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Commercial Pledges Act

Issuer:Riigikogu
Type:act
In force from:01.01.2011
In force until:18.12.2012
Translation published:19.12.2013

Commercial Pledges Act

Passed 05.06.1996
RT I 1996, 45, 848
Entry into force 01.01.1997

Amended by the following legal instruments (show)

PassedPublishedEntry into force
05.06.1997RT I 1997, 48, 77410.07.1997
14.11.2001RT I 2001, 93, 56501.02.2002
05.06.2002RT I 2002, 53, 33601.07.2002
15.06.2005RT I 2005, 39, 30801.01.2006
12.10.2005RT I 2005, 57, 45001.01.2006
26.01.2006RT I 2006, 7, 4204.02.2006
06.12.2006RT I 2006, 61, 45601.01.2007
21.11.2007RT I 2007, 65, 40515.12.2007
21.11.2007RT I 2007, 67, 41328.12.2007
10.12.2008RT I 2008, 59, 33001.01.2009
22.04.2010RT I 2010, 22, 10801.01.2011, shall enter into force on the date specified in the decision of the Council of the European Union concerning declaring the exception established with regard to the Republic of Estonia on the basis of article 140 (2) of the Treaty on the Functioning of the European Union, Decision No. 2010/146/EU of the Council of the European Union of 13 July 2010 invalid (OJ L 196, 28.07.2010, pp. 24-26).

Chapter 1 GENERAL PROVISIONS 

§ 1.  Definition of commercial pledge

 (1) An undertaking registered in the commercial register may establish a pledge registered in the commercial pledge register on the undertaking’s movable property to the extent provided for in this Act as security for a claim (commercial pledge), without the undertaking transferring possession of the pledgeable property.

 (2) A commercial pledge does not presume the existence of a securable claim and does not extinguish with termination of a claim.

 (3) The provisions concerning registered security over movables in the Law of Property Act apply to a commercial pledge unless otherwise provided for in this Act.

§ 2.  Extent of commercial pledge

 (1) A commercial pledge extends to all movable property of a company or movable property relating to the economic activity of a sole proprietor. A commercial pledge may be established on the movable property of the Estonian branch of a foreign company.

 (2) A commercial pledge extends to all encumberable property which belongs to an undertaking at the time the pledge entry is made and to property which the undertaking acquires after the pledge entry is made.

 (3) A commercial pledge does not extend to:
 1) money in cash register or credit institution; shares, stocks, investment fund shares, contributions in co-operatives or participation in other companies belonging to an undertaking; promissory notes or other loan documents accepted in common usage; or other securities;
 2) property on which another class of registered security over movables or the pledge specified in subsection 132 (2) of the Law of Property Act Implementation Act may be established, property to which a mortgage established on the immovable before or after establishment of the commercial pledge extends or property on which a possessory pledge is established;
 3) property which, pursuant to law, can not be subject to a claim for payment.

§ 3.  Claim secured by commercial pledge

  A commercial pledge secures a claim to the extent of the amount of the pledge, the unpaid interest on the claim within three years before the sale of property encumbered with the commercial pledge in satisfaction of the claim, the fine for delay and expenses for the collection of the debt, the insurance premiums paid by the pledgee on behalf of the owner of property encumbered with the commercial pledge, and other collateral claims.

Chapter 2 LEGAL CONSEQUENCES ARISING FROM COMMERCIAL PLEDGE 

§ 4.  Establishment of commercial pledge

 (1) In order to establish a commercial pledge, an undertaking (pledgor) shall enter into a commercial pledge contract with a pledgee. A commercial pledge contract shall include:
 1) the business name and registry code of the pledgor;
 2) the name and personal identification or registry code of the pledgee;
 3) the amount of the pledge;
 4) other information provided by law.

 (2) A commercial pledge contract shall be notarised.

 (3) A commercial pledge is created on the basis of an application after a corresponding entry is made in the commercial pledge register.

§ 5.  Use and disposal of property

 (1) An undertaking may use and dispose of property encumbered with a commercial pledge in the ordinary course of business.

 (2) If an undertaking transfers a thing which forms part of the property encumbered with a commercial pledge in the ordinary course of business, the commercial pledge on the thing extinguishes. If the person to whom the thing is transferred or for whose benefit the thing is encumbered acted in good faith with respect to the undertaking’s right of disposal upon acquisition of ownership or other real right, the right of security extinguishes even if the transfer is contrary to the provisions of subsection (1) of this section.

