The right of pledge is the right to another's thing, on the basis of which the pledged thing secures the claim of the creditor in case the debtor does not fulfill his obligations. The Civil Law (CL) specifies several types of pledge: hand pledge, mortgage, use pledge. At the same time, there are other types of pledges that are regulated by special laws, such as financial pledges and commercial pledges, which are explained in more detail in this publication.
A commercial pledge is a right of pledge, which differs from other types of pledge in terms of its object, as well as the procedure for registration – a commercial pledge must be registered in the register of commercial pledges, which is supervised by the Enterprise Register (UR). Like other types of collateral, commercial collateral is also used as one of the means of strengthening obligations. Accordingly, a commercial pledge cannot exist separately from the so-called of the main claim for which the commercial pledge was concluded.
Although the provisions applicable to commercial pledges are primarily regulated by the Commercial Pledges Act, the provisions on pledge rights contained in the CL also apply to commercial pledges, insofar as they do not conflict with the provisions of the Commercial Pledges Act
The Commercial Pledge Law describes in detail the items that may or may not be the subject of a commercial pledge, it also regulates the procedure for establishing and registering a commercial pledge, the consequences of a commercial pledge, etc. aspects applicable to a commercial pledge. In compliance with this and when preparing a commercial pledge agreement or planning to register a commercial pledge in the Commercial Pledge Register, the Commercial Pledge Law serves as one of the main sources in which to look for the necessary information.
How to register a commercial pledge
As already indicated, one of the distinguishing features of a commercial pledge is the need to register it in the Register of Commercial Pledges. It is important to note that commercial pledge registration can only be done electronically, i.e. using the e-service available on Komerckila.ur.gov.lv. This is an important point to keep in mind, as the procedure for submitting documents differs from the usual practice of the UR (which manages the register of commercial pledges). Although UR usually allows the submission of documents not only in electronic, but also in paper format (usually allowing submission of documents in mixed form - both paper and electronic), this procedure does not apply to the registration of a commercial pledge.
With this in mind, it is important that the commercial pledger has a secure electronic signature, which can be used to sign both the application form and, if necessary, certify electronic copies of documents signed in paper form. In the event that the commercial pledger does not have a secure electronic signature or if the commercial pledger has other considerations, due to which he is unable or unwilling to sign the documents electronically himself, the commercial pledger can authorize another person to do so. I.e., both applications for commercial pledge registration and, for example, confirmations of electronic copies of paper documents can be signed by the authorized person of the commercial pledger, if the authorization allows it.
It should be noted that the power of attorney must be signed with a secure electronic signature of the pledger or must be executed at a notary in the form of an electronic extract. The power of attorney can also be included in a commercial pledge agreement. In that case, the commercial pledge agreement must be signed with a secure electronic signature, or if the commercial pledge agreement is drawn up in paper format, an electronically certified copy of the agreement must be prepared before a sworn notary. Of course, all submitted documents must be in the national language.
If the commercial pledger signs the power of attorney electronically, the commercial pledge register can accept not only documents signed in "edoc" format, but also documents signed in other formats, such as "pdf", "asice", "adoc", "bdoc". If another e-signature format is available to the commercial pledger, it should contact UR to find an individual solution.
Also, when registering a commercial pledge, a commercial pledge agreement must be submitted, as well as a document from which the secured claim derives, for example, a loan agreement or a copy of a court ruling, if the commercial pledge is established on the basis of a court ruling.
All the above documents must be submitted in electronic form. In accordance with this, if the documents to be submitted are in paper format, they must be scanned and the scanned copy must be certified by the pledger or his authorized representative with a secure electronic signature in accordance with the procedures specified in the regulatory acts.
Likewise, when registering a commercial pledge, you must not forget about paying the state fee. In the event that an object subject to registration is pledged, such as a trademark or a vehicle, an additional fee must be paid for the registration of a commercial pledge mark in the register of objects subject to registration.
Pledger and taker
When registering a commercial pledge, the parties to the commercial pledge must also be specified in the application. As with every pledge, a commercial pledge has a pledger as well as a pledgee. If the mortgagor is different from the debtor, then the debtor must also be specified separately, as well as the manager of the commercial pledge, if one has been established.
The pledger may differ from the debtor, for example, in situations where the shares of a joint stock company (JSC) are pledged based on a loan agreement by which the JSC borrows financial resources from another person. In such situations, the owner of the AS (who also signs the commercial pledge agreement) is indicated as the pledger, while the AS itself is indicated as the debtor.
The commercial pledge manager is appointed by the commercial pledgee. Its main function is to act as the trustee of the commercial pledge holder, and information about it can be registered in the commercial pledge register both simultaneously with the establishment of the commercial pledge and later, based on the written application of the commercial pledge holder.
Subject of commercial pledge
The subject of the commercial pledge must also be indicated in the commercial pledge application. The subject of the commercial pledge specified in the application must not conflict with that specified in the commercial pledge agreement. When choosing an object, you must choose whether the entire or individual property of the commercial pledger is pledged.
When choosing to pledge all property of the commercial pledger, the parties may agree that:
- it is pledged as a community of things for the time of pledging or
- it is pledged as a community of things at the time of pledging, as well as the subsequent components of the community of things.
If the commercial pledger does not want to pledge the entire property, it is also possible to pledge a separate one. As a separate property, the following can be pledged:
- intangible investment;
- physical capital;
- claim rights;
- shares, shares and bonds, company as a community of things;
- savings.
In the event that things subject to registration are pledged (the exact list of things subject to registration is contained in Section 1, Clause 3 of the Commercial Pledge Law) or other property, this must also be indicated in the commercial pledge application.
Likewise, the commercial pledge application must also state the amount up to which the commercial pledge liability extends.
In the event that the commercial pledge agreement states that the commercial pledgee has the right to sell the pledged property without an auction, or if it is stated that the subject of the commercial pledge is prohibited to be re-pledged, this must also be noted in the commercial pledge application, in the "Final Provisions" section.
Documents submitted for commercial pledge registration are examined by the Commercial Pledge Registry within five working days, excluding the day of submission. If it is necessary to correct the information submitted in it regarding the examination of the application, the responsible notary contacts the pledger or his authorized person using the contact information specified in the commercial pledge application.
Source: iBizness