Negative pledge
The negative declaration or negative clause is a promise contained in unsecured credit agreements or debt of the debtor that he will put future creditors no collateral available or will simultaneously offer the beneficiary of the Declaration creditors equivalent guarantees. It is one of the standards of non- financial covenants.
Content
Unsecured creditors are interested in that they are equally treated and operated by the debtor. This interest derives from the principle par conditio creditorum, which calls for the equal treatment of creditors.
The banks provide unsecured loans with regard to the assets of a borrower and rely on their stock during the loan term. In order not to jeopardize the asset base of the borrower during the loan term, the negative declaration contains disposition, stress and commitment prohibitions, to the extent such transactions are entered into for the purpose of credit protection ( general collateral ban). The debtor may indeed be prohibited by the negative pledge to dispose of alienable rights ( § 137 sentence 2 German Civil Code), but the borrower does not ( § 137 sentence 1 BGB ) loses his ( rem ) of disposal. This means that a statutory prohibition provided for sale or only load its assets must be pronounced by the negative pledge to the debtor. However, he does not keep it, so the sales or charges to third parties nevertheless made by him are quite effective.
With the negative clause, a borrower or obligor with respect to the unsecured creditors obliged to accord for no obligation other security interest, without ordering at the same time and in the same rank for the liabilities benefiting from the clause itself similar securities. The negative clause is therefore to prevent a creditor discriminatory collateral. The negative declaration of the pari passu clause comes very close in content. The difference between the pari passu clause and the negative clause is that the pari passu clause represents a Gleichrangigkeitszusicherung, while the negative clause contains a pari passu clause.
Species
Negative clauses are found in almost all syndicated loan agreements as a standard LMA, but are already penetrated in the SME sector. Even in real estate financing they are used. They are regularly used in loan terms for unsecured loans. The contents of the clause have, in contrast to other clauses in loan agreements or bond conditions, a very low degree of standardization on. Depending on the amount of the obligation rather systematically following types can be distinguished.
- Standard negative declaration:
The borrower agrees to herein simply, the repayment period without the consent of a bank to provide future while no other creditors with collateral to offer equivalent guarantees simultaneously without the bank. She is very simplistic in this global formulation, so that more precise versions are preferable.
- Advanced Negative Declaration:
In addition, the borrower can commit, in whole or in part, to charge its assets without the consent of the bank. To prevent an indecent act gagging here, disposals or encumbrances as current assets in the ordinary course of business operations must be explicitly permitted.
- Positive Statement:
Contains more than the above scope, the obligations of the borrower under certain conditions (eg non - compliance with financial ratios, deterioration in the equity ratio under a contractually fixed minimum rate; covenants as suspensive condition kasuelle ) to order a possible security specifically described. This security must reach a Bestimmbarkeitsgrad to a specific legal claim of the bank to the collateral described triggers the occurrence of the condition.
Status pending the issue of a negative declaration remains unchanged for all three variants, thus they secure an existing status quo and future development.
Disposition, commitment and prohibitions on charges
The Parties wish to enter any kind of collateral to loan security purposes with such prohibitions. As dispositions ( " Disposals " ) the collateral assignment of objects and the assignment are considered in the first place. Also disposals as part of a quasi-factoring, discounting of receivables and sale- and-lease -back transactions fall into this category, where the transaction cost is a credit, and sales have credit protection function. The incrimination ( " encumbrance " ) relates to the order of rights in rem such as mortgages, rights in rem with fuse character and liens. Subject of the obligation ban ( " contingencies " ) is primarily guarantees, warranties and other assumptions of liability by the borrower for the purpose of securing credit. The scope of the collateral ban is determined in a credit agreement in Anglo-American model largely depend on the rules on the exceptions ( " Permitted Encumbrances "). This catalog contains exceptional particularly those set at the conclusion of the credit agreement collateral, statutory liens, retention of title in the ordinary course of business and other charges which collateralize a certain amount ( "threshold amount" ) on borrowings.
The negative declaration is regularly must also include the subsidiaries of the borrower, whereby the borrower to the Group to ensure compliance with the prohibitions provided by appropriate instructions. It is more favorable from the perspective of creditors, if these subsidiaries emit negative declaration itself.
