Legislative Decree no. 59/2016: the non-possessory pledge. New opportunities for the access to the credit?

– by Laura Basso.

The Law dated June, 30th 2016, no. 119 – converting the Legislative Decree no. 59 of May 3rd, 2016, entitled “urgent provisions on the enforcement and bankruptcy proceedings, as well as in favour of the investors in banks in liquidation” – introduced into the judicial system an important new legal institution aimed, simultaneously, to facilitate financing to enterprises, providing a guarantee on the company assets and goods, as well as the most concrete credit satisfaction, in certain times.

That provision establishes, among others, a new “credit security” to protect creditors, represented by the “non possessory movable pledge“, special institute, compared to the general one, as applied to credits coming from the business management and characterized by the lack of dispossession of the seized movable, characteristic that, conversely, represents the guarantee towards the third parties in the case of the general institution, where the movable is subtracted to the debtor’s availability.

The debtor (necessarily an entrepreneur, entered in the Italian Register of the Companies, at the Chamber of Commerce) may, by contract drawn up in writing (characteristic requested ad substantiam), constitute a non-possessory pledge to guarantee loans granted to him in the business management, both present and future, determined or determinable and with the definition of the maximum sum secured. That pledge may be placed on credits and/or on movable properties used for business purposes (except for those registered), both present and future, determined or determinable, also by reference to one or more product categories, or to a total value, such as, (for example) single machineries and/or single goods.

Since that pledge does not involve the dispossession and can also be established on future receivables, the creditor protection is guaranteed by the necessary registration, of the pledge itself, in the new computerized register of non-possessory movable pledges, which will be set up shortly, at the Income Revenue Authority (in Italian Registro delle Entrate). This constituent advertising will last for ten year and will involve its opposability against third parties, in the enforcement and also in bankruptcy proceedings.

The new law also establishes that, if not otherwise defined into the contract, the debtor or the third party granting the pledge, is authorized to transfer or to modify or, in any case, to sell the goods subjected to the pledge, in accordance with their economic destination. Through the exercise of this right, the pledge is transferred from the good, to the result of its transformation, that could be the amount earned through the sale of the goods submitted to the pledge or the value of the new asset bought with this sum (so called revolving), without involving the establishment of a new guarantee.

There is only one exception to this rule: non possessory pledge, although before constituted and registered, is not opposable to those who have financed the purchase of the good intended for the company management and are already secured by retention of title or pledge, even non-possessory, next, provided that their “special” pledge, have been registered in the above mentioned register and that, at the time of this enrolment, the creditor have informed the non-possessory movable holders who have registered their pledge before.

Regarding the discussion of the pledge, the creditor could, alternatively:

1. Sell the assets submitted to the pledge (through competitive procedures advertised as per art. 490 Italian Code of Civil Procedure and after having informed the third party, provider of the collateral), and retaining the collected sum to satisfy its credit, up to the guaranteed amount and then, return the
2. Realize the value of the credit secured by the pledge, within the limits of the guaranteed amount.
3. Lease the asset submit to the pledge, and ascribe the collected instalments, to the satisfaction of its credit, up to the amount of the guaranteed sum.
4. To appropriate of the asset submit to the pledge, up to the amount guaranteed, provided that this possibility is foreseen by the contract which also previously establishes the criteria and the terms to follow, to estimate both the value of the asset under pledge and the guaranteed obligation.

According to this new institution, therefore, in business, although compatibly with the bargaining power of each party, the seller/ financier may:

1. subscribe contracts to supply goods or services, together with a non-possessory pledge agreement over the goods sold. In this way, the supplier will have a guarantee easily accessible in case of recovery of its credit, as it will be no longer necessary to obtain an enforceable title, but it will be sufficient to exercise the pledge. Moreover, if the good or the credit will be subjected to enforcement, the judge will authorize the supplier, secured as above described, to discuss the non possessory pledge, by surpassing the other creditors who will have activated the enforcement proceedings on the same asset.
2. grant loans and/or make capital investments, secured by non possessory pledge even on the credit itself, constituting a privilege that, if registered into the establishing computerized register and upon notice, about such registration, to any further holder of non possessory pledge, may be discuss by this financier/lender, with precedence over any other creditor, even if provided with pledge, even non possessory, given the exception, provided by law, in favour of loans granted to companies, to implement business activities.

For the practical implementation of this new institute, it only remains, therefore, to wait for the creation of the computerized non possessory movable pledges Register, by the Income Revenue Authority, as fulfilment of the mandate given by the mentioned law.