Angola
The law does not mention special differences between lending to institutional and non-institutional debtors.
The only legal regime that is exclusive to individuals is the consumer credit regime.
Australia
Consumer and small business lending is generally heavily regulated, requiring necessary licenses and compliance obligations.
By contrast, lending to institutional or professional borrowers is subject to less regulatory oversight and is less burdensome from a compliance perspective.
Belgium
There are no differences except for mortgage credit and consumer credit, which are regulated activities.
Brazil
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
Canada
Generally, there are no differences between lending to institutional/professional borrowers and other borrowers. There may be additional considerations regarding the taking and enforcing of security for secured loans and execution requirements.
Chile
Lending to institutional/professional borrowers is subject to less regulatory oversight and less burdensome from a compliance perspective not being applicable consumer protection rights.
Colombia
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
Czech Republic
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
By contrast, lending backed by mortgages and lending to consumers is a regulated activity. The aim of the regulation is to protect the weaker party to the contract (consumer) and therefore the activity is subject to various legal conditions, which are set out mainly in the Act on Consumer Credit.
Finland
Lending to legal persons is subject to less regulatory oversight and so less burdensome from a compliance perspective. It is mainly a matter of contract law.
The Consumer Protection Act (especially Chapters 7 and 7a) regulates lending to consumers and the provisions in the Act are mandatory.
France
The main differences concern lending to consumers. This type of lending is governed by the Consumer Code (Code de la consommation) and lenders are subject to additional obligations regarding in particular:
- advertisement of consumer credit transactions;
- pre-contractual and contractual information obligations are reinforced; and
- evaluation of the consumer’s solvency.
Germany
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
By contrast, lending to consumers is a regulated activity and subject to special requirements for consumer credit agreements pursuant to section 491 et seq. of the German Civil Code (Bürgerliches Gesetzbuch – BGB), regarding, for example, the written form, minimum content, information obligations of the lender and right of withdrawal of the borrower.
Ghana
There are specific rules such as the restrictions indicated above that apply to banks, specialized deposit-taking institutions, statutory corporations and local government authorities, but do not apply to individual borrowers.
Hungary
Lending to institutional/professional borrowers (as opposed to consumer borrowers) is subject to less regulatory oversight and is therefore less burdensome from a compliance perspective.
By contrast, stricter rules shall apply in case of lending in the context of mortgages and to consumers. For more information, see Lending and borrowing – restrictions.
Ireland
Please see above in relation to the differences in lending to corporates and to natural persons.
Italy
Lending to institutional/professional borrowers entails a reduced set of protections and limitations in favour of the borrower.
Lending activities towards retail clients and consumers in particular are subject to stricter provisions and limitations.
Ivory Coast
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective as they are considered as more experienced and knowledgeable that other categories of borrowers.
By contrast, lending in the context of mortgages and to consumers is a more regulated activity and as such requires more protection and BCEAO authorizations. For more information, see Consumer Law, Law n ° 2016‐412 of June 15, 2016.
Japan
There are no notable differences between lending to institutional or professional companies such as qualified institutional investors (as defined in the Financial Instruments and Exchange Act) and lending to other companies.
Lending to individuals is subject to the requirement that the ratio of the outstanding amount of total lending against an individual's annual salary must be one third or less, unless certain exemptions apply (for instance, relating to the purchase of real estate by an individual). This is referred to as the Total Volume Control.
Luxembourg
Lending to institutional/professional borrowers is subject to less regulatory oversight.
By contrast, lending in the context of mortgages and to consumers are subject to specific obligations on the lenders set out in the Luxembourg Consumer Code (ie more pre-information of the borrower).
As a more general principle, the Luxembourg courts determination as to whether lender misconduct is serious will be dependent on whether borrower is a professional or not.
Mauritius
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
Mexico
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
By contrast, lending in the context of mortgages and to consumers is a regulated activity supervised by the National Banking and Securities Commission (CNBV) and the National Commission for the Protection and Defense of Users of Financial Services (CONDUSEF).
For more information, see Lending and borrowing – restrictions.
