During the last 3 years, non-performing loan transactions have seen an outburst, peaking at 7.6 billion in 2019. Undoubtedly, the tailor-maid and updated legal framework has significantly assisted the interesting parties in this area of distressed M&As.
In 2015 the Greek Parliament passed the law on the assignment of receivables from loans and credits from credit or financial institutions, which significantly simplified the process of selling and transferring non-performing loans (NPLs) in Greece. L. 4354/2015, as amended and in force from time to time, sets first of all specific conditions for the subjects participating in the sale and assignment of these receivables. It provides for that the seller must be a credit or financial institution, while the buyer must be a company acquiring receivables from loans and credits (in Greek “ΕΑΑΔΠ”). More specifically, receivables from loans and credits can be acquired by Greek sociétés anonymes or companies with registered seat in the EEA, which have as statutory object the acquisition of such receivables. Moreover, companies with registered seat outside the EEA with a respective statutory corporate object can acquire such receivables, provided that their registered seat is not located in a State with a privileged tax regime or a non-cooperating State in terms of taxation.
The scope of the sale and assignment agreement includes receivables under loans and credits which have been granted or are being granted by credit or financial institutions, as well as any other rights related to the receivables being assigned, even if they are not auxiliary rights in the sense of article 458 of the Greek Civil Code.
Receivables under a loan are both the receivables for the payment of the principal amount and of the (contractual and lawfully accrued) interest, compounded interest, expenses etc.
On the other hand the sense of a credit (facility) presents particular difficulties in terms of interpretation, since it is not specified in Greek legislation. For this reason, it is necessary to synthetically interpret various provisions of law in which reference is made to the term in order to clarify its meaning.
The Law does not provide a specific definition for the sense of credit. However, it is accepted in Greek legal theory that it includes in its scope of application any form of credit in the sense analyzed above, to the extent it is assignable and may constitute the object of the receivables sale and assignment agreement.
Conditions for the validity of the assignment
- Written form
- Agreement for the assignment of servicing
- Registration in public books
- Announcement of registration
It is very important to stress out that the Law expressly provides that any agreements between the assigning credit or financing institution and borrowers for non-assignability of the receivables do not oppose to the assignee. In other words, in case there are clauses for non-assignability or even a provision for the necessary of obtaining an approval for any assignment of receivables from the loan or credit, such clauses are ineffective.
At this point we must address the specific case of the revolving (debit and credit) account and to which part thereof the assignment of receivables under the conclusion of such an account is permitted under the provisions of L. 4354/2015.
The prevailing view is that despite that the non-assignability of the sums entered into the debit and credit account is indeed a notional element of the said account, it does not rebut the fact that the debit and credit account agreement concluded between the parties includes statements of will for the conclusion of the legal transaction, which must be mutually covered to all parts thereof, even those of minor importance, not to mention in relation to the loss of the independency of the receivables of both parties, which are exactly the ones the lawmaker wishes to fully cover for the needs of the assignment of receivables by credit institutions.
Moreover, it should be underlined that according to the more correct view, the preponderance of L. 4354/2015 in the agreements for the non-assignability in the debit and credit account agreements extends only to the exclusion of the provision of art. 466* of the Civil Code, for the sake of realizing the financial object of the assignment of receivables, however the contractual, according to article 177 of the Civil Code, action of these agreements is preserved.
|As the Bank of Greece states, “the outbreak of the pandemic has changed the rising trend of NPL transactions. As a result, banks have revised their securitisation plans in terms of timing and loan perimeter. This will delay the further reduction of the high stock of NPLs. At the same time, despite the positive measures taken by the government and banks, an inflow of new NPLs is expected, especially from early-2021.”
It is concluded from the above that the receivables of credit institutions which derive from the conclusion of revolving (debit and credit) accounts may be assigned in deviation of any agreements for the non-assignability of receivables and in these cases, as a result of the above, only the receivables of the credit institutions for the balance standing to the credit of the account after the final closing thereof may be assigned, since neither the individual debits of the account nor the provisional balance are due or assignable.
“We, at VAP LAW, undertake on behalf of our clients, including major foreign institutional investors, funds and/or private equities, NPLs transactions in Greece and assist in every step of the portfolio acquisition from A-Z, i.e. from the portfolio loan review, due diligence, structuring of the transaction, drafting and negotiation of transactional documents, the successful closing of the envisaged transaction etc. Further to the acquisition of the NPL portfolio, we undertake any legal actions against the debtors, enforcement procedures and any settlement negotiations and assist our clients with the day-to-day management of the NPL portfolio.”