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Implementation of Security Interests Act delayed again

December 2016

In 2013 the Belgian legislator modernised the law on security interests with the Act on in rem security interests on movable assets (the "Security Interests Act"). However, establishing a pledge register – which is essential for the introduction of the Security Interests Act – is taking longer than expected, and accordingly the implementation of the Act was postponed until 2017. It has now been further delayed until 1 January 2018 at the latest. The legislator has also taken the opportunity to make some changes to the Act.


Background

The main objective of the Security Interests Act is to introduce a new regime for pledging movable tangible goods and receivables. The legislator wants to contribute, through the optimisation of security instruments, to expanding credit opportunities. The Security Interests Act makes it possible, among other things, to establish a pledge on movable tangible goods (e.g., material or stock) by registration in a pledge register, without the need for dispossession of the debtor. The delay in the development of this pledge register is the reason for the new postponement of the Security Interests Act.

The implementation of the Security Interests Act was originally scheduled for 1 December 2014 and was first postponed until 1 January 2017. It is now delayed again until 1 January 2018, with the possibility of entering into force earlier through a Royal Decree.


Public pledge register

The Security Interests Act originally limited access to the pledge register to certain categories of persons. This limitation was considered by practitioners as very obstructive and was inconsistent with the legislator's intention of creating transparency: it is essential that a well-functioning register can be consulted by third parties, e.g., a creditor who wants to assess the creditworthiness of his debtor or a buyer who does not want to purchase a pledged good.

The legislator has addressed these concerns and has now decided to make the pledge register accessible to everyone, albeit for a fee (which is generally expected to be relatively low).


Elimination of registered pledge on receivables

The original text of the new Security Interests Act provided for the possibility of establishing a registered pledge of receivables. This has now been abandoned. The new pledge regime therefore remains fully consistent with the current provisions (article 2075 of the Civil Code), in which a pledge is perfected through fictional dispossession when a pledge agreement is entered into. However, the receivables can still be part of a registered pledge on the universality of goods, which is the new, broader "pledge on the businesses" or "floating charge".


Possibility to register retention of title

The amendment to the Security Interests Act clarifies – to the extent that this was necessary – that it is also possible to register retention of title in the pledge register. Such registration is not necessary for the validity or enforceability of retention of title, but it can be useful, e.g., in resolving a ranking conflict with a mortgage creditor if the goods under retention of title became immovable by incorporation.


Some technical clarifications

Privilege

The legislator clarifies that the Security Interests Act grants the same preferential right to the creditor as a privilege and this right corresponds to the concept of privilege ("voorrecht"/"privilège") as provided for in article 12 of the Mortgage Act.


Enforceability of a fiduciary transfer of assets in ownership (security trust)

There was some debate with the original version of the Security Interests Act on the enforceability of a security trust (fiduciary transfer of assets in ownership). The Court of Cassation held under the previous regime that a security trust cannot qualify as more than a pledge under Belgian law, and the Security Interests Act has now incorporated this case law. On the other hand, the Security Interests Act imposes strict rules on the validity of a pledge agreement, and this could potentially cause a conflict when the agreement on the transfer of ownership in trust does not comply with the conditions of a pledge agreement. The legislator has now decided that a fiduciary transfer that is requalified as a pledge is valid, even when the fiduciary transfer does not comply with the conditions of a pledge agreement, except when the transferor is a consumer.


Financial Collateral Act and consumer protection

The Security Interests Act puts strong emphasis on the protection of consumers, in particular regarding the realisation of the pledge. Because of the priority rule of article 2 of the Financial Collateral Act ("FCA"), it was potentially uncertain whether these (stricter) consumer rules would also be applicable to the FCA. The legislator has now decided not to make the provisions on consumer protection applicable to the FCA (consistent with the general intention that the Security Interests Act should not affect the FCA).

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