A recent reform introduced a non-possessory floating pledge to the Italian legal framework. Under the reform, the perfection of such security can take place without the delivery of a pledged asset to the secured creditor, thus introducing an important exception to the general legal framework.
Similar to the floating charge structure, the absence of a dispossession requirement enables entrepreneurs to retain the availability of collateral which can be used in the course of the productive cycle, so that a pledge can be transferred to the final products, the price of the transfer and assets acquired by the pledgor.
A pledge may be granted only by companies enrolled in the Companies' Register to secure debts that they (or a third party) assume in the course of business. An important innovation, by contrast to the general Italian rules, is that a pledge can also secure future claims subject to a maximum secured amount.
A pledge may be created over:
- movable assets (with the exclusion of registered chattels), including immaterial assets to be used in a company's existing or future business, determined or determinable with reference to one or more classes of product or an overall amount; and
- receivables stemming from, or concerning, a company's business activity.
The only formality envisaged for the perfection and enforceability of a pledge is its registration with the new register for non-possessory liens, which will be established by the Tax Office. Further, a pledge agreement requires a written form that sets out the essential terms of the secured claims and collateral.
The relevant decree-law introduced an enforcement system that is more favourable for secured creditors and faster than the usual Italian court procedure: the enforcement of a pledge is driven substantially by secured creditors, whereas the courts' involvement is residual (eg, challenges to enforcement procedures by secured creditors or debtors that fail to cooperate with the enforcement).
In order to enforce a pledge, secured creditors may:
- sell the pledged assets;
- enforce the pledged receivables until satisfaction in full of the secured amount; or
- if the pledge agreement so provides:
- rent out the pledged assets and use the rent to repay the secured amount; or
- take possession of the pledged assets up to the value of the secured claims.
The relevant decree-law does not provide for a specific transitory period for the application of the above regulation; therefore, it can be deemed to apply from the date of the decree-law's entry into force.
However, the required registration of a pledge with the new register for non-possessory liens will postpone the reform's application, as the register's establishment is subject to an implementing decree-law that has yet to be issued.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.