Right of pledge is a type of security that is used very frequently. There are various regimes for pledging all kinds of assets in the Netherlands, and the following are the most common:
- pledging rights such as accounts receivable, insurance, bank balances, intra-group claims and intellectual property;
- pledging of movable property such as stocks, fixtures and fittings, goods in storage, transport systems and cranes (insofar as these are movable);
- pledging of shares in one or more subsidiaries.
Legal assistance on pledge agreements
At Ploum, our specialists can draw up the notarial or privately-executed deed you require for pledging rights or movable property (undisclosed or non-possessory pledge). The pledging of shares in a Dutch private limited company may only be done through a notarial deed.
In case of a syndicate of financiers, for example in LMA based transactions, it is possible to create security on behalf of a security agent or a security trustee (generally one of the banks) by inserting a parallel debt clause in the deed of pledge. This security agent or trustee exercises the right of pledge on behalf of the syndicate in the case in question. But there is some doubt in Dutch law concerning the options for creating independent security on behalf of a party that is not a creditor, or is only a partial creditor. For this reason, the deed of pledge (or the credit document or intercreditor agreement) provides that the entire amount is also payable to the security agent as a separate debt. This separate debt decreases in proportion to the repayments made or the security enforcements carried out. In the past, parallel debts were only arranged for certain jurisdictions, mainly the Netherlands. However, they are currently gaining popularity under English law as well.
Security for third-party debts
Security for third-party debts is sometimes issued in the form of a pledge. In such cases, it is important to make absolutely sure that the relevant company is authorised to enter into the transaction. The management at the local company also wishes to ascertain that it is not assuming any kind of liability by agreeing to this kind of security.