New requirements for the registration of commercial pledge

17.03.2015 Irina Stromberga, lawyer

The Law of the Republic of Latvia on Commercial Pledge was adopted in 1998. The commercial pledge provides an opportunity to pledge the movable property – capital shares, vehicles, trademarks, equipment and other registered property – without transferring it into the possession of the pledge holder, but registering a lien in the appropriate register. Business owners use commercial pledge to receive loans for the development of their companies.

On January 1, 2015 the amendments to the Law on Commercial Pledge came into force. In general, these changes are related to the increasingly pervasive integration of information technologies into our lives, namely – the use of an electronic signature. E.g, an application for registration of the commercial pledge is no longer signed by a sworn notary but is certified by an official of the Register of Enterprises of the Republic of Latvia; this is cheaper than at the notary but takes a lot of time. One can also sign an application with an e-signature and send it together with other documents by email to the Register of Enterprises. On the one hand, it is designed to save time and money but on the other hand, it requires knowledge and compliance with all the details of this procedure. When submitting documents in an electronic form, it is important to fill in the documents correctly; there must be a clear understanding of which documents have to be certified with an electronic signature and in what sequence. Please do not assume that a scanned version of the original is the original. This is a copy now, and it should be executed accordingly. 

Recently, capital shares are increasingly used as security for commercial pledge alongside with other movable property. Capital shares are now displayed to the registered objects of pledge, i.e. previously, if the pledgor indicated that the subject of the pledge was the whole property in total, then the capital shares belonging to the entity were also considered to be pledged. Now the capital shares must be indicated separately! The same applies to trademarks and patents. 

What else can be said about the capital shares in this context? The records on the essence of the pledge on shares have become publicly available. This is a very important innovation, as now with the purchase of shares it would be possible to check whether they are pledge-free. This will help to avoid many unpleasant surprises. It is also very important to redeem records of the pledge on time. Many people believe that if the mark of the pledge is placed for 5 years, then in five years the pledge will be called in automatically. Now this will not be the case! All the pledges on which the application for redemption will not be submitted in time are automatically converted into indefinite pledges. 

Good news for partnerships: now they can also be the entities of pledge and pledge the property owned by the partnership. 

If there was received a refusal and there was given a period to eliminate the disadvantages, one no longer has to pay the state duties on the redemption of the pledge and on the resubmission of the documents for registration. 

You can learn more about these and other changes by asking for assistance in the Law Office INLAT PLUS. 

Our specialists for many years have been helping both individuals and legal entities to draft the required documents, carry out the process of registration of commercial pledges from “A” to “Z”.

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