The International Comparative Legal Guide to Securitisation 2016 Edition

w

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.UK262 ICLG TO: SECURITISATION 2016© Published and reproduced with kind permission by Global Legal Group Ltd, London

Chapter 26

K&L Gates Studio Legale Associato

Andrea Pinto

Vittorio Salvadori di Wiesenhoff

Italy

of Italy, and are based on the average overall effective rate (Tasso Effettivo Globale Medio) charged by banks and other financial institutions during the quarter ending three months before the relevant period.

(b) Under Italian law, and more specifically under article 1224 of the Italian Civil Code, a creditor may, in the event of non-payment by the relevant debtor, demand the default interest fixed by the law from the day of the default, even if it was not due previously and even if the relevant creditor cannot prove that it has suffered any damage. In any case, the relevant parties may agree an interest rate higher than the legal interest rate.

(c) Under certain provisions of Italian law (e.g. article 182-septies of Royal Decree no. 267, dated 16 March 1942, the “Italian Bankruptcy Law”), the relevant debtor may obtain from its creditor a so-called moratorium, which ensures the debtor suspends its payment obligation for a period agreed with its creditor.

(d) The European Union consumer protection legislation has been recognised in a consolidated act called “Codice del Consumo” according to the Legislative Decree n. 206, dated 6 September 2005 (the “Italian Consumers’ Code”). The Italian Consumers’ Code provides for certain instruments in order to protect the interest of consumers when they enter into a contract with a professional entity.

According to the Italian Civil Code, certain provisions afford consumers protection, such as those on transparency in banking and consumer credit agreements, insurance contracts and regulation of the retail trade.

Under articles 121 and ff. of the Legislative Decree no. 385, dated 1 September 1993 (“Italian Banking Law”), consumer protection legislation applies to personal loans that are qualified as consumer loans. For example, under paragraph 2 of article 125-septies of the Italian Banking Law, the relevant bank shall inform the consumer in relation to the assignment of its loan agreement.

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?

The Royal Decree no. 2440, dated 24 November 1923 (the “2440 Royal Decree”) provides for a specific regulation on the assignment of government receivables. According to article 69 of the 2440 Royal Decree, the assignment of government receivables shall be effective only if the following requirements are fulfilled:(i) the assignment must be executed as a public deed (atto

pubblico) or authenticated public deed (scrittura privata autenticata);

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?

(a) Under a general principle of Italian law, a specific formality is not required in order to execute contracts or give evidence of such execution. However, it must be considered that, according to certain provisions of Italian law (e.g. article 1350 of the Italian Civil Code) the written form is required for the validity of certain contracts, in the absence of which that contract shall be considered null and void. In addition, the written form is needed for providing evidence before a Court in such cases provided for under Italian law (e.g. article 1888 of the Italian Civil Code).

(b) Invoices can be mainly considered as written evidence of trade between the parties. Nonetheless, according to article 633 of the Italian Civil Procedure Code, if a creditor has a claim that can be considered as liquid, certain and payable, the same creditor may use the invoice as instrument in order to obtain from the relevant Court an injunction to pay against the debtor.

(c) A sale of receivables contract cannot be deemed to exist as a result of the behaviour of the parties. In any case, pursuant to article 1362 of the Italian Civil Code, an Italian Court may assess the behaviour of the parties only as criteria necessary in order to understand the intention of the parties which shall be compared with any other external elements of the contract (including but not limited to the behaviour of the parties).

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?

(a) The rate of interest payable under any credit agreement shall not be in breach of Law n. 108, dated 7 March 1996 (“Disposizioni in materia di usura” − Italian usury law), which expressly sets the interest rate thresholds applicable to receivables. The usury thresholds are updated quarterly by the Italian Treasury Department, in agreement with Bank

ICLG TO: SECURITISATION 2016 263WWW.ICLG.CO.UK© Published and reproduced with kind permission by Global Legal Group Ltd, London

Ital

y

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?

As a general principle of law, set forth also under the Rome I Regulation, the parties to a contract may freely choose the law applicable to the contract, also indicating the relevant jurisdiction that can solve any dispute which may arise in connection with the interpretation and/or the execution of the abovementioned contract, provided that the choice of the jurisdiction shall not conflict with any overriding mandatory provision under Italian law. In addition, please note that specific limitations to the recognition of foreign law (such as public policy or mandatory principles of law) do not apply to commercial relationships.

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

Yes, it is in effect.

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)?

In the case described above, article 14 of the Rome I Regulation may apply, since it governs the voluntary assignment of contractual (and non-contractual) obligations in conflict of laws. Therefore, under article 14, paragraph 1, of the Rome I Regulation, the validity of the assignment as between the assignor and assignee shall be governed by the law that applies to the contract between them under the Rome I Regulation. In addition to the above, the law governing the assigned or subrogated claim shall determine its assignability, the relationship between the assignee and the debtor, the conditions under which the assignment or subrogation can be invoked against the debtor and whether the debtor’s obligations have been discharged.

(ii) the government receivables assigned are all vis-à-vis a single debtor; and

(iii) the relevant assignment shall be accepted by the assigned debtor with date certain in law or giving notice to the assigned debtor by way of court bailiff (ufficiale giudiziario).

In addition, under article 117 of Legislative Decree no. 163, dated 12 April 2006, the assignment of the receivables arising from a procurement agreement is allowed by a contractor towards banks or other financial entities only if the following requirements are fulfilled:(i) the assignment must be executed as public deed (atto

pubblico) or authenticated public deed (scrittura privata autenticata);

(ii) the relevant assignment shall be accepted by the assigned debtor with date certain at law or giving notice to the assigned debtor by way of court bailiff (ufficiale giudiziario); and

(iii) the assignment is valid and effective towards the public entity if it is not rejected by the public entity within 45 days from receipt of the relevant notification.

