters. The rules of the convention supersede national Swiss law. However, the convention itself does not regulate procedural matters and, consequently, the CISG does not provide for jurisdiction. The jurisdiction of the competent court is to be determined according to the rules of private international law of the forum state. Since the requirements of the CISG (e.g. Art. 1 para. 1 lit. a) are met, the convention finds direct application without recourse to the Swiss rules on conflict of laws. However, the parties may agree to exclude the application of the CISG, as it is often done in practice.

International Sales or Movable Property. However, this provision shall not apply within the scope of the United Nations Convention on the International Sales of Goods (CISG) of 11 April 1980, if the application has not explicitly been excluded by the parties (see question 2.4 below).

■ Contracts concerning real property (or its use) are basically governed by the law of the state in which the property is located. A choice of law by the parties is permitted. However, it has to be noted that the form of the contract is governed by the law of the state in which the real property is located unless that law permits the application of another law. In case of real property located in Switzerland, the form shall be governed by Swiss law.

■ Contracts for a performance relating to normal consumption, which is intended for a consumer’s or for his family’s personal use and not connected with his professional or commercial activities, are governed by the law of the state in which the consumer has his ordinary residence if (i) the offeror has received the order in that state, (ii) in that state, the conclusion of the contract was preceded by an offer or advertisement and the consumer has carried out the legal acts necessary for the conclusion of the contract in that state, or (iii) the offeror has prompted the consumer to go abroad and deliver his order there. In such cases, a choice of law by the parties is excluded.

■ Employment contracts are governed by the law of the state in which the employee has his ordinary place of work. If the employee ordinarily works in several states, the employment contract is governed by the law of the state in which the employer’s business establishment or, in the absence of such establishment, his domicile or ordinary residence, is located. However, the parties may subject the employment contract to the law of the state in which the employee has his ordinary residence, or in which the employer has his business establishment, domicile, or ordinary residence.

■ Contracts concerning intellectual property are governed by the law of the state in which the party transferring the intellectual property right or granting the use thereof has its ordinary residence. A choice of law is permitted. However, contracts between employers and employees in the course of performance of the employment contract shall be subject to the law governing the employment contract.

2.2 Base Case. If the seller and the obligor are both resident in your jurisdiction, and the transactions 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 jurisdiction to govern the receivables contract, is there any reason why a court in your jurisdiction would not give effect to their choice of law?

No, a court in Switzerland should give effect to their choice of law.

2.3 Freedom to Choose Foreign Law of Non-Resident Seller or Obligor. If the seller is resident in your jurisdiction but the obligor is not, or if 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 contract, will a court in your jurisdiction give effect to the choice of foreign law? Are there any limitations to the recognition of foreign law (such as public policy or mandatory principles of law) that would typically apply in commercial relationships such as that between the seller and the obligor under the receivables contract?

The Swiss PIL is based on the general principle of the parties’ autonomy to contract. This principle includes the right of the

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and other third parties, provided no mandatory provisions of law other than those chosen by the parties would be violated. However, certain specifics regarding performance (e.g. transfer and perfection) of the receivables will be subject to the law of the state in which they actually occur, irrespective of the law governing the receivables contract (Art. 125 PIL). In addition, the assignment of the receivables, however, is typically governed by the law governing the receivables themselves.

3.4 Example 3: If (a) the seller is located in your jurisdiction but the obligor is located in another country, (b) the receivable is governed by the law of the obligor’s country, (c) the seller sells the receivable to a purchaser located in a third country, (d) the seller and the purchaser choose the law of the obligor’s country to govern the receivables purchase agreement, and (e) the sale complies with the requirements of the obligor’s country, will a court in your jurisdiction recognise that sale as being effective against the seller and other third parties (such as creditors or insolvency administrators of the seller) without the need to comply with your jurisdiction’s own sale requirements?

Yes. Please refer to question 3.2. A court in Switzerland will recognise such a sale as being effective against the seller, the obligor and other third parties, provided no mandatory provisions of law other than those chosen by the parties would be violated. However, certain specifics regarding performance (e.g. transfer and perfection) of the receivables will be subject to the law of the state in which they actually occur, irrespective of the law governing the receivables contract (Art. 125 PIL).

3.5 Example 4: If (a) the obligor is located in your jurisdiction but the seller is located in another country, (b) the receivable is governed by the law of the seller’s country, (c) the seller and the purchaser choose the law of the seller’s country to govern the receivables purchase agreement, and (d) the sale complies with the requirements of the seller’s country, will a court in your jurisdiction recognise that sale as being effective against the obligor and other third parties (such as creditors or insolvency administrators of the obligor) without the need to comply with your jurisdiction’s own sale requirements?

Yes. Please refer to question 3.2. A court in Switzerland will recognise such a sale as being effective against the seller, the obligor and other third parties, provided no mandatory provisions of law other than those chosen by the parties would be violated. However, certain specifics regarding performance (e.g. transfer and perfection) of the receivables will be subject to the law of the state in which they actually occur, irrespective of the law governing the receivables contract (Art. 125 PIL).

3 Choice of Law – Receivables Purchase Agreement

3.1 Base Case. Does your jurisdiction’s law generally require the sale of receivables to be governed by the same law as the law governing the receivables themselves? If so, does that general rule apply irrespective of which law governs the receivables (i.e., your jurisdiction’s laws or foreign laws)?

No. The parties to a receivables purchase agreement are free to choose which law shall govern their contract, irrespective of the law governing the receivables themselves. However, certain specifics regarding performance (e.g. transfer and perfection) of the receivables will be subject to the law of the state in which they actually occur, irrespective of the law governing the receivables contract (Art. 125 PIL). In addition, the assignment of the receivables, however, is typically governed by the law governing the receivables themselves.

3.2 Example 1: If (a) the seller and the obligor are located in your jurisdiction, (b) the receivable is governed by the law of your jurisdiction, (c) the seller sells 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 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 against the seller, the obligor and other third parties (such as creditors or insolvency administrators of the seller and the obligor)?

