Act for Amendment and Supplement to the Registered Pledges Act has been Adopted
09 January 2017
An Act for Amendment and Supplement to the Registered Pledges Act (AASRPA, the Act) was promulgated in the State Gazette, issue 105 of December 30, 2016. The amendments cover several aspects and are aimed at ensuring legal certainty, improving turnover efficiency, eliminating certain inconsistencies and gaps in the existing legal framework, as well as making administrative services more accessible.
A higher level of legal certainty will be guaranteed by the envisaged constitutive effect of the entry of a pledge in the register. Like the mortgages, the pledge shall be deemed established subject to entry of the pledge agreement into the Central Pledge Registry (the Registry). For disposal of pledged property which falls beyond the scope of the ordinary activity of the pledge creditor by occupation, an express consent of the pledge creditor is already required and it shall be subject to entry as well. In the absence of consent, the person acquiring rights over the pledged property shall have the status of a pledger, as was provided under the preceding legislation as well. This status however is now extended to any subsequent acquirer, unless the latter proves to have actеd in good faith. The pledge creditor can now enter the pledge at any time with regard to any person acquiring rights over the pledged property, unless the transaction was concluded within the regular scope of activities pertaining to the pledger’s occupation and the pledge has been redeemed under the procedure of Art. 7.The adopted amendments to Art. 17 of the Registered Pledges Act explicitly prohibit the pledger to dispose of the pledged receivable, including by repledging it without the consent of the pledge creditor. The idea of non-opposability of circumstances not entered in the Registry is also implemented through the amendment to Art. 9, Para 4 providing that the pledger shall not be able to dispose of the pledged property after entry of the commencement of execution, and not after receipt of the notification of such commencement, as was the case until now. The situation with the pledge over aggregate is analogical, meaning that the relevant time this pledge passes over to the separate assets in the aggregate shall be the time of the entry.
Other amendments aimed at ensuring higher levels of security and stability in the regulated relations are the ones regulating the status of the depositary. A requirement for the latter to be either a lawyer or a registered auditor is introduced. The depositary shall be held liable for any damages caused by misconduct to the pledger, the pledge creditor, the other creditors, and a mandatory insurance of such damages shall be made. The lists prepared under Art. 39 of the Act are subject to mandatory entry in the Register, thus guaranteeing publicity of the information regarding the property subject to execution as well as the encumbrances on this property.
There are several amendments aimed at clarifying the issues concerning competition between more creditors and between different proceedings. It would be no longer possible to establish a second pledge on the same property without the consent of the preceding pledge creditor, thus guaranteeing that the principle of qui prior est tempore, potior est jure is applied. The same rule has been introduced with regard to the commencement of execution. Only the creditor whose pledge is first in line may commence execution, unless the creditors with earlier pledges give their explicit consent for a creditor with a subsequent pledge to commence execution over the pledged property.
Supplements to Art. 10 explicitly regulate the right of the pledge creditor to be satisfied at his/her discretion either under the Registered Pledges Act or under the Civil Procedure Code (CPC). In case the general execution procedure is preferred, the same can be initiated by the creditor on the basis of an excerpt from the Register. Once the creditor obtains a certificate from the Register, the creditor can participate in the distribution of the funds received for the property which is subject to the execution proceedings pursuant to CPC or Tax Insurance Procedure Code (TIPC). The creditor shall be satisfied by the equiva¬lence of the pledged property under CPC only.
The procedure for joining in a creditor with a special pledge to initiated execution proceedings under CPC or TIPC has also seen changes. Art. 10, Para 3 stipulates that the pledge creditor exercises his/her rights of a joined in claimant, including the right to receive the amounts as per the allocation, based on a certificate from the Register for a pledge entry and a declaration with a notary certification of the signature for the current amount of the receivable.
