The securitisation market in Liechtenstein is not very active and therefore no specific types of assets and receivables may be allocated for securitisation purposes. In particular, to our knowledge, Liechtenstein banks are not currently active in securitisation for regulatory and practicable reasons.

Liechtenstein law does not provide for a specific regulation on types of asset classes that are generally prohibited from a securitisation. In theory, all assets that can be assigned and create a cash flow such as claims, loans or other receivables, may be included in a securitisation. The assignment of claims resulting from confidential legal relationships may be restricted unless the debtor consents to such assignment or waives their rights of protection of data/confidentiality arising from such legal relationship.

Regulation (EU) 2017/2402 laying down a general framework for securitisation, creating a specific framework for Simple, Transparent and Standardized (STS) Securitisation and amending Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012 (“EU Securitisation Regulation”), as amended, entered into force in Liechtenstein on 1 November 2022 and directly applies. The Regulation creates a uniform regulatory framework for securitisations in Liechtenstein for the first time.

In order to give effect to Art. 29 (“Designation of competent authorities”), Art. 30 (“Powers of the competent authorities”), Art. 32 (“Administrative sanctions and remedial measures”), Art. 33 (“Exercise of the power to impose administrative sanctions and remedial measures”) and Art. 34 (“Criminal sanctions”) of the EU Securitisation Regulation, Liechtenstein has passed the EEA-Securitisation Implementation Act (EWR-Verbriefungs-Durchführungsgesetz; “EWR-VDG”), which also entered into force on 1 November 2022.

Apart from the EU Securitsation Regulation, the relevant technical and implementing standards at the EU level and the EWR-VDG, there is no specific Liechtenstein legislation governing, for example, the civil, insolvency or tax law aspects in of securitisation. The assignment of claims, loans and other types of receivables is regulated in the Liechtenstein General Civil Code.

There is no developed securitisation practice in Liechtenstein. However, the public company limited by shares (Aktiengesellschaft) would be a type of company that may be ideally used for securitisation purposes.

As an EEA member state, Liechtenstein must implement the EU Securitisation Regulation (see question 3). The Liechtenstein Financial Market Authority (“FMA”, Finanzmarktaufsicht) is the competent regulatory authority responsible for overseeing compliance with all due diligence and reporting requirements as well as the adequacy of risk monitoring of securitization participants within the meaning of Art. 29 EU Securitisation Regulation.

The regulatory requirements and conditions set out in the EU Securitisation Regulation directly apply to securitisation transactions in Liechtenstein (see also, in particular, the answer to question 9).

Under national Liechtenstein law, securitisation as such is not a regulated activity. However, certain participants in a securitisation transaction have to be licensed under existing financial markets laws such as the Liechtenstein Banking Act (Bankgesetz). For example, the sponsor of a securitization transaction, if domiciled in Liechtenstein, has to be licensed as a bank or investment firm by the FMA.

Furthermore, confidentiality requirements of banks and other financial institutions under Liechtenstein law may prevent the disclosure of personal data of debtors and/or customers to a third party such as a Special Purpose Vehicle (SPV) without the prior consent of the customer.

Yes. Since the entry into force of the EU Securitisation Regulation in Liechtenstein, the concept of Simple, Transparent and Standardised Securitisation (“STS Securitisation”) has been introduced in Liechtenstein through Chapter 4 of the EU Securitisation Regulation.

A distinction is made if a securitisation transaction relates to a public offering or a private placement. In case of a public offering of securities, a prospectus in accordance with Regulation (EU) 2017/112 (“EU Prospectus Regulation”) has to be drawn up and approved by the competent regulator.

Within the scope of application of the EU Securitisation Regulation, originators, sponsors and SPVs are required to submit certain information and documents about the transaction to the competent authority and, if applicable, a securitisation repository. Additionally, originators and sponsors have to jointly notify the European Securities and Markets Authority (“ESMA”) where a securitisation meets the requirements of a STS securitisation.

