New Belgian Collateral Law
On January 1st 2018, the new collateral law came into effect in Belgium, after some delay. The new legislation creates a more robust framework with regard to asset based lending. The introduction of the law therefore has a positive influence on the possibilities for inventory based lending. The following matters are regulated in the new law:
- Possessory pledge is no longer required. Although the possessory pledge is still supported in the law, under the new law it is perfectly possible to establish a pledge on the collateral without the possession of that property. However, in this case it is necessary to register the pledge in the new National Pledge Register, in this case there is a registered non possessory pledge.
- Retention of title has been strengthened and extended. In this way the retention of title also applies in situations of concurrence. Retention of title does not necessarily have to be registered in the National Pledge Register, but must be described in a (for example purchase) agreement.
- The enforcement procedure has become simpler. If no consumers are involved, no court intervention is required in the first instance, and terms and conditions relating to the enforcement can even be stipulated in advance.
In summary, the legal framework has become a lot more robust. Dispossession is no longer required. This means that it will become much more efficient to set up inventory based lending. The costs that are saved by no longer working with dispossession can partly be used to obtain a better and continuous insight into the details of the inventory and the associated risk factors. This extra information gives the lender / pledgee additional instruments to act when things go wrong and to detect in time that risks relating to the collateral are increasing.