Yes. Under Swiss conflict of law provisions, the parties to a receivables contract are free to choose which law shall govern their contract, irrespective of the law governing the receivables themselves. This applies whether the purchaser, the seller or the obligor are in different countries or not and whether the parties choose a jurisdiction in which one of them is located or not. In particular, a court in Switzerland permits the seller, the purchaser and the obligor to choose the law of Switzerland to govern the receivables sale if only one of the seller, the purchaser or the obligor is resident in Switzerland. A court in Switzerland will recognise such a sale as being effective against the seller, the obligor and other third parties, provided no mandatory provisions of law other than chosen by the parties would be violated. However, certain specifics regarding performance (e.g. transfer and perfection) of the receivables will be subject to the law of the state in which they actually occur, irrespective of the law governing the receivables contract (Art. 125 PIL). In addition, the assignment of the receivables, however, is typically governed by the law governing the receivables themselves.

3.3 Example 2: Assuming that the facts are the same as Example 1, but either the obligor or the purchaser 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 (such as creditors or insolvency administrators of the seller), or must the foreign law requirements of the obligor’s country or the purchaser’s country (or both) be taken into account?

Yes. Please refer to question 3.2. A court in Switzerland will recognise such a sale as being effective against the seller, the obligor



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A good faith purchaser/assignee of receivables does not exist (exceptions apply for bills of exchange/securities). If the assignor assigns the same receivables several times to different parties, the first assignee acquires first rights. After the first valid assignment, the assignor loses his right to dispose of said receivables and cannot validly assign them to any other party. The first assignor becomes the owner of the receivables. However, the obligor is protected if he has been notified of the second assignment only and makes payment to the alleged (later) assignee. The first and rightful assignee is then entitled to raise a claim for unjust enrichment and damages against the second assignee.

4.3 Perfection for Promissory Notes, etc. What additional or different requirements for sale and perfection apply to sales of promissory notes, mortgage loans, consumer loans or marketable debt securities?

The perfection of promissory notes (einfacher Schuldschein) relating to receivables requires a valid assignment. With regard to mortgage-backed loans, the sale and transfer of receivables secured by a mortgage (Grundpfandverschreibung) as a right in rem over the underlying encumbered land to the purchaser will be effected by way of assignment. Such assignment is effective and perfected without notice to the respective obligors or filings with the competent land registry and will include the security over the encumbered land (which passes to the purchaser ex lege as ancillary right of the assigned receivables). Although no filings or registrations with the land registry are necessary for the perfection of the sale and transfer of receivables, purchasers will typically wish to be registered as creditors in the creditors’ register with the effect that insurers may not validly discharge their payment obligations to the land owner without the consent of the registered creditor. In case a mortgage certificate (Schuldbrief) was provided as security by the obligor to the lender and (i) transferred to the latter by way of security (Sicherungsübereignung), the lender/originator selling the receivables (loan claims) to the special purpose vehicle (SPV) may transfer the security to the SPV by transferring the mortgage certificate to the SPV by way of security (Sicherungsübereignung) or pledge (Pfand). In the case of bearer mortgage certificates, physical delivery is required and, in the case of registered mortgage certificates, physical delivery and endorsement are necessary. If instead, (ii) the mortgage certificate was pledged to the lender, the security passes to the SPV ex lege as an ancillary right at the time of assignment of the loan claim. The transfer of marketable debt securities requires, in case of bearer securities (Inhaberpapiere), physical delivery of the securities and in case of registered securities (Ordrepapiere), physical delivery and endorsement to the purchaser. Special rules apply for book-entry securities.

4.4 Obligor Notification or Consent. Must the seller or the purchaser notify obligors of the sale of receivables in order for the sale to be effective against the obligors and/or creditors of the seller? Must the seller or the purchaser obtain the obligors’ consent to the sale of receivables in order for the sale to be an effective sale against the obligors? Whether or not notice is required to perfect a sale, are there any benefits to giving notice – such as cutting off obligor set-off rights and other obligor defences?

A notification of the obligor is not required for the sale/assignment to be effective. No other formalities or filings with any administrative or governmental authority in Switzerland are required in order

3.6 Example 5: If (a) the seller is located in your jurisdiction (irrespective of the obligor’s location), (b) the receivable is governed by the law of your jurisdiction, (c) the seller sells the receivable to a purchaser located in a third country, (d) the seller and the purchaser choose the law of the purchaser’s country to govern the receivables purchase agreement, and (e) the sale complies with the requirements of the purchaser’s country, will a court in your jurisdiction recognise that sale as being effective against the seller and other third parties (such as creditors or insolvency administrators of the seller, any obligor located in your jurisdiction and any third party creditor or insolvency administrator of any such obligor)?

Yes. Please refer to question 3.2. A court in Switzerland will recognise such a sale as being effective against the seller, the obligor and other third parties, provided no mandatory provisions of law other than those chosen by the parties would be violated. However, certain specifics regarding performance (e.g. transfer and perfection) of the receivables will be subject to the law of the state in which they actually occur, irrespective of the law governing the receivables contract (Art. 125 PIL). In addition, the assignment of the receivables is typically governed by the law governing the receivables themselves.

4 Asset Sales

4.1 Sale Methods Generally. In your jurisdiction what are the customary methods for a seller to sell receivables to a purchaser? What is the customary terminology – is it called a sale, transfer, assignment or something else?

The seller: (i) enters into a purchase contract (which does not necessarily

have to be in writing) with the purchaser; and (ii) assigns the receivables against the respective obligor(s) to the

purchaser. In order for an assignment to be effective, the claims must be assignable, i.e. the assignment must not be prohibited by law, contractual non-assignment clauses or the nature of the receivables. The declaration of assignment must be made in writing and signed by at least the assignor. It is common practice that the parties enter into an assignment agreement signed by both parties. Notification to the respective obligor is not required in order for the assignment to be valid. However, until the obligor is notified of the assignment, the bona fide obligor may validly discharge his obligations by making payments to the assignor.The customary terminology is a sale and assignment of receivables.

4.2 Perfection Generally. What formalities are required generally for perfecting a sale of receivables? Are there any additional or other formalities required for the sale of receivables to be perfected against any subsequent good faith purchasers for value of the same receivables from the seller?

The existence of a purchase agreement and an assignment in writing is required for an effective sale and assignment of receivables. Perfection does not require that the obligor be notified of the assignment. However, as long as the obligor is not notified of the assignment, he may validly discharge his obligations if he makes payments to the assignor in good faith.



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4.7 Restrictions on Assignment; Liability to Obligor. If any of the restrictions in question 4.6 are binding, or if the receivables contract explicitly prohibits an assignment of receivables or “seller’s rights” under the receivables contract, are such restrictions generally enforceable in your jurisdiction? Are there exceptions to this rule (e.g., for contracts between commercial entities)? If your jurisdiction recognises restrictions on sale or assignment of receivables and the seller nevertheless sells receivables to the purchaser, will either the seller or the purchaser be liable to the obligor for breach of contract or tort, or on any other basis?

