On March 16 2011, the Plenum of the Supreme Arbitration Court of the Russian Federation (the “SAC Plenum”) published the Decree “On Several Issues on Applying the Pledge Legislation” – (the “Decree”).
The Decree clarifies the following issues:
- Out-of-court enforcement of a participatory share in a limited liability company under a pledge agreement made between an individual participant and a third party is not permitted.
- Alteration of the secured obligations or the maturity period of a secured debt (for example, as the result of altering the interest rate or final maturity date) does not result in the termination of a pledge.
- If a pledge agreement does not stipulate the interest rate and the procedure for payment, only the principal amount is secured under the credit agreement (the pledge agreement remains enforceable).
- At least one procedure for the out-of-court enforcement of a mortgage must be indicated as an essential condition of an out-of-court enforcement agreement.
- The procedure for the out-of-court enforcement of a pledge on movable assets is not an essential condition of an out-of-court enforcement agreement. Special attention is paid to the procedure of enforcement and alienation of a pledged asset.
The SAC found it necessary to adopt the Decree as a result of numerous issues that have arisen in respect of the enforcement of pledged assets, particularly in the post-economic crisis period.
The Ruling of the SAC Plenum should be taken into account when drafting pledge agreements.
[Decree No. 10 of the Plenum of the Supreme Arbitration Court of the Russian Federation “On Several Issues on Applying Pledge Legislation”, dated 17 February 2011]