Morocco
There are specific provisions concerning external financing operations:
These are external loans granted to Moroccan legal entities registered in the Commercial Register or to branches of foreign companies, registered with the Exchange Office. In this context, a number of documents must be submitted to the bank before the execution of the regulations on the reimbursement of external loan maturities, and declarations must be made to the exchange office.
Finally, there are specific provisions applicable to loans granted to non-residents:
Financing in Dirhams
These are the following loans granted to non-residents:
- Loans in Dirhams granted by banks to non-resident foreign individuals and Moroccans residing abroad, intended to finance the acquisition and/or construction of real estate in Morocco;
- Consumer credits granted in Dirhams by banks to foreign personnel working for diplomatic missions accredited in Morocco or international organizations based or represented in Morocco;
- Credit lines and facilities granted to branches registered with the Exchange Office in connection with the execution of contracts in Morocco, which the remuneration is denominated entirely in Moroccan Dirhams.
Commercial credits
These are credits granted by the exporter of goods or services, or a Moroccan bank alone or as part of a consortium in favour of non-resident customers, in the form of supplier credits or buyer credits repayable in the short or medium term.
Netherlands
The following financial services only need authorization in the event that the service is provided to a consumer:
- offering, directly or indirectly, credit to a consumer and managing or performing a credit agreement with a consumer;
- providing advisory services to a consumer in relation to credit; and
- providing brokerage services to a consumer in relation to credit.
Therefore, if these services are solely provided to institutional or professional (ie non-consumer)
borrowers, the services are not regulated under the Financial Supervision Act (Wet op het financieel toezicht). However, in the event that a financial entity has obtained an authorization, various rules will be applicable to this financial entity (eg rules concerning its governance structure, conduct of business and operational management).
A bank (ie a credit institution) will need authorization in the event that banking services are provided to consumers and/or non-consumers. The rules that are applicable to banks (eg rules concerning their governance structure, conduct of business, operational management, proper service providing and financial health of the company) are applicable to all activities that the bank performs, including lending to consumers and non-consumers. However, the more professional the client of the bank is, the less far-reaching the rules concerning proper service providing are (eg the more professional, the less (pre-) contractual information duties will be applicable to the bank).
Furthermore, based on Dutch civil law, a (special) duty of care is applicable to financial entities,
including banks. This (special) duty of care requires that banks should, in all their activities, take the interest of their clients (consumers and non-consumers) into account. The more professional the client of the bank is, the less far-reaching the (special) duty of care of the bank towards its client will be.
Please note that this concept is developed in Dutch legal precedents and that it is subject to continuous change. The (special) duty of care that a bank might have, is highly dependent on the specific circumstances of the case.
In conclusion, lending to institutional/professional borrowers is subject to less regulatory oversight and so is less burdensome from a compliance perspective.
New Zealand
Lending to institutional/professional borrowers is subject to less regulatory oversight and therefore is less burdensome from a compliance perspective.
Lender Responsibility Principles will only apply to consumer credit contracts (except for consumer leases). Subject to this, parties are generally free to contract on their own terms and conditions subject to restrictions which apply generally (for example in relation to penalties, and oppressive conduct).
Norway
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective. The Financial Contracts Act of 1999 chapter 3 contains several provisions that aim to protect consumers.
Peru
Lending to institutional/professional borrowers is subject to less regulatory supervision and so less burdensome from a compliance perspective.
By contrast, lending in the context of mortgages and to consumers is a regulated activity. Standard contracts and loan documents forms must be previously approved by the SBS.
Poland
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
Portugal
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
By contrast, lending in the context of mortgages and to consumers is a regulated activity. For more information, see Lending and borrowing – restrictions.
Puerto Rico
The main difference may be that consumer credit lending is more regulated than institutional lending. However, institutional lending may be subject to specific regulations that are not applicable to consumer credit (for example, commercial property appraisals).
Romania
In principle, lending to institutional or professional borrowers is more flexible, while lending in the context of mortgages and to consumers is subject to more regulatory oversight and is more cumbersome from a compliance perspective.
For more information, see Lending and borrowing – restrictions.
Russia
Lending to individuals for non-business related purposes, including mortgage lending, is subject to regulatory restrictions under Federal Law 'On Consumer Credit (Loan)', which are not applicable to institutional and professional borrowers. For more information, see Lending and borrowing – restrictions.
