A leading Hungarian commercial bank had been offered securities held on a securities account owned by a “Sparverein,” a specific Austrian legal entity similar to a savings club, as collateral for a credit agreement with a separate entity. As the bank was unfamiliar with the corporate form of a Sparverein, and the laws applicable for such entities, it raised several questions and the bank wanted to ensure that its collateral would be valid and enforceable. These questions, among others, related to whether the Sparverein is allowed to offer its funds as collateral in general, and with respect to loans granted to a third party in particular, as well as the enforceability of the security deposit in a liquidation procedure or any other insolvency situation.
The bank, being a key client of ILN Hungarian member, Jalsovszky Law Firm, approached the firm to get their assistance with the matter in Austria. Partner Gábor Pázsitka contacted Dr. Andreas Bauer of the ILN’s Austrian firm, Brauneis Klauser Prändl Rechtsanwälte GmbH (bkp), and following the necessary administration, bkp examined the case further and learned it would be a challenging one.