sou 1999 1 - Regeringen

SOU 1999:1 Summary 41
for security which did not have any major significance for the decision to
extend credit. The proposal will probably not lead to any amendment to the
legislation (compare Ot Government Bill no. 26 1998-99).
The Committee has further noted that there is no corresponding instrument
to the floating charge in many countries and that the banks in such
countries must, in addition, accept that, in conjunction with a bankruptcy,
stock in trade and receivables primarily go to suppliers according to the
rules governing retention of title which are more generous than in Sweden.
Thus, in Germany suppliers often have a better right than the banks to stock
in trade and outstanding accounts receivable which arose in conjunction
with sales of the goods through expanded retention of title clauses, while the
banks have better rights than creditors without priority due to the fact that
the banks obtain security with secondary priority in the debtors’ current and
future stock in trade and accounts receivable, without the debtor being deprived
of the ability to deal with his property, and without the security being
made public. In reality, this results in the banks acquiring the superior
rights in a fraction of the value of what in Sweden constitutes the basis for
the business mortgage.
The Committee has obtained legal-economic studies from Theodore Eisenberg
(Cornell Law School, USA), Clas Bergström (the Stockholm School
of Economies) and Stefan Sundgren (the School of Economics, Vasa, Finland)
and Karin Thorburn (Dartmouth College, USA). The Committee has
also studied other legal-economic literature, inter alia, regarding consideration
of amendments to the U.S. insolvency legislation (Uniform Commercial
Code, article 9, see no. 6 of 82, Cornell Law Review 1997).
In the Committee’s evaluation of the business mortgage, the Committee
has assumed that the business mortgage does possess certain significance in
lending. When the risks are deemed to be too great, they cannot be compensated
with interest where the business only has a normal level of profitability.
However, lending to businesses in Sweden is the most profitable investment
for Swedish banks, and somewhere the deposits must receive interest.
A transition to other forms of security is not simple, since fixed assets
are already financed through instalment payment purchases and leasing,
and since a charge over stock in trade and accounts receivable requires that
the business give up its ability to deal with the assets (compare the Danish
views). Considering the prevailing foreign conditions, the Committee assumed
that a limitation on the underlying property in a business mortgage
would not materially diminish the availability of credit to enterprises. In
addition, it has been assumed that a limitation would lead to loans increasingly
being directed to businesses with the best profitability prospects,
rather than to those which can offer the best security.