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Pledge on the commercial property: the ultimate guarantee for entrepreneurs

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For (starting) entrepreneurs, it is not always easy to obtain a loan to expand their business. All too often the bank asks for collateral as a guarantee of repayment before granting a loan. This can sometimes take the form of a pledge on the business (officially called a "pledge on company assets"). But what exactly does this mean and what are the consequences of establishing a pledge?

In a pledge, a debtor agrees with his creditor to 'deposit' with him a certain object as security for his debt. If at any time the debtor fails to pay his debt, the creditor can, without the intervention of the court, sell or rent the asset pledged in order to pay the debtor's debt.

Until recently, the 'delivery' of the property pledged, the so-called non-possession, could even be understood literally in this way: the debtor had to physically hand over his pledged property to the pledgee creditor who took possession of it. This transfer was even an essential condition for the existence of a right of pledge. Indeed, only in this way did the creditor have the certainty that the debtor would not alienate the good and thereby diminish the creditor's security. The physical surrender of the property meant that the pledgor-debtor no longer had possession of the pledged property and could therefore no longer use it.

An exception to the physical handing over of a pledged asset is the pledging of the trade object. In order to ensure that the debtor would not simply sell his trade property to a third party, the legislature at the time provided that an agreement whereby a trade property was pledged had to be registered in a special register of the mortgage office. In this way, anyone could see that the business was blocked by means of a pledge in favor of the pledgee creditor.

With the introduction of the new Pledge Act of January 1, 2018 and the entry into force of an electronic pledge register, the non-possession as an essential condition for the establishment of a pledge was abolished. From now on, the creditor and debtor can also choose to have the pledged property registered in the electronic pledge register that can be consulted by anyone, of course against payment (+/- EUR 6 per search). An advantage, first and foremost for the pledgor, is that the latter can thus continue to hold and use the property. Think of a farmer who no longer has to give his tractor to the bank as security for his investment loan, but can instead keep and use his tractor to work better and faster and thus be able to pay off his loan more easily.

With the introduction of this pledge register on January 1, 2018, use was immediately made of the opportunity to have a pledge on the commercial property registered via the electronic application from now on, and no longer via the mortgage office. The cost of registration depends on the value of the business and varies between EUR 21 and 518. It is important to note that all pledges that were still registered in the mortgage office before the new law were not automatically transferred by the government to the electronic pledge register. Pledge creditors had to look into this themselves and were admittedly given one year, up to and including December 31, 2018, to put this in order free of charge and with retention of rank.

Creditors who were late with this conversion can still have their pledge registered in the electronic register, but they will lose their (privileged) rank over the other creditors.

For those who want to take a look: the electronic pledge register, part of the FPS Finance website, can be accessed via the following link:

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