An enforcement procedure can be initiated by any creditor that has a claim on the debtor which is fixed and due. It is thus possible for a creditor that has a second-ranking security interest to initiate the procedure. In the latter event, the initiator (that is second ranked) of the enforcement procedure, will not obtain any prerogatives and will be paid after the payment of the first ranked creditor, provided that the residual amount is sufficient to cover the claim of the second ranked security interest.
A pledgee can enforce its security rights upon a (payment) default and can do so without insolvency proceedings being opened, if the conditions (eg, a payment default) stated thereto in the pledge agreement have been met.
A pledgee has the right to enforce all types of pledges over movable assets (including inventory, equipment and business assets) without prior court authorisation. Enforcement will then take the form of a public or private sale, lease of the pledged assets or, if so agreed and a valuation method has been provided in the pledge agreement, appropriation of the same.
The pledgee should inform the debtor or third-party pledgor (as well as any other pledgee or creditor that has seized the pledged assets) of its intention to enforce the pledge, by means of a registered letter. After expiry of a waiting period of 10 days (which in certain circumstances can be shortened to three days), and provided no objections have been filed with the attachments judge, the pledgee may publicly or privately sell or lease the pledged assets or appoint a bailiff to do so. In a private sale, the pledgee may not act as purchaser. The sale or lease should take place in good faith and in an economically responsible manner. Enforcement occurs at the risk of the pledgee, whose liability cannot be limited or excluded.
In addition, the pledgee is allowed to appropriate the pledged assets, if this possibility is expressly provided for in the pledge agreement or subsequently (but prior to enforcement) by agreement between the pledgor and the pledgee. The value of the pledged assets must be determined at the time of appropriation, either by an expert or based on the fair market value of the same or similar goods.
At any time during the enforcement proceedings and at the latest within one year from the end thereof, any interested party can petition the attachments judge if it objects to the manner in which the pledge is being or was executed or the proceeds distributed.
The enforcement of security rights over financial collateral (such as bank receivables, cash and financial instruments (including shares)) does not require prior court approval. Enforcement can take place by means of a public or private sale or, if this possibility and a valuation method have been provided in the pledge agreement itself or any subsequent agreement, by means of the appropriation of the assets by the pledgor.
With respect to a pledge over account receivables, the pledgee is entitled to keep the proceeds from the pledged account receivables for the satisfaction of its principal claim, as provided in the pledge agreement, at any time or after the occurrence of an event of default.
In the event of insolvency proceedings, the creditors whose claims are secured by a pledge over financial collateral (such as bank receivables, cash or financial instruments (including shares)) can proceed with enforcement. The enforcement of a pledge over other assets is suspended during the period of verification of the claims (approximately three months).
Beneficiaries of a pledge over receivables, bank accounts, and financial instruments (including shares) are able to enforce their security despite any standstill pronounced in connection with reorganisation proceedings of a Belgian company. The enforcement of other security interests, such as a pledge over movable assets or a pledge over inventory, is suspended for a period of six months, which can be extended to up to 18 months.
Enforcement of a mortgage outside bankruptcy requires an enforceable title, consisting of an executory judgment or a notarised (officially recorded) deed in which the obligation to pay is defined. No enforceable title is required to rely on one’s rights as mortgagee in the context of bankruptcy proceedings and a sale by the receiver in bankruptcy.
A notarial deed will constitute such an enforceable title if, besides creating a mortgage, it also contains the loan or facility agreement or, at least, states in detail the terms and conditions of the secured obligations. A mere reference in the notarial deed to a private agreement detailing the claim is not sufficient in itself.
If the notarial deed is limited to the mere creation of a mortgage and is not an enforceable title, the mortgagee will first need to obtain a final court decision ordering payment before enforcing the mortgage.
If the mortgage deed constitutes an enforceable title, the enforcement procedure can be initiated directly.
Enforcement is initiated by means of service of a payment order by bailiff, stating that the mortgaged asset will be attached (seized) if the debt is not paid. Seizure should occur at least 15 days and no more than six months from the date of the payment order. The order should mention, among other things, that the mortgagor has eight days to propose to the attachments judge to purchase the mortgaged asset.
Subsequently, the attachment order must be recorded in the register of the competent mortgage office. Publication is mandatory.
Within one month after recordation of the attachment, the appointment of a civil law notary, entrusted with organising a public sale of the mortgaged asset, should be requested. This request must be filed with the attachments judge. If all conditions are met, the judge will appoint a civil law notary.
The civil law notary will prepare the terms of sale, which will be reviewed by the court. The notary will then sell the property at auction within six months after his or her appointment. After the sale, the notary will divide the proceeds among the creditors by rank.
Although it is difficult to estimate the duration of enforcement proceedings since incidents may arise (eg, the mortgagor may file opposition before the attachments judge at various stages) that may cause additional delays, the duration of the enforcement proceedings (without the occurrence of any incidents) is approximately six to seven months.
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