Senegal
Lending to institutional/professional borrowers is characterized by less regulatory oversight and is less burdensome from a compliance perspective as institutional/professional borrowers are considered as more experienced and knowledgeable than other categories of borrowers.
Lending in the context of mortgages and to consumers is, by contrast, a more regulated activity and as such requires more protection and BCEAO authorizations. In Senegal, consumer credit is partly regulated through Law n° 2008-08 of January 25, 2008, on electronic transactions, Law n° 2008-11 of January 25, 2008, relating to Cybercrime and Decree n° 2008-718 of June 30, 2008, relating to electronic commerce which also deals with consumer law on a digital standpoint.
Singapore
For more information see Lending and borrowing – restrictions.
Slovak Republic
In general, lending to institutional/professional borrowers is subject to less regulatory oversight and is consequently less burdensome from a compliance perspective.
Lending in the context of mortgages and lending to consumers is a regulated activity and requires authorization from the National Bank of Slovakia.
South Africa
Lending to large corporations/institutional investors is less burdensome, particularly on enforcement, than lending to individuals or small corporations. Enforcement of a lender's rights under a loan advanced by a lender to an individual or any other entity regulated by the National Credit Act requires the lender to first refer the applicable borrower to a debt counsellor in order to agree a payment plan before the lender is entitled to enforce its rights under the applicable credit agreement.
A lender is also obliged to ensure that, when lending to an individual or small corporation, that individual or small corporation will not become over-indebted as a result of loan advanced by the lender. The lender must take reasonable steps to ascertain a borrower's understanding of the credit agreement it is to enter into, its debt repayment history and its existing financial means, prospects and obligations.
Spain
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
By contrast, lending in the context of mortgages and to consumers is a regulated activity and so additional protection will be afforded to borrowers. For more information, see Lending and borrowing – restrictions.
Sweden
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
By contrast, lending in the context of mortgages and to consumers is a regulated activity and so requires the Swedish Financial Supervisory Authority's (Finansinspektionens) authorization.
Thailand
Lending to institutional and/or professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
By contrast, lending in the context of consumer lending is a regulated activity under the supervision of Bank of Thailand and Fiscal Policy Office.
Ukraine
Ukrainian law does not contain sophisticated regulation in relation to lending to institutional/professional borrowers. Generally, the regulation is less onerous on lenders to institutional/professional borrowers.
UK - England and Wales
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
By contrast, lending in the context of mortgages and to consumers is a regulated activity and so requires UK Financial Conduct Authority authorization. For more information, see Lending and borrowing – restrictions.
UK - Scotland
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
By contrast, lending in the context of mortgages and to consumers is a regulated activity and so requires UK Financial Conduct Authority authorization. For more information, see Lending and borrowing – restrictions.
United Arab Emirates
Lending to institutional/professional borrowers is subject to different regulatory oversight and may be less burdensome from a compliance perspective.
The Central Bank issued regulations No 29 of 2011 regarding Bank Loans & Services Offered to Individual Customers. The regulations control lending activities and excessive charges by banks and aim to protect banks by regulating lending and encouraging banks to carry out detailed due diligence on their potential borrowers. The regulations enable individual customers to borrow only up to 20 times their salary or monthly income and requires that repayment instalments should not exceed 50% of the borrower's gross salary or any regular income from a specific source. With the introduction of the New Banking Law, it is expected that a new set of regulations for loans made available to consumers will be issued in the next 2-3 years.
For more information, see Lending and borrowing – restrictions.
United States
Federal agencies, such as the US Consumer Financial Protection Bureau, regulate lending to consumers and in the context of residential real estate loans. Lenders in the context of commercial real estate loans should also consider zoning laws and environmental regulations.
For more information, see Lending and borrowing – restrictions.
Are there any restrictions on giving and taking guarantees and security?
A company can grant a security interest aiming to secure its obligations as a borrower on a credit facility and as a guarantor of the obligations of other borrowers and guarantors’ obligations under a credit facility.
For that reason, the general rule set forth under Angolan legal framework is that a company’s corporate power is restricted to rights and duties considered adequate in order to proceed with the exercise of the company’s corporate object.
