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September 13, 2017
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Changes in the Law on Special Pledges

The recent amendments in the Law on Special Pledges continue the legislative trend towards higher legal certainty and business environment security and more accessible and efficient administrative services.

 

        I. Substantive law amendments

 

Registration effect: Like mortgages, the special pledge shall be deemed established with the registration of the pledge agreement at the Central Pledge Register- the so called constitutive effect.

 

Explicit approval of the pledge creditor: Shall be granted in all cases of disposal of pledged property outside the scope of the ordinary activity of the pledger.  In the absence of registered approval, any acquirer has the status of pledger and the pledge creditor can register the pledge at any time at the batch of such acquirer;

 

Changes related to the depositary: Shall be a lawyer or a registered auditor and bear responsibility for damages caused by misconduct to the pledger, the pledge creditor and the other creditors.  The depositary shall have a mandatory liability insurance for such damages.

 

Competition between more creditors and proceedings: The possibility for establishment of a second pledge on the same property without the approval of the previous pledge creditor has been removed.  Also, the pledge creditor is entitled to choose between the special execution procedure under the Law on Special Pledges and the general one under the Code on Civil Procedures on the grounds of a certificate from the Central Pledge Register.  In case the execution has begun under the Code on Civil Procedures, the Code in Tax- Insurance Security Procedures or the Law on Commerce (insolvency proceedings) prior to the registration of the execution under the Law on Special Pledges, the execution shall continue under the respective general rules.  Conversely, if the execution under the Law on Special Pledges has begun, it shall not be suspended due to the commencement of execution under the general rules.  The sale of properties effected under the Law on Special Pledges shall extinguish only the special pledges over the property and shall not affect the mortgages and other collaterals.

 

Changes related to going concern pledge: The registered going concern shall be opposable to third parties acquiring rights over individual assets therefrom without the need for these assets to be individualized in the pledge agreement if the pledge is also entered in the relevant register which is kept for that asset (i.e. Real Estate Registry for real estate assets).  Upon commencement of an execution, the pledge creditor could resort to compulsory means to be given access to the pledged going concern and be provided with the trade books and accounting records of the pledger. The creditor also has the right to request the imposition of interim relief under the Code of Civil Procedures to ensure the preservation of the pledged property.  A completely new provision allows the creditor to receive the revenues generated by the management of the going concern and the sale price. There is also an option for sale of individual assets as long as they are not related to and impede the main activity of the pledger.

 

Other important changes: the pledge agreement shall always be attached to the application for registration.  Apart from the legal representatives of entities and physical persons personally, only lawyers with explicit power of attorney will also be able to request registrations and deletions on behalf of the clients.

 

       II.Procedural law amendments, effective September 1, 2018

 

As part of the comprehensive administrative reform aiming at introducing e- management in all areas of the public sector, starting on September 1, 2018, the Central Pledge Register shall be administered by the Registry Agency.

 

Like the Commercial Register, each pledger shall have a separate file in electronic form, to which the applications and documents attached thereto will be applied.  The access will be facilitated by the possibility for electronic submission of applications, in which case the due state fee will be reduced by at least 50% compared to the paper application.  It will be possible to file applications in any territorial unit of the agency regardless of the seat and registered address of the pledger and pledgee. Free access to the registry shall be granted to the courts, governmental bodies and other persons specified by law when exercising their official powers.

 

Substantive law amendments

Procedural law amendments, effective September 1, 2018

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