Also in the context of a securitisation transaction, should an assignment of government receivables be realised, according to article 4bis of Law no. 130, dated 30 April 1999 (“Italian Securitisation Law”), no further formalities than those set out under the Italian Securitisation Law are required in order to make the assignment enforceable against the Public Administration.

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 EU Regulation no. 593, dated 17 June 2008 on the Law Applicable to Contractual Obligations (the “Rome I Regulation”) comes into force on 17 December 2009 and will be directly applicable in all EU Member States (including Italy). Pursuant to article 4, paragraph 1 of the Rome I Regulation, in the absence of choice of law by the relevant parties, the law governing the contract shall be determined as that which was most closely connected to such contract, provided the contract does not fall within one of the categories listed from letter (a) to (h) of the same paragraph 1.

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?

There would not be any reason why the Italian Courts would not give effect to the choice of Italian law to govern the receivables contract; in fact, the Italian Courts take into consideration the choice of law made by the relevant parties of the contract.

K&L Gates Studio Legale Associato Italy


Ital

y

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?

In accordance with article 11, paragraph 1, of the Rome I Regulation, a contract concluded between persons who, or whose agents, are in the same country at the time of its conclusion, is formally valid if it satisfies the formal requirements of the law which governs it in substance under the Rome I Regulation or the law of the country where it is concluded, so that the Italian Courts would recognise the relevant sale as being effective and the seller shall not need to comply with the Italian sale requirements.

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)?

Taking into account the answer given to question 3.2 above, and also according to article 14, paragraph 2 of the Rome I Regulation, in order for an Italian Court to recognise the relevant sale as being effective in the case mentioned above, the requirements provided for under the Italian law must be fulfilled together with those of the law governing the sale and purchase agreement.

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 customary method for a seller to sell receivables to a purchaser under Italian law is by means of a deed between the assignor and the assignee. Pursuant to article 1260 of the Italian Civil Code, a creditor may assign its receivable, gratuitously or for consideration, even without the consent of the debtor, provided that it is not forbidden by law and subject to certain limitations arising from the specific characteristics of the receivables.The customary terminology used in order to identify the transfer of receivables is to “assign” (cedere) the relevant receivables.

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)?

In the case described above, article 11, paragraph 2 of the Rome I Regulation may apply, since a contract concluded between persons who, or whose agents, are in different countries at the time of its conclusion, is formally valid if it satisfies the formal requirements of the law which governs it in substance under the Rome I Regulation, or of the law of either of the countries where either of the parties or their agent is present at the time of conclusion, or of the law of the country where either of the parties had his habitual residence at that time. In such case, an Italian Court would recognise that sale as being effective.

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?

Taking into account the answer given to question 3.1 above, according to article 14, paragraph 2 of the Rome I Regulation, the law governing the assigned or subrogated claim shall determine its assignability, the relationship between the assignee and the debtor, the conditions under which the assignment or subrogation can be invoked against the debtor, and whether the debtor’s obligations have been discharged. In such case, an Italian Court would recognise that sale as being effective.

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?

Due to the fact that pursuant to the Rome I Regulation, the parties to a contract can freely choose the governing law (including a foreign law), in the case described above, the Italian Courts would recognise the relevant sale as being effective and the seller would not need to comply with the Italian sale requirements. In any case, please note that the choice of law made by the parties may not prevent the application by an Italian Court of the overriding mandatory provisions provided for under the Italian law.



Ital

y

Pursuant to article 2021 of the Italian Civil Code, recorded instruments are transferred by means of a double annotation (doppia intestazione) recorded on the instrument and on the issuer’s register, entitling the holder of a recorded instrument to exercise the right mentioned therein.Pursuant to article 2003 of the Italian Civil Code, bearer instruments are transferable by delivery, so that the holder shall be entitled to exercise the rights mentioned therein upon presentment of the instrument.Pursuant to article 2011 of the Italian Civil Code, the order securities (titoli all’ordine) are transferred by endorsement, which ensures the transfer of all the rights inherent in the instrument.

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?

Taking into account the answer given to question 4.2 above, the assignor shall alternatively notify the assigned debtor or receive an acceptance of the assignment by the same assigned debtor, in order for the sale to be effective against the obligors and/or creditors of the seller, so that the assigned debtor’s consent is not required.In any case please note that, according to article 1248, paragraph 2, of the Italian Civil Code, there are benefits to giving notice; in fact, if the obligor has expressly accepted the assignment made by the creditor in favour of a third party, the obligor is not entitled to set-off the debt he is owed by the assignor against the debt he owes to the assignee, even if the debt owed by the assignor existed prior to the transfer of the receivables.In addition to the above, for the purposes of article 1248 of the Italian Civil Code, in the context of a securitisation transaction, the effects of the notification are produced by the relevant registration of the transfer and the publication of the notice of the assignment in the Italian Official Gazette.

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?

Taking into account the answer given to question 4.2 above − pursuant to article 1264 of the Italian Civil Code − in order to perfect a valid assignment of receivables, the assignor shall alternatively notify the assigned debtor or receive an acceptance of the assignment by the same assigned debtor.In relation to the possibility to have a time limit beyond which a notice to obligors is ineffective, there is no specific provision under Italian law. Nevertheless, pursuant to article 45 of the Italian Bankruptcy Law, any formality that is necessary to make a transaction enforceable vis-à-vis third persons shall have no effect

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?

