Here is the article rewritten in Markdown format with proper headings, subheadings, and bullet points:
Notary Public Plays Crucial Role in Andorran Financial Transactions
In the small principality of Andorra, a notary public plays a vital role in facilitating financial transactions, particularly when it comes to the assignment of loans and sales of loan portfolios. According to experts, the notification of the assignment of loans is not mandatory under Andorran laws, but it is highly recommended to prevent the exercise of the transferee’s set-off right.
Assignment of Loans
The assignment of loans in Andorra allows for the transfer of specific security packages, including mortgages and pledges, along with the loans themselves. However, the exclusive transfer of specific loans is also permitted, depending on the scope of the transaction and the nature of the mortgage loans.
- Transfer of specific security packages
- Exclusive transfer of specific loans
Sale of Loans
The sale of loans, or “venda”, is a common practice in Andorra that involves the transfer of the full contractual position, including rights and obligations, from the seller to the purchaser. This process typically involves bespoke sale and purchase agreements (SPAs) that are tailored to the specific characteristics of the portfolio and the parties involved.
- Transfer of full contractual position
- Customized SPAs for each transaction
Novation
Contractual novation, or “novació”, is another mechanism for transferring loans in Andorra. Unlike an assignment, novation involves the termination of the contractual relationship between the transferor and the transferee (borrower) followed by the creation of a new contractual relationship between the transferee and the borrower.
- Termination of existing contract
- Creation of new contract
Debt Buy-Back
While debt buy-back transactions are not common in Andorra, experts note that they would be permitted under local laws as long as they do not qualify as financial activities. Debt buy-backs involve the direct purchase of loans by a borrower or sponsor.
- Direct purchase of loans
- Not considered financial activities
Public Acquisition Finance
Andorran laws do not provide specific rules or principles for mergers and acquisitions (M&As) or takeover transactions, unlike some other jurisdictions. Instead, parties are expected to negotiate agreements in good faith, with no provision for “certain funds” clauses that guarantee funding.
- No specific rules for M&As
- Parties must negotiate in good faith
Tax Considerations
Tax implications must also be considered when transferring loans in Andorra. For example, withholding tax applies at a rate of 10% on amounts paid to natural person lenders by legal persons who are tax residents in Andorra. Corporate Income Tax (Impost de Societats) also applies to the payments collected as interest by legal entities.
- Withholding tax: 10%
- Corporate Income Tax: applicable
Guarantees and Security
In Andorra, common forms of security include:
- First or second-ranking mortgages over real estate assets
- Pledges over shares of subsidiaries
- Pledges on bank accounts
Other types of security may be available depending on the specific circumstances of the transaction.
Notary Public Role
While notarisation is not strictly required for the creation of security interests in Andorra, it is advisable as a matter of best practice. In cases where effect against third parties is sought, notarisation is mandatory. A notary public plays a crucial role in facilitating financial transactions and ensuring that all necessary formalities are met.
- Notarisation: recommended but not required
- Effect against third parties requires notarization
As the financial landscape continues to evolve in Andorra, the importance of a well-functioning notary public system cannot be overstated. By providing a secure and efficient means of recording and verifying financial transactions, notaries play a vital role in supporting economic growth and stability in this small but important principality.