Yes, such restrictions are generally enforceable in Switzerland. The obligor cannot raise, against a third person who has acquired the claim in reliance upon a written acknowledgment of indebtedness which does not contain a prohibition of assignment, the defence that the assignment has been precluded by agreement. The assignment of a restricted claim is invalid and remains with the seller. A seller can become liable for breach of contract or by tort.

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?

Under generally applicable principles of the Code of Obligations, the receivables must be identified or identifiable. Whether receivables are identifiable or not must be determined on a case-by-case basis. There are no standardised objective characteristics. With regard to future receivables (receivables which come into existence after the assignment), the Federal Supreme Court held that they must be identified or identifiable regarding the obligor, legal ground and amount. This, in particular, holds true in case the seller sells all of his receivables to the purchaser, including future receivables (Globalzession). It is, however, advisable to identify the receivables to be sold either in advance, or with respect to future receivables, periodically to evidence the receivables that have come into existence. Likewise, one could question whether it is sufficient identification of receivables if the seller sells all of its receivables other than receivables owing by one or more specifically identified obligors.

4.9 Respect for Intent of Parties; Economic Effects on Sale. If the parties describe their transaction in the relevant documents as an outright sale and explicitly state their intention that it be treated as an outright sale, will this description and statement of intent automatically be respected or will a court enquire into the economic characteristics of the transaction? If the latter, what economic characteristics of a sale, if any, might prevent the sale from being perfected? Among other things, to what extent may the seller retain: (a) credit risk; (b) interest rate risk; (c) control of collections of receivables; or (d) a right of repurchase/redemption without jeopardising perfection?

The “true sale” principle aims to ensure that the sale of assets from the seller to the purchaser is made on a “no recourse” basis

to render the sale/assignment of receivables effective. While the validity and effectiveness of the sale/assignment is not dependent on the notification to the obligor, the latter may validly discharge its obligations by payment to the seller/assignor, as long as the assignment has not been notified to the obligor. In order to validly effect a sale/assignment of receivables, the obligor’s consent to the sale/assignment is not required, subject to the following exceptions, the contract between the seller/assignor and the obligor: (i) contains a prohibition of assignment or expressly provides for the assignment to be subject to the consent of the obligor; (ii) is considered to have been entered into intuitu personam; or (iii) is subject to Swiss banking secrecy. The receivables contract between the seller/assignor and obligor does not have to expressly permit the assignment of claims. When bankruptcy proceedings regarding the seller/assignor are opened, notification of the obligor (by the purchaser/assignee) is highly recommended. Upon notification, the obligor can only validly discharge his obligations by making payments to the assignee. If he is not notified in due time and pays the bankrupt assignor, he is validly discharged. If the obligor becomes bankrupt, the obligor loses his capacity to dispose of his assets. All assets form part of the bankrupt estate. Thus, when notified of the assignment, the obligor is not entitled to make payments to the assignee.

4.5 Notice Mechanics. If notice is to be delivered to obligors, whether at the time of sale or later, are there any requirements regarding the form the notice must take or how it must be delivered? Is there any time limit beyond which notice is ineffective – for example, can a notice of sale be delivered after the sale, and can notice be delivered after insolvency proceedings against the obligor or the seller have commenced? Does the notice apply only to specific receivables or can it apply to any and all (including future) receivables? Are there any other limitations or considerations?

There is no requirement as to the form of the notice. One should, however, ensure that the obligor received the notice by sending the notice through adequate means (registered letter, courier, etc.). There is no limit beyond which notice is ineffective for Swiss law governed receivables against obligors domiciled in Switzerland. The notice applies to all (including future) receivables. For the effects of bankruptcy proceedings on future receivables, please refer to questions 6.1 to 6.5.

4.6 Restrictions on Assignment – General Interpretation. Will a restriction in a receivables contract to the effect that “None of the [seller’s] rights or obligations under this Agreement may be transferred or assigned without the consent of the [obligor]” be interpreted as prohibiting a transfer of receivables by the seller to the purchaser? Is the result the same if the restriction says “This Agreement may not be transferred or assigned by the [seller] without the consent of the [obligor]” (i.e., the restriction does not refer to rights or obligations)? Is the result the same if the restriction says “The obligations of the [seller] under this Agreement may not be transferred or assigned by the [seller] without the consent of the [obligor]” (i.e., the restriction does not refer to rights)?

Yes, as mentioned above (under question 4.3 above), should a contract contain any such restriction, the seller can only assign subject to the obligor’s consent.



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4.12 Related Security. Must any additional formalities be fulfilled in order for the related security to be transferred concurrently with the sale of receivables? If not all related security can be enforceably transferred, what methods are customarily adopted to provide the purchaser the benefits of such related security?

The assignment of receivables includes so-called ancillary rights. Some security interests constitute such ancillary rights, e.g. a pledge. Hence, when receivables that are secured by a pledge are transferred, the pledge automatically passes to the assignee ex lege. However, other security interests such as mortgage certificates (Schuldbriefe) do not constitute ancillary rights and do not pass ex lege. Hence, when the receivables secured by a mortgage certificate are assigned to the purchaser/assignee, specific action is required in order for the security interest to pass to the assignee. Bearer mortgage certificates must be transferred by physical delivery and registered mortgage certificates by physical delivery and endorsement. Please also refer to question 4.3.

4.13 Set-Off; Liability to Obligor. Assuming that a receivables contract does not contain a provision whereby the obligor waives its right to set-off against amounts it owes to the seller, do the obligor’s set-off rights terminate upon its receipt of notice of a sale? At any other time? If a receivables contract does not waive set-off but the obligor’s set-off rights are terminated due to notice or some other action, will either the seller or the purchaser be liable to the obligor for damages caused by such termination?

The obligor can set-off any amounts against the seller and any subsequent purchaser. If the obligor sets-off a claim against the seller, the seller becomes liable to the purchaser/assignee.

5 Security Issues

5.1 Back-up Security. Is it customary in your jurisdiction to take a “back-up” security interest over the seller’s ownership interest in the receivables and the related security, in the event that an outright sale is deemed by a court (for whatever reason) not to have occurred and have been perfected?

It is not customary to provide for a “back-up” security interest. However, the parties are at liberty to choose a back-up security.