§ 6.  Transfer of encumbered property

 (1) [Repealed – RT I 2005, 39, 308 – entered into force 01.01.2006]

 (2) Upon the transfer of property which is encumbered with a commercial pledge and which constitutes an enterprise or installation, the commercial pledge is preserved.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

§ 7.  Validity of commercial pledge upon merger, division or transformation of companies

 (1) If in the case of merger of companies a commercial pledge was established on property of more than one company being merged, the merger may be entered in the commercial register only if together with the application for entry of the merger in the register a notarised agreement of the pledgees regarding the ranking of pledge entries is submitted to the registrar of the commercial register. The same is valid upon division of a company if a commercial pledge was established on property of several companies participating in the division.

 (11) If, in the event of the cross-border merger of companies, a commercial pledge has been established on the property of the company being acquired and if the acquiring company is governed by the law of another contracting state of the European Economic Area, the merger may be registered in the commercial register only if the pledgee’s notarised consent to the registration of the merger is submitted to the registrar of the commercial register along with the application.
[RT I 2007, 65, 405 - entry into force 15.12.2007]

 (2) The transformation of a company does not affect the validity of a commercial pledge or a preferential right granted by the pledge entry.

 (3) The registrar of the commercial pledge register shall make amendments resulting from subsection (1) of this section to the commercial pledge register on the basis of the agreement of the pledgees.

§ 8.  Validity of commercial pledge upon death of sole proprietor

  A commercial pledge established on property which forms part of an estate does not extinguish upon the death of a sole proprietor.

§ 9.  Right to insurance indemnity

 (1) If property encumbered with a commercial pledge is insured, the commercial pledge also extends to an insurance indemnity claim.

 (2) Payable insurance indemnity may be paid wholly or partly to the pledgor, and the debtor may relinquish the insurance indemnity only with the written consent of all commercial pledgees whose claim is secured by the commercial pledge.

§ 10.  Rights arising from commercial pledge upon compulsory execution or bankruptcy

 (1) In the event of compulsory execution or bankruptcy, a pledgee may demand satisfaction of a claim out of the property encumbered with a commercial pledge to the extent of the amount of the pledge according to the ranking of the pledge pursuant to law. The provisions of §§ 292-295 of the Law of Property Act do not apply to the satisfaction of claims secured by a commercial pledge.
[RT I 2002, 53, 336 - entry into force 01.07.2002]

 (2) If commercial pledges established as security for a claim by a pledgee are valid consecutively, the provisions of subsection (1) of this section apply to the entire amount of the pledges.

 (3) A pledgee does not have a preferential right to payment from property which is seized before entry of the commercial pledge in the commercial pledge register or on the day the entry is made. Upon release of property from seizure or its exclusion from the bankruptcy estate, the commercial pledge also extends to such property.

 (4) If a claim for payment is made on encumbered property for satisfaction of a claim which is not secured by a commercial pledge or for satisfaction of a claim of a commercial pledgee ranked after the claim of a pledgee, the pledgee may demand satisfaction of the pledgee’s claim from funds received from sale of the property or from funds which are received for the property by compulsory execution in any other manner, even if the pledgee’s claim is not yet collectable, ahead of the creditor for whose benefit the collection is made. The pledgee shall not demand satisfaction of the claim if the property remaining after satisfaction of the other claim is full security for the pledgee.

§ 11.  Satisfaction of claim before it falls due

 (1) A creditor may demand satisfaction of a claim out of property encumbered with a commercial pledge even if the claim has not fallen due if:
 1) the encumbered property is divided, the operations of the enterprise are suspended or property is transferred to another person contrary to the provisions of subsection 5 (1) of this Act, or
 2) all property encumbered with a commercial pledge or a majority thereof is destroyed, or
 3) the debtor does not give the information specified in § 12 of this Act to the creditor, or
 4) the encumbered property is neglected or has decreased and, as a result, the value of the security has declined significantly.

 (2) A creditor may demand satisfaction of a claim under the circumstances specified in subsection (1) of this section within three months after becoming aware of the circumstances. If property is transferred or divided, or the operations of the enterprise are wholly or partly suspended, the claim shall be submitted within the term provided for in subsection 6 (3) of this Act.

§ 12.  Notification obligation

  An undertaking on whose property a commercial pledge is established is required to notify promptly the pledgee of suspension of operations of the enterprise, division, transfer or delivery in any other manner of the enterprise, decrease in property if the value of the security declines significantly, and of the destruction of the property or a majority thereof. At the request of the pledgee, a pledgor shall also give the pledgee other information concerning encumbered property necessary to determine the value of the security.

