Financial Collateral Arrangements Regulations, 2013
News    ·   28-06-2013
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AUTHOR: Louis de Gabriele, Malcolm Falzon

The MFSA issued a consultation note regarding proposed amendments to the Financial Collateral Arrangement Regulations (S.L. 459.01).

The proposed amendment aims to widen the definition of ‘credit claims’ to also include pecuniary claims due to a non-natural person, provided that the debtor of the claims granted as collateral is also a non-natural person. Non-natural person will be taken to mean any legal person, unincorporated firm or body of persons or partnership not being an individual.  

The draft amendment proposes that the obligation placed on a pledgee of shares in a public company to offer pledged shares to the shareholders of such company prior to applying for the judicial sale of such shares or securities, becomes inapplicable in respect of pledges of shares provided in accordance with these proposed regulations. This extends to the offer of shares on a pre-emptive basis to other shareholders in terms of the Companies Act (Investment Companies with Variable Share Capital) Regulations.

In relation to who may act as a collateral taker and a collateral provider, the draft proposal recommends the inclusion of the following into the remit:

  1. corporations or other legal persons, in either case established by law; and
  2. securitisation vehicles as defined in article 2 of the Securitisation Act. 

Also, the amendment proposes to widen the scope of how the collateral taker may realise any financial collateral provided under a security financial collateral arrangement to include that, in relation to instruments consisting of securities of a SICAV, the financial collateral may also be realised in the manner and in accordance with the value as contemplated in regulation 14(6)(iii) of the Companies Act (Investment Companies with Variable Share Capital) Regulations. The latter provision provides that in the event of a default, the pledgee shall be entitled to request the SICAV to purchase the pledged securities in settlement of the debt due to him or part thereof. 

For more information please either contact us or click here to read the amendment.

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