The recent major Belgian law reform of security interests promotes the enforceability of a retention of title clause. Lenders, originators and factoring companies should be aware of this when contemplating factoring or receivables purchase arrangements with Belgian content.

1 Retention of title

The reform introduces a super priority right for retention of title clauses, meaning that the owner will prevail over any pledgee or assignee of the receivables. There is also a general recognition of retention of title clauses, inside and outside bankruptcy.

A new improvement consists of the possibility of registering the retention of title clause in the new public National Pledge Register. While this registration is not needed for the enforceability of a retention of title clause, it upholds your retention of title clause for sold assets that have become immovable by incorporation.

Finally, it is now also established that a retention of title will be upheld in case of commingling or processing of the sold assets under certain conditions.

2 Extended retention of title

Belgian law currently recognises an extended retention of title of a supplier on the on-sale receivable. It is confirmed that an extended retention of title will also benefit from super priority, which means that a supplier will prevail over a lender or factoring company in case of conflict.

The beneficial flipside for a lender or factoring company is of course that the collateral base of its client will now also be enhanced if their contracts provide for valid extended retention of title clauses. Accordingly, there is also an enhanced security position, specifically in case of reverse factoring.