On 15 December 2016, the Belgian Parliament approved a bill (the "Amending Act") amending the act on in rem security interests in movable assets (the "Security Interests Act"). The Security Interests Act was adopted in July 2013, and its entry into force was originally scheduled for 1 December 2014. However, practical difficulties in setting up a national pledge register led to the postponement of its implementation. Due to further delays, the Belgian legislature decided to postpone implementation for another year, i.e. until 1 January 2018 at the latest. In addition to this postponement, the Amending Act addresses a number of outstanding issues and introduces important changes to the Security Interests Act.
Recap of the Security Interests Act
The Security Interests Act, a much needed modernisation of the statutory framework governing security interests in movable assets, codifies certain principles and introduces fundamental changes.
One of the most important changes introduced by the Security Interests Act is the abolishment of the cumbersome dispossession requirement to establish a pledge of movable assets. The Security Interests Act provides for the possibility to create a pledge of movable assets through mere agreement between the parties, which can be perfected by means of either (i) filing with the national pledge register or (ii) dispossession of the pledged assets, as is currently the case.
Further Postponement of Implementation
The implementation of the Security Interests Act was initially scheduled for 1 December 2014, but was subsequently postponed until 1 January 2017. The main reason for the postponement was that the establishment of a national pledge register took longer than expected. Due to further delays the implementation of the Security Interests Act has been postponed once again until 1 January 2018, at the latest. If the pledge register is available earlier, however, the Belgian government can decide to implement the Security Interests Act before that time.
The changes introduced by the Amending Act result from consultation with experts and stakeholders and seek to address a number of practical and technical issues.
Pledges of receivables
One key change is that the possibility to establish a pledge of receivables by recording the pledge in the pledge register has been abandoned.
Consequently, the current rules will remain in effect. A pledge of receivables is perfected by entering into a pledge agreement. In order to (i) ensure the enforceability of the pledge against the debtor and (ii) establish the priority of the pledge vis-à-vis other creditors and third parties with conflicting rights, the pledge must be notified to, or acknowledged by, the debtor.
It should be noted that receivables can be included in a registered pledge to the extent they form part of a business pledged as a universality of goods (floating charge).
Access to the national pledge register
Another key change concerns access to the national pledge register.
Under the Security Interests Act, access to the pledge register was originally limited to certain categories of persons. Such restricted access was, however, deemed inconsistent with the purposes of the reform, namely to enhance efficiency and transparency.
Despite the Privacy Commission's opinion to the contrary, the Amending Act now provides for general access to the national pledge register, upon the submission of a valid request and the payment of a (nominal) fee.
Retention of title
The Amending Act introduces a change with respect to retention of title. A retention of title can be recorded in the national pledge register, albeit registration is not required for its validity or enforceability. Registration of a retention of title may be useful when it comes to resolving conflicts with a mortgage creditor in the event the goods in question become immovable through incorporation.
A posteriori judicial review
Simplified enforcement proceedings (which are largely based on the procedure set out in the Financial Collateral Act) are available for pledges by non-consumers. In principle, enforcement will no longer require prior judicial approval. However, at any time during the enforcement proceedings, an interested party can petition the attachments judge if it objects to the manner in which the pledge is being or was executed or the proceeds distributed.
Whilst the Security Interests Act already provided for the possibility of a posteriori judicial review, the Amending Agreement shortens the period during which an interested party may file a petition requesting such review. The petition must be filed within one month (rather than one year as initially provided) after notification of the completion of enforcement or three months if the interested party did not receive a notification. This change is expected to result in greater legal certainty.
Assets deemed immovable due to their purpose or use
Under the Security Interests Act it was unclear whether movable assets considered immovable due to their intended use or purpose at the time of entering into the pledge agreement could be pledged. The Amending Act clarifies this issue by providing that such assets may indeed be pledged.
Before the national pledge register is up and running and the new rules on in rem security interests in movable assets enter into effect, a number of outstanding issues concerning the pledge register and related costs must be resolved by means of implementing decrees. We will be sure to keep you informed of further developments in this regard.