Furthermore, certain participants in a securitisation transaction may have to be a licensed financial market participant or specifically licensed by the competent regulator or ESMA in accordance with the requirements of the EU Securitisation Regulation. In particular, a securitization repository has to be registered with the ESMA; a third party verifying compliance with STS requirements as well as an originator of an ABCP Program has to be licensed by the FMA or another competent regulatory authority in the EEA; the sponsor of a securitisation transaction has to be licensed as a credit institution or an investment firm in the EEA or a third country.

In addition, the securitisation transaction may be subject to the prospectus duty according to the Prospectus Ordinance.

Within the scope of application of the EU Securitisation Regulation, the originator, sponsor and SPV will have to make certain disclosures to holders of a securitisation position, the competent authorities, to a securitisation repository, if applicable, and, upon request, to investors. This disclosure requirement will apply to both public and private securitisations.

The EU Commission has issued technical standards implementing the disclosure requirement pursuant to the EU Securitisation Regulation (Commission Delegated Regulation (EU) 2020/1224), including a template for making the relevant disclosures to competent authorities and securitisation repositories (Commission Implementing Regulation (EU) 2020/1225).

In addition to the foregoing disclosure requirements, securitisation connected with a public offering may be subject to the prospectus duty in accordance with the EU Prospectus Regulation and therefore certain disclosure requirements apply to an issuer.

Within the scope of application of the EU Securitisation Regulation, the originator, sponsor or original lender of a securitisation has to retain, on an ongoing basis, a material net economic interest in the securitisation of not less than 5%. That interest has to be calculated at the source and determined by the notional value for off-balance-sheet items.

Where the originator, sponsor or original lender have not agreed between them who will retain the material net economic interest, the originator has to retain the material net economic interest. For this requirement, the originator must not be an entity that has been established or operates for the sole purpose of securitising exposures.

In addition to the foregoing requirements, participants in a securitisation like banks or investment firms may be subject to certain general capital requirements according to the Banking Act.

Institutional investors are specifically required to carry out due diligence prior to holding a securitisation position pursuant to Art. 5 of the EU Securitisation Regulation.

For the purpose of this provision, an institutional investor is a credit institution, an investment firm, an insurance undertaking or reinsurance undertaking, an occupational pension scheme under the scope of Directive (EU) 2016/2341, the EEA management company of an undertaking for the collective investment in transferable securities (UCITS) or an internally-managed UCITS or alternative investment fund (AIF) established in the EEA, or an alternative investment fund manager that manages or markets alternative investment funds (AIF) in the EEA.

Furthermore, an institutional investor may generally be subject to a duty of care with a view to investments under civil or company law or, in case of licensed entities, under relevant financial market regulations.

In particular, a legal entity going to invest in a certain financial product has to verify the adequate and proper character of an investment and to check whether such investment would violate the object of the entity, provisions of its articles or internal regulations.

In addition, securitisation positions may not be sold to retail investors domiciled in Liechtenstein, unless the seller has performed a suitability test in accordance with Art. 25 (2) of Directive 2014/65/EU (“MiFID II”) and is satisfied, because of the test, that the securitisation position is suitable for that retail investor, among other requirements (Art. 3 EU Securitisation Regulation). In this context, a retail investor is a non-professional client within the meaning of Art. 4 (1) (11) MiFID II Directive.

The administrative and criminal sanctions set out in Art. 32 and 34 EU Securitisation Regulation, respectively, apply in Liechtenstein by virtue of Art. 6 EWR-VDG.

According to Art. 4 of the EU Securitisation Regulation, a SPV must not be established in a third country that is listed as a high-risk and non-cooperative jurisdiction by the FATF and/or a third country that has not signed an agreement with Liechtenstein regarding the effective exchange of information on tax matters based on the OECD Model Agreement on the Exchange of Information on Tax Matters.

Apart from those requirements, there are no specific restrictions on the nature of securitisation SPVs. In theory, a public company limited by shares (Aktiengesellschaft) would be a type of entity to be used for securitisation purposes. Depending on the type of transaction, a SPV may be subject to the regulatory requirements of the Banking Act or the Prospectus Ordinance.

There is no specific law or developed practice in Liechtenstein to make a SPV bankruptcy remote. In theory, a SPV may limit its corporate object in its articles of association or, in addition to the corporate structure, non-petition, limited recourse and no-setoff provisions may be implemented in the contract with the counterparties.

