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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 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 1.3% to 1.6% 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 movable assets pledge agreement. From January 1 2018, a valid and enforceable pledge over tangible movable assets can be created without the need to transfer possession. Generally speaking, all movable assets can be pledged, provided that they are determined or determinable, and tradable. It makes no difference whether the movable assets are:

  • tangible or intangible;
  • present or future; or
  • fungible or individualised or non-interchangeable.

The mere conclusion of an agreement between the pledgor and the beneficiaries of the pledge creates a valid pledge. A written pledge agreement is necessary for consumers and to prove the pledge’s existence. The movable assets pledge (a company’s entire business, excluding real estate) must be registered in the national pledge register. The pledge can no longer be granted only by entities with an EEA banking licence and costs significantly less. Depending on the amount secured, retributions can range between:

  • €20 (if the secured amount is less than €10,000) and €500 (if the secured amount exceeds €500,000) for the registration of the pledge; and
  • €12 (if the secured amount is less than €10,000) and €300 (if the secured amount exceeds €500,000) for a change of the registration in the national register.

The register can be consulted freely and costs €5 per (negative) search result and €5 per additional search result. However, the register must not be used improperly or for commercial reasons. To counter this risk, the pledgor and the buyer can access a history of the parties that have consulted their data during the last six months. Consultation for commercial prospecting is prohibited and parties involved may be held liable for any damages incurred.

The amount secured by the movable assets pledge can be freely determined by the parties but must be registered in the national pledge register. The value of the business, the amount of the loan and the associated costs are usually taken into account to determine the secured amount.

Following the introduction of the new pledge register, all existing business pledge agreements must be registered within 12 months after the entry into force of the New Belgian Pledge Law (ie, December 31 2018) in order to maintain their ranking. Until that date, a search of the relevant mortgage registry as the online national pledge register will be needed to provide conclusive evidence regarding the existing pledges of a company.

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.

Under the New Belgian Pledge Law, a pledge over receivables cannot be registered in the national pledge register and the parties can rely on only the current rules when pledging receivables.

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 (eg, 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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This article was co-authored by Kasper Van Landeghem.