1. Scope

The new law will apply to all moveable assets, including both tangible and intangible assets. It therefore impacts pledges on any or all business assets such as inventory, intellectual property rights, receivables and financial instruments. Securities on real estate (such as mortgages and mortgage mandates) or personal securities are not affected by the new law.

It is to be noted that the new law does not impact the Belgian financial collateral law of 2004, meaning that financial securities will be governed by both the new law (on general provisions) and the financial collateral law (on certain specific aspects).  

2. Validity of the pledge between parties – absence of dispossession

As far as validity is concerned, a pledge over moveable assets will no longer require any dispossession of the concerned pledged assets by the pledgor (i.e. with physical remittance to the pledgee or a third party pledge holder). 

The pledge will therefore exist between the parties (i.e. the pledgor and the pledgee) solely through their consent. 

The written agreement will have to expressly indicate (i) the secured obligations, (ii) the pledged assets and (iii) the maximum amount of the secured obligations covered by the pledge. The latter information is not standard under current drafting practice. Lenders will likely try to mention the highest possible amount, but such amount is likely to determine the tax duties to be paid by the pledgor upon registration of the pledge (see below). Commercial discussions with the borrower should be expected in that respect.  

3. Enforceability vis-à-vis third parties 

3.1. Registration

One of the main objectives of the new regime is to enable the borrower/pledgor to pledge assets while at the same time keeping possession of such assets (which is not possible under the existing regime, except for the business floating charge).

Under the existing regime, dispossession of the pledged assets is the key element in rendering a pledge enforceable vis-à-vis third parties. In future, such enforceability will be ensured via registration of the pledge in a (unique) electronic register held with the Federal Department of Finances. Such register will be available online and third parties will therefore be able (under certain conditions linked to data privacy) to check the existence of possible pledge(s) on a counterparty’s assets.

As the pledgor will be allowed to keep the free disposal of the pledged assets, the new regime provides for certain protective measures in favour of the pledgee (duty of care, follow-up right, inspection right and contractual prohibitions available).

3.2. Pledge with dispossession 

Registration of the pledge will not be the only way to render a pledge enforceable vis-à-vis third parties. Indeed, parties will retain the power to structure their pledge as of today, i.e. by means of the dispossession of the pledged assets. In such a case, the dispossession will be the starting point for the enforceability of the pledge vis-à-vis third parties, and no registration will be needed (and with the likelihood of no tax duties to be paid).

3.3. Pledge over receivables

Regarding the pledge over receivables, the new regime enables the parties to continue applying the existing simplified regime (enforceability by the mere conclusion of the pledge agreement, save for the third party debtor, who needs to be notified), without registration.  

4. Enforcement

Pledges over moveable assets will be able to be enforced without the need to obtain a prior court decision. This is a significant improvement in terms of efficiency of the security.

It is, however, to be noted that the pledgee will have the obligation of notifying the pledgor (and other interested parties) of its intention to enforce the pledge at least 10 days prior to the enforcement (or three days in the case of a risk of pledged assets losing their value).

The pledgee will be entitled by law to enforce the pledge through the public sale, private sale, forfeiture (this may be subject to prior contractual arrangements) or lease of all or part of the pledged assets.  

5. Existing business floating charge abolished

The current regime of the pledge over business assets (“gage sur fonds de commerce/pand op handelszaak”) will be abolished and replaced with the new regime. Existing pledge over business assets will have to be registered as a “pledge over all goods which compose the business” within 12 months as from the entry into force of the new law (otherwise they will lose their priority rank).  

6. Entry into force

A royal decree has to determine the entry into force of the new regime, which shall be no later than 1 December 2014. This royal decree is also due to determine the modalities of the online register and the amount of tax duties to be paid upon registration.