Commercial Pledges Act

Link to law: https://www.riigiteataja.ee/en/eli/ee/Riigikogu/act/527012015013/consolide
Published: 2015-01-01

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)

Passed
Published
Entry into force

05.06.1997
RT I 1997, 48, 774
10.07.1997

14.11.2001
RT I 2001, 93, 565
01.02.2002

05.06.2002
RT I 2002, 53, 336
01.07.2002

15.06.2005
RT I 2005, 39, 308
01.01.2006

12.10.2005
RT I 2005, 57, 450
01.01.2006

26.01.2006
RT I 2006, 7, 42
04.02.2006

06.12.2006
RT I 2006, 61, 456
01.01.2007

21.11.2007
RT I 2007, 65, 405
15.12.2007

21.11.2007
RT I 2007, 67, 413
28.12.2007

10.12.2008
RT I 2008, 59, 330
01.01.2009

22.04.2010
RT I 2010, 22, 108
01.01.2011, will enter into force on the date specified in the decision of the Council of the European Union concerning abrogation of the derogation established with regard to the Republic of Estonia under 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 (OJ L 196, 28.07.2010, pp. 24-26).

05.12.2012
RT I, 18.12.2012, 3
19.12.2012

27.02.2014
RT I, 21.03.2014, 3
31.03.2014, in part 01.04.2014 and 01.01.2015

11.06.2014
RT I, 21.06.2014, 8
01.01.2015

19.06.2014
RT I, 29.06.2014, 109
01.07.2014, the ministers’ official titles have been replaced on the basis of subsection 107³ (4) of the Government of the Republic Act starting from the wording in force as of 1 July 2014.

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, in accordance with 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 settlement 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) enters into a commercial pledge contract with a pledgee. A commercial pledge contract must set out:
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 must be authenticated by a notary.
(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 – entry 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 notarially authenticated 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 notarially authenticated 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 – 15.12.2007]
(12) If a private limited company or a public limited company whose assets have been encumbered with a commercial pledge merges with the assets of the natural person who is the sole shareholder of the company, the merger may be registered in the commercial register only if a consent of the pledgee regarding the merger, which has been authenticated by a notary, is submitted to the registrar of the commercial register along with the application.
[RT I, 21.03.2014, 3 – entry into force 01.01.2015]
(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 makes 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 the settlement 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 in accordance with law. The provisions of §§ 292-295 of the Law of Property Act do not apply to the settlement 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 the settlement of a claim which is not secured by a commercial pledge or for the settlement of a claim of a commercial pledgee ranked after the claim of a pledgee, the pledgee may demand the settlement 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 cannot demand the settlement of the claim if the property remaining after the settlement of the other claim constitutes the full security for the pledgee.

§ 11.  Settlement of claim before it falls due

(1) A creditor may demand the settlement 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 the settlement 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 must 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 must 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 is 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 is 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 must be certified by a notary. An application may be included in a commercial pledge contract. A certified application must, along with the documents required for making an entry, be submitted to the registrar by the notary who certified the application via the electronic information system of notaries. With good reason an application and documents required for making an entry may be submitted via another notary. The notary will explain to the person which documents must be annexed to the application and what requirements are applicable thereto.
[RT I, 18.12.2012, 3 – entry into force 19.12.2012]
(2) Entries in the commercial pledge register are 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 consent of the pledgor for the entry of the commercial pledge in the register, which has been certified by a notary, must 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 must be set out in the application. The commercial pledge contract must be appended to the application.
(4) Applications which arrive by post or by electronic mail on the same day are deemed to have arrived concurrently and are registered in the journal as the last applications to arrive on that day. The time of closing the acceptance of applications is 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 will 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 will return the application submitted by electronic mail, indicating the reasons thereof, and will 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 certified consent of the pledgees whose registered right is prejudiced by the amendment of the entry is required.
(7) An application, an authorisation document for submission of an application and a consent for making, amendment and deletion of an entry, which has been certified by a notary, is 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 is considered as correct with respect to a third party except if the third party knew or should have known that the entry is not correct.
(3) If facts to be entered in the register are not entered in the register, such facts will have legal effect with respect to a third party only if the third party knew or should have known about them.
(4) [Repealed – RT I 2008, 59, 330 – entry 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 is deleted from the register on the basis of an application from the pledgor to which the consent of the pledgee certified by a notary 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 is deleted upon deletion of an undertaking from the commercial register. An undertaking is not deleted from the commercial register before deletion of the commercial pledge.
(4) If a commercial pledge extinguishes in accordance with law before deletion from the register, it will be deleted from the register by the registrar.
§ 19. – § 22. [Repealed – RT I 2005, 39, 308 – entry into force 01.01.2006]

§ 23.  Change of ranking

(1) In order to change the ranking of commercial pledges, a notarially authenticated agreement between the pledgees the ranking of whose pledges is changed and notarially certified consent of the undertaking are required. If the relinquishment of a ranking infringes the rights of other pledgees, the notarially authenticated consent of the pledgees whose rights are infringed must 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 must not prejudice 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 must promptly notify the pledgor and the debtor, if the pledgor is a third party, 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 is 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 will 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 will immediately make an appropriate notation in the register and will 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 will 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 will be indicated as invalid and the correct entry will be made.
[RT I, 18.12.2012, 3 – entry into force 19.12.2012]
(2) The new entry will indicate that it replaces the previous entry.
(3) The correction of an entry in any other manner is prohibited.

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

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

Chapter 4 IMPLEMENTING PROVISIONS 

§ 29.  Entry into force of Act

(1) This Act will enter into force on 1 January 1997.
(2) As of 1 January 1997, commercial pledges may only be registered in the commercial pledge register in accordance with 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 – RT I 2001, 93, 565 – entry into force 01.02.2002]

§ 32.  Notification obligation of enterprise register

The enterprise register must 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 form of the commercial pledge registry card will be established by a regulation of the minister responsible for the field.
[RT I, 21.06.2014, 8 – entry into force 01.01.2015]

§ 38.  Specifics of currency used

(1) Before the day determined in the decision of the Council of the European Union concerning abrogation of the derogation established with regard to the Republic of Estonia under Article 140(2) of the Treaty on the Functioning of the European Union, (hereinafter day of abrogation of derogation), the pledge amounts entered in the register of commercial pledges are expressed in Estonian kroons.
(2) Pledge amounts are entered in the register of commercial pledges in euros if the registration application is submitted to the registrar before the day of abrogation of the derogation, but the entry is made after the day of abrogation of the derogation.
[RT I 2010, 22, 108 – entry into force 01.01.2011]
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