(2) such insurance fund operation as guarantee, financing and investment, etc.

Equivalence of acquisition financing devices to security rights

Security for post commencement finance (paras. 103 and 104)

Attracting post commencement finance providing priority or security

Acquisition security rights include those that are denominated as security rights, as well as those that are denominated as retention of title, arrangements and financial leases.

The law should specify that a security right is created by agreement between the buyer, grantor or financial lessee (hereinafter referred to as the grantor ) and the seller, secured creditor or financial lessor (hereinafter referred to as the acquisition financier ) which is in writing and evidences the intent of the grantor to grant a security right or is accompanied by delivery of possession pursuant to the agreement and in accordance with recommendation 9.

Due to the absence or limited role of personal guarantees or securities provided by the project sponsors, project finance is said to be non recourse or limited recourse financing.

The availability of such security was considered crucial for the availability of financing for privately financed infrastructure projects.

(ii) The seller or financial lessor of the same encumbered asset that has retained title to it pursuant to an acquisition security right

The purpose of the provisions of the law on acquisition financing devices (sales with a retention of title arrangement, purchase money security devices and financial leases) is to

The law should provide that the priority, provided under recommendation 130, for an acquisition security right in inventory over a pre registered security right in the same goods applies to the proceeds of such inventory, provided that the acquisition financier notified pre registered financiers with a security right in assets of the same kind as the proceeds.

The deposit given by the customer, all the securities that have been purchased through securities lending and borrowing, and all the funds from the sales of securities are collaterals to the securities firm, and shall be deposit to the customer securities guarantee account or the customer funds guarantee account and credited to the customer s credit granting account.

Frequently, the only unencumbered assets that may be available for securing post commencement finance will be assets recovered through avoidance proceedings.

The law should provide that, in the case of default on the part of the buyer, grantor or financial lessee, the seller, purchase money secured creditor or financial lessor has, to the maximum extent possible, the same rights and remedies as the holder of a security right.

(b) Export Loan Guarantees guarantee schemes to support domestic and export financing for SMEs are generally operated by government agencies or non profit organizations.

The Multilateral Investment Guarantee Agency (MIGA), the newest member organization of the World Bank Group, facilitates investments through the provision of investment guarantees against the risks of currency transfer, expropriation, and war and civil disturbance.

It would be useful to consider ways in which investment risks would be shared by the parties with the backing of existing or future financial institutions.

(65) The insolvency law should enable a security interest to be granted for repayment of post commencement finance, including a security interest on unencumbered assets, including after acquired assets, or a junior or lower priority security interest on already encumbered assets of the estate.

The law should treat all devices that perform security functions as secured transactions, including the transfer of title to tangibles or the assignment of intangibles for security purposes, retention of title, financial leases and hire purchase agreements, except to the extent otherwise contemplated in recommendation 7 .

The insolvency law should provide that, in the case of the insolvency proceedings of the grantor, the acquisition financier has the rights and duties of a holder of a security right.

Article 50 A securities firm that carries out securities lending and borrowing business shall sign a securities lending and borrowing contract with the customer, and shall open a customer securities guarantee account with the securities registration and settlement organs, and a customer funds guarantee account with the designated commercial bank in the name of the securities firm in accordance with the provisions of the securities regulatory agency under the State Council.

The law should provide that an acquisition security right is subject to the recommendations in this Chapter regarding effectiveness against third parties and priority even if the acquisition financier (i) also has a security right in the goods securing non acquisition obligations of the grantor or (ii) has a security right in other assets of the grantor securing the payment obligation relating to the acquisition security right.

(c) Foreign exchange transactions, inter bank payment systems, transfer of security rights and transfer of economic assets

The insolvency law should enable a security interest to be granted for repayment of post commencement finance, including a security interest on an unencumbered asset, including an after acquired asset, or a junior or lower priority security interest on an already encumbered asset of the estate.

The insolvency law should establish the priority that may be accorded to post commencement finance, ensuring at least the payment of the post commencement finance provider ahead of ordinary unsecured creditors, including those unsecured creditors with administrative priority.

An insolvency law can recognize the need for such post commencement finance, provide authorization for it and create priority or security for repayment of the lender.

Other innovative financing mechanisms include credit guarantees, revolving funds and issuance of municipal bonds.

However, because secured transactions often involve parties and assets located in different jurisdictions, the Guide also seeks to address the recognition of security rights and title based security devices, such as retention of title and financial leases, effectively created in other jurisdictions.

For example, it was pointed out that it would be desirable to discuss the different types of security interest and the different types of asset that might be encumbered for the purpose of providing security and that in some legal systems the inalienability of public assets might constitute an obstacle to creating security interests in the context of privately financed infrastructure projects.

UNCDF will continued to serve as the policy advisor to the UNDP group to ensure consistent application of the best microfinance practices.

Parties, security rights, secured obligations and assets covered

The insolvency law should provide that, in the case of the insolvency proceedings of the grantor, the acquisition financier has the rights and duties of a holder of a security right.

The law should provide that, in order for a non possessory acquisition security right to be effective against third parties, the acquisition financier has to register a notice covering its right in the relevant security rights registry.

(b) Acquisition security right means a security right in an asset that secures the obligation to pay any unpaid portion of the purchase price of the asset or other obligation incurred to enable the grantor to acquire the asset.

(66) The law should specify that a security interest over the assets of the estate to secure post commencement finance does not have priority ahead of any existing security interest over the same assets unless the insolvency representative obtains the agreement of the existing secured creditor(s) or follows the procedure in recommendation 67.

The government is using a variety of instruments, including financial sector credit discipline, to rein in investment demand. Essentially, the government guarantee associated with financing public sector investment is being withdrawn as it should be.

The insolvency law should provide that, in the case of insolvency proceedings with respect to a buyer under a title retention arrangement, a grantor or a financial lessee, the seller, purchase money lender or financial lessor has the rights and duties of a holder of a security right.

For businesses that do not have strong, well established credit ratings, term loan financing will generally be available only if the business is able to grant security rights in its assets to secure the financing.

Article 61 The securities firm shall not provide financing or warranty to other people using the assets of the securities brokerage customers or securities assets management customers.

If the customer fails to make up the difference within the prescribed period, or fails to pay back the due debts of the securities lending and borrowing, the securities firm shall immediately dispose of its collaterals according to the agreement.

The types of securities that can be lent to the customer by the securities firm and can be bought with the funds lent to the customer by the securities firm, the types and coefficient of the securities that can be used as deposit, the time limit for securities lending and borrowing, the minimum guarantee maintenance ratio and the time limit for making up the difference shall be determined by the stock exchange.

Who guarantees our wages?

The law should specify that a security interest over the assets of the estate to secure post commencement finance does not have priority ahead of any existing security interest over the same assets unless the insolvency representative obtains the agreement of the existing secured creditor(s) or follows the procedure in recommendation 67.

These examples represent only a few of the numerous forms of secured credit transactions currently in use, and an effective secured transactions regime must be sufficiently flexible to accommodate many existing methods of financing, as well as methods that may evolve in the future.

In addition, the Guide is intended to cover a broad range of transactions that serve security functions, including those related to possessory and non possessory security rights, as well as transactions not denominated as secured transactions (such as retention of title, transfer of title for security purposes, assignment of receivables for security purposes, financial leases, and sale and leaseback transactions and the like).