5.2 Seller Security. If it is customary to take back-up security, what are the formalities for the seller granting a security interest in receivables and related security under the laws of your jurisdiction, and for such security interest to be perfected?

Security interest in receivables may be established by: (i) assignment by way of security (Sicherungszession); or (ii) pledge (Verpfändung). Assignment by way of security is the more commonly used form to create security and is preferable for the assignee. In particular, it leaves more flexibility in terms of available foreclosure proceedings (when the purchaser/assignor becomes bankrupt) and will de facto lead to the earlier completion of foreclosure proceedings. The two forms of security are briefly described below.

both from a legal and accounting perspective. The Swiss legal framework is able to satisfy all requirements which result from this concept although it is not a recognised legal concept under Swiss law (but is an accounting and tax concept). The question as to whether or not the “true sale” requirement is met or not will widely depend on the economic conditions and circumstances of each individual case. The fact that the seller retains a credit risk, or an interest rate risk, or the control of the collection of the receivables is, as such, not a factor which may jeopardise perfection. The factors which may put a true sale at risk would be circumstances where the price is not determined at arm’s length so that there is a risk of challenge by third party creditors requesting a “revocation” in the event of insolvency of the seller on the grounds that they have been defrauded by the sale of the receivables. The risk of such a claim is generally considered to be excluded if the sale of the receivables is made at market value.

4.10 Continuous Sales of Receivables. Can the seller agree in an enforceable manner to continuous sales of receivables (i.e., sales of receivables as and when they arise)? Would such an agreement survive and continue to transfer receivables to the purchaser following the seller’s insolvency?

Swiss law provides for the assignment of claims on a revolving basis (as and when they arise). The question of whether or not receivables that come into existence after the date of the seller’s bankruptcy can be validly assigned to the assignee, is not addressed under Swiss law (please refer to question 4.8). The agreement itself would survive the seller’s insolvency but according to the literature, there would be no assignment of receivables that come into existence after the bankruptcy of the seller, rather after bankruptcy, these receivables fall within the bankrupt estate (also see questions 6.1 and 6.5).

4.11 Future Receivables. Can the seller commit in an enforceable manner to sell receivables to the purchaser that come into existence after the date of the receivables purchase agreement (e.g., “future flow” securitisation)? If so, how must the sale of future receivables be structured to be valid and enforceable? Is there a distinction between future receivables that arise prior to or after the seller’s insolvency?

It is possible under Swiss law to sell/assign future claims (i.e. claims that come into existence after the date of the receivables purchase/assignment agreement) provided that they are sufficiently identified or identifiable as to the obligor, legal ground and amount (also see question 4.8). There is no further requirement for the sale and the assignment of future receivables to be valid and enforceable under Swiss law. There is no specific Federal Supreme Court decision regarding the enforceability of future receivables that have arisen (rather than matured only) after the commencement of Swiss bankruptcy proceedings with regard to the seller/assignor. Since the assignor loses his capacity to dispose of the assigned claims upon the adjudication of bankruptcy/insolvency proceedings, receivables that arise after the seller’s insolvency may not be validly assigned and the competent insolvency official may challenge the validity of the transfer of future claims.



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debt securities requires physical delivery of the certificates (in the case of bearer instruments) together with an endorsement (in the case of instruments drawn to the order of a person) or assignment. A security interest can also be established by transfer by way of security (Sicherungsübereignung). The same rules apply. Under Swiss law, neither notification of the debtor (or owner of the encumbered land in case of mortgages) nor registration or filing with a governmental authority is required for the perfection of the pledge.

5.6 Trusts. Does your jurisdiction recognise trusts? If not, 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 from the seller’s own assets until turned over to the purchaser?

Substantive Swiss trust law does not exist. Therefore, a trust in its literal sense cannot be set up under Swiss law. Since July 2007, the Hague Convention on the Law Applicable to Trusts and on their Recognition 1985 (Hague Trust Convention) is applicable in Switzerland. The conflict of laws rules have incorporated the Hague Trust Convention into national law and allow for full and complete recognition of foreign trusts in Switzerland. Collections received by the seller in respect of sold receivables can be held in a separate account of the seller apart from his own assets until the collection proceeds are turned over to the purchaser. After the assignment of receivables, the assignee is the rightful owner of the receivable. Therefore, the assignee has to authorise the assignor to collect the receivables (in his own name) on behalf of the assignee. To ensure that the debtors transfer the funds to a separate account of the seller, the receivables contract between the seller and the debtors has to specify such separate account.

5.7 Bank Accounts. Does your jurisdiction recognise escrow accounts? Can security be taken over a bank account located in your jurisdiction? If so, what is the typical method? Would courts in your jurisdiction recognise a foreign law grant of security (for example, an English law debenture) taken over a bank account located in your jurisdiction?

Switzerland recognises escrow accounts. It is also possible to create a security interest over bank accounts located in Switzerland. There are two possibilities: bank account assets and claims against the bank relating to the bank account assets can either be: (i) pledged; or (ii) assigned by way of security. A pledge is preferable for the security provider/pledgor since he remains the owner of the bank account assets, whereas an assignment is preferable for the security taker/assignee because he becomes the owner of the bank account assets. He is also in a better position in foreclosure proceedings. For further reference, please see question 5.3.Pursuant to the Swiss conflict of laws rules, the parties are free to choose the law under which they create a security interest. If the security interest over a Swiss bank account is validly perfected under the relevant foreign law, the security interest will generally be treated as valid and perfected under Swiss law between the parties (security provider and security taker). However, limitations apply in relation to the bank account. Foreign law may not be binding for the bank account. Please refer to question 5.4.

Assignment by way of security (Art. 164 CO): when receivables are assigned, the assignee becomes the owner of the receivables. Even if, technically, the assignee could dispose of the assigned receivables freely due to his full ownership interest in the receivables, his right to dispose of the receivables is contractually limited; he is only allowed to dispose of the receivables in accordance with the underlying security assignment agreement and to realise the security for the secured obligations. Pledge (Art. 899 et seq. of the Civil Code (CC)): claims and other rights can be pledged if they are assignable. Claims are assignable unless the assignment is prohibited by law, contractual non-assignment stipulations or due to the nature of the receivables. The only formal requirement is that the pledge agreement should be in writing. Neither the validity nor the perfection of the pledge depend on the notification of the debtor.

5.3 Purchaser Security. If the purchaser grants security over all of its assets (including purchased receivables) in favour of the providers of its funding, what formalities must the purchaser comply with in your jurisdiction to grant and perfect a security interest in purchased receivables governed by the laws of your jurisdiction and the related security?

