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.
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