Antwerp, Belgium

BELGIUM: Non-Possessory Pledge and the Electronic Pledge Register: An Efficient Remedy Against Default in Payment Due to COVID-19. A Device from Roman Law for Today’s Needs?

By Greet Slegers, Konsilanto CVBA

During the COVID-19 crisis, business is encouraged despite all difficulties. The first quarantine was handled without too many problems in most sectors. With some improvisation, business continued; except, of course, for those hard-hit sectors such as restaurant business. But, with Belgium facing a possible new quarantine, many entrepreneurs are now asking questions of a more strategic nature.

Government subsidies were the first aid for this crisis. But securing the company’s going concern requires a multidisciplinary approach.

The Roman proverb “Ius est vigilantibus”, or “The right belongs to the vigilant”, is still relevant even after 20 centuries. In the background of the collateral securities, we shed light on a relatively new and easy to use security: the non-possessory pledge

How does it work?

As a general rule, the right of pledge is accompanied by the physical surrender of the pledged property. This means that the creditor who obtains the security (the pledgee), is also placed in possession of the movable property encumbered with the pledge. The right of pledge is therefore accompanied by the surrender of the pledged movable property. Exceptions exist in the case of a pledge on a commercial fund, which for obvious reasons cannot be accompanied by the surrender of the intangible asset.

Registration of the pledged property is not necessary, as the pledge is enforceable against third parties by the actual power that the pledgee has over the property. The pledgee may not use the encumbered goods and the pledgor remains the owner of them.

Non-possessory pledge

The non-possessory pledge works completely differently. Here the pledgor may freely dispose of the encumbered goods within normal business operations. The pledgor can continue his normal activities unhindered, which can be useful for repaying his debts.

The non-possessory pledge is registered in the “national pledge register”. This is a computerised system that is directly accessible for entering and consulting pledge rights.

The following information is stated in the Pledge Register:

  • the identity of the pledgee (or his representative) and of the pledgor;
  • the indication of the encumbered goods and the secured debts;
  • the maximum amount for which the claims are guaranteed.

The registration expires after ten years. However, the pledgee can renew the registration each time for another ten years.

If the pledgor has paid his debt, the pledgee must ensure that the registration of the pledge disappears.

The importance of the registration lies in the enforceability of the non-possessory pledge — that is to say, the extent to which third parties must take the pledge of this property into account.

The time of registration determines the rank of the pledge. The point in time at which the secured debts arise or at which the property that is the subject of the right of pledge is created, is irrelevant. This is important to know when one comes into concurrence with other (preferential) creditors.

The right of pledge can be established as a security for any debt, including for future debts. The only condition is that the secured debt is determined or determinable.

The right of pledge guarantees the principal amount of the guaranteed debt and also its accessories, such as interests, but only within the limits of the contractually determined maximum amount.

An exception to this rule exists for the pledgor-consumer. Coverage for accessory rights is limited to 50% of the principal amount. In the case of several different debts, the limit is calculated per debt.

The right of pledge is attached to the claim ... but also to the pledged property.

As soon as a secured debt is transferred, the right of pledge also passes.

The right of pledge also follows the encumbered property. The acquirer thus becomes (“the new”) pledgor from the transfer.

When the pledge is registered in the pledge register, the professional third-party acquirer cannot rely on his good faith.

The pledgor may actually process goods intended for processing. Parties can agree otherwise. The right of pledge remains, notwithstanding the processing. If a new good arises from the processing, the right of pledge will encumber that new good.

If pledged movable property has become immovable, the pledgee will still receive priority payment from the proceeds of this immovable property.

The right of pledge extends to all claims that take the place of the encumbered goods. This also includes the proceeds from the sale of the encumbered goods and the payments from insurance companies in the event of destruction of the pledged goods.

Competition between creditors

Now suppose that your debtor’s situation deteriorates and that he becomes the subject of foreclosure proceedings. In order to secure the non-possessory pledge until the foreclosure procedure has been completed, the pledgee can seize the pledged property.

A pledgee who wishes to proceed with the foreclosure of a non-possessory pledge, notifies the pledgor in advance. In order to prevent the pledgor from disposing of the pledged property in the meantime, the pledgee can, from then on, have the pledged property seized via bailiff’s intervention, without the court’s permission required.

Greet Slegers

Greet Slegers

GGI member firm
Konsilanto CVBA
Accounting, Tax, Advisory, Corporate Finance, Fiduciary and Estate Planning
Antwerp, Belgium
T: +32 3 443 75 50
E: This email address is being protected from spambots. You need JavaScript enabled to view it.

Konsilanto is a full-service accountancy firm that offers an integrated service to entrepreneurs and business organisations, alongside their core activities in accountancy and tax consultancy services. In particular, they try to assist international companies with payroll services in Belgium.

Greet Slegers joined Konsilanto as a partner in 2019. She is a full member of the Belgian Institute for Tax Advisors and Accountants and was accredited in 2011 as a chartered accountant and tax advisor. Her area of expertise covers corporate tax, mergers and acquisition, tax litigation and international taxation. She also has a special interest in the overlapping areas of the various tax domains.

Published: Litigation & Dispute Resolution Newsletter, No. 13, Autumn 2020 l Photo: Freesurf -

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