Legal Alert: New Protections for Lenders using Pledges as a Security Interest
New provisions in the Russian Civil Code, which entered into force on July 1, 2014, provide the ability to record pledges of non-real estate assets by filing “pledge notices” with a register kept by the Federal Notary Chamber. Now either the pledgee or the pledger may submit pledge notices to any notary, and the information may then be requested by any third party from a notary or viewed on the Internet at www.reestr-zalogov.ru.
Why is This Important?
The registration of pledge notices for non-real estate assets is not legally required. However, lenders may refer to pledges used as a security interest in relation to third parties after the pledge notice has been submitted. Therefore, in order to receive priority in relation to other third parties when satisfying claims (including in relation to other pledgees), a lender must first ensure that a pledge notice has been filed with the register.
When Should a Lender File a Pledge Notice?
Legally, there is no set deadline for submitting a pledge notice. However, considering the importance of timing in relation to any other possible pledges, we recommend filing a pledge notice immediately after executing the agreement. Otherwise, a pledgee receiving a pledge over the assets at a later time may receive priority if it files a pledge notice at an earlier date.
At present (during the period from July 1, 2014 –February 1, 2015), the parties to pledge agreements that were executed earlier will receive priority regardless of the date of filing a pledge notice. In other words, until February 1, 2015, the seniority of a pledge will be determined by the date of the agreement, not by the date of filing a pledge notice.
Please feel free to contact us if you have any questions related to this issue or would like to receive an estimate of the legal fees for drafting the required documents and filing a pledge notice.