On 25 July 2014, the Parliament of the Republic of Moldova (Moldova) adopted Act No. 173/2014 on amending and supplementing of certain legal acts (Act No. 173). Act No. 173 will enter into force on 8 November 2014 and will inter alia change the Act No. 449/2001 on pledges (Pledges Act). The effected changes will have a direct impact on both guarantees issued before the entrance into force of the Act No. 173 (which will have to be dealt under the new legal provisions) and on obligations to be secured under the new legal frame. Act No. 173 is also meant to introduce a series of novelties into Moldovan legislation.
Some of the novelties are:
Controlled Pledge on Pledgor’s Bank Accounts
Under Art.25¹ of the Pledges Act, a pledgee may benefit from a pledge over a pledgor’s cash in various accounts (current, deposit, etc.) subject to either the registration into the Register of Real Guarantees (Register) of such pledge, or the receipt of a controlled pledge over the pledgor’s bank accounts. The notion of controlled pledge on pledgor’s bank accounts did not exist in the former legislation.
A controlled pledge on bank accounts does not require registration into the Register and is instituted by one of two means:
- the pledgee is a local commercial bank and the pledged account is open with the pledge: in such case, the pledge is effective as of the moment of execution of the pledge agreement; or
- the pledgor, the pledgee and the commercial bank in which the pledgor has its accounts placed enter into a control agreement (RO contract de control), whereby the pledgee receives control over the pledgor’s cash: in such case, the pledge becomes effective as of the moment of the entrance into force of the control agreement.
Unless the control agreement provides otherwise, the pledgor is still entitled to the use of cash from its pledged bank account.
Under Moldova’s banking secret legislation, local banks are entitled to deny third parties access to knowing whether a specific client’s bank accounts are under controlled pledge. In practice, this means that a controlled pledge over bank accounts is opposable only among the three signatories of the control agreement.
Register of Pledges Turned Into the Register of Real Guarantees
With the entry into force of Act No. 173, the former Register of Pledges will be renamed as the Register of Real Guarantees – Registrul garanțiilor reale mobiliare (the Register). Under the Act, all pledges instituted with respect to all movable goods, except for controlled pledges on bank accounts, are to be registered into the Register. Furthermore, the Register has been declared as the only officialsource of information regarding guarantees instituted vis-à-vis all movable goods, including the ranking of such guarantees. Hence, as of 8 November 2014, pledges over such movable goods as trademarks, shares, and invention brevets are to be also registered only into the Register. However, pledges over real estate will continue to be registrable with local real estate registers.
As previously, the Register will be kept by the Ministry of Justice, whereas the Government (in a form of a regulation approved by means of a Governmental Decision) shall regulate its functioning. Act No. 173 leaves the possibility for the Government to include new categories of persons with active access (operators) to the Register. While only notaries have had the right to register as operators to date, as of 8 November 2014, the Government is entitled to enlarge the list of persons eligible for being operators. It remains to be seen whether the local Government will enlarge the list of eligible operators.
Also, the Act simplifies the application to register a pledge, which will have to contain:
- information on the pledgor, the pledgee and the administrator of the pledge (if one appointed);
- a general or detailed description of the pledged movable goods;
- an interdiction on further pledges (if agreed by the involved parties);
- an express specification that the pledge is being instituted over the entire enterprise (should that be the case);
- the signatures of the pledgor and the pledgee.
Opposability of Financial Leasing Agreements
With the Act’s entry into force, what was previously impossible will now be possible. The recent amendments to the legislation grant the right of both the lessor and the lessee to a financial leasing agreement to register (each separately) their relationship into the Register (provided that the object of financial leasing is a movable good).
By general rule, rights vis-à-vis a concrete movable good – the object of a financial leasing agreement - become opposable towards third parties as of the moment of registration of such into the Register.
Foreclosure of Pledges Made Faster
As previously, in case of the foreclosure of a pledge, pledgees are not entitled to directly enter into the property over pledged goods (with the exception of cash); however, in the first instance, they [i.e. pledgees] must enter into goods’ possession (posesiune) and, in the second instance, to dispose of such goods in favor of third parties.
The novelty introduced by Act No. 173 lies in the fact that, in addition to the court means to enter into possession of goods already provided by the former legislation, pledgees are also entitled to directly request a bailiff to foreclose and pass the good to the pledgee for further sale. While court formalities shall no longer be required, such a possibility is subject to the following conditions:
- the pledgor expressly consented in the pledge agreement that the pledgee may enter into the goods’ possession without court intervention; and
- the pledgee has duly served on the pledgor the notice of foreclosure (as provided by the law) and registered such notice into the Register.
At first glance, one may say that the modifications discussed above were made at the initiative of local commercial banks. Indeed, in connection with a series of norms, local commercial banks are set to enjoy an additional comfort with the implementation of these changes. Still, one should also agree that the changes are oriented at making the overall sphere of business transactions friendlier and at reducing the potential for bad-faith actions. At the same time, the whole process remains quite formal in a series of aspects. It remains to be seen how the latest changes will be applied in practice, especially by bailiffs -- who, as practice shows, are not always as transparent as they should ideally be.