The Act of 11 July 2013 on collateral on commodities was expected to cause a revolution in security law, and to originally become effective by 1 December 2014.

The legislator has extended the deadline by when the legislation will become effective to 1 January 2017.

This means that specific stumbling blocks for the calculation of securities on commercial transactions, which would have been repealed by the Act of 11 July 2013, are still in effect.

A first stumbling block is that obtaining a pledge on a business enterprise by means of a simple registration only remains an option for credit institutions. Other companies that provide credit to a trading partner and that wish to obtain a pledge on material components of the business enterprise, will need to submit the property to an effective dispossession of the debtor. This is not evidence, whereas the mere registration allows that the debtor remains in possession of the components of the business enterprise, and continues to use them for normal business activities. A pledge on the shares and receivables(such as invoices) nevertheless remains possible for non-banking companies, but it needs to be carefully developed and executed in time in order to be effective.

A second stumbling block is that the retention of title can only be enforced against other creditors in the event the defaulting buyer of the goods goes bankrupt. In the event the defaulting company is liquidated, or in the event of a collective debt settlement of the defaulting individual, the clause of the retention of title cannot be enforced against other creditors.

Deferment is obviously not the same as a cancellation, but the welcome changes in the landscape of securities are provisionally not forthcoming.

Portelio will be pleased to provide you with further information on the subject.


 

Matthias Gesquière
Glenn Fredrix
Andy Beeckwee

Portelio Law Firm