§ 13.  Objections of pledgor

 (1) A pledgor may only present objections against a pledgee which are founded on the pledge entry or which the pledgor has on the basis of the law of obligations against the creditor who has submitted a claim.

 (2) A pledgor may also present the objections specified in subsection (1) of this section against the legal successor of the creditor or a person to whom the pledgee has transferred the commercial pledge.

 (3) The owner of property encumbered with a commercial pledge who is not the debtor may present the same objections against the claim secured by the commercial pledge which the debtor may present. The owner may present objections even if the debtor does not contest the claim.

Chapter 3 REGISTRATION OF COMMERCIAL PLEDGE 

§ 14.  Information entered in commercial pledge register

  The following shall be entered in the commercial pledge register:
 1) the business name and personal identification code or registry code of the undertaking;
[RT I 2006, 61, 456 - entry into force 01.01.2007]
 2) the date the entry is made;
 3) the monetary amount of the commercial pledge (amount of pledge) in euros and, in the event of a commercial pledge owned by several pledgees jointly, fractions owned by them;
[RT I 2010, 22, 108 - entry into force 01.01.2011]
 4) the ranking of the commercial pledge;
 5) the name and personal identification code or registry code of the pledgee;
[RT I 2006, 61, 456 - entry into force 01.01.2007]
 6) amendment and deletion of entries;
 7) other information provided by law.

§ 15.  Commercial pledge register

 (1) The commercial pledge register shall be governed by the provisions governing the commercial register, as provided for in the Commercial Code, with the specifications provided for in this Act.
[RT I 2006, 61, 456 - entry into force 01.01.2007]

 (2) Subsections 53 (4) to (6) of the Commercial Code do not apply.
[RT I 2006, 61, 456 - entry into force 01.01.2007]

 (3) Subsection 62 (7) of the Commercial Code is applicable to pledgees.
[RT I 2006, 61, 456 - entry into force 01.01.2007]

§ 16.  Making entries

 (1) An application submitted to the registrar shall be notarised. The application may be included in the commercial pledge contract.

 (2) Entries in the commercial pledge register shall be made on the basis of an application, court decision or on another basis provided by law. An application for entering a commercial pledge in the register may be submitted by a pledgor or pledgee. If an application is submitted by a pledgee, the notarially authenticated consent of the pledgor for entry of the commercial pledge in the register shall be appended thereto.
[RT I 2008, 59, 330 - entry into force 01.01.2009]

 (3) The information provided for in clauses 14 1), 3), 4), 5) and 7) of this Act shall be set out in the application. The commercial pledge contract shall be appended to the application.

 (4) Applications which arrive by post or by electronic mail on the same day shall be deemed to have arrived concurrently and shall be registered in the journal as the last applications to arrive on that day. The time of closing the acceptance of applications shall be indicated as the time of acceptance.
[RT I 2006, 61, 456 - entry into force 01.01.2007]

 (41) If a digitally signed application can be submitted directly to the commercial pledge register’s online information system, the application and the time of receipt thereof shall be registered in the journal of the register automatically.
[RT I 2006, 61, 456 - entry into force 01.01.2007]

 (42) If a digitally signed application can be submitted directly to the commercial pledge register’s online information system, the application may not be submitted by electronic mail. Otherwise the registrar shall return the application submitted by electronic mail, indicating the reasons thereof, and shall not register the application in the journal of the register.
[RT I 2006, 61, 456 - entry into force 01.01.2007]

 (5) Commercial pledges cannot be established with one and the same ranking, except in the case specified in subsection (4) of this section, if the pledge contracts are entered into on the same date. A commercial pledge may be owned in fractions jointly by several pledgees.

 (6) To amend an entry concerning a commercial pledge, the notarially authenticated consent of the pledgees whose right, entered in the register, is prejudiced by the amendment of the entry is required.

 (7) A notarially authenticated application, an authorisation document for submission of the application and a consent for making, amendment and deletion of an entry shall be deemed to be equal to a digitally signed application, authorisation document and consent.

§ 17.  Legal effect of entry

 (1) An entry in the commercial pledge register enters into force as of signature of the entry.

 (2) An entry shall be held as correct with respect to a third person except if the third person knew or should have known that the entry is not correct.

 (3) If facts required to be entered in the register are not entered in the register, such facts have legal effect with respect to a third person only if the third person knew or should have known about them.

