3.4 Management of Working Capital 57Approximation of laws. The legal aspects of forfaiting depend on the regulation
of bills of exchange. One could say that there are two main legal systems which
regulate the law of bills of exchange.
The first group covers the countries which adopted the 1930 Geneva Uniform
Law on Bills of Exchange and Promissory Notes. The Geneva Uniform Law is
mainly based on French and German law. This system is adopted in most civil law
countries.
The second system applies in common law countries. It is based on the English
Bills of Exchange Act 1882 and the American Uniform Negotiable Instruments
Act 1896 (which was later replaced by section 3 of the UCC).
There are some important differences between those two systems.^135 In the civil
law system, the bill of exchange is subject to strict rules regarding its form and
content. In the common law system, those rules are more flexible. For example,
article 1 of the Geneva Uniform Law requires that the term “bill of exchange” be
inserted in the document. No such requirement exists in the common law system.
In common law, there is even a special kind of bill of exchange called “promis-
sory note”.
In the civil law system, the obligations arising from the bill of exchange are un-
conditional.^136 Under common law, the obligation from a bill of exchange can be
made subject to performance of another obligation.^137
An aval is a special kind of guarantee instrument recognised in the Geneva Uni-
form Law, that is, the civil law system.^138 The giver of an aval is bound in the
same manner as the person for whom it has become guarantor. For example, if the
buyer has accepted the bill, the bank avalizing the bill for account of the buyer as-
sumes the liability of an acceptor.^139
3.4.4 Particular Aspects of Securitisation
Introduction
There are two typical motivations for the issuance of asset-backed securities: fund
raising and credit risk transfer. Both can be achieved either through a true sale
securitisation or through a funded synthetic securitisation.
Securitisation is a financing technique that allows asset-rich firms to raise
lower-cost funding from the capital markets. From the perspective of the firm, it
could be described as a sophisticated form of factoring or discounting of debts.
The term “securitisation” describes a process whereby the revenue stream on a
segregated pool of receivables or other income producing assets, rather than being
(^135) Pejovic C, Civil Law and Common Law: Two Different Paths Leading to the Same
Goal, Victoria U of Wellington L R (2001) 32 pp 817–841 at 829–830.
(^136) Article 26 of the Geneva Uniform Law.
(^137) For example, section 19 of the Bills of Exchange Act 1882 provides that the acceptance
may be conditional.
(^138) Article 31 of the Geneva Uniform Law.
(^139) See Cranston R, op cit, pp 382–384.