Special
With the inclusion of a clause negative features are taken into account. Disposals or encumbrances as current assets in the ordinary course of business operations must remain explicitly permitted within the extended negative declaration, because the borrower otherwise any commercial freedom of action is taken and the risk of immoral gagging. The permission applies only to the current assets, disposals or so loads of fixed assets ( including investments ) without the consent of the creditor may not be made.
When a bank is already a real estate lien creditor, the negative declaration must explicitly exclude the already loaded in favor of the Land Bank. According to § 1136 BGB those agreements in fact void, against a mortgagee committed by the land owner, the land to sell nor to burden further.
See the Terms and Conditions in para. 13 AGB-Banken/Ziff. 22 No. 1 Conditions of savings banks to Nachbesicherungsanspruch ago, according to which the order or gain of loan collateral due to a change in the risk situation the customer is required. This Nachbesicherungsrecht is a kind of positive statement, which will apply to all customer relationships, where there is no contractual loan positive statements were agreed. According to the prevailing opinion that resulting from the terms and conditions claim is not directed from the outset to a particular security, but more generally on the position of banking securities, so that the debtor remains free to choose among various asset components. This is therefore a so-called incongruent coverage. Such incongruent collateral insolvency law are voidable and must be issued by the concerned credit institution in the insolvency of the borrower. Thus, the Nachbesicherungsanspruch and the hereafter ordered security is only as long as legally sound as it does not come to insolvency.
The not parked on a concrete collateral subsequent collateral from a negative declaration is in crisis of the borrower under § 131 Insolvency actionable because the order / increase collateral for existing loans is not a matching cover. Exceptions are clearly specified collateral, which are determined by way of a negative or positive clause so accurate that they are distinguishable from other components of the debtor's assets.
For the current assets of the exception under " normal / ordinary course of business " is ( "ordinary course of business" ) were used. This is a vague legal term. Dispositions or encumbrances in the ordinary course of business operations be expressly permitted in order to avoid gagging. What is considered uncommon or unusual in the context of business, depends both on industry and business purpose ( commercial register ) of the company concerned, on the other hand, sales of products at non-market conditions are subsumed here under. Squandering of inventory holdings thus do not count for normal business operation. Unless specifically mentioned belong to certain sectors deliveries under retention of title to the ordinary course of business. However, if the retention of title suppliers for the first time agreed, already the phase of a non- normal business operation begins.
Impairments
The negative declaration must be as thoroughly as possible, so that their effectiveness is not missed. In addition, they must have a degree of liability reach, played by the commitment involved. This requires that on the one hand the exact disposition, stress and commitment prohibitions describes the other hand, the necessary exceptions defined as accurate. Namely Strictly detects the standard negative pledge by retention of title secured trade credit, because of the retention of title is "Security for third creditor ." This conventional suppliers security is but the negative declaration can not be banned because it is part of usual business operations. Know this all involved, so one can still get no justiciable meaning in this form submitted undifferentiated Policy.
Also the sale of fixed assets at market prices can not be prevented by a standard negative pledge. The borrowing on the basis of a negative report company may sell and lease back the land as part of a " sale-and -lease-back ." Thus, it has economically reduced the adhesion mass without having formally violates the negative declaration. Revalutierungen already registered mortgages by the same creditor also despite the existence of a negative declaration still possible, because it does not come to a new strain of the property. If existing mortgages to be ceded to other creditors, so attacks the negative declaration, because assignments against the restraining order under the negative pledge would violate.
Legal consequences
The debtor does not lose despite ceded its negative declaration in rem right to dispose of its unencumbered assets ( § 137 sentence 1 BGB). Therefore, contrary to agreement made security order in favor of other creditors are legally thing fully effective.
Does the borrower the negative declaration is received and he ordered for other creditors collateral without informing the creditor agreement under or at the same time offer him equivalent collateral, he has violated the credit agreement and violated a secondary obligation. A bank can then decide whether they can continue to hold the credit relationship or whether it is not reasonable because of the seriousness of the breach, a maintaining the loan relationship for them. In the case of unreasonableness, the bank can withdraw from the contract ( § 325 BGB). Failure to comply with the negative declaration also triggers termination options that may arise from the default clause of a loan agreement. In the list of examples of the extraordinary grounds for termination for cause, the culpable violation of contractual obligations by the borrower falls.