Court-ordered business pledge

Principle

When a creditor feels that there is a serious threat to the recovery of a loan he can request the President of the Court of First Instance to order an interim charge over a business asset of his debtor. (see article 762 bis of the Code of Civil Procedure).

The creditor must supply a copy of the entry on the Trade and Industry Registry for the business for which he requires a charge.

During the three months in which the interim charging order is valid, the creditor must bring the case before the court.

If the case is not brought before the court within the stated time period, the interim charging order becomes retrospectively void and its discharge can be requested by any concerned party at the cost of the registrant on application to the President of the Court of First Instance, ruling in emergency proceedings.

If court hearing the case pronounces its decision in favour of the application of the creditor, the latter must register the final charging order and present the writ of execution of the judgement, within three months of the date upon which the decision was given the authority of res judicata, in other words when it is no longer subject to appeal.

The final charging order then retrospectively replaces the provisional registration.

If the court does not recognise the loan it will, in the same decision, order the interim charge to be revoked.

The court before which the matter is brought may, in any case, and even before deciding on the merits of the case, order the full or partial discharge of the interim order if the debtor provides serious and legitimate reasons (see article 762 quater of the Code of Civil Procedure).

Interim entry of a pledge

Time limit for registration

The interim charging order must be registered within two weeks of the court order, for the amount in principal and related charges stated by the order.

If this time limit is not respected, the interim charging order becomes void.

Notifying the debtor

The debtor must be notified of the order within a fortnight of the registration with address for service, failing which the charging order becomes void.

Appeal by the debtor

The debtor can make request to the summary judge for the discharge or delimitation of the interim charging order.

The summary judge can order the discharge or delimitation of the order subject to the deposit with an official receiver, designated by the judge, of an amount sufficient to guarantee the principal, interest and expenses of the loan, with special allocation for the debt.

Effects of an interim charging order

From the date of the interim charging order until the final charging order, the debtor may not grant a lease or place the business under lease management without authorisation from the court, constitute real rights that may be used against the creditor or receive any revenue in advance or transfer revenue for more than one year (see article 762 quinquies of the Code of Civil Procedure).

Provisions apply provided that they are not contrary to the

. However, provisions related to the seizure and liquidation of the business cannot be relied upon by a creditor who holds an interim charging order.

Revoking the interim entry of a pledge

The decision to revoke an interim charging order is made by:

• Order from the summary judge if the case has not been referred to court or following the expiry of the legal time period
• Judgment of the court hearing the case, stating that the debt is not recognised
• Judgment by the court before which the matter is brought, before deciding on the merits of the case, ordering the full or partial discharge of the charging entry if the debtor provides serious and legitimate reasons (see article 762 quater of the Code of Civil Procedure)
• Order of the summary judge if the final charging order authorised by the court that ruled on the case has not been registered within three months of the order being granted authority of res judicata

The final charging entry

Within three months of the registration of the interim charging order on the Trade and Industry Registry, the creditor must bring the matter before the Court of First Instance, who will hear the case.

The court judges notably on the validity of the debt, which must be certain, of a fixed amount and due.

If the judge decides that the debt is valid, he issues the final charging order which retrospectively replaces the interim charging order.

Time limit for registration

When the court decision has the authority of res judicata, in other words when it is no longer subject to appeal, the creditor must register the final charging entry within three months.

The creditor must present the writ of execution of the judgement.

If this time limit is not met, the final charging order cannot be registered. The interim charging order becomes retrospectively void and its discharge can be requested by any concerned party at the cost of the registrant, on application to the President of the Court of First Instance, ruling in emergency proceedings.

Effects of the final charging entry

The final charging order takes its date of validity from the date of registration of the interim charging order.

Registration of the final charging order retains its authority for five years from that date.

It allows the creditor to seize the assets or apply for an order of sale.

Revoking the final charging order

Requests for the discharge of a final charging order are made upon presentation of a legal document of withdrawal or by a judgement with the authority of res judicata.