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Non-possessory pledge

On May 3, 2016, the Decree Law 3 May 2016, no. 59, containing “Urgent provisions on enforcement and bankruptcy proceedings in favor of investors in banks in liquidation”, entered into force and introduced a new form of credit guarantee, the so-called non-possessory pledge.

This Decree was converted into Law no. 119 of 30 June 2016 and published in the Official Gazette no. 153 on July 2, 2016.

Article 1 of Decree Law no. 59/2016 stipulates that “Entrepreneurs registered in the Business Register may place a non-possessory pledge in order to guarantee the credits granted to them or to thirds, whether current or future, determined or determinable and with a forecasted maximum guaranteed amount, relating to the business activity of the enterprise”.


Antonello Corrado
Giovanna Canale
Silvia Viceconte

This new form of security is aimed at combining the need for corporate finance – the debtor that can offer this form of guarantee must be an entrepreneur registered in the Business Register – with the interest of the creditors for the realization of their right and for the certainty of the timeframe of credit satisfaction.

The pledge is granted through written deed and is published in a dedicated register (the “Register of Non-possessory Pledges”) held in computerized systems of the Revenue Agency. From the date of registration, the pledge becomes effective and enforceable against third parties, both in enforcement and bankruptcy proceedings.

The essential and innovative characteristic of the non-possessory pledge, that differentiates it from the ordinary pledge, is the lack of “dispossession”, i.e. the possession of the asset remains in the hands of the entrepreneur/debtor who can use it for the purposes of its business activity. In fact, unless otherwise provided in the pledge agreement, the debtor or third parties granting the pledge is allowed to transform the asset, object of the pledge (raw materials, components, semi-finished products), to alienate it in accordance with its economic purpose, or otherwise dispose of it in other forms (barter, lease, loan). In this case, the pledge is transferred – respectively – to the product resulting from the transformation, to the amount resulting from the sale of the pledged asset or to the replaced asset purchased with such amount, without having to place a new guarantee.

If the product resulting from the transformation includes a mixture of goods belonging to different product categories and it is subject to several non-possessory pledges, the rights provided in case of pledge enforcement are reserved to each pledgee, with the obligation, on their part, to return to the collateral provider the value of the asset related to the other product categories.

For the satisfaction of the claim, the secured creditor, upon written notice – even notified via certified email directly by the creditor to the debtor or the third pledgor -, has the opportunity to choose among several options:

Sale – through competitive procedures – of the asset object of the pledge, withholding the amount for the satisfaction of the credit until the achievement of the guaranteed amount and with the obligation to return the surplus to the debtor. The lienor may otherwise proceed with the enforcement or assignment of the receivables object of the pledge, until the achievement of the guaranteed amount;
Lease of the asset object of the pledge, ascribing the rent to the satisfaction of the claim until the achievement of the guaranteed amount;
appropriation of the assets object of the pledge until the achievement of the guaranteed amount, provided that the contract contemplates the criteria and requirements for evaluating the value of the asset object of the pledge and of the guaranteed obligation.
The debtor and any third pledgor have the right to submit their objection within 5 days from the receipt of the formal notice.

On the debtor’s declaration of bankruptcy, the creditor may act by choosing one of the options mentioned above only after and provided that the claim has been admitted to preemptive sum of liabilities, unlike what happens in case of ordinary pledge, for which the pledgee may sell the asset object of the pledge only with the consent of the Court, which can, however, also opt to keep the res within the bankruptcy liquidation in the hands of the Trustee.

The new regulation reconciles two conflicting interests: on one hand, it facilitates the financing granted to the company and its business activity, without limiting the use of corporate assets and, on the other, it satisfies the need to simplify the procedures for credit recovery, encouraging the disbursement of new loans to the company and the development of the economic system.