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Limited recourse: Difference between revisions
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In the immortal words of the East Enders: “Leave it Phil! Leave it! He's not worth it.” | In the immortal words of the East Enders: “Leave it Phil! Leave it! He's not worth it.” | ||
===Formulations=== | |||
The following, in the linguistic mush you can expect from [[Mediocre lawyer|securities lawyers]], are the sorts of things you can expect the [[limited recourse]] provision to say: | |||
*'''Recourse limited to segregated assets''': your [[Limited recourse|recourse]] against the [[SPV]] will be strictly limited to those assets that are ring-fenced for the particular deal you are trading against. This might be: | |||
**ring-fenced by {{tag|security}} and {{tag|contract}} (in an old-style [[repackaging]] with a regular [[LLC]]) — there there is a subtle trade off between security over your assets (preferring your claim against all other comers) and limitation of that claim to those secured assets; or | |||
**by means of a specialist corporate structure providing for segregation of the corporate personality into little cells which may<ref>such a company and [[incorporated cell company]]</ref> or may not<ref>Such a company a [[segrtegated portfolio company</ref> have their own [[legal personality]] (if the [[SPV]] is a [[segregated portfolio company]] or an [[incorporated cell company]]); | |||
*'''No set-off or netting between cells''': Netting and set-off will be limited to the specific cell you are facing: this means if your deal goes down the others can continue unaffected — boo — ''and vice versa'' — hooray. | |||
*'''Extinction (or non-existence) of outstanding debt''': following total exhaustion of all assets after enforcement, appropriation, liquidation and distribution, and all claims subsequently arising form those assets, your outstanding unpaid debt will be “extinguished”. | |||
**Here the intention is that you will at no point have legal grounds for seeking judgment, and thereafter commencing bankruptcy proceedings, for that unpaid amount once your own cell is fully unwound and its proceeds distributed. | |||
**'''Pendantry alert''': some sniff at this “extinction” language, fearing it implies that there was ''once upon a time'', until extinction, a debt for an amount which the company was theoretically unable to pay — meaning that the company was, for that anxious moment in time, [[technically insolvent]]. These people — some hail from [[Linklaters]] — prefer to say “no debt is due” than “the debt shall be extinguished”. | |||
*'''A proceedings covenant''': You must solemnly promise never to set to put the [[SPV]] into insolvency proceedings. If you agree to all the foregoing, you should have concluded you have no literal right to do so, so this shouldn't tax your conscience too greatly. | |||
===See also=== | ===See also=== | ||
*[[Bankruptcy remoteness]] | *[[Bankruptcy remoteness]] | ||
*[[Special purpose vehicle]] | *[[Special purpose vehicle]] | ||