Change in Legislation on Securities concerning Movable Goods

After all, on 2 August 2013 the long-awaited new "Movable Securities Law” was published in the Belgian Official Gazette.

Actually, two laws are concerned.

The main law is the law of 11 July 2013 amending the Civil Code as regards securities on movable goods, and revoking various of its provisions. 
The other, purely procedural law is dated 24 June 2013 and was published in the Belgian Official Gazette on the same date.

These laws will enter into force on a date to be determined by Royal Decree, not later than on 1 December 2014.

1. Some Basic Thoughts

It is mainly the legislation on pledges that changes substantially.

The condition that the movables of the debtor (security provider) are expropriated (the so-called "dispossession"), is no longer applicable as a necessary condition to establish a pledge. So the debtor keeps the movables and can (continue to) use them to acquire income from them.

Since the pledge is no longer necessarily based on a dispossession, the pledge can be invoked against third parties by its entry in a new "pledge register".

Since the pledge is no longer necessarily based on a dispossession, the pledge can be invoked against third parties by its entry in a new "pledge register". That register will be set up by the Mortgages Service of the Federal Public Service of Finance.

In addition, a simplified enforcement procedure is implemented, whereby the prior obtention of an enforceable title is not required, and which is centralised with the seizure judge.

Besides, many matters relating to rights of pledge currently settled by jurisdiction will henceforth be regulated explicitly.

The reform of the right of pledge is completed by new provisions on the right of retention and the reservation of ownership, which has been transferred from the Bankruptcy Law to the Civil Code.

Hereafter, we will focus on the applicable transitional law (transitional provisions).

2. Transitional Law

By implementing a new general register pledge on all movables, a number of other security mechanisms become superfluous.

These include in the first place the pledge on a business (Law of 25 October 1919) which is absorbed by the register pledge and whereby the borrower and lender themselves can specify which property in particular will be pledged, and the abolition of the difference between a civil pledge and a commercial pledge (Commercial Pledge Law of 5 May 1872). Therefore, there is no need for a further maintenance of different pledge systems.

In addition, the warrant system (Law of 18 November 1862) and the agricultural loan privilege (Law of 15 April 1884) are abolished.

Most legal privileges on movables continue to exist, with the exception of the seeds and harvesting privilege and the hotelkeeper’s privilege, which will be abolished. 

In this way, a simplification of the legal system is aimed at.

In principle, new provisions on real security rights have immediate effect (at the latest on 1 December 2014), except where a situation of concurrence has already been created in the meantime  (e.g. bankruptcy). In such case, the positions of the creditors are irrevocably established and their ranking order will be determined in accordance with the current applicable legal provisions. As long as there is no concurrence, the creditors can for example not claim an acquired right to the continued existence of their privilege.

As far as the new provisions regarding the reservation of ownership, the right of retention, and the "new" register pledges are concerned, there seem to be no transitional law problems.

The abolition of some special privileges as set out in this law requires no transitional regulation either.

Such is, however, the case for the abolished register pledges (pledge on business and agricultural privilege); a transitional regulation is necessary.  Under the new law, the creditors holding such lien will have to register their right of pledge. The Movable Securities Law provides that they will keep their rank they had under the old law (pledge on business: time of registration), if they have registered a right of pledge on the encumbered property within twelve months from the entry into force of these laws.

As has been said, the Movable Securities Law will not take effect immediately. After all, the Patrimony Documentation Services must be given time to work out the pledge register technically. In addition, its terms and conditions still have to be determined legally. Therefore, the law will take effect "on a date to be determined by the King, but not later than on 1 December 2014".

Moreover, the King may determine a date of entry into force prior to 1 December 2014 for any provision (of the new law). Therefore, the application of the new regulation for securities on movable goods still depends on a number of implementing measures.