In order to perfect a valid assignment of receivables, pursuant to article 1264, paragraph 1, of the Italian Civil Code, the assignor shall alternatively notify to the assigned debtor or receive an acceptance of the assignment by the same assigned debtor. In case the same receivable has been assigned, through following assignments, to a different assignee, then – pursuant to article 1265 of the Italian Civil Code – the first assignment in respect of which the assigned debtor has been notified, or which the assigned debtor has accepted and having a date certain in law (data certa), shall prevail in respect of the other assignments.In the context of a trade receivables securitisation transaction, the relevant assignment shall be perfected upon the filing of the assignment deed with the relevant Companies’ Register and the publication of a notice of the assignment in the Italian Official Gazette. In addition, pursuant to article 4 of the Italian Securitisation Law, the parties may decide to implement the less burdensome regime provided for by Law no. 52, dated 21 February 1991 (the “Italian Factoring Law”) in order to ensure that the assignment of receivables is enforceable as against the third party creditors of the assignor. In such case, the assignment may be perfected if the relevant parties alternatively: (i) publish in the Italian Official Gazette a short form notice indicating the assignor, the assignee and the relevant transfer date; or (ii) apply the provisions set forth under article 5, paragraphs 1,1bis and 2 of the Italian Factoring Law. In case of the assignment of receivables, according to Legislative Decree no. 170, dated 21 May 2004 (the “170 Decree”), which sets forth the discipline for security over financial collateral, under article 2, paragraph 1, letter (b) of the 170 Decree, in order to have a date certain in law (data certa), shall be sufficient to record the cash standing on the relevant account of the assignor.

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?

Pursuant to articles 24 and ff. of the Royal Decree no. 1669, dated 14 December 1933, in order to assign promissory notes, the seller shall endorse them in favour of the purchaser.In relation to the perfection of the sale of a mortgage loan, through an assignment agreement, pursuant to article 2843 of the Italian Civil Code, the assignment must be recorded in the competent land register offices, while for the sale of consumer loans no specific formalities are required.In addition, financial instruments negotiated in the market (including debt securities), shall be issued in dematerialised form, according to Article 83bis and ff. of the Legislative Decree no. 58, dated 24 February 1998 (the “Italian Consolidated Law on Finance”), and held by a centralised securities management company (società di gestione accentrata). In fact, pursuant to article 86 of the Italian Consolidated Law on Finance, the transfer of rights attached to financial instruments on deposit is allowed, so that the person depositing financial instruments admitted to the system may, through the depositary and in accordance with the methods indicated in the relevant services regulation, request delivery of a corresponding quantity of financial instruments of the same type on deposit with the central depository.



Ital

y

as effective against the assignee unless it is proved he knew of it at the time at which the assignment was made. In case a sale of the going concern of a company occurs, the assignment of receivables relating to the going concern is valid and effective vis-à-vis third parties, even without the consent of the debtor, as from the date of the filing of the relevant notice with the competent Companies Register.

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 a general principle of Italian law, the contract must specifically indicate the object (oggetto) of the same contract, which must be identified or identifiable according to article 1346 of the Italian Civil Code. However, pursuant to Article 1262 of the Italian Civil Code, the assignor shall deliver to the assignee the documents evidencing the receivables which are in his possession.In the context of a securitisation transaction, there are specific rules in order to carry out a valid assignment of receivables according to the Italian Securitisation Law. In particular, the receivables may be identified as a pool (in blocco), when they consist of a plurality of claims identified as credits, debts and contracts which have a common element of identification (rapporti giuridici individuabili in blocco) as stated under the Bank of Italy regulations (istruzioni di vigilanza di Banca d’Italia). In addition, according to article 58, paragraph 2, of the Italian Banking Law, the assignee bank shall give notice of the effected assignment, filing it with the Companies’ Register and via publication in the Italian Official Gazette.

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?

Pursuant to article 1362 of the Italian Civil Code, an Italian Court may assess the behaviour of the parties only as a criteria necessary to understand the intent of the same parties, with the aim of carrying out a specific transaction. In this respect, the intent shall prevail over any other external element.In addition to the above, according to article 1267 of the Italian Civil Code, the assignor is not responsible for the solvency of the debtor, unless he has undertaken to guarantee it. In this case the assignor is liable within the limit of what he has received, and any agreement directed toward increasing its liability shall be without any effect.The seller may retain credit risk, interest rate risk, control of collections of receivables, or a right of repurchase/redemption, but it may jeopardise the perfection of the assignment.

against the creditors if completed after the date of adjudication in bankruptcy. Should the assignment deed have been entered during the hardening period (periodo sospetto) and the bankruptcy receiver proves that the purchaser was aware, or should have been aware, of the insolvency of the seller, the assignment may be subject to claw-back. In the context of a securitisation transaction, the hardening period (periodo sospetto) mentioned above is reduced from six to three months.The mechanism of notice also described in the paragraphs above shall apply both to existing receivables and to any future receivable. In case of future receivables, the relevant notice shall be delivered once the relevant deed of assignment has been entered into and the relevant receivables have arisen.

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)?

Pursuant to article 1260 of the Italian Civil Code, a creditor may validly assign its receivables, gratuitously or for consideration, even without the consent of the debtor, provided that it is not forbidden by law and subject to certain limitations arising from the specific characteristics of the receivables, and it being understood that it would not be enforceable against the assigned debtor. There may be a different result in case the restriction provides for a prohibition on assigning the agreement; in fact, such provision would not prevent the transfer of the receivables, unless the relevant agreement contains clauses which provide for certain specific conditions to be fulfilled in order to transfer the receivables.

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?

Under Italian law, an assignment of receivables may be considered as valid if it is not forbidden by law, and subject to certain limitations arising from the specific characteristics of the receivables. For example, the assignment of receivables of a strictly personal character is forbidden, and if there is a breach of a specific prohibition provided for under the Italian law, an Italian Court may state the invalidity of the relevant assignment. In addition, according to article 1260, paragraph 2 of the Italian Civil Code, the parties may exclude the possibility to assign the receivables but, in any case, such agreement cannot be considered



Ital

y

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?

