Pledge on a business must be registered in the Pledge Register

As we have already stated in previous articles, the new Law on Movable Securities of 11 July 2013 and the National Pledge Register entered into force on 1 January 2018.

This law introduces a non-possessory pledge which allows people to give a pledge without having to hand it over to the creditor. Which is precisely why the Pledge Register was introduced at the same time: with the aim of making pledges and retention of title enforceable against third parties without having to hand over said property.

1. Legislation on pledges on a business and an agricultural privilege abolished

The introduction of the Pledge Register also obviated pledges on a business and agricultural privileges.

These legal concepts have been set up to enable the owners of a business or an agricultural enterprise to pledge a property without dispossession. Obviously they did not benefit from having to transfer their trade goods or agricultural goods to creditors in order to grant them a right of pledge. Pledges on a business with dispossession were possible in compliance with a number of legal provisions: pledges on a business were only possible with an authorised bank or credit institution, through a public or private instrument, registered in a special register of the mortgage office, . The pledgor used to have a retention obligation and could be criminally punished if he had fraudulently sold or relocated parts of the business enterprise that had been pledged.

2. Pledges on a business and an agriculture privilege provided in the new Law on Pledges 

From now on, pledge on a business will be enforceable against third parties by registration of the pledge in the Pledge Register.

The Law on Pledges stipulates that, unless more restrictive provisions were agreed in a pledge agreement,

• the pledge on a business relates to the whole of the goods that make up the business;
• the pledge on an agricultural exploitation, relates to the entirety of the goods serving this agricultural exploitation.

3. Rights and obligations of the pledgor and pledgee

As before, the pledgor still has certain obligations.

He must take care of the pledged goods.

However he will remain entitled to a reasonable use thereof in accordance with their intended purpose.

For example, the pledgor has the right to process goods intended for that purpose. In that case, the newly created good will be encumbered by a pledge. In addition, the pledgor must grant the pledgee the right to inspect the encumbered goods at any time.

In the event that goods of third parties are used for such processing, and the separation of these goods is either impossible or not economically justifiable, the pledge shall encumber the newly created goods, if this is the most important or has the greatest value. In that case, the third party has a claim for enrichment without cause on the pledgee.

4. Transitional measures for pledges on business enterprises and agricultural privileges

It is clear that the abolition of the specific legislation regarding pledges on businesses and agricultural privileges affects debtors who had already received pledges on businesses or agricultural privileges before the new Law on Pledges entered into force.

Which is why the Law on Pledges provides for a transitional period of twelve months in which creditors can register the encumbered goods in the pledge register, thus letting them maintain their ranking in relation to other debtors. They have until 31 December 2018 to do this.

Note! If this has not happened by the deadline date, a new registration can still be made, but the ranking will be irrevocably lost.