Please refer to question 5.2.

5.4 Recognition. If the purchaser grants a security interest in receivables governed by the laws of your jurisdiction, and that security interest is valid and perfected under the laws of the purchaser’s country, will it be treated as valid and perfected in your jurisdiction or must additional steps be taken in your jurisdiction?

Under the Swiss conflict of laws rules, the purchaser/parties is/are free to choose the law under which the purchaser grants a security interest. If the security interest is validly perfected under the relevant foreign law, the security interest will generally be treated as valid and perfected under Swiss law. Pursuant to the Swiss conflicts of laws rules, the following special rules apply to the debtors or third parties, respectively, in relation to the assigned or pledged receivables: Assigned receivables: the assignor and the assignee’s choice of a foreign law may not be asserted against, and will not be binding upon, the debtor without his consent if the law governing the receivables is different from the chosen law. In other words, the validity and perfection of the foreign law-governed assignment cannot be asserted against the debtor, unless the debtor consents to the foreign law, or the requirements for a valid and perfected assignment under the laws governing the receivables are met.Pledged receivables: the pledgor and the pledgee’s choice of foreign law may not be asserted against, and will not be binding upon: (i) the debtor, if the law governing the receivables is different from the chosen law; and (ii) bona fide third parties, such as third party creditors.Instead, the law governing the receivables will apply to the debtor (unless the debtor consents to the law chosen by the pledgor and pledgee) and the law of the jurisdiction where the pledgee is resident will apply to bona fide third parties.

5.5 Additional Formalities. What additional or different requirements apply to security interests in or connected to insurance policies, promissory notes, mortgage loans, consumer loans or marketable debt securities?

A security interest in marketable debt instruments can be created by way of pledge. The establishment of a pledge in respect of marketable



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are opened against the originator of the receivables. The opening of bankruptcy proceedings causes all obligations to fall due, according to Art. 208 para. 1 of the Federal Statute on Debt Enforcement and Bankruptcy (Bankruptcy Act) of 11 April 1889. Pursuant to the current jurisprudence of the Swiss Federal Supreme Court, future receivables are not deemed to have been validly assigned and therefore fall within the bankruptcy estate of the seller in the event of bankruptcy or similar insolvency proceedings against the seller (Durchgangstheorie). Regarding the assigned future receivables, the purchaser will be treated as an unsecured creditor ranking equal to all the other unsecured creditors of the bankruptcy seller (mainly in the third class). Although no “automatic stay” applies under Swiss law with respect to future receivables, the purchaser is not entitled to collect, transfer or otherwise exercise ownership rights.According to the prevailing opinion in Switzerland, the assignment of receivables is linked to the underlying transaction (e.g. the assignment agreement) and therefore only valuable if the sale is perfected. With the opening of bankruptcy proceedings, all seizable assets owned by the debtor at this time, irrespective of where they are situated, form part of the bankruptcy estate. This applies also to controversial receivables.Immediately upon receipt of the bankruptcy order, the insolvency official raises an inventory of the assets belonging to the bankruptcy estate. If the insolvency official doubts the sale of certain (existing) receivables to be perfected, he lists the receivables in the inventory. Further, the insolvency official has the ability to take all necessary measures for their safeguarding (Art. 221 of the Bankruptcy Act), e.g. a stay collection and enforcement actions until it is determined that the sale is perfected.According to Swiss law, it makes no difference whether or not the receivables have been assigned for security purposes (Sicherungszession) in connection with a secured financing.

6.2 Insolvency Official’s Powers. If there is no stay of action under what circumstances, if any, does the insolvency official have the power to prohibit the purchaser’s exercise of rights (by means of injunction, stay order or other action)?

Once bankruptcy proceedings have been opened, claims forming part of the bankruptcy estate can no longer be validly discharged by payment to the debtor (Art. 205 Bankruptcy Act). With regard to future receivables (which fall into the bankruptcy estate of the seller), the competent insolvency official will notify the debtors of the opening of bankruptcy proceedings and inform them that the sole legally valid way of discharging their obligation is by payment to the bankruptcy office. Payment made to the purchaser will not relieve the debtor from its payment obligations, unless it is otherwise received by the bankrupt estate. As to the already existing receivables, the competent insolvency official will not interfere with the exercise of rights, provided that the sale is effective and perfected (see question 6.1 above).

6.3 Suspect Period (Clawback). Under what facts or circumstances could the insolvency official rescind or reverse transactions that took place during a “suspect” or “preference” period before the commencement of the insolvency proceeding? What are the lengths of the “suspect” or “preference” periods in your jurisdiction for (a) transactions between unrelated parties, and (b) transactions between related parties?

The insolvency official can avoid a transaction (actio pauliana) under the following circumstances:

5.8 Enforcement over Bank Accounts. If security over a bank account is possible and the secured party enforces that security, does the secured party control all cash flowing into the bank account from enforcement forward until the secured party is repaid in full, or are there limitations? If there are limitations, what are they?

Security over bank accounts is typically taken by way of assignment or by way of a pledge. The object of the assignment or the pledge is, amongst others, the right of the account holder against the account bank to deliver any accounts standing to the credit of the account holder. This means that the secured party controls any cash flowing into the bank account, provided there are no other first priority rights. In particular, the account bank, under its general terms and conditions, has first priority rights. The secured party is further limited so that in case of an assignment of the claims against the bank account (but not in case of a pledge), after the bankruptcy of the account holder, the future claims and cash fall into the bankruptcy estate and the secured party has no control rights over any future cash flowing in the bank account after such a bankruptcy event. Please also see question 6.1 below.

5.9 Use of Cash Bank Accounts. If security over a bank account is possible, can the owner of the account have access to the funds in the account prior to enforcement without affecting the security?

Yes, this is possible. The security agreement provides whether the owner of the account has access to the funds in the account prior to enforcement.

6 Insolvency Laws

6.1 Stay of Action. If, after a sale of receivables that is otherwise perfected, the seller becomes subject to an insolvency proceeding, will your jurisdiction’s insolvency laws automatically prohibit the purchaser from collecting, transferring or otherwise exercising ownership rights over the purchased receivables (a “stay of action”)? If so, what generally is the length of that stay of action? Does the insolvency official have the ability to stay collection and enforcement actions until he determines that the sale is perfected? Would the answer be different if the purchaser is deemed to only be a secured party rather than the owner of the receivables?