Pursuant to article 1248, paragraph 1, of the Italian Civil Code, a debtor who has accepted purely and simply the assignment of the rights of the creditor to a third party cannot claim against the assignee the set-off right that he could have claimed against the assignor.In addition, pursuant to article 1248, paragraph 2, of the Italian Civil Code, if the obligor has expressly accepted the assignment made by the creditor in favour of a third party, the obligor is not entitled to set-off the debt he is owed by the assignor against the debt he owes to the assignee, even if the debt owed by the assignor existed prior to the transfer of the receivables.In addition to the above, for the purposes of article 1248 of the Italian Civil Code, in the context of a securitisation transaction, and pursuant to article 4, paragraph 2 of the Italian Securitisation Law, the effects of the notification are produced by the relevant registration of the transfer and the publication of the notice of the assignment in the Italian Official Gazette. Consequently, from the date of the publication of the notice or the date of the payment of the purchase price, the assigned debtors cannot exercise any of the set-off rights between the receivables which have been purchased by the SPV and receivables owed by such assigned debtors to the originator which have arisen after such date.

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?

This is not applicable.

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?


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?


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?

According to article 1322 of the Italian Civil Code, the parties can freely determine the contents of the contract within the limits imposed by law, so that the seller may agree in an enforceable manner to continuous sales of receivables. Pursuant to article 2, paragraph 3, letter e) of the Italian Securitisation Law, where the securities subject to the securitisation transactions are placed with professional investors, the purchasing company may reinvest in other financial activities the amounts arising from the management of the assigned claims which are not immediately used to satisfy the obligations arising in connection with the securities.In addition, the Italian Factoring Law admits the continuous sales of receivables, provided that certain requirements are fulfilled.In case of the seller’s insolvency, any agreement shall not survive and would not be enforceable against the receiver.

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?

Under Italian law, the seller may sell receivables that come into existence after the date of the receivables purchase agreement only if, when the sale is perfected, the receivables to be assigned have come into existence.Please note that the assignment of present and future receivables is admitted both in the context of the securitisation and factoring transaction. In case of a factoring transaction, according to article 3, paragraph 3 of the Italian Factoring Law, an assignment of future receivables may be carried out only if the contracts from which such future receivables will arise are executed no later than 24 months after entering into the relevant assignment deed.There cannot be any commitment to sell the receivables if they have not yet come into existence after the seller’s declaration of insolvency.

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?

By effect of the assignment, pursuant to article 1263 of the Italian Civil Code, the receivables are transferred to the assignee with any privileges, real or personal guarantees, and other related security. In any case, please note that different perfection formalities must be fulfilled under Italian law in order to grant the effectiveness of the sale of receivables.



Ital

y

law of the jurisdiction where the asset is located (i.e. lex rei sitae) in the event of a movable asset or real asset; or (ii) the law of the domicile of the creditor, in the event of receivables. In this respect, according to article 51 of the Italian Private International Law, the Italian Courts would recognise a foreign law grant of security (for example, an English law debenture) taken over a bank account located in Italy, provided that all the relevant perfection formalities have been duly fulfilled.

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?

Upon the occurrence of an enforcement event and at any time thereafter, the proceeds of any and all monetary receivables (crediti pecuniari) of the pledgor arising, or which will or may arise, from the balance of a pledged account, shall be for the benefit of the secured creditor and may be applied towards discharge of the secured obligations.Upon a bankruptcy proceeding being opened in respect of the pledgor:(i) under a general principle of Italian law, the secured creditors,

although they may be considered as privileged creditors, may recover their credit only at the end of the bankruptcy proceeding; and

(ii) under article 4 of the Legislative Decree no. 170, dated 21 May 2004, the secured creditors may withhold the amount standing on the pledged account in order to apply such amounts in discharge of the secured obligations.

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?

In a standard financing transaction, the pledgor is entitled to utilise the pledged amount – in accordance with the terms and conditions provided for under the relevant deed of pledge and/or relevant finance documents − until the occurrence of an enforcement event (unless the credited amount constitutes a specific cash reserve).

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?

Under the Italian Bankruptcy Law, there is no specific provision which prohibits the purchaser from collecting, transferring or otherwise exercising ownership rights over the purchased receivables (i.e. a “stay of action”) if, after a sale of receivables that is otherwise perfected, the seller becomes subject to an insolvency proceeding.

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?

The security interest in receivables which is valid and perfected in a foreign country may be perfected in Italy, upon the relevant Italian perfection formalities being duly carried out. In any case, the above security interest will be valid and perfected also in Italy, if the formalities provided for under the foreign law have been duly fulfilled and there is not a breach of any mandatory provisions under Italian law.

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?

See the answer to question 5.3 above.

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?

In Italy there is not a domestic set of rules on trust. However, pursuant to the provisions of the 1985 Hague Convention on the Law Applicable to Trusts and Their Recognition – which has been ratified and implemented and is fully effective in Italy as part of the Italian legal system – the trusts created under foreign law are recognised and enforceable also in Italy.In any case, please note that pursuant to article 3 of the Italian Securitisation Law, there must mandatorily be a separation between collections received by the seller and the corporate assets of the purchaser. In addition to the above, the Law Decree no. 145, dated 24 December 2013 (the “Destinazione Italia Decree”), has introduced some provisions which relate to the segregation principle that shall be applied to the current accounts opened in the context of securitisation transactions. In fact, pursuant to article 3, paragraphs 2bis and 2ter of the Italian Securitisation Law, the “segregated current accounts” of the securitisation vehicles are separated from the depositary’s and the other depositors’ assets (paragraph 2bis) and the servicer’s and sub-servicer’s assets (paragraph 2ter).

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?

