B/K Brenner & Kollegen International Insolvency Lawyers www.bbrenner.com

1. B/KBrenner & KollegenInternational Insolvency Lawyerswww.bbrenner.com Secured Transactions under the European Insolvency Regulation (EIR)

2. Brenner, Secured Transactions...Case Study • Stock • book debts • equipment • deposit Suppliers‘ R.O.T. Bank‘s Global Securities

3. Brenner, Secured Transactions...EIR Art. 4 Principle: lex fori concursus • Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened,... • The law of the State of the opening of proceedings shall determine ... in particular: (a) - ... (d) - conditions for a set-off (m) - voidability of legal acts

4. Brenner, Secured Transactions...EIR Art. 5 Exception: Rights in Rem (R.I.R.) • The opening of insolvency proceedings shall not affect the rights in rem of creditors or third parties in respect of tangible or intangible, moveable or immoveable assets ... belonging to the debtor which are situated within the territory of another Member State at the time of theopening of proceedings. • (in particular): (c) the right to demand the assets from ... anyone having possession ... contrary to the wishes of the party so entitled;

5. Brenner, Secured Transactions...EIR Art. 7 Exception: R.O.T. • The opening of insolvency proceedings against the purchaser of an asset shall not affect the seller‘s rights based on a R.O.T. where at the time of the opening of proceedings the asset issituated within the territory of a Member State other than the State of opening of proceedings. • ...

6. Brenner, Secured Transactions... UNCITRAL Guidelines Working Group VI UNCITRAL aims at SME‘s need of credits • Asset-backed financing gives SME‘s an easier and less costly access to credits • In exchange: strengthen efficiency of securities on moveables (opposability against 3rd parties) • Enforce transparency and publicity of such securities* • Banks‘ and suppliers‘ credit securities should be treated equally • Encourage multiple securitisation by the same asset • Ensure enforceability in other countries.

7. Brenner, Secured Transactions... UNCITRAL Guidelines Working Group VI *UNCITRAL Recommendations: • Securities should be made opposable towards 3rd parties as a general effect (incl. assignments) • States should grant super priority in insolvency proceedings • But: • clear rules for priority • transparency by public register of ass. of book debts • Strict lex rei sitae-rule for goods on transit should be amended: • Law of State of origin / State of final destination should be applicable

8. Brenner, System of securities...

9. Brenner, Secured Transactions...Case Study • Stock • book debts • equipment • deposit Suppliers‘ R.O.T. Bank‘s Global Securities

10. Brenner, Secured Transactions... German Insolvency System • Abolition of all preferential rights (Insolvency Act 1999) • R.O.T. and Collateral securities • no part of the debtor‘s estate (R.O.T.) • collaterals give priority rights • Exception: collaterals are voidable (3-months-period)

11. Brenner, Collateral Securities... Securities‘ System on movables • ROT (= Eigentumsvorbehalt, EV) • Collateral securities on movables • Transfer of ownership by way of security (= Sicherungsübereignung, SÜ) • assignment of receivables by way of sec. (= Sicherungsabtretung, SAbtr) • Guaranties, debentures, bonds, ...

12. Brenner, Collateral Securities... Securities‘ System • R.O.T. • simple version (= goods are still in stock) • extended version • Permission to sell property + • Assignment of receivables

13. Brenner, German Securities‘ System... German Securities‘ System • ROT (= Eigentumsvorbehalt, EV)/Test: • Did parties agree upon it • in time? (at closing of contract) • in the proper way? (no formal requirements) • Is there proof ? („always get it in writing!“) • Can you identify the goods? :-(

14. Brenner, German Securities‘ System... Who has got to prove what: • Supplier / Owner • original ownership* • Delivery • Administrator/liquidator • Payment (i.e. automatic passing of title)

15. Brenner, German Securities‘ System... *original ownership: Problem: mixed stock • Supplier / owner can‘t even prove original ownership on certain goods Therapy: transfer of all title to „suppliers‘ pools“ • Association owns  100 % of stock • No identification necessary any more

16. Brenner, German Securities‘ System... Securities‘ System • R.O.T. • simple version (= goods are still in stock) • extended version • Permission to sell property against • Assignment of future receivables

17. Brenner, German Securities‘ System... R.O.T. „extended version“ (Assignment of certain unidentified, future receivables) • No formal requirements • Opposable to third parties (admin., factor) • Preferential towards banks-assignments • But: Restricted to special receivables Problem: identification! Therapy: see „suppliers‘ pools“

18. Brenner, German Securities‘ System... Competing securities Landlord‘s lien Banks Global securities Supplier‘s R.O.T. - secondary -stock -receivables • Preferential, but • Identification • necessary  • not preferential but • Global :-)

19. Brenner, Secured Transactions...Case Study • Stock • book debts • equipment • deposit Suppliers‘ R.O.T. Bank‘s Global Securities

20. Dortmund Public Hearing 14. June 2006in re:Podolski vs. Zurawski in re:

21. B/KBrenner & KollegenInternational Insolvency Lawyerswww.bbrenner.com