Swiss law distinguishes between the sale of existing receivables and the sale of future receivables:In general, existing receivables validly assigned are bankruptcy remote. This means, in the event of bankruptcy or similar insolvency proceedings against the seller, the existing receivables will not fall within its bankrupt estate. Moreover, the openings of bankruptcy or similar proceedings do not cause an “automatic stay” of such receivables under Swiss law. Accordingly, the purchaser is free to collect, transfer or otherwise exercise his ownership rights over the assigned receivables. Future receivables are defined as assigned receivables that have not yet come into existence. Such receivables may be assigned under Swiss law if the future claims can be defined with sufficient specificity, whereas the assignment becomes effective upon existence of the assigned receivable. However, a valid assignment of future receivables will cease to be valid if bankruptcy proceedings



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6.6 Effect of Limited Recourse Provisions. If a debtor’s contract contains a limited recourse provision (see question 7.3 below), can the debtor nevertheless be declared insolvent on the grounds that it cannot pay its debts as they become due?

Please refer to question 7.3 below.

7 Special Rules

7.1 Securitisation Law. Is there a special securitisation law (and/or special provisions in other laws) in your jurisdiction establishing a legal framework for securitisation transactions? If so, what are the basics?

There is no special securitisation law in Switzerland. Regarding the transfer of assets from the originator to the SPV, the provisions of the Code of Obligations are applicable (in particular, the provisions regarding sale and assignment).

7.2 Securitisation Entities. Does your jurisdiction have laws specifically providing for establishment of special purpose entities for securitisation? If so, what does the law provide as to: (a) requirements for establishment and management of such an entity; (b) legal attributes and benefits of the entity; and (c) any specific requirements as to the status of directors or shareholders?

Switzerland does not have any such special laws for SPVs. Stock corporations and limited liability companies are available for the establishment of an SPV. The requirements for the establishment and management of an SPV, as well as the status of directors and shareholders, are set forth in the respective statutory provisions applicable to stock corporations and limited liability companies.

7.3 Limited-Recourse Clause. Will a court in your jurisdiction give effect to a contractual provision in an agreement (even if that agreement’s governing law is the law of another country) limiting the recourse of parties to that agreement to the available assets of the relevant debtor, and providing that to the extent of any shortfall the debt of the relevant debtor is extinguished?

A court in Switzerland might not give effect to a contractual provision alone limiting the recourse of parties to available assets. The whole transaction as a whole must be structured in a way that the “no recourse” basis is possible (please refer to question 4.9).

7.4 Non-Petition Clause. Will a court in your jurisdiction give effect to a contractual provision in an agreement (even if that agreement’s governing law is the law of another country) prohibiting the parties from: (a) taking legal action against the purchaser or another person; or (b) commencing an insolvency proceeding against the purchaser or another person?

The principle of liberty of contracts governs Swiss law. The parties are thus at liberty to enter into an agreement waiving the right to take legal action against the SPV. Such non-petition clauses are enforceable, subject to the following limitations: a party may not validly waive its rights under compulsory provisions of Swiss law or

(a) Any relevant transaction which the debtor made during a suspect period of one year before the seizure of assets or the opening of bankruptcy proceedings is voidable. Relevant transactions are gifts and voluntary settlements, as well as transactions equivalent to a gift, e.g. transactions in which the debtor accepted a counter-performance out of proportion to his own or transactions through which the debtor obtained for himself or a third party a life annuity, an endowment, a usufruct or a right of habitation (Art. 286 Bankruptcy Act).

(b) The insolvency official may avoid the granting of collateral for existing obligations without the obligation to do so, the settlement of a debt of money by unusual means and the payment of an obligation not yet due for payment, provided that (i) the debtor carried them out during a suspect period of one year before the seizure of assets or the opening of bankruptcy proceedings, and (ii) the debtor was, at that time, already insolvent. The transaction is not avoided, however, if the recipient proves that he was unaware, and need not have been aware, of the debtor’s insolvency (Art. 287 Bankruptcy Act).

(c) Finally, all transactions which the debtor carried out during a suspect period of five years prior to the seizure of assets or the opening of bankruptcy proceedings with the intention, apparent to the other party, of disadvantaging his creditors or of favouring certain of his creditors to the disadvantage of others, are voidable (Art. 288 Bankruptcy Act).

As to the length of the suspect period, Swiss law does not distinguish between transactions between related and unrelated parties.

6.4 Substantive Consolidation. Under what facts or circumstances, if any, could the insolvency official consolidate the assets and liabilities of the purchaser with those of the seller or its affiliates in the insolvency proceeding?

As long as the purchaser is legally independent from the seller and is acting on arm’s length terms, the risk of consolidation is quite remote from a Swiss law perspective. The legal concept of a “true sale” is not established in Switzerland (see question 3.4 above). Therefore, no distinction is made between “true sale” and secured financing under Swiss law. However, in a secured financing, the seller may reserve the right to repurchase the assigned receivables from the purchaser. In such a case, the insolvency official may assume that there is no valid assignment of the receivables, which would lead to a de facto consolidation. However, such risks can be prevented by a proper wording and structure of the assignment agreement.

6.5 Effect of Insolvency on Receivables Sales. If insolvency proceedings are commenced against the seller in your jurisdiction, what effect do those proceedings have on (a) sales of receivables that would otherwise occur after the commencement of such proceedings, or (b) sales of receivables that only come into existence after the commencement of such proceedings?

Pursuant to the current jurisprudence of the Swiss Federal Supreme Court, the sale of future receivables by way of assignment is not bankruptcy remote (see question 6.1 above). After the opening of bankruptcy proceedings, such receivables fall within the bankruptcy estate of the seller on which the bankruptcy administration (Konkursverwaltung) has the exclusive power to dispose. The debtor himself is no longer allowed to dispose of the assets within the bankruptcy estate. Acts by the debtor concerning such assets are deemed to be invalid as against his creditors (Art. 204 para. 1 Bankruptcy Act).



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8.2 Servicing. Does the seller require any licences, etc., in order to continue to enforce and collect receivables following their sale to the purchaser, including to appear before a court? Does a third party replacement servicer require any licences, etc., in order to enforce and collect sold receivables?

The mere purchasing, enforcing or collecting of the sold receivables by the seller (servicing) does not require the seller to obtain any licence in Switzerland. The same applies to a third party replacement servicer.