An escrow account may be constituted in Italy through the creation of a pledge over the sums credited on such account. In fact, pursuant to article 51 of the Law no. 218, dated 31 May 1995, Italian Statute on Private International Law (the “Italian Private International Law”), the governing law required for the perfection and enforcement of a security over collateral (as a pledge over the account) shall be: (i) the



Ital

y

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?

In case an insolvency proceeding occurs, under Italian law a consolidation of the assets and liabilities of the purchaser with those of the seller or its affiliates cannot be carried out by the insolvency official.

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?

(a) Should the sale of receivables have not yet become effective before the declaration of insolvency, the relevant assignment shall not take place after such declaration.

(b) Please see also question 4.9 above.

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?

A limited recourse clause can be considered binding between the relevant parties in those cases in which such provisions are included in an agreement entered into by the relevant parties, however it is debatable if such provisions can be considered enforceable vis-à-vis third parties (e.g. a bankruptcy receiver). In any case, a limited recourse provision shall be interpreted in order to evaluate the existence of the relevant payment obligation.

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?

The Italian Securitisation Law, as defined above, applies to securitisation transactions involving assignment for consideration of existing or future monetary receivables to SPVs (i.e. special purpose vehicles which issue notes to be repaid using the cashflow arising from collections of the receivables), where those receivables are homogenous (in blocco) in the case of multiple receivables, and where the requirements listed under article 1, paragraph 1 of the Italian Securitisation Law are fulfilled.In addition to the above, the Destinazione Italia Decree has added a new paragraph 1bis to article 1 of the Italian Securitisation Law, which ensures the application of such law also if there is a securitisation transaction carried out through the subscription and purchase of bonds and similar securities other than equity instruments, hybrid securities and convertible bonds.On the other hand, the Law Decree no. 91, dated 24 June 2014 has amended the Italian Securitisation Law in order to ensure the

In any case, please note that the bankruptcy receiver is also entitled to manage and liquidate the assets of the bankrupt, also clawing-back the transactions carried out during the hardening period (periodo sospetto).

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)?

In case an insolvency proceeding occurs, Italian law does not provide for specific measures in order to prohibit the purchaser’s exercise of rights.

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?

Under the Italian Bankruptcy Law, certain transactions cannot be considered as enforceable vis-à-vis creditors.1. Pursuant to article 64 of the Italian Bankruptcy Law,

transactions without consideration for the benefit of the bankrupt which were carried out in the two years prior to the declaration of bankruptcy.

2. Pursuant to article 65 of the Italian Bankruptcy Law, payments of debts which expire on the date of the bankruptcy declaration or thereafter, if those payments have been made in the two years prior to the bankruptcy declaration.

Pursuant to Article 67 of Italian Bankruptcy Law, the claw-back action works in connection with the following transactions, unless the other party of the transaction is able to prove that the debtor’s state of insolvency was not known at that time:1. transactions for consideration entered into in the year prior

to the declaration of insolvency in which the obligations performed or undertaken by the debtor exceed by more than a quarter what the debtor received;

2. payment of overdue monetary debts due and payable where payment was not made by cash or other normal means of payment, if made in the year prior to the declaration of insolvency;

3. pledges, securities and judicially mortgages created in the six months prior to the declaration of insolvency in respect of obligations not already due; or

4. pledges, securities and judicially mortgages created in the six months prior to the declaration of insolvency in respect of overdue obligations.

In addition, the claw-back action shall apply also in relation to payment of liquid and payable debts, transactions for consideration and transactions where pre-emption rights are granted in respect of debts towards third parties, which are effected in the six months prior to the declaration of insolvency, if the bankruptcy receiver proves that the other party of the transaction was aware, or should have been aware, of the state of insolvency.In the context of a securitisation transaction, according to article 4, paragraph 3 of the Italian Securitisation Law, there is an exemption pursuant to which, in case of payments made by the assigned debtors to the SPV, articles 65 and 67 of the Italian Bankruptcy Law shall not apply.



Ital

y

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?

Pursuant to article 3, paragraph 1 of the Italian Securitisation Law, the purchasing company (i.e. the SPV) or, where different from the purchasing company, the company issuing the securities, shall have as its sole corporate object the undertaking of one or more securitisation transactions. In addition to the above, pursuant to article 3, paragraph 3 of the Italian Securitisation Law, the provisions contained in title V of the Italian Banking Law, together with the sanctions contained in title VIII of the Italian Banking Law, shall apply to the purchasing company and the issuer, so that the special purchase vehicles may be incorporated both as joint stock companies or limited liability companies.The directors of the special purpose vehicles for the securitisation shall fulfil the requirements of professionalism, respectability and independence, provided for under articles 25 and 26 of the Italian Banking Law, while the requirements for the shareholders are indicated under article 19 of the Italian Banking Law.

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?

Italian Courts may give effect to a limited recourse clause (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, it being understood that such provision cannot − in any case − prevent the application of article 2740, paragraph 2 of the Italian Civil Code.

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?

A non-petition clause (pactum de non petendo) may be recognised by an Italian Court and the same may give effect to such a contractual provision (pursuant to which a creditor undertakes to not enforce a debt by way of taking legal action against the purchaser or commencing an insolvency proceeding) only to the extent that, in case a breach of such provision occurs, it shall give rise to a right of claim for damages.

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?

Under Italian law, a contractual provision in an agreement (even if that agreement’s governing law is the law of another country)

possibility for SPVs to grant loans to entities other than individuals and micro-enterprises, subject to the fulfilment of certain conditions set out under article 1ter of the Italian Securitisation Law and listed below:a) the borrowers shall be identified by a bank or a financial

intermediary registered with the register held by the Bank of Italy as set forth under article 106 of the Italian Banking Act, which can also carry out the activities mentioned under article 2, paragraph 3, letter c) of the Italian Securitisation Law;

b) the securities issued in order to grant loans to the abovementioned entities are intended for qualified investors, as defined pursuant to article 100 of the Italian Consolidated Law on Finance;

c) the bank or financial intermediary, referred to under paragraph a) above, retains a “significant economic interest” in the transaction, in accordance with the implementing measures set out by the Bank of Italy.

