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Asset classes used as collateral for security

Real estate

Can security be granted over real estate? If so, what are the most common forms of security granted over real estate and what is the procedure?

Yes. Security over real estate is created by entering into a in Dutch, French or German language mortgage deed to be executed before a notary. The notary will then register the mortgage with the tax authorities and have it recorded in the appropriate mortgage registers of each judicial district in which the real estate is located.

A mortgage incurs certain costs (eg, notary fees, registration rights and mortgage registry fees), which are approximately 1.7% to 1.9% of the amount secured by the mortgage. The amount secured by the mortgage can be freely determined by the parties. To limit – or at least postpone – the costs associated with a mortgage, the parties may limit the amount secured by it and cover a significantly higher amount by way of a mortgage mandate. The value of the real estate, the amount of the loan and the associated costs are usually taken into account to determine the secured amount. A mortgage mandate is not a security interest and offers no right of priority; it is only a power of attorney to create additional mortgage(s).

Machinery and equipment

Can security be granted over machinery and equipment? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Yes. Security over immovable machinery and equipment may be created by a mortgage deed.

Movable machinery and equipment is often secured under a business pledge agreement. The business pledge agreement may be entered into before a notary by way of a deed, but this is not required. The business pledge must be registered with the tax authorities and recorded in the appropriate mortgage registers. A business pledge is a pledge over a company’s entire business (excluding real estate and 50% of the stock inventory). A business pledge can be granted only to an entity that has an EU banking licence or certain financial institutions. A business pledge incurs certain costs (eg, registration rights and mortgage registry fees), which are approximately 0.6% to 0.8% of the amount secured by the business pledge. The amount secured by the business pledge can be freely determined by the parties. To limit – or at least postpone – the costs associated with a business pledge, the parties may limit the amount secured by a business pledge and cover a significantly higher amount by a business pledge mandate. The value of the business, the amount of the loan and the associated costs are usually taken into account to determine the secured amount. A business pledge mandate is not a security interest and offers no right of priority; it is only a power of attorney to create additional business pledge(s).

Theoretically, it is also possible to create a separate pledge over machinery and equipment, but such security is valid and effective against third parties only if possession over the secured assets has been transferred to the pledgee or a third-party pledge holder (which is often impossible in practice). Once the New Belgian Pledge Law enters into force, it will be possible to create a valid and enforceable pledge over tangible movable assets without the need to transfer possession.

Receivables

Can security be granted over receivables? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Yes. Security over receivables is granted under a pledge agreement that need not be notarised. To the extent that Belgian law applies, the pledge will be valid and effective against third parties (except the debtor of the pledged receivables) once the pledge agreement has been entered into. The pledge will be effective against the debtor of the pledged receivables only if the debtor has been notified or has acknowledged the pledge. 

Financial instruments and cash

Can security be granted over financial instruments? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Yes. Security over financial instruments is created by entering into a pledge agreement that need not be notarised. A pledge over registered shares is valid and effective against third parties once the pledge has been registered in the company’s share register. A pledge over book-entry shares is valid and effective against third parties once the shares have been transferred to a special pledged account held by the pledgee or the pledgee’s representative.

Can security be granted over cash deposits? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Yes. Security over cash deposits (ie, money credited to an account held with a credit institution or other financial institution) is created in a similar way to a pledge over receivables. The pledge over cash is valid and effective against third parties once the pledge agreement has been entered into. The pledge will be effective against the credit institution or financial institution holding the pledge account only if the institution has been notified or has acknowledged the pledge.

Intellectual property

Can security be granted over intellectual property? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Yes. Security over IP rights is created by entering into a pledge agreement that need not be notarised. A pledge agreement over IP rights may need to be notified or registered with the competent authorities, depending on the type of intellectual property being pledged.

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