Last call: creditors holding a pledge over business assets vested prior to 1 January 2018? Register now, or forever hold your peace

Available languages: FR NL

It’s been almost a year since the Law of 11 July 2013 on security interests on movable assets (“Act”) entered into force.

One of the major innovations of the Act was the introduction into the Belgian legal landscape of a so-called ‘non-dispossessory’ pledge. Inextricably linked to this non-dispossessory pledge, the same act also introduced a new method of perfection; an (autonomous) electronic pledge register. This means that the plain and simple registration of one’s security interest in the pledge register suffices as publicity measure for the purpose of third party opposability (with a few exceptions to this general rule). The moment of registration in the pledge register also fixes the order of priority of competing claims.

Along with the disappearance of the requirement of dispossession of the pledged asset (the general rule prior to the Act) the usefulness of the legal construct of the ‘pledge over business assets’ as envisaged by the law of 25 October 1919 (“pand op de handelszaak/gage sur fonds de commerce”) also disappears. The underlying rationale behind this construct was precisely to enable a non-dispossessory pledge, for the very simple reason that it would be somewhat shortsighted to take possession of those goods your debtor exploits in the ordinary course of business to generate the very profit that will allow him to pay off his debt.

The Act does away with this legal construct altogether. Instead, it introduces a uniform scheme that allows all movable assets, tangible or intangible, current or future, to be pledged (with a few exceptions). This broad category of eligible assets inevitably encompasses ‘business assets’, again underlining the redundant nature of the construct of a pledge over business assets. Prior to the Act, pledges over business assets could only be vested by financial institutions, by way of authentic deed and subsequent registration. Under the new legal framework, all creditors can vest a pledge over business assets. It is also worth noting that the new scheme allows for all available business stocks to be pledged (compared with the previous 50% ceiling).

A new scheme on security interests inevitably affects those who currently already hold such security interests. Existing holders of valid security interests will remain subject to prior applicable rules, except those who hold a traditional pledge over business assets, for whom there is a specific transitional arrangement provision under the Act. This transitional arrangement enables these pledge holders to register their pledge in the pledge register without losing their priority rank vis-à-vis other creditors, on the absolute condition they do so within 12 months of entry into force of the Act.

Eleven months have passed, so holders of a pledge over assets only have a few weeks left before the deadline to register their security interests and subsequently keep their rank. Those who register after 31 December will irrevocably lose their priority!

Simply put: you snooze, you lose!

Not registered yet? Do not hesitate to contact us.