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Banking & Finance Headlines: Doing Business in Belgium - Taking security over movable assets

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15/12/2017

New regime for taking security over movable assets enters into force on 1 January 2018

Taking security over movable assets in Belgium will become much more straightforward following the entry into force on 1 January 2018 of a new legislative framework adopted in 2013. Going forward, it will be possible for creditors to take a pledge on movable assets of a debtor by way of registration in an online National Pledge Register.

Not only is it expected that the new legal regime will boost asset-based lending into Belgium, the reform will also have a significant impact on structuring security packages in banking transactions involving Belgian entities. We highlight below the most significant changes brought about by the reform, and set out a few practical considerations in relation to the online National Pledge Register.

 

Key advantages of the new regime

Dispossession of pledged assets is no longer required
Under the current legal regime, transferring the physical possession of the assets to the pledgee or a third-party pledge holder is required in order to create a valid pledge. This is no longer required under the new regime. A pledge over movable assets can now be established through the registration in the National Pledge Register.

Use of pledged assets is possible
Unless otherwise agreed between the parties, the pledgor will be able to use the pledged assets. He will for instance be able to process any raw materials and dispose of pledged assets in the ordinary course of business. If pledged assets are assembled or commingled with other assets owned by a third party causing the pledged assets to no longer be identifiable, the pledge will not be affected. In case different creditors are the beneficiary of a pledge over specific assets, they will be entitled to exercise their rights in proportion to their respective entitlement to the pledged assets.

Pledge on a debtor’s business assets
Taking security over a debtor’s business assets is no longer reserved to licensed credit institutions. In addition, the restrictions stemming from the current legal regime with respect to pledges covering all business assets of a company (pand handelszaak/gage sur fonds de commerce) no longer apply. It will now be possible for instance to pledge 100% of a debtor’s stock (finished products (voorraad/marchandises en stock)), instead of only 50% under the current regime.

Significantly reduced costs
The cost of registering a pledge in the National Pledge Register will amount to maximum EUR 500 - a significant reduction in costs associated with security over movable assets, in particular for pledges on business assets. Any registration of a pledge in the National Pledge Register must include the amount of the liabilities that are secured by the pledge and for which the pledge is registered.


Online pledge register

A few practical considerations in relation to the online pledge register are set out below:

  • registration in the National Pledge Register is required in order to perfect a pledge;
  • fees for the registration of a pledge securing liabilities in excess of EUR 500,000 amount to EUR 500;
  • ranking of a pledge is determined by the date of registration in the National Pledge Register;
  • assignment of ranking of a right of pledge may be registered against payment of a small fee;
  • a registration of a pledge in the National Pledge Register is valid for a term of ten years but can be renewed for subsequent terms of ten years;
  • a registration can be amended or corrected against payment of a small fee;
  • registrations may be removed against payment of a fee of maximum EUR 200;
  • consultation of the National Pledge Register is possible against payment of a small fee;
  • anyone may consult the National Pledge Register but access is restricted to Belgian legal entities and Belgian nationals. Liedekerke as a law firm will have access to the National Pledge Register.

 

Further points to note

Pledge with dispossession remains possible
Although registration of a pledge in the National Pledge Register is likely to be the preferred option to establish security as from 1 January 2018, it remains possible to create a pledge over movable assets by way of dispossession and without registration in the National Pledge Register. If the relevant movable assets (e.g. commodities or quickly rotating stock of finished products) are for instance located at warehouses or sites operated by third parties used to act as a third party pledge holder, parties may still opt for a pledge by way of dispossession by transfer of the assets to such third-party pledge holder.

Simplified and more flexible enforcement
Prior court approval will no longer be required to enforce a pledge over movable assets. Subject only to giving prior notice of its intention to enforce, the pledgee will be able to enforce a pledge by selling or renting the pledged assets. Subject to the pledgor’s agreement, a pledgee will be able to enforce a pledge by appropriating the pledged assets.

Retention of title
Under the new legal regime, it will also be possible for creditors to register retention of title arrangements in the National Pledge Register.

Legal regime for pledges over receivables and financial collateral remains unchanged
The legal framework for taking security over receivables remains unchanged. A pledge over receivables cannot be registered in the National Pledge Register. The legal regime as regards financial collateral, i.e. security over financial instruments, bank claims and cash booked into bank accounts, also remains unchanged.

Authored by Freya Mareels
      




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