Difference between Transfer Certificate and Assignment Agreement

Novation is the most efficient way to transfer rights and obligations under a syndicated loan agreement from an original lender to a new lender. The existing agreement (including all outstanding obligations) between the original lender and the borrower will be terminated and replaced by a new agreement between the new lender and the borrower. As part of an order, you continue to fulfill your obligations under the contract, but waive certain rights to third parties. The main difference between assignment and license is that with a license, the person granting the authorization, the so-called licensor, retains an interest in the product to be licensed. In the event of an assignment, the assignor transfers its rights in the proceeds or property to be transferred. This article discusses three ways in which a lender can sell all or part of its shares in a syndicated loan agreement, namely by novation, assignment or sub-participation. An assignment and a novation differ in several important respects. Assignment confers certain rights on a third party, while novation transfers both rights and obligations to a third party. Novations are most often used in business buyouts or the sale of a business. Syndicated facility agreements in English law traditionally provide as follows: If a loan in this context is transferred by means of an English legal innovation, it is unlikely that existing Spanish legal certainty will guarantee the renewal of the obligation. This is not necessarily the case if the transfer takes place by way of assignment and acceptance. However, unless the buyer signs a notarized «escritura», the guarantee remains legally in the relevant Spanish registers as held by the securities agent for the original lenders.

The signing of an «Escritura» is generally not feasible due to the associated stamp duty payment obligations. Without «escritura», the new lender can still benefit indirectly from the guarantee provided by the contractual arrangements between it, the original lender and the securities agent. Spanish courts sometimes question the right of securities agents to enforce collateral on behalf of unregistered lenders. New lenders can try to reduce this risk by signing a notarial «policy» regarding the transfer, which does not entail stamp duty. A transfer by Novation may also work, but the guarantee must be expressly reserved if it is to continue to guarantee the renewed obligations. This reserve language can be included in the French legal certainty document. If this is the case, it is not necessary to change the form of the transfer certificate. Unlike novation, assignment involves the transfer of rights, but no obligations. For a legal assignment under English law, the assignment must be: For example, an assignment might be relevant if you have a larger company in which you have a parent company and also some subsidiaries.

You want the parent company to continue to fulfill its obligations under a contract, but you want the parent company`s customers to make payments to a subsidiary to increase that company`s cash flow. You would enter into a deed of assignment with the Customer to allow the Customer to pay to the subsidiary. Where English law regulates the security of transactions, this approach generally works. In particular, transfers through Novation should not compromise the security of transactions. The new lender establishes a direct relationship with the borrower and the other parties to the syndicated loan agreement. The loan agreement should include the form of the transfer certificate used to carry out the novation and a provision stating that the borrower has no objection to the original lender selling its shares in the loan agreement to a new lender. Novation is typically used for revolving credit facilities when the original lender still has outstanding obligations, such as. B the obligation to grant future loans. French courts have recently adopted a parallel debt structure created on the basis of a foreign law document. However, certain types of security (such as a «Dailly» assignment in the form of a guarantee or a pledge of shares subject to the French Commercial Code) can only be granted to credit institutions that have granted a «loan». Parallel debts cannot therefore be used under these guarantees.

(Parallel debt is also not used in purely national French transactions. Although not tested, it is generally thought that it would not work in this context.) Novation most often occurs during takeovers of large companies or the sale of a company. In acquisition, novation deeds are used to transfer contracts from the seller to the buyer and allow the buyer to continue the seller`s business. However, these documentary elements are only a starting point where a transaction implies the security of foreign law. The AML agreements indicate that local legal advice is essential to ensure that the security structure and transfer mechanisms are effective in all relevant foreign jurisdictions. What happens if other laws regulate some or all of the security of transactions? The situation is not always so simple, especially when it comes to civilian regimes. Philippe Max (France), Tim Stubbs (Russia) and Jesús Varela (Spain) briefly discuss how their local legal certainty is generally maintained in syndicated lending operations under English law. They are also looking at how to avoid pitfalls in transferring loans under English law that benefit from this security. The difference between a novation and a task is summarized below. In the case of an assignment, only a few parties need to agree.

To be absolutely sure of the consent requirements, it is always best to comb through the contract or act to understand the requirements. A legal assignment transfers all the rights of the original lender under the loan agreement, but none of the obligations. A new guarantee is not required for each order, as the original lender retains its obligations under the loan agreement. The peculiarity of a sub-participation agreement is that the original lender remains the «official lender» for the borrower and there is no direct contractual relationship between the sub-participant and the borrower. No borrower consent is required, so this process may be confidential. The guarantee under Russian law is generally an aid to a secured obligation and follows the secured obligation, unless otherwise provided in the contract. If Russian legal certainty guarantees syndicated loans under English law, the re-listing of such loans should always be avoided, regardless of the title holding structure used. Security against renewed engagement is unlikely to continue to be effective.

Instead, transfers can be made by assignment agreement. For registered guarantees, the register must be amended to complete the transfer of the benefit of the guarantee to a new lender. However, this is not relevant if, under the structure of the transaction (as described above), the collateral was not provided directly to the transferring lender. .