 (4) [Repealed – RT I 2008, 59, 330 – entered into force 01.01.2009]

§ 18.  Extinguishment of commercial pledge

 (1) A commercial pledge extinguishes by deletion from the register unless otherwise provided by law.

 (2) A commercial pledge shall be deleted from the register on the basis of an application from the pledgor to which the notarially authenticated consent of the pledgee is appended or on the basis of an application from the pledgee.
[RT I 2006, 7, 42 - entry into force 04.02.2006]

 (3) A commercial pledge shall be deleted upon deletion of an undertaking from the commercial register. An undertaking shall not be deleted from the commercial register before deletion of the commercial pledge.

 (4) If a commercial pledge extinguishes pursuant to law before deletion from the register, it shall be deleted from the register by the registrar.

§ 19. – § 22. [Repealed – RT I 2005, 39, 308 – entered into force 01.01.2006]

§ 23.  Change of ranking

 (1) In order to change the ranking of commercial pledges, a notarised agreement between the pledgees the ranking of whose pledges is changed and notarially authenticated consent of the undertaking are required. If relinquishment of a ranking violates the rights of other pledgees, the notarially authenticated consent of the pledgees whose rights are violated shall also be submitted.
[RT I 2006, 7, 42 - entry into force 04.02.2006]

 (2) If a pledge lowered upon a change of ranking extinguishes, the elevated right does not, as a result, lose the place received by the change of ranking.

 (3) A change of ranking shall not damage the rights of the pledgor or the rights of pledgees whose pledge rankings are between the lowered and elevated rights.

 (4) A pledgee who relinquishes a ranking shall promptly notify the pledgor and the debtor, if the pledgor is a third person, of the relinquishment of ranking.

 (5) Upon the deletion of a commercial pledge with higher ranking, pledges with lower ranking are correspondingly elevated. An entry concerning changes in ranking shall be made by the registrar without a corresponding application upon the deletion of the commercial pledge with higher ranking.

§ 24.  Correction of entry before signature

  If a commercial pledge register entry does not comply with the ruling on entry and the incorrectness of the entry becomes apparent before signature, the correction shall be made without making a new ruling on entry.
[RT I 2005, 39, 308 - entry into force 01.01.2006]

§ 25.  Correction of entry after signature

  If a commercial pledge register entry does not comply with the ruling on entry and the incorrectness of the entry becomes apparent after signature, the registrar shall immediately make an appropriate notation in the register and shall notify the persons concerned, who have the right to make objections during a term specified by the registrar, of the proposed correction. After expiry of the term, a judge shall decide on correction of the entry.
[RT I 2005, 39, 308 - entry into force 01.01.2006]

§ 26.  Method of correcting entry

 (1) In order to correct an entry, the incorrect entry shall be underlined and the correct entry shall be made pursuant to § 22 of this Act.

 (2) The new entry shall indicate that it replaces the previous entry.

 (3) The correction of an entry in any other manner is prohibited.

§ 27. – § 28. [Repealed – RT I 2005, 39, 308 – entered into force 01.01.2006]

Chapter 4 IMPLEMENTING PROVISIONS 

§ 29.  Entry into force of Act

 (1) This Act shall enter into force on 1 January 1997.

 (2) As of 1 January 1997, commercial pledges may only be registered in the commercial pledge register pursuant to procedure provided for in this Act. The registrar of the enterprise register may, on the basis of an application from a pledgee or from an undertaking with the written consent of the pledgee submitted prior to 1 September 1997, delete from the enterprise register all the commercial pledges registered therein, notifying the registrar of the commercial register thereof immediately.

§ 30.  Commercial pledges registered in enterprise register

 (1) The appropriate provisions of §§ 1–13 of this Act apply to commercial pledges entered in the register of enterprises, agencies and organisations (hereinafter enterprise register).

 (2) If an application for establishment of a commercial pledge is submitted to the enterprise register before 1 January 1997, the application may be registered in the enterprise register.

§ 31.  [Repealed]

§ 32.  Notification obligation of enterprise register

  The enterprise register shall submit a list of commercial pledges entered in the enterprise register by 1 January 1997 to the registrar of the commercial register.

§ 33. – § 36. [Omitted from this text]

§ 37.  Implementing regulations

  The Minister of Justice may issue regulations for organisation of the activities of registration departments. The Minister of Justice shall establish the form of a commercial pledge registry card by a regulation.