Hence, it is assumed that the granting of guarantees regarding other entities’ duties is opposed to the purpose of companies, except in situations where the companies’ own interest is legitimate in providing the guarantee or the company being considered is in a group or control relationship with other companies (Article 6(3) Angolan Companies Law).
The company’s own legitimate interest is visible when providing the downstream guarantees. However, it is less visible when providing upstream and cross-stream guarantees, being advisable for the necessary resolutions to be given with the intention to justify the own interest of the company, which in certain circumstances might be an indirect one, when providing the guarantee.
In regard to governmental or other consents or filings (or other formalities) required when granting/taking a guarantee, with exception of when there are state-owned and other public sector companies, the general rule is that no governmental consent or filings is required under the law, in order for a guarantee being provided by an Angolan company to be enforceable.
Notwithstanding, a guarantee provided by an Angolan company becomes enforceable when either a shareholder or border consent is given in accordance with the Angolan Companies Law. Commonly, such consent will detail expressly the benefit expected to be acquired from the provision of the guarantee.
Moreover, a security can be taken over inventory when executing a written agreement. Whenever there is a situation of non-payment or the occurrence of other circumstances presumed to be described in the pledge agreement, the pledgee or security agent can provide an enforcement notice to the pledgor. As an alternative, parties may prefer the provision of ordinary notices containing details of the stock.
Additionally, a company cannot guarantee and/or give a security to support borrowing arising from the financing of direct or indirect acquisition of shares of the company, being expressly forbidden (Article 344 of the Angolan Companies Law). Exceptions are available. Criminal liability of the directors/managers of such company may be considered when violating this prohibition, as well as the declaration of voidance and nullity of the agreement, guarantee or security interest.
Contrary to that, no express prohibition exists when the subject is the direct or indirect financing of shares of any company which directly or indirectly owns shares in the company or shares in a sister subsidiary, even though it is generally understood as applicable. Again, as previously mentioned, the corporate powers of the company may be restricted in respect of granting of guarantees or security.
What are common types of guarantees and security?
The Angolan Civil Code in Book II, Chapter VI, establishes the following types of secure lending obligations:
I. Provision of Bonds;
II. Bail;
III. Consignation of income;
IV. Pledge;
V. Mortgage, and
VI. Right of Retention.
Angolan law establishes that the possibility to provide general security over the assets of a given entity through a general security agreement is treated as null and void since there is a lack of determination of the specific assets subject to the security.
Thus, a security agreement must identify the assets that are subject to the security created by the agreement. It must have a certain criterion that as a result gives the possibility to identify the secured assets at a given time.
As mortgages and consignation of income must be granted by public deed, whereas pledged may be granted by the celebration of private agreements, the adoption of one single agreement or separate agreements varies in accordance with the type of security being granted.
Moreover, in companies incorporated in Angola, security can be taken over shares by pledges of shares (quotas or shares).
The shares on a Joint Stock limited liability companies (Sociedades Anónimas) are carried out through means of registration in the securities holder's account, with an indication of the number of shares pledged, the guaranteed obligation and identification of the beneficiary. If the voting right is granted to the pledge creditor, the pledge may be constituted by registration in their account. In the other hand, on Private limited liability companies (Sociedades por Quotas), the pledge must be done through means of a public deed.
The said pledges of shares may be either in book-entry form or in a certified form. The procedure to be followed varies according to the type of company in question, since such security can be granted by a document governed by the laws of other jurisdiction (e.g. English law) upon the compliance of the formalities set out by Angolan Law.
Are there any other notable risks or issues around giving and taking guarantees and security?
In circumstances where only a small benefit to the guaranteeing/securing company can be shown, it is likely that there is no legitimate interest to the company in providing the guarantee/security.
Consequently, unless the company is part of a group or it is in a control relationship with the entity whose obligations it guarantees/secures, the granting of the guarantee/security may be declared null and void.
The Civil Procedure Code, article 1175, determines that the declaration of bankruptcy may be filed within two years of the occurrence of the facts established by law, even if the trader has ceased trading or died.
Luís Filipe Carvalho
Partner
DLA Piper Africa, Angola (ADCA)
[email protected]
T +244 926 612 525
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