Non-possessory pledge: technical standards to facilitate access to credit for Italian companies are approved

Prepared by Cristian Sgaramella, Roberto Percoco and Valeria Saponaro

On 23 January 2023, the technical regulations, which had already been issued by “Agenzia delle Entrate” by means of the Provision of the previous 12 January (the “Provision”), were published in the Official Gazette No. 18, thereby completing the protracted process necessary to begin the operation of the non-possessory security pledge.

Below we will proceed with a summary of the regulatory process that has followed over the last few years.

In particular, with Decree-Law No. 59 of 3 May 2016, setting forth “Urgent provisions on enforcement and insolvency procedures, as well as in favour of investors in banks in liquidation” (hereinafter, the “Banks Decree”) converted with amendments by Law No. 119 of 30 June 2016, the institution of the non-possessory security pledge was introduced into the Italian legislation.

First of all, it should be noted that the institution in question has represented, since its entry into force, a new type of security of a non-possessory nature that can be used exclusively by entrepreneurs registered in the “Registro delle Imprese” (see Article 1 of the Banking Decree), giving the latter the possibility of securing their obligations, present or future, contracted in the exercise of their business activity, by means of a guarantee operating on the company’s movable assets.  This case is distinguished from the pledge governed by the Civil Code in that it allows the entrepreneur to maintain full possession and the power to dispose of such movable assets, without them having to be handed over to the creditor or the designated third party.

The pledge in question must, under penalty of nullity, be in writing and indicate, inter alia, the creditor, the debtor, the description of the asset and the maximum amount secured. Non-possessory pledges may include movable assets (including intangible assets, existing or future, definite or determinable) and receivables intended for or inherent in the conduct of the business. Therefore, registered movable property remains excluded from the rules in question. Specifically, therefore, industrial machinery, intellectual property rights, or corporate participations could constitute the object of guarantees.

The revolving nature of the non-possessory security interest constitutes a further important element: in fact, in the absence of different agreements and subject to the economic purpose, the debtor may freely dispose of, sell or transform the object of the security interest. Where such a circumstance materialises, without any novative effects on the underlying relationship, the pledge automatically transfers to the product of such transformation (i.e. to the consideration obtained from the sale or to the substitute asset acquired with such consideration).

The pledge under review would therefore be particularly flexible, recognising a wide margin to the negotiating autonomy of the parties, departing in a more or less significant manner from the traditional codified model and assuming, at times, depending on what is established from time to time by the parties, facets that are also very divergent from each other.

Also worth mentioning are the rules provided for the enforcement of the guarantee, governed by Paragraph 7, Article 1 of the Banks Decree, according to which, in order to ensure a swifter and safer recovery of the claim, the lender-creditor is granted, in the event of non-performance by the counterparty, the right to proceed autonomously with the sale of the asset, the collection or assignment of the claim, the lease of the asset, or its appropriation (provided, in the latter case, that the criteria and the manner of valuation of the asset in question are contractually established).

In this perspective, this new form of guarantee immediately appeared to be an innovative instrument that could overcome the inadequacy of the so-called traditional guarantees, which are often a source of obstacles to access to credit by Italian businesses, considered significantly static and inadequate to meet the challenges posed by modern markets.

However, although the introduction of the new institute into the legal system dates back to 2016, the actual possibility of using it was subject to the issuance of certain regulations and technical standards by various authorities; specifically, as provided for in Article 1(4) of the Banking Decree, the establishment of a digitalised register of non-possessory pledges at the “Agenzia delle Entrate” (the “Register”) was also necessary.

The first step forward was the adoption of Decree no. 114 of 25 May 2021, which entered into force the following 25 August, adopted by the Ministry of Economy and Finance, in agreement with the Ministry of Justice (the “Ministerial Decree“), which established the Register and regulated the corresponding operations of registration, consultation, amendment, renewal or cancellation in the Register, the obligations to be fulfilled by those who perform such operations, as well as the methods of access to the Register itself, and established the fees for the inspection and certification, to an extent suitable to guarantee at least the coverage of the costs of setting up, managing and evolving the Register.

In fact, in order to be enforceable against third parties, the deed of pledge must be recorded in the Register by the interested party, also by telematic means, by signing the application digitally and bearing all the information relating to the grantor, the licensee of the pledge and the asset that will be the subject of the pledge (as provided for in paragraph 2, Article 3, of the Ministerial Decree), together with the title establishing the same. Said registration will have a duration of ten years and upon expiration may be renewed.

This registration will have a duration of ten years and on expiry may be renewed, or cancelled.

Lastly, with the Provision, the Register has finally been activated, thus establishing an entirely telematic process model inspired by simplicity, from which will derive the consequent and extensive involvement of credit institutions.  In fact, even though to date there is no consolidated negotiating practice or decisive jurisprudential experience, the institution could certainly be qualified as a solid basis for revitalising economic development by facilitating access to credit for small and medium-sized companies. As seen, the set of specific features envisaged for the non-possessory guarantee give it an elastic scheme that can be applied in different ways depending on the needs and agreements between the parties. In this sense, the divergence of this innovative type of pledge from the traditional model, provided for by the codified legislation, would result in its possible adaptation to the guarantee models spread in the commercial practices of the operators in the sector, leading to a greater and easier development of the economy and trade.

As mentioned at the beginning, the institution of the non-possessory pledge of movable property provides in fact that the debtor grants a pledge of movable property intended for the operation of the business and has the possibility of preserving the use of the same within the business chain (a factor clearly excluded by the law under the pre-existing Code of Civil Law). However, in this context, the reference legislation makes no provision as to the subjective requirement of the grantor of the credit and beneficiary of the guarantee in question, which should therefore not be reserved for banks.  Consequently, the creditor need not necessarily belong to the category of intermediaries authorised to grant credit, also determining, inter alia, the possible use of the guarantee in combination with the so-called minibonds in alternative financing transactions with respect to the traditional banking channel, favouring its additional development.

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Cristian Sgaramella

PwC TLS Avvocati e Commercialisti