A commercial pledge allows a pledgor to retain possession of a pledged item. It does not presume that a securable claim exists and cannot be extinguished after a claim is terminated. Provisions of registered security over movables in the Law of Property Act may apply to this pledge unless otherwise stated. A solution to securing receivables in the Baltic region, the pledge extends to other items, and in some cases, the total assets of the contracting party. Commercial pledges are registered in a register accessible by the public, allowing creditors to see which assets of their debtors have already been pledged.
If you are considering establishing a commercial pledge between you and a pledgee, or you are simply interested in learning more about it, this article provides information on everything you need to know about commercial pledges, how to register them in the country, and other things to know.
Items that can be pledged
It is possible to pledge anything movable, but only real estate cannot be done so. This covers all shares of a corporation as well as any assets or items in stock that are owned by a company in the country. Intangible property rights typically come with attachments under a republic.
Registration of a commercial pledge
To establish a commercial pledge, a pledgor must enter a contract with a pledgee. Unlike in Lithuania, the notarization of the pledge is not necessary for Latvia. The documents required for the application can be signed by the directors and in the case where a fiscal agent is hired, the powers of attorney may be notarized. To register it, the pledgor must provide the following information:
- Company name and personal identification code of the undertaking (pledgor)
- Date of entry
- Amount of the pledge in euros
- Ranking of the pledge
- Details of the pledgee
- Amendment and deletion of entries
Cost of registering a commercial pledge
If there is a need to notarize the agreement, then a notary fee must be paid based on the amount of claim to be secured. There is also a fee to be paid for entry into the register; this cost around EUR 100.
Obligation to notify a pledgee
When a commercial pledge is created, the pledgor is obligated to provide notification to the pledgee regarding any changes to the enterprise, including the suspension of operations, division, transfer, or delivery of the company. In addition to this, the pledgee is responsible for keeping themselves apprised of any decline in the value of the property or any destruction of the property. If the pledgee requests additional information, the undertaking is obligated to supply additional details regarding the property to establish the value of its security.
Termination of a commercial pledge
To put an end to a promise, the parties involved must put their agreement or permission in writing to signify that the contract is being terminated. The document must be notarized to be removed from the register. Aside from this, it can be revoked if the thing that was pledged is destroyed, if the claim is no longer valid, or if the person who pledged no longer owns it. Other ways that it can be put out are as follows:
- By deletion from the register unless stated by law
- Deletion by the pledgor’s application with the pledgee’s notarized approval
- Taking an undertaking off the commercial register
- When it terminates before being erased from the register, the registrar deletes it automatically
Validity of commercial pledge when the sole proprietor dies
Sometimes it can be set up on a property that is a part of real estate. In the case of the death of a sole proprietor, it remains intact.
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