Moreover, Liechtenstein trust law allows to form orphan owner structures, where the shareholder of an SPV is a trust controlled by a corporate trustee that is not affiliated with the originator. Unlike other jurisdictions, Liechtenstein trust law also allows Purpose Trust Structures.

There is no established practice in key forms of credit support in securitisation transactions in Liechtenstein. However, credit support might be provided by way of a subordination agreement with certain creditors or by way of over-collateralization. However, over-collateralization (difference between the value of the assets purchased and the purchase price paid to the originator) may trigger the risk of a challenge of the transfer by creditors of the originator (creditors´ avoidance within or outside insolvency proceedings).

A transfer of receivables requires a Share Purchase Agreement (SPA) between the assignor and the assignee and the effective assignment and transfer of the receivables to the purchaser. Furthermore, the sales price has to comply with the arms-length principle. The consent of the debtor is generally not required. In some cases (see question 2) the debtor has to consent to an assignment and transfer of the receivables to the purchaser.

However, to achieve a “true sale” of receivables governed by Liechtenstein law, the obligor has to be notified of the assignment. Otherwise, the obligor is allowed (to continue) to validly discharge their obligations under the agreement the receivables are based on.

Furthermore, the obligor generally has a right to set-off against the creditor of the receivable and against persons to whom the creditor has assigned, pledged, or otherwise used the credit claim as collateral unless they have waived their right to set-off in writing or in a legally equivalent form.

The same applies to the obligor’s rights arising from a bank’s duty of confidentiality, which generally prevent or restrict the bank from providing information on the credit claim or the obligor to a purchaser. The obligor must waive their right to confidentiality in writing or in a legally equivalent form.

If the obligor is a consumer, such a waiver may not be fully effective under Liechtenstein law or may be subject to a subsequent review by a Liechtenstein court.

In practice, acts or omissions detrimental to creditors of the originator are challenged within or outside of insolvency proceedings such as a transfer of assets without an arms-length consideration. The same applies to acts of an entity incorporated in Liechtenstein violating capital maintenance requirements.

The general data protection and confidentiality provisions applicable to financial institutions and certain professions such as lawyers, physicians etc. apply. In practice, banks usually have to obtain a waiver of confidentiality requirements from their customers before being able to assign and transfer loan obligations (see also question 17).

The EU Regulations governing rating agencies are directly applicable in Liechtenstein. The Liechtenstein CRA implementation law provides for additional provisions regulating the competent authority, their functions and powers, and penal provisions.

Due to its moderate corporate taxation on income and profits and a considerable number of double taxation treaties, Liechtenstein would be an attractive place to establish SPVs compared to other jurisdictions. There are in general no withholding taxes on dividends paid to investors, always subject to double taxation treaties.

However, the main tax issue concerning SPVs established in Liechtenstein is the Swiss stamp duty that is generally applicable in Liechtenstein. In addition, and depending on the structuring of the transfer, potential VAT on the transfer of assets/receivables and mitigation of VAT costs incurred as well as VAT on services provided to the SPV by a foreign service provider (reverse VAT for imported services) may have a negative impact on SPVs.

There is no specific cross -border securitisation legislation in Liechtenstein. However, due to its membership in the EEA the EU freedom of movement of capital and the EU freedom to provide services also apply in Liechtenstein.

Since the securitisation market is not very active in Liechtenstein, the securitisation market has currently no influence on such transition.

The entry into force of EU Securitisation Regulation in Liechtenstein has improved the regulatory framework for securitisations. Furthermore, less stringent confidentiality rules and a clarification of the conditions for insolvency-proof true sale securitisations by the legislator would generally facilitate the insolvency-remote sale of receivables by banks.

The general provisions of the civil law concerning contracts apply to a transfer of assets, including a true sale of receivables. Depending on the type of assets to be transferred, filings or formalities like the requirement of a written agreement, certification of signatures, notarial act or registration in public registers may apply (e.g., if a debt is secured by a mortgage, the transfer of the mortgage has to be registered in the land register).