On 6 March 2016, the Bank of Italy published the implementing measures, relating to the supervisory regulations for loans granted by securitisation vehicles incorporated under the Italian Securitisation Law, which have implemented, among others, the discipline related to the retention requirements provided for under article 1ter, letter c) of the Italian Securitisation Law.The receivables may be identified as a pool (in blocco), when they consist of a plurality of claims identified as credits, debts and contracts which have a common element of identification (rapporti giuridici individuabili in blocco) as stated under the Bank of Italy regulations (istruzioni di vigilanza di Banca d’Italia). In addition, according to article 58, paragraph 2, of the Italian Banking Law, the assignee bank shall give notice of the effected assignment, filing it with the Companies’ Register and through a publication in the Italian Official Gazette.In the context of a trade receivables securitisation transaction, the relevant assignment shall be perfected upon the filing of the assignment deed with the relevant Companies’ Register and the publication of a notice of the assignment in the Italian Official Gazette. In addition, pursuant to article 4 of the Italian Securitisation Law, the parties may decide to implement the less burdensome regime provided for by the Italian Factoring Law in order to ensure that the assignment of receivables is enforceable as against the third party creditors of the assignor. In such case, the assignment may be perfected by the relevant parties alternatively choosing: (i) to publish in the Italian Official Gazette a short form notice indicating the assignor, the assignee and the relevant transfer date; or (ii) to apply the provisions set forth under article 5, paragraphs 1, 1bis and 2 of the Italian Factoring Law.Under the Italian Securitisation Law, there must mandatorily be a separation between collections received by the seller and the corporate assets of the purchaser. In fact, pursuant to article 3, paragraphs 2bis and 2ter of the Italian Securitisation Law, the “segregated current accounts” of the securitisation vehicles are separated from the depositary’s and the other depositors’ assets (paragraph 2bis) and the servicer’s and sub-servicer’s assets (paragraph 2ter). In the context of a securitisation transaction, according to article 4, paragraph 3 of the Italian Securitisation Law, there is an exemption pursuant to which in case of payments made by the assigned debtors to the SPV, articles 65 and 67 of the Italian Bankruptcy Law shall not apply. For the purposes of securitisation transactions governed by the Italian Securitisation Law, the time limits of two years and one year contained in article 67 of the Italian Bankruptcy Law are hereby reduced to six months and three months, respectively.



Ital

y

More specifically, according to the Decree 18/2016, EU AIFs may lend to Italian borrowers, other than to Italian consumers, if the following conditions are fulfilled: (a) the EU AIF must be authorised to lend by the competent authority in its home Member State; (b) the EU AIF must be a closed-end fund and its operating rules (including those relating to its investors) must be similar to those applicable to Italian AIFs; and (c) the rules on risk diversification and limitation − including limitations on leverage − applicable to the EU AIF under the regulations of its home Member State must be equivalent to those applicable to Italian AIFs.The answer does not change if the purchaser does business with other sellers in Italy.

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?

Pursuant to article 2, paragraph 6, of the Italian Securitisation Law, credit collection activities may be carried out by banks or financial intermediaries registered with the register held by the Bank of Italy as set forth under article 106 of the Italian Banking Act, having obtained the relevant authorisation issued by Bank of Italy only.

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 Italy, the Legislative Decree no. 196, dated 30 June 2003 (the “Italian Data Protection Code”) provides that personal data are processed by respecting data subjects’ rights, fundamental freedoms and dignity, particularly with regard to confidentiality, personal identity and the right to personal data protection. The Italian Data Protection Code applies both to consumers and to enterprises.

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 Italian Consumers’ Code provides for consumers’ protection that shall be ensured through fairness, transparency and equity in contractual relations with entrepreneurs. The consumer being considered as the weaker party of the contract, entrepreneurs must carry out the relevant transaction in compliance with the supply of services according to standards of quality and efficiency, safety and quality of services, and adequate information and correct advertising.

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?

Italian law does not provide for any specific provisions restricting the exchange of currency.

distributing payments to parties according to an order of priority of payments, pursuant to which a party accepts to subordinate its rights to the rights of other creditors, would be valid between the relevant parties and an Italian Court, subject to any overriding mandatory provision under Italian law, may give effect to such contractual provision.

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?

Pursuant to article 2388, paragraph 4 of the Italian Civil Code, those resolutions that have not been adopted in compliance with the law and the by-laws may be challenged only by the board of auditors or by those directors who were not present or were dissenting (e.g. an independent director who has not expressed his vote) within 90 days from the date of the resolution. In case of insolvency proceedings, please note that directors (including the independent directors) shall mandatorily comply with those duties provided for under the Italian Bankruptcy Law.

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?

Pursuant to the Italian Banking Act, financial activities in Italy − also in the context of a securitisation transaction − may be carried out on the market by certain financial intermediaries/banks (e.g., under article 106 of the Italian Banking Act, a financial intermediary must be filed with a specific register held by the Bank of Italy) and if certain conditions are fulfilled by them.In addition to the above, please note that the Italian Government has recently approved the Law Decree no. 18, dated 14 February 2016 (the “Decree 18/2016”) which sets out, inter alia, a direct lending regime by EU and Italian AIFs (i.e. EU and Italian alternative Undertakings for Collective Investment (UCI) falling within the scope of application of Directive 2011/61/EU) to Italian borrowers. The Decree 18/2016 entered into force on 16 February 2016 and must be converted into law within 60 days of such date. Further amendments may be introduced during the conversion process and in any implementing rules promulgated by the Bank of Italy or the Italian Ministry of Economy and Finance. In particular, the Decree 18/2016 states that:■ EU AIFs may, subject to certain conditions, lend directly to

Italian borrowers;■ Italian and EU AIFs are not permitted to lend to consumers;

and■ Italian and EU AIFs are subject to the same transparency

obligations applicable to banks and financial intermediaries.



