Improved control during enforcement of register pledges
The Belgian Parliament approved an amendment to the Pledge Act on 25 April 2019 aiming to give pledgees more control in case they wish to enforce a pledge. The amendment will be welcomed by many, as it resolves some practical concerns.
The register pledge in general
The Pledge Act, which entered into force on 1 January 2018, provided a much-needed overhaul of the Belgian movable assets security regime. Among other things, the Pledge Act abolished the dispossession requirement and created a National Pledge Register. The online Register provides for perfection of a pledge by way of straightforward registration. In such a way, the pledgor can remain in possession of its pledged assets without impacting the pledge. This would permit, for instance, continued trade with the pledged assets, benefiting the pledgor’s business.
Enforcement of a register pledge
The downside of this mechanism is that the pledgee has less control over the pledged assets in a (potential) enforcement scenario. The pledgee must provide the pledgor with prior notice when enforcing, triggering a 3- or 10-day waiting period. As the pledgor remains in possession of the pledged goods, its (non-)cooperation with the enforcement procedure can significantly impact the outcome & timing. In addition, if a pledgor initiates legal proceedings, enforcement proceedings are suspended.
More tools for the pledgee
The amendment provides the pledgee with two additional tools to obtain control over the pledged assets when enforcing a pledge.
First, during the notice period, the pledgee may instruct a bailiff to attach the collateral, thereby preventing the pledgor from taking adverse (legal) action with respect to such collateral.
In addition, the pledgee obtains the right to instruct a bailiff to take control of the collateral itself upon expiry of the notice period. The pledgor will, in such case, be obliged to surrender possession of the collateral to the bailiff. The pledgee can, however, only exercise this right to the extent the pledgor has not initiated legal proceedings regarding the enforcement proceedings during the notice period.
Finally, the suspending effect of legal proceedings initiated by a professional pledgor is now limited. Going forward, enforcement will only be suspended if suspension proceedings are initiated before the expiry of the notice period of 3 or 10 days.
Flexible and efficient enforcement
This development serves as another indication that the Belgian legislator continues to support a flexible and efficient enforcement environment, which further strengthens the Belgian market for secured financing.
MarcVermylenManaging Partner Belgium Attorney at Law
Marc Vermylen is managing partner of Loyens & Loeff Belgium and heads the Banking & Finance Practice Group in Brussels. He is recognised worldwide as an expert and influential lawyer in banking law and finance law.T: +32 2 743 43 15 E: firstname.lastname@example.org