The newly introduced Art. 32a is intended to dispel any doubts with regard to competition between different execution proceedings concerning one and the same property. It is provided that in case the proceedings has been initiated under CPC or TIPC before entry of the commencement of execution under RPA, it will not be terminated because of the fact that execution has been commenced following the general procedure. Conversely, if the execution under RPA has been initiated, it will not be terminated because of the initiation of proceedings under the general procedure. If the pledge creditor has not entered the commencement of execution and an insolvency procedure is initiated for the pledger, the pledger shall be satisfied within the insolvency proceedings.
The issue of mortgages established on properties sold under RPA is also regulated by the amendments. In accordance with Art. 37, Para 5, the sale performed under the special procedure can redeem only the pledges established under this Act and does not affect the other securities.
The Act includes several amendments aimed at facilitating all parties participating in the relationships regulated by the RPA. First, in order to stimulate the civil and trade turnover, the range of persons that may become pledgers has been expanded. Legal entities established by freelance practitioners, as well as non-profit organisations are included with regard to their business activity.
With the amendments to Art. 36 of the Act, the pledger is given the right to dispute the receivable or the pledge right by filing a claim before commencement of the execution procedure. Another novelty explicitly provides for any third person the right to file a claim in case his/her right has been affected by the execution and establish that the pledge is not opposable or that the pledged property does not belong to the pledger.
There are a number of amendments with regard to the pledge of commercial enterprise. The registered pledge is now opposable to third persons acquiring rights over separate assets of the pledged enterprise without the necessity of specifying these assets in the agreement, as long as they have been entered in the respective register for this asset.
Amendments provide for the possibility that upon commencement of an execution over a commercial enterprise the creditor could resort to compulsory means in order to be given access to the pledged enterprise and be provided with the trade books and accounting records of the merchant. The creditor is entitled to request imposing of security measures under Art. 397, Para 1, item 3 of CPC so as to secure the pledged property. An entirely new provision of Art. 52 has been introduced to provide for satisfying the pledge creditor through the pledged commercial enterprise. It stipulates that the creditor shall be satisfied from revenues received in the process of management of the enterprise, as well as from the sale price of the pledged property. An opportunity is introduced for sale of separate assets of the enterprise provided that the same are not directly connected to its main activity so that the latter is not impeded.
Significant amendments have been introduced with regard to proceedings before the Central Pledge Registry. The amendments have been triggered by the necessity of implementation of a comprehensive administrative reform through the introduction of e-government in all areas of the public sector. In accordance with these amendments, the Central Pledge Register shall be administered by the Registry Agency. In analogy to the Commercial Register, it is envisaged that every pledger will have an individual file in electronic form where applications and enclosed documents shall be entered. Access shall be facilitated by the possibility of submitting applications to the register by electronic means, in which case the due state fee shall be reduced by at least 50% compared to the fee for applications submitted on paper. Paper applications can be submitted at any territory office of the Registry Agency according to the headquarters of the respective regional court. Free access shall be provided to the court registry, the public authorities and other persons or bodies as specified in any relevant act, for the performance of their official duties.
Entry in the Register shall be done by filing application forms and also based on a decision of the court, any other public authority or a person performing public functions in the cases provided for by law. Any lawyer with an express power of attorney shall also be entitled to submit applications for entry and deletion on behalf of their client.
Another novelty is the requirement for the respective contracts, evidencing the circumstances whose entry is applied for, to be enclosed to the application.
In case of refusal for entry of a circumstance, this refusal is subject to immediate entry in the pledger’s file. The appeal against the refusal shall also be subject to entry, which shall provide publicity with respect to third parties – they shall be aware that in case of possible revocation of the refusal, the entry will be completed. The refusal is subject to appeal before the regional court pursuant to the provisions of CPC, as is the case of appealing refusals of registry judges. In case of revocation of the refusal for entry, a procedure shall be followed from the time of submitting the application, thus ensuring that the rights of the pledge creditor opposable to third persons shall not be affected by the initially issued refusal for entry.
The changes regarding the functioning of the Central Register of the Special Pledges and the procedure for entry thereto shall enter into force on September 1, 2018. Proceedings that have started prior to this date shall be closed under the previous procedure. The same applies for initiated and not closed by this date judicial proceedings for appealing refusals of entry.