Ital

y

required to adopt IFRS in their annual accounts. The de-recognition of the receivables from the seller’s accounts will be driven by the relevant set of accounting principles applicable to it (whether Italian GAAP or IFRS).For tax purposes, a seller should generally be allowed to deduct the loss suffered on disposal of the receivables on condition that the assets are de-recognised from its accounts and that the loss is booked to the income statement. If the purchaser is a Law130 Company, all assets and liabilities and any other values, including those arising from derivatives and similar transactions, attributed directly to the securitisation shall be treated, based on the regulations issued by the Bank of Italy, as off-balance sheet assets and liabilities in the issuer’s accounts. According to the guidelines of the Italian tax authorities, a Law130 Company should not generate any taxable income, and hence should not incur any corporation tax charge, whilst any notes are outstanding. Once all the payments to the noteholders and the other creditors of the securitisation transaction have been fully discharged, the issuer would be taxed in respect of the amounts (if any) that remain available to it.

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

On condition that the sale of receivables constitutes an exempt supply for VAT purposes, a flat and negligible registration tax (currently EUR 200) would be due on the transfer deed. In addition, a flat stamp duty (currently EUR 16) would be due for each four pages of the relevant document.If, on the other hand, the sale of receivables falls outside the scope of VAT, the registration tax would be due at the rate of 0.5%. However, if the transfer deed is executed by way of exchange of correspondence or outside of Italy (which may not be possible in relation to sales of government receivables), the 0.5% registration tax would be due in the following circumstances only: (i) upon filing of the transfer deed with any Italian Court in the course of administrative proceedings; (ii) upon filing of the transfer deed with Italian administrations or public bodies, unless such filing is compulsory as a matter of law or regulations; (iii) in the case of a cross-reference to the transfer deed in an agreement or other document entered into by the same parties thereto and registered with the competent tax authority; or (iv) in the case of a reference to the transfer deed in any judicial decisions.

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?

Italian value added tax (“VAT”) is chargeable on supplies of goods and services within Italy by “taxable persons” in the course of a business. The standard rate of VAT is currently 22%, although certain supplies (including the supply of certain financial services) are exempt from VAT.A sale of receivables can be regarded either as a VAT-exempt supply or as a transaction falling outside the scope of the Italian VAT. In both cases, no VAT is charged on the purchase price. On condition that the place of supply is within Italy, debt collection services should qualify for the VAT finance exemption, whilst Italian VAT should be charged in respect of debt recovery services.

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?

As a principle, when the purchaser is a company established under the Italian Securitisation Law (a “Law130 Company”), no withholding tax is levied from the payments made by the obligors, regardless of the nature of the receivables. In the case of a sale of trade receivables at a discount to a foreign purchaser, a case-by-case analysis should be performed in order to determine the Italian income tax regime applicable to the profits realised by such purchaser. Indeed, depending on the relevant facts and circumstances (including, but not limited to, the existence of a deferred purchase price mechanism), such profits could be qualified as capital gains (in which event they would generally not be taxable in Italy) or as income from capital (in which event, Italian income taxes would generally be due). In the case of a sale of interest-bearing receivables to a foreign purchaser, the latter would generally suffer Italian income taxes, levied by way of withholding or otherwise, when collecting Italian source interest. The taxes would be due at the domestic 26% rate or, depending on the purchaser’s location and tax status, at the reduced rate under an applicable double tax treaty.On the basis of new rules enacted in 2014 and subsequently amended in 2015, an exemption applies to interest and other proceeds deriving from medium-to-long-term loans granted to Italian enterprises by: (a) credit institutions established in EU Member States; (b) entities falling under Article 2(5)(4) to 2(5)(23) of Directive 2013/36/EU (these are development promotion institutions established in different EU Member States); (c) insurance companies incorporated and authorised under provisions issued by EU Member States; or (d) foreign institutional investors, even if not liable to tax, that are established in States with an adequate exchange of information with Italy and which are subject to forms of supervision in the foreign countries in which they are formed (these would include regulated collective investment undertakings). In the absence of any guidance on the matter, however, it is unclear whether the exemption would also be applicable to secondary market transactions.

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?

An Italian seller shall draft its annual accounts, as the case may be, under Italian GAAP or IFRS. In particular, Italian banks and regulated financial intermediaries, Italian companies whose shares are traded on regulated exchanges, and Italian companies issuing financial instruments widely distributed among the public, are



Ital

y

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?

In general terms, and subject to a more detailed case-by-case analysis, the purchase of the receivables or the enforcement of the receivables against the obligors do not create a taxable presence (i.e., a permanent establishment) of a foreign purchaser in Italy. Nor should the appointment of a servicer by the purchaser result in the latter having an Italian permanent establishment, on condition that the servicer meets the conditions for being treated as an “independent agent”. In this respect, reference shall be made to the servicer’s activities and to the terms and conditions governing its involvement in the transaction.

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?

As described above, a transfer of receivables would usually either constitute an exempt supply for VAT purposes, or fall outside the scope of VAT altogether. Accordingly, the seller should not be required to account for VAT upon the sale of receivables. It may, on the other hand, have to pay VAT on the sale of goods or services that give rise to the receivables. However, if the seller fails to account for the VAT due on such underlying transactions, the taxing authority should not be able to make claims for the unpaid tax against the purchaser.The seller and the purchaser are jointly liable for the payment of any registration tax and stamp duty that may be due on the transaction documents (regardless of any different agreement between them as to the allocation of the tax charge).