8.3 Data Protection. Does your jurisdiction have laws restricting the use or dissemination of data about or provided by obligors? If so, do these laws apply only to consumer obligors or also to enterprises?

In Switzerland, the processing of information is mainly regulated in the Federal Act on Data Protection (Data Protection Act) of 19 June 1992. The Data Protection Act applies to the processing of data pertaining to natural persons and corporations by private persons and federal bodies. However, it does not apply to personal data that is processed by a natural person exclusively for personal use and which is not disclosed to outsiders. Data that does not qualify as “sensitive personal data” or “personality profiles” under the Swiss Data Protection Act can be communicated without the consent of the debtor (Art. 4 para. 5 e contrario Data Protection Act). The Data Protection Act contains a special regulation relating to cross-border disclosure. Thus, personal data may not be disclosed abroad if the privacy of the data subjects would be seriously endangered thereby, in particular due to the absence of legislation that guarantees adequate protection. In the absence of such legislation, disclosure of personal data abroad is subject to various restrictions, including the following: (i) sufficient safeguards (in particular contractual clauses) shall ensure an adequate level of protection abroad; (ii) the data subject must have consented in the specific case; and (iii) the processing shall be directly connected with the conclusion or the performance of a contract and the personal data shall be that of a contractual party (Art. 6 Data Protection Act).The use or dissemination of data by Swiss banks requires special precautions due to Swiss banking secrecy. Swiss banking secrecy is based on the contractual relationship between the bank and its clients, e.g. the bank’s loyalty as an agent to the client as principal, the bank’s obligation not to contravene the client’s privacy rights and Art. 47 of the Swiss Federal Act on Banks and Savings Institutions (Banking Act) of 8 November 1934 which makes the violation of banking secrecy a criminal offence. Swiss banking secrecy imposes an obligation upon the bank, their executive bodies and their employees to treat any client-related information confidentially so as to avoid any disclosure of information potentially harmful to a client’s interests. However, a client’s right to privacy does not mean that Swiss banks do not need to know the identity of their clients. Moreover, Swiss banks are obliged to identify each of their contractual partners and specifically the beneficial owner of the assets involved in any business relationship. Thus, it has to be noted that there are no ‘anonymous accounts’ in Switzerland as regards the bank’s duty to identify their clients. This banking secrecy has never been absolute, and the obligation to secure their client’s privacy does not dispense banks from federal and cantonal disclosure obligations. In particular, legal assistance is granted in the event of tax fraud.The Data Protection Act and the bank secrecy rules apply both to individuals and enterprises.

in a way that would be against “bonos mores” (Art. 27 CC). Further, such a waiver may be subject to challenge in the case of bankruptcy of one of the parties who has waived his rights against the SPV, in accordance with the limitations which result generally from Swiss bankruptcy law.

7.5 Priority of Payments “Waterfall”. Will a court in your jurisdiction give effect to a contractual provision in an agreement (even if that agreement’s governing law is the law of another country) distributing payments to parties in a certain order specified in the contract?

It is possible to contractually agree on a certain order. There is no reason why a court should not uphold such provision, whether agreed under Swiss law or any other (applicable) law, unless such order would clearly be against public policy. In case of a bankruptcy, however, the creditors will be grouped in three main classes depending on the type of creditor, and the bankruptcy administrator will not consider such contractually agreed provisions (unless the subordination is made with respect to all other creditors). However, in the internal relationship between the parties, a contractual provision relating to a certain order is enforceable (in court) between the parties in question.

7.6 Independent Director. Will a court in your jurisdiction give effect to a contractual provision in an agreement (even if that agreement’s governing law is the law of another country) or a provision in a party’s organisational documents prohibiting the directors from taking specified actions (including commencing an insolvency proceeding) without the affirmative vote of an independent director?

As a principle, there is no such contractual subordination that a court must give effect to, apart from in case of a specific subordination where a creditor subordinates its claims against the claims of all other creditors.

8 Regulatory Issues

8.1 Required Authorisations, etc. Assuming that the purchaser does no other business in your jurisdiction, will its purchase and ownership or its collection and enforcement of receivables result in its being required to qualify to do business or to obtain any licence or its being subject to regulation as a financial institution in your jurisdiction? Does the answer to the preceding question change if the purchaser does business with other sellers in your jurisdiction?

The mere purchasing, ownership or collecting of receivables will neither require a foreign purchaser to do business or obtain any licence in Switzerland nor is such a purchaser qualified as a financial institution (e.g. securities dealer, financial intermediary, investment fund, bank, insurer) under Swiss law.This analysis changes only if the purchaser conducts a business in Switzerland that requires a licence. The mere fact that the purchaser does business with other sellers in Switzerland does not change this analysis.



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9.2 Seller Tax Accounting. Does your jurisdiction require that a specific accounting policy is adopted for tax purposes by the seller or purchaser in the context of a securitisation?

No. Under Swiss law, there is, to date, no specific accounting policy which must be adopted for tax purposes by the seller or purchaser in the context of a securitisation transaction.

9.3 Stamp Duty, etc. Does your jurisdiction impose stamp duty or other documentary taxes on sales of receivables?

No stamp duty is payable on sales of receivables unless such receivables are regarded as bonds, debentures or money market papers and are transferred by, or via, a securities dealer under Swiss stamp tax law. The statutory stamp duty rate amounts to 0.15 per cent on the transfer of Swiss bonds, debentures or money market papers, and to 0.3 per cent on bonds, debentures or money market papers issued by a non-Swiss person.

9.4 Value Added Taxes. Does your jurisdiction impose value added tax, sales tax or other similar taxes on sales of goods or services, on sales of receivables or on fees for collection agent services?

The sale of goods and the provision of services, including those of a collecting agent (“servicing”), are, in general, subject to Swiss value-added tax (VAT) at the current standard rate of 8 per cent.The sale of receivables is exempt from VAT as a financial transaction but the purchaser may become liable for the VAT included in the assigned receivables.

9.5 Purchaser Liability. If the seller is required to pay value added tax, stamp duty or other taxes upon the sale of receivables (or on the sale of goods or services that give rise to the receivables) and the seller does not pay, then will the taxing authority be able to make claims for the unpaid tax against the purchaser or against the sold receivables or collections?

In general, the taxing authority will not be able to make such claims regarding VAT, stamp duty or income and profit taxes. However, on 1 January 2010, Switzerland introduced a completely revised VAT Act. The new act includes, under certain conditions, a secondary liability of the purchaser with respect to VAT included in receivables sold/assigned and remaining unpaid in the insolvency of the seller.

