The non-possessory pledge: more chances to access to credit

The introduction of the “register of non-possessory pledges”

With the introduction of the “register of non-possessory pledges” (the “Register of Pledges”)^[1], implemented with Decree 25 May 2021, no. 114^[2], of the Italian Ministry of Economy and Finance (the “Ministerial Decree”), companies registered with the Register of Companies will finally be able to establish pledges without the need to deliver the pledged asset to the relevant creditor, thus allowing the establishment of so-called “non-possessory” pledges.

The implementation of the non-possessory pledge will likely become effective on 25 January 2022, date by which the Italian Revenue Office must make the Register of Pledges operational and effective.

The main features of the new institution

In order to facilitate the companies’ access to credit, the Italian legislator has introduced an institution with clear distinctive features which set it apart from the pledge currently regulated under the Italian Civil Code. In fact, the latter is a guarantee in rem, which therefore requires the so-called “traditio” – i.e. the actual delivery of the assets burdened by the pledge – for its valid completion. On the other hand, the establishment of a non-possessory pledge will be validly completed directly upon the execution of the relevant agreement, without the delivery of the asset being required for its validity/effectiveness. 

The assets which may be the object of such kind of pledge are movables, including intangible assets, provided that they refer to the Company’s business operations, and receivables arising out of or in connection with such operations, excluding “registered movable assets, including registered intangible assets”. 

The absence of the de-possession feature seems to admit the creation of more than one pledge on the same asset, the so-called “second-degree pledge” (“pegno di secondo grado”)^[3]. Furthermore, the similarities with the mortgage seem to allow the application to the former of the rules regarding the creditors’ subrogation provided for the latter.

The Ministerial Decree further admits that the debtor (or, as the case may be, the third-party pledgor), unless expressly so prohibited under the pledge agreement, may transform (e.g., in case of raw materials), transfer or otherwise dispose of the pledged assets – provided that their economic function is respected – without the foregoing modifying the guarantee relationship. In such case, the pledge is automatically transferred “to the product resulting from the transformation, to the transfer price of the pledged asset or to the substitute asset acquired with such price” (art. 1, paragraph 2, L.D. 59/2016)^[4].

This specific so-called “revolving” feature is thus automatic in this particular type of pledge (although the parties may agree on its exclusion) while, for ordinary pledges, it must be the object of specific arrangements. 

The non-possessory pledge agreement

The Register of Pledges is meant for the registration of the non-possessory pledge agreements. Particularly, the non-possessory pledge agreement shall present, under penalty of nullity, the following features: 

• written form^[5];
• indication of the creditor, the debtor and of any third-party pledgor;
• information on the pledged asset;
• indication of the guaranteed receivables and of the maximum guaranteed amount.

The functions of the Register of Pledges and the enforceability of the guarantee

The registration with the Register of Pledges will render the guarantee enforceable against third parties, thus constituting a form of declaratory registration (“pubblicità dichiarativa”)^[6]. The applicant, upon submission of the registration request, shall:

• electronically sign the request (in case it is submitted by an attorney of the applicant, it shall be accompanied by a specific electronically-signed power of attorney);
• enclose the title establishing the pledge (e.g. the pledge agreement);
• provide the information on the pledgor, the pledgee and the pledged assets expressly indicated in article 3, paragraph 2, of the Ministerial Decree^[7].

The registration expires after ten years and may be renewed by submitting a specific request prior to its expiration. The registration may be cancelled upon joint request of the guaranteed creditor and the pledgor or upon request to the competent judicial authority.

Forms of self-defence granted to the holder of a non-possessory pledge by L.D. 59/2016

In order to balance the unavailability of the pledged asset for the creditor, article 1, paragraph 7, of L.D. 59/2016 sets forth specific forms of self-defence, granting the latter a set of instruments functional to the swift enforcement of the receivable in the event the debtor fails to pay. In fact, the creditor, after serving the debtor with a warning to pay the amounts due and having notified its intention to any other titleholders of non-possessory pledges over the relevant asset as well as to the debtor of the pledged receivables (if applicable), may:

• sell the pledged asset and retain the proceeds up to the guaranteed amount^[8];
• enforce or assign the pledged receivables up to the guaranteed amount;
• where so provided under the pledge agreement and recorded in the Register of Pledges, rent the pledged asset and retain the fees up to the guaranteed amount^[9];
• where so provided under the pledge agreement and recorded in the Register of Pledges, take possession of the pledged assets^[10].

The debtor and any third-party pledgors have the right to file an opposition within five days of the notice (art. 1, paragraph 7-bis, L.D. 59/2016). 
 

Non-possessory pledges over stocks of joint-stock companies…

The reference, among the requirements for the registration of the non-possessory pledge, to the “nature, quantity and identification details of the stocks, or of the shareholdings encumbered” (art. 3, par. 2, lett. i), no. 6, M.D. 114/2021), suggests the possibility to establish a non-possessory pledge over stocks of joint-stock companies (“S.p.A.”).

