The Law on Pledge on Movable Assets in the pledge Registry was amended

On 25 April 2019, the National Assembly of the Republic of the Serbia adopted Bill amending and modifying the Law on Pledge of Movable Assets in the Pledge Register (“the Law”), published in the Official Gazette No. 31/2019 dated 29 April, 2019, effective eight days after publishing in the Official Gazette on 07. May 2019.

The amendment to the Law specifies the article that relates to the content of a pledge agreement, for the purposes of terminological alignment with the provisions regulating companies and provisions regulating in detail pledge on a collection of movable assets. The Law also found that the pledgee who acquired the right of possession on assets has a priority in debt settlement in respect to the pledgee who acquired right of pledge by registering in Pledge Registry. The Law also regulates in more detail the extension of the right of pledge to all movable assets that become part of the collection of movable assets, after the establishment of a pledge, if the assets are owned by the pledger. These changes have met the requirements imposed by the law enforcement practice and the modern way of doing business. Amendments to the Law also indicate in a clear way that the right of pledge is acquired by registering in the Pledge Registry, based on a pledge agreement. The Law also prescribes that the pledge right can be established on shares. The adopted amendments also filled the legal vacuum concerning the person authorized by pledgee, in this way provisions of the Law are harmonized with the provisions of the Law on Contracts and Torts regulating the power of attorney and the scope of the power of attorney. According to the new provisions an agent cannot waive the right of a pledge without special authorization. The Law now also precisely determines the moment of acquiring the asset on which the right of a pledge was established, or the moment of transferring possession. With the provision of the Law regulating the satisfaction of the principle claim of the pledgee amended, the procedure of settlement by the fulfillment of the right of pledge has been made much more efficient. The provision stipulates that the pledgee obtains the right to satisfy the principle claim by the expiration of 30 days from the day of publishing the notification submitted to the Pledge Registry which contains the information that the pledgee intents to settle his claim from the object of a pledge. The pledgee will be able to settle his claim by retaining the object of the pledge or by selling it. The extra-judicial sales announcement shall be posted on the Pledge Registry at least 15 days before the extra-judicial sales. The Law regulates only the acquisition of ownership rights in extra-judicial sales, while the acquisition of ownership rights in the process of judicial sales is regulated by the Law on Enforcement and Security. The Law also explicitly prescribes that a special procedure for acquiring the right of possession on the object of a pledge relates only to extra-judicial settlement of a claim, thereby removing the possibility of uneven practice and different interpretation of this provision by the court, which has been the case so far. With the changes of the Law it is prescribed that besides the pledgee’s statement that he accepts deletion, the deletion of the right of pledge can be made on the basis of court decision, or any other document from which it follows that the right of pledge has ceased. With this changes it was filled the legal vacuum about the documents on basis of which deletion of the right of pledge can be made. Within six months from the Law’s entry into force, the bylaws shall be adopted, consisting of detailed provisions for the content of the Pledge Registry.

Long-standing application of the Law showed the existence of legal gaps, as well as the existence of insufficiently defined provisions which led to uneven application of the Law and thus negatively reflected on the effectiveness of the right of pledge as security instrument. As the right of pledge on movable assets without the transfer of the right of possession became a widely used means of securing loans or other monetary obligations, which shows a positive effect of the Law and its contribution to legal security.  With this the position of the debtor is more favorable, and satisfaction of the interest of the pledgee more effective, since the certificate from the Pledge Registry was recognized as enforceable document, so it was necessary to change the Law.