Civil Law Countries
No civil law country recognizes a unified security interest remotely similar to the broad U.S. security interest or the English floating charge, let alone a family of specialized security interests that can together attach the same types of property. The two countries that come closest are the Netherlands and Germany, but even then, their equivalents are overly hypertechnical, require mountains of expensive paperwork to create multiple security devices (the very evil that UCC Article 9 was designed to address) and are still narrower than Article 9.
Most civil law countries recognize some kind of security interest, but it is normally severely restricted in that it applies only to certain types of movable property, the property has to be specifically described in rigorous detail, the creditor has to publicize the interest in a burdensome fashion, the creditor's enforcement rights upon default are quite weak, and so on. Even worse, the concept of a floating lien that attaches to after-acquired property and accounts receivable is either unavailable or is tightly restricted in scope in most civil law countries.
Unfortunately, many civil law countries do not recognize security interests or, for that matter, priority among creditors, with the result that loans are either priced accordingly as unsecured debt or are simply unavailable. This is one reason why it is so difficult for entrepreneurs to raise money (whether by way of equity or debt) and build startups in much of the world. In those countries, investors are always essentially unsecured and are thus hesitant to invest, and in event of default are more likely to resort to extralegal methods for recovery (or, if all the money is gone, revenge).
Read more about this topic: Security Interest
Famous quotes containing the words civil, law and/or countries:
“... there was the first Balkan war and the second Balkan war and then there was the first world war. It is extraordinary how having done a thing once you have to do it again, there is the pleasure of coincidence and there is the pleasure of repetition, and so there is the second world war, and in between there was the Abyssinian war and the Spanish civil war.”
—Gertrude Stein (1874–1946)
“And what other great nation has statutes and ordinances as just as this entire law that I am setting before you today? But take care and watch yourselves closely, so as neither to forget the things that your eyes have seen nor to let them slip from your mind all the days of your life; make them known to your children and your children’s children...”
—Bible: Hebrew, Deuteronomy 4:8,9.
“General education is the best preventive of the evils now most dreaded. In the civilized countries of the world, the question is how to distribute most generally and equally the property of the world. As a rule, where education is most general the distribution of property is most general.... As knowledge spreads, wealth spreads. To diffuse knowledge is to diffuse wealth. To give all an equal chance to acquire knowledge is the best and surest way to give all an equal chance to acquire property.”
—Rutherford Birchard Hayes (1822–1893)