It remains to be determined whether, for the effective establishment of a non-possessory pledge over stocks, the execution of the relevant pledge agreement would suffice or, rather, if the rules on the double registration on the stock certificate and the shareholders ledger (or of the endorsement certificate or equivalent, as the case may be) pursuant to articles 3 and 5 of the R.D. 239/1942 would apply.

On this subject, it seems appropriate to consider, in compliance with L.D. 59/2016, that, for the pledge to be validly established, it is not necessary to fulfil the abovementioned requirements – the latter being presumably necessary only for the creditor’s exercise of the relevant corporate rights.
 

… and over quotas of limited liability companies

Even in the absence of consistent interpretations on this point, it seems reasonable to assume that, with the word “shareholdings”, the legislator intended to admit the possibility to establish such new kind of pledge also over quotas of limited liability companies. Such interpretation appears in line with the relevant case-law, according to which the quotas of a limited liability company are to be considered as intangible assets.

However, as for joint-stock companies, the question remains as to whether, for the validity of the non-possessory pledge, the requirements provided for the ordinary pledge apply – considering that the Italian Court of Cassation, with decision no. 31051 of 27 November 2019, stated that “the establishment of a pledge over quotas of limited liability companies is subject to the provision of art. 2806 of the Italian Civil Code, thus the pledge is validly established with the registration of the relevant title with the Register of Companies”.

The answer is not univocal. On the one hand, in fact, authoritative doctrine argues that the registration with the Register of Companies is a “constitutive” element of the pledge over limited liability companies’ quotas and, therefore, excludes that the validity and effectiveness of the guarantee can be rooted in the simple pledge agreement. On the other hand, however, it is the Italian Civil Code itself, in article 2806, paragraph 2, that states that, as regards the establishment of a pledge “the provisions of special laws” shall nonetheless apply.

In support of this interpretation, it is, therefore, possible to invoke the “special nature” of the discipline of the non-possessory pledge as compared with the articles of the Italian Civil Code that govern the “ordinary” pledge, since the former – regulated by Law Decree 59/2016 and by the Ministerial Decree on the establishment of the Register of Pledges – applies only to businesses within the scope of their business activity.

If this last thesis were to be supported, it could be considered that the constitution of a non-possessory pledge can take place by way of derogation from the principle of law enunciated by the Court of Cassation, which would instead apply only to the “ordinary” pledge, and that the constitution of non-possessory pledges on quotas of limited liability companies can be completed even without the relative registration with the competent Register of Companies.

Like for stocks of joint stock companies, this last requirement would nevertheless remain at least necessary for the exercise of corporate rights by the pledgee.

For this querelle to be solved all that remains is to wait for the competent courts to rule on its regard.

^[1] The entirely online register will be held by a special department of the revenue agency (“Agenzia delle Entrate”) located in Rome and placed under the supervision of the Ministry of Justice.

^[2] The introduction of the Register of Pledges completes the process initiated with the enactment of Law Decree 3 May 2016, no. 59 (converted with amendments in Law 30 June 2016, no. 119).

^[3] Such a “second-degree” pledge could, therefore, be considered validly established at the time of the registration of the relevant title in the Register of Pledges and without the consensus of the “first-degree” pledgee.

^[4] The variations of the relationship and the guarantee are subject to the same publicity regime provided for the registration: to update the registration, it is therefore necessary to submit a special application for annotation.

^[5] The Ministerial Decree further provides that “registrations and other formalities may not be carried out unless they are based on a public deed, an authenticated or judicially ascertained private deed, an agreement executed electronically pursuant to article 24 of the Legislative Decree 7 March 2005, no. 82, or on a Court’s decision”.

^[6] The Register of Pledges may be consulted online to verify whether an asset is burdened by a “non-possessory pledge”. If needed the system may, issue a certificate attesting to the absence of registrations with regard to such asset.

^[7] Where the pledge is granted as guarantee of a loan for the purchase of a specific asset, such specific asset will need to be clearly identified as well.

^[8] This provision further provides that “the sale is carried out by the creditor through competitive procedures (“procedure competitive”) also by employing specialised persons, based on estimates obtained, excluding goods having a non-relevant value (“beni di non apprezzabile valore”), from expert professionals, ensuring proper forms of publicity, the maximum information and participation of the stakeholders; the expert professional is appointed upon agreement between the parties or, in the absence of such agreement, by the judge; in any case the creditor shall take care of the publishment on the public sales website (“portale delle vendite pubbliche”) indicated in article 490 of the Italian Code of Civil Procedure”.

^[9] Provided, however, that the “agreement sets forth the criteria and modalities for the determination of the rent fees”.

^[10] Provided, however, that the “agreement sets forth the criteria and modalities for the valuation of the pledged asset and of the guaranteed obligation”.