Ital

y

Andrea PintoK&L Gates Studio Legale AssociatoPiazza San Marco 1 20121 MilanoItaly

Tel: +39 02 3030 291Email: [email protected]: www.klgates.com

Vittorio Salvadori di WiesenhoffK&L Gates Studio Legale AssociatoPiazza San Marco 1 20121 MilanoItaly

Tel: +39 02 3030 291Email: [email protected]: www.klgates.com

OVERVIEW

Andrea Pinto is the partner responsible for the finance and banking practice in the firm’s Milan office. He focuses his practice on advising lenders and has significant experience in structured finance transactions. He regularly represents Italian banks, together with their financial advisors, on the sale of NPL portfolios. Andrea Pinto also advises arrangers and originators on securitisation transactions in a variety of asset classes, including non-performing credits.

Mr. Pinto has been named by Chambers Global 2015 as a leading individual for debt restructuring / NPL.

PROFESSIONAL BACKGROUND

Prior to joining K&L Gates, Mr. Pinto practised at the most reputable Italian independent law firm and at another international law firm in Milan. Andrea has been seconded for one year with Barclays Bank PLC in the international lending department (2007).

ADMISSIONS

Andrea is an Italian qualified lawyer registered with the Genoa Bar membership.

EDUCATION

Law Degree, Università degli Studi di Genova, 1998 (110/110 magna cum laude).

Postgraduate Master in Corporate Law, Anselmo Anselmi of Rome, February 1999/January 2000.

Project Finance Workshop managed by International Faculty of Finance (IFF) – London, January to February 2010.

LANGUAGES

English and Italian.

K&L Gates LLP comprises more than 2,000 lawyers who practise in fully integrated offices located on five continents: Anchorage; Austin; Beijing; Berlin; Boston; Brisbane; Brussels; Charleston; Charlotte; Chicago; Dallas; Doha; Dubai; Fort Worth; Frankfurt; Harrisburg; Hong Kong; Houston; London; Los Angeles; Melbourne; Miami; Milan; Newark; New York; Orange County; Palo Alto; Paris; Perth; Pittsburgh; Portland; Raleigh; Research Triangle Park; San Francisco; São Paulo; Seattle; Seoul; Shanghai; Singapore; Sydney; Taipei; Tokyo; Warsaw; Washington; and Wilmington.

K&L Gates practises law on an integrated basis and indeed has the largest integrated network of offices of any global law firm. The Firm represents leading global corporations, growth and middle-market companies, capital markets participants and entrepreneurs in every major industry group as well as public sector entities, educational institutions, philanthropic organisations and individuals. Our practice is a robust full market practice − cutting edge, complex and dynamic, at once regional, national and international in scope. Over each of the last five years, our revenues exceeded $1 billion.

OVERVIEW

Vittorio Salvadori di Wiesenhoff is the partner responsible for the tax practice in the firm’s Milan office. He focuses his practice, among other issues, on the tax aspects of structured finance transactions. In particular, he has significant experience in the area of securitisation involving mortgage loans, receivables from leasing contracts and consumer loans, leasing, trade receivables, receivables from the public sector and tax credits.

He regularly assists many foreign institutional investors in the structuring of investment transactions in performing and non-performing loans.

Mr. Salvadori di Wiesenhoff is ranked in Legal 500, Chambers Europe and Chambers Global. He graduated summa cum laude from Università Commerciale Luigi Bocconi in Milan in 1994 and was admitted as a Dottore Commercialista (chartered accountant admitted to practice in tax courts) in 1995.

PROFESSIONAL BACKGROUND

Prior to joining K&L Gates, Mr. Salvadori di Wiesenhoff was a tax partner in the Milan office of another international law firm. He focused his practice on all tax aspects connected to corporate, banking and finance, and real estate transactions.

PUBLICATIONS

Mr. Salvadori di Wiesenhoff has written several articles on “European Taxation − IBFD” and “Derivatives and Financial Instruments − IBFD”.

PROFESSIONAL/CIVIC ACTIVITIES

Member of the Board and Treasurer, Plan Italy.

ADMISSIONS

Certified accountant admitted to practice in front of tax courts (Dottore Commercialista e Revisore Contabile).

EDUCATION

Post Degree Advanced Course on Taxation, Bocconi University School of Law, 1996.

Degree in Business Administration, Bocconi University, 1994.

LANGUAGES

English, French and Italian (mother tongue).


Other titles in the ICLG series include:

■ Alternative Investment Funds■ Aviation Law■ Business Crime■ Cartels & Leniency■ Class & Group Actions■ Competition Litigation■ Construction & Engineering Law■ Copyright■ Corporate Governance■ Corporate Immigration■ Corporate Recovery & Insolvency■ Corporate Tax■ Data Protection■ Employment & Labour Law■ Enforcement of Foreign Judgments■ Environment & Climate Change Law■ Franchise■ Gambling■ Insurance & Reinsurance

59 Tanner Street, London SE1 3PL, United KingdomTel: +44 20 7367 0720 / Fax: +44 20 7407 5255

Email: [email protected]

www.iclg.co.uk

■ International Arbitration■ Lending & Secured Finance■ Litigation & Dispute Resolution■ Merger Control■ Mergers & Acquisitions■ Mining Law■ Oil & Gas Regulation■ Outsourcing■ Patents■ Pharmaceutical Advertising■ Private Client■ Private Equity■ Product Liability■ Project Finance■ Public Procurement■ Real Estate■ Shipping Law■ Telecoms, Media & Internet■ Trade Marks

The International Comparative Legal Guide to Securitisation 2016 Edition

Law

Transcript of The International Comparative Legal Guide to Securitisation 2016 Edition