The amended provisions aim at better protected rights of pledgees and enhanced legal certainty
Since the beginning of 2017 important changes in the Registered Pledges Act have been in force. A focal novelty has affected the registration of pledges. Pledges are now deemed registered upon their entry into the Central Pledge Registry (CPR) kept by the Ministry of Justice. Under the previous statutory framework, the mere conclusion of a contract on a registered pledge sufficed for the pledge to be considered established; its entry into CPR had a purely informative effect.
The amendments have also broadened the scope of entities that can be pledgers. So far only merchants, natural persons engaged in farming, artisans, freelancers and persons providing hotel services had the capacity of establishing registered pledges. From now on, this possibility will also be open to:
- legal entities whose members are natural persons engaged in farming;
- the spouse of a sole enterprise proprietor;
- municipalities providing security for municipal debt;
- the Bulgarian Bank Deposit Insurance Fund when the Fund secures loans taken thereby;
- non-profit legal entities when they carry out business activities.
Another significant change is the requirement to provide the pledgee’s explicit consent in cases the pledged property transfers. The consent must be duly entered in CPR. In default of such entry, buyers of pledged property would obtain title under encumbrances and would take the status of pledgers vis-à-vis entered pledgees. This rule also applies to any subsequent acquirer of pledged property unless he would be able to demonstrate a bona fide possession. Explicit consent on the part of a pledgee is now also required when registering a subsequent pledge on the same property.
Beginning with September 2018 CPR is expected to become better accessible (over the Internet). It will then be kept by the Registry Agency which is also responsible for the Land and Commercial Registers. It will become possible to electronically submit applications for entries into CPR and publications of acts therein. The mode of operation of CPR will then be similar to the rules applicable to the Commercial Register. Pledges will be registered based on requests submitted by the applicant himself/herself or by a lawyer explicitly authorised to this end.
Restrictions with regard to pledge trustees have been introduced. A pledge trustee is a person empowered to perform relevant duties upon enforcement on a pledged piece of property or on a pledged right. Professionals other than lawyers and registered auditors will not be entitled to act as pledge trustees in future. Accountants and tax consultants will no longer be allowed to fulfil the functions of pledge trustees.
The amendments discussed above are meant to prevent abuses with registered pledges and raise the effectiveness of this means of collateral. However, only practice will show whether the new regime will achieve its intended goals.