Transactional issuesSPV forms
Which forms can special purpose vehicles take in a securitisation transaction?
A securitisation special purpose vehicle (SPV) is usually established as a private company with limited liability for the sole purpose of the securitisation. The articles of association should reflect this in the objects clause.SPV formation process
What is involved in forming the different types of SPVs in your jurisdiction?
There are limited specific formal or procedural requirements to establish a securitisation SPV. In general, the rules of Dutch corporate law (mainly Book 2 of the Civil Code) apply when establishing a securitisation structure.
The involvement of a Dutch civil law notary is required to incorporate a private company with limited liability and any amendments to its articles of association. In addition, the SPV must be registered with the Chamber of Commerce.
A private limited liability company in the Netherlands has no minimum capital requirements and the costs of establishment are limited. Incorporation can usually be concluded within days or a few weeks.Governing law
Is it possible to stipulate which jurisdiction’s law applies to the assignment of receivables to the SPV?
Choice-of-law clauses in contracts are recognised and enforced in the European Union on the basis of EU Regulation 593/2008 (Rome I). Pursuant to Rome I, the contractual aspects of the assignment of receivables are governed by the law applicable to the assignment agreement.
The Supreme Court has ruled that Rome I also applies to property law aspects of the assignment of a receivable under Dutch law, such as the ability to invoke the transfer against debtors. As a result, a choice-of-law clause under Dutch law can stipulate the applicable law on an agreement of assignment as well as on the assignment itself.
Dutch law is generally supportive of the parties’ choice of a foreign law, provided that it does not conflict with mandatory principles of Dutch law.Asset acquisition and transfer
May an SPV acquire new assets or transfer its assets after issuance of its securities? Under what conditions?
Dutch law does not prevent an SPV from acquiring new receivables after the issuance of its securities. However, the transaction documentation will generally impose such limitations or subjects acquiring new assets to certain conditions.Registration
What are the registration requirements for a securitisation?
There are no registration requirements for securitisations.Obligor notification
Must obligors be informed of the securitisation? How is notification effected?
An assignment of receivables need not be notified, as Dutch law allows for a transfer by way of an undisclosed assignment. This requires either a simple deed and registration with the Dutch tax authorities or a deed in notarial form executed in front of a Dutch civil law notary. However, the transfer of a receivable is effective against the relevant debtor only after notice thereof to that debtor. This means that before notification, a debtor can validly pay and be discharged of its payment obligations only if it makes a payment to the assignor (ie, the originator).
In a securitisation transaction, the relevant debtors are not usually notified until the occurrence of an assignment notification event. Before such an event, the originator undertakes to transfer the collections on a regular basis to the SPV.
The assignment notification events are set out in the transaction documentation and usually include:
- insolvency events;
- rating downgrades; and
- payment defaults.
What confidentiality and data protection measures are required to protect obligors in a securitisation? Is waiver of confidentiality possible?
The EU General Data Protection Regulation (GDPR) and the Dutch GDPR Implementation Bill apply to the processing of personal data. Therefore, the general principles and requirements of the GDPR apply.
Additional specific requirements may apply pursuant to the GDPR Implementation Bill. These requirements predominantly relate to restrictions on the use of social security numbers.
For the securitisation of residential mortgage loans, personal data typically remains with the originator and the servicer of the mortgage loans (or even an independent third party, such as a civil law notary) and is shared with the SPV and security trustee only in the case of an assignment notification event.
The GDPR does not prevent individuals from contractually waiving their rights under this regulation.Credit rating agencies
Are there any rules regulating the relationship between credit rating agencies and issuers? What factors do ratings agencies focus on when rating securitised issuances?
Credit rating agencies are regulated by the EU Credit Rating Agencies Regulation (462/2013) amending EU Regulation 1060/2009. The regulation also provides certain requirements for issuers of structured finance instruments (eg, securitisation SPVs).
If a prospectus is prepared in connection with the issue of a securitisation transaction and reference is made to a credit rating, the SPV must ensure that the prospectus also includes clear and prominent information stating whether such credit ratings are issued by a credit rating agency established in the European Union and whether such an agency is registered under the EU Credit Rating Agencies Regulation. In addition, for a structured finance instrument, the SPV must solicit a credit rating of at least two credit rating agencies, which cannot belong to the same group of companies or be otherwise connected. One of these credit rating agencies should have a market share of no more than 10%; otherwise, the SPV must document that its credit rating agencies hold a larger market share.
Although each credit rating agency has its own risk models, methodology and procedures, in general the credit rating assigned by credit rating agencies reflects the issuer’s ability to meet its payment obligations of interest and principal in a timely manner, pursuant to the terms and conditions of the notes.
Typically, the relevant credit rating agency assesses whether the losses for investors are expected on the basis of the historical payment performance of the assets.Directors’ and officers’ duties
What are the chief duties of directors and officers of SPVs? Must they be independent of the originator and owner of the SPV?
Usually a corporate service provider is appointed as managing director of an SPV. Such service provider will contractually undertake, in the various business agreements with respect to the transaction, to restrict the SPV’s business activities in order to shelter it from exposure to unnecessary risks. The corporate service provider is often also the director of the founding shareholder. However, since off-balance sheet treatment of securitised assets is usually envisaged by the originator, the SPV’s directors are usually fully independent from the originator. However, this is typically a condition imposed by rating agencies and not a regulatory requirement under Dutch law.Risk exposure
Are there regulations requiring originators and arrangers to retain some exposure to risk in a securitisation?
Yes – pursuant to the EU Securitisation Regulation (2017/2402/EU), the originator, the sponsor or the original lender must retain an economic interest in the securitised assets of at least 5% on an ongoing basis. If these entities do not agree between them who will retain the interest, the obligation rests on the originator. There is no such obligation on arrangers, unless they are an originator, sponsor or original lender.