9.6 Doing Business. Assuming that the purchaser conducts no other business in your jurisdiction, would the purchaser’s purchase of the receivables, its appointment of the seller as its servicer and collection agent, or its enforcement of the receivables against the obligors, make it liable to tax in your jurisdiction?

The mere purchase of receivables, appointment of the seller as its servicer or collecting agent, or the enforcement of receivables against the debtors does not make the purchaser subject to Swiss income tax under Swiss national income tax laws.

8.4 Consumer Protection. If the obligors are consumers, will the purchaser (including a bank acting as purchaser) be required to comply with any consumer protection law of your jurisdiction? Briefly, what is required?

The Federal Act on Consumer Credit of 23 March 2001 (Consumer Credit Act) applies only to certain agreements between lenders and consumers, such as loans not secured by mortgages or usual guarantees, loans for amounts between CHF 500 and CHF 80,000 or short-term loans (Art. 7 para. 1 lit. e contrario Consumer Credit Act).Agreements under the Consumer Credit Act must be concluded in writing. It has to be noted that the Consumer Credit Act basically allows the consumer to terminate his loan at any time by repaying the outstanding amount. Such an early termination allows the consumer to retrieve a part of the costs of his loan (Art. 17 para. 2 Consumer Credit Act).

8.5 Currency Restrictions. Does your jurisdiction have laws restricting the exchange of your jurisdiction’s currency for other currencies or the making of payments in your jurisdiction’s currency to persons outside the country?

The Federal Act on Consumer Credit of 23 March 2001 (Consumer Credit Act) applies only to certain agreements between lenders and consumers, such as loans not secured by mortgages or usual guarantees, loans for amounts between CHF 500 and CHF 80,000 or short-term loans (Art. 7 para. 1 lit. e contrario Consumer Credit Act).Agreements under the Consumer Credit Act must be concluded in writing. It has to be noted that the Consumer Credit Act basically allows the consumer to terminate his loan at any time by repaying the outstanding amount. Such an early termination allows the consumer to retrieve a part of the costs of his loan (Art. 17 para. 2 Consumer Credit Act).

9 Taxation

9.1 Withholding Taxes. Will any part of payments on receivables by the obligors to the seller or the purchaser be subject to withholding taxes in your jurisdiction? Does the answer depend on the nature of the receivables, whether they bear interest, their term to maturity, or where the seller or the purchaser is located? In the case of a sale of trade receivables at a discount, is there a risk that the discount will be recharacterised in whole or in part as interest? In the case of a sale of trade receivables where a portion of the purchase price is payable upon collection of the receivable, is there a risk that the deferred purchase price will be recharacterised in whole or in part as interest?

Payments by a Swiss debtor are, in general, not subject to Swiss withholding tax. However, interest payments may be subject to Swiss withholding tax at a rate of 35 per cent if made under a banking account, bond, debenture or money market paper, or if a Swiss debtor’s overall financing activities are regarded, for tax purposes, as so-called “collective fund raising”. In addition, interest payments made to non-Swiss lenders are subject to a withholding tax at source if the debt is secured by mortgages in Swiss real estate. A deferred purchase price could indeed be recharacterised as interest.



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Oliver WidmerPestalozzi Attorneys at Law LtdLoewenstrasse 1CH-8001 ZurichSwitzerland

Tel: +41 44 217 9242Fax: +41 44 217 9217Email: [email protected] URL: www.pestalozzilaw.com

Urs KlötiPestalozzi Attorneys at Law LtdLoewenstrasse 1CH-8001 ZurichSwitzerland

Tel: +41 44 217 9292Fax: +41 44 217 9217Email: [email protected] URL: www.pestalozzilaw.com

Oliver Widmer is a Partner and Head of Pestalozzi’s Private Client group and member of Pestalozzi’s Financial Services group. He primarily advises domestic and international banks, financial institutions, wealth management service providers and high net worth individuals on banking, finance and capital markets matters. Further areas of work include domestic and cross-border trust, foundation and estate planning matters.

He is highly regarded by The Legal 500 (Banking and Finance and Capital Markets), by Chambers Global 2013 (Banking and Finance) and by Chambers Europe 2013 (Banking and Finance), by Citywealth Leaders List 2013 (International Lawyer), by Legal Media Group in its Expert Guides 2013 (Trust and Estates) and in its Best of Best Lawyers 2013 (Trust and Estates).

He graduated from the University of Zurich (lic. iur., 1998) and the London School of Economics and Political Science (M.Sc., Law and Accounting, 2002). He was admitted to the Bar in Switzerland in 2000 and as a solicitor (not practising) of England and Wales in 2003, is an authorised issuer’s representative at the SIX Swiss Exchange and is recognised as trust and estate practitioner (TEP) by STEP. Oliver Widmer joined Pestalozzi in 2001. In 2003/2004, he was seconded to head the Swiss law and compliance department of one major US investment bank.

Pestalozzi’s roots go back to 1911; of the major and most respected Swiss law firms, Pestalozzi has the longest tradition.

Supporting our international and domestic clients from our offices in Zurich and Geneva to reach their goals is our paramount ambition. With the extensive know-how, experience and the strong commitment of our staff of about 150 people, we help our clients achieve their goals quickly and efficiently. We are known for our integrity, our high quality, as well as for our efficacy.

For each project, we form a customised team to accommodate your specific needs. We have direct access to an international network of lawyers and can introduce you to an appropriate law firm in jurisdictions worldwide.

Three distinctive values guide us:

■ We care for our clients: we provide them with result-oriented, effective and realisable solutions.

■ We act responsibly: both competence and integrity are at the core of our services.

■ We are committed to attracting and retaining dedicated and skilled people.

Urs Klöti is Managing Partner of Pestalozzi and heads Pestalozzi’s Financial Services group. His practice is focused on banking and capital markets, corporate finance, securities, insurance and corporate law.

Urs Klöti, born in 1965, graduated in economics from the University of St. Gall in 1990. In 1991/1992, he worked for a Swiss firm in Indonesia. In 1994, he graduated in law from the University of St. Gall and joined Pestalozzi in 1995. In 1998, he was admitted to the bar in Switzerland. From 2000 to 2003, Urs Klöti was Head of Law and Compliance of the Swiss institutional client bank in Zurich of one of the world’s leading US investment banks. Urs Klöti’s professional languages are German and English and he also speaks some Spanish.


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