Text consolidated by Valsts valodas centrs (State
Language Centre) with amending laws of:
20 December 1999 [shall
come into force from 24 January 2000];
20 November 2003 [shall come into force from 1 January
2004];
21 April 2005 [shall come into force from 25 May
2005];
3 December 2009 [shall come into force from 1 January
2010];
16 December 2010 [shall come into force from 1 January
2011];
12 September 2013 [shall come into force from 1 January
2014];
6 November 2013 [shall come into force from 1 January
2014];
12 June 2014 [shall come into force from 1 January
2015];
7 January 2021 [shall come into force from 2 February
2021].
If a whole or part of a section has been amended, the
date of the amending law appears in square brackets at
the end of the section. If a whole section, paragraph or
clause has been deleted, the date of the deletion appears
in square brackets beside the deleted section, paragraph
or clause.
|
The Saeima1 has adopted and
the President has proclaimed the following law:
Commercial Pledge Law
Chapter I
General Provisions
Section 1. Terms Used in this
Law
The following terms are used in this Law:
1) Commercial Pledge Register - a database of
commercial pledges;
2) holder of the Commercial Pledge Register - the
Enterprise Register of the Republic of Latvia which maintains the
Commercial Pledge Register and ensures its accessibility to the
public in accordance with the procedures laid down in this
Law;
3) properties subject to the registration - land
vehicles, small craft (rowing boat, motor boat, cutter, and
personal watercraft), aircraft, shares of the equity capital
registered in the Republic of Latvia and animals and herds to be
registered in the National Unified Animal and Herd Register, as
well as trade marks, designs, topographies of semiconductor
products registered in accordance with the national procedure,
granted Latvian patents and European patents in which Latvia is
the designated state and regarding which a translation has been
published in the Official Gazette of the Patent Office;
4) holder of the Register of Properties Subject to the
Registration - an institution the obligations of which
include keeping of registration of the properties subject to the
registration.
[20 December 1999; 21 April 2005; 12 June 2014]
Section 2. Commercial Pledge
(1) The commercial pledge is a pledge right recorded in the
Commercial Pledge Register in accordance with the procedures laid
down in this Law.
(2) [20 December 1999]
(3) General provisions for the pledge right provided for in
The Civil Law shall apply to the commercial pledge, insofar as it
has not been laid down otherwise in this Law.
[20 December 1999]
Section 3. Subject of the Commercial
Pledge
(1) The following may qualify as the subject of the commercial
pledge:
1) a movable tangible or intangible property (including the
right to claim) which belongs to a merchant or another legal
person;
2) an aggregation of the properties referred to in Clause
1;
3) the entire assets of a merchant or another legal
person.
(2) Properties subject to the registration, as well as an
undertaking as an aggregate of properties, co-operative shares,
stocks, and bonds may be the subject of the commercial pledge
regardless of the ownership thereof.
(3) The commercial pledge where the subject is an aggregate of
properties shall include the existing and also future parts
thereof unless it is explicitly clear that the intent of the
commercial pledgor has been to pledge only parts of such
aggregate of properties as it was at the moment of creating the
pledge right.
(4) Assets that may constitute the subject of the commercial
pledge may not be pledged according to the provisions for other
types of pledges. A contract concluded contrary to the present
prohibition shall be deemed void against third persons.
[20 December 1999; 21 April 2005; 3 December 2009; 12 June
2014]
Section 4. Properties which May not
be the Subject of the Commercial Pledge
(1) A vessel, a financial instrument recorded in the account
of financial instruments, credit claims within the meaning of the
Financial Collateral Law, financial resources, as well as a claim
arising from a cheque or a bill of exchange may not be the
subject of the commercial pledge.
(2) If the entire assets of a merchant or another legal person
are pledged or an aggregate of properties is pledged, the claims
referred to in Paragraph one of this Section, as well as
immovable property, vessels, financial instruments recorded in
the account of financial instruments, credit claims within the
meaning of the Financial Collateral Law, and financial resources
shall be considered excluded from the pledged property.
[20 December 1999; 20 November 2003; 21 April 2005; 3
December 2009; 12 June 2014]
Section 5. Commercial Pledgor
A commercial pledgor is a person granting the commercial
pledge right.
Section 6. Commercial Pledgee
A commercial pledgee is a person accepting the commercial
pledge to secure the claim thereof.
Section 7. Claim Secured by the
Commercial Pledge
(1) A commercial pledge may be used to secure any claim,
either existing, or contingent on the basis of an existing
liability (outstanding loan to a debtor). If not explicitly
agreed otherwise, the commercial pledge shall secure not only the
principal claim but also ancillary claim.
(2) The maximum amount to be secured by the principal claim
and ancillary claim should be determined by parties in the
contract on commercial pledge. Part of the claim in excess of the
agreed maximum amount of the commercial pledge liability shall be
deemed an unsecured claim.
(3) If the commercial pledgor and the commercial pledgee agree
to increase the amount of the secured claim or the volume of the
pledged asset, such increase shall be regarded as a new pledge to
be created and registered in accordance with the requirements
laid down in this Law.
[20 December 1999]
Section 8. Specific Cases for
Transfer of the Commercial Pledge Right
The commercial pledge right shall be transferred to the right
to claim in respect of the following:
1) insurance compensation if the subject of the commercial
pledge has been insured;
2) disbursement due to a shareholder (stockholder, member) if
shares of the equity capital, stocks, or co-operative shares are
the subject of the commercial pledge and they are cancelled as a
result of the reduction of equity capital or the issuer thereof
has been liquidated;
3) compensation received as a result of unauthorised
alienation of the pledged assets if the acquirer thereof is
acting in good faith.
[12 June 2014]
Chapter II
Creation and Registration of the Commercial Pledge
Section 9. Creation of the
Commercial Pledge
(1) The commercial pledge shall be created on the basis of a
contract or court ruling and registered in the Commercial Pledge
Register in accordance with the requirements of this Law.
(2) If the parties have entered into a contract on the
creation of the commercial pledge, but the commercial pledge has
not been registered, the commercial pledgee may not exercise its
right and the commercial pledge shall not be effective against
third persons, however, the contract on commercial pledge shall
remain effective. The commercial pledgee may institute a personal
claim against the commercial pledgor. The subject-matter of the
claim is registration and neither of the parties may, without the
consent of the other, derogate from the liability because the
commercial pledge has not been registered. The priority right for
such commercial pledge is determined as of the moment of
registration.
(3) The commercial pledge may be created on the basis of a
court ruling whereby there has been a certain amount in cash
adjudged from the debtor in favour of the claimant or there has
been a undisputed enforcement allowed if the bailiff, upon
effecting the collection of the assets of the debtor, has failed
to obtain funds sufficient for full coverage of the claim of the
claimant and has identified that the movable assets of the debtor
have been pledged according to the provisions for the commercial
pledge and the debtor has no other assets for the collection. The
subject of the commercial pledge in this case is the assets of
the debtor already subject to the creation of the commercial
pledge and the amount to be recovered shall be the scope of the
pledge liability.
[20 December 1999]
Section 10. Information to be
Entered in the Commercial Pledge Register
(1) The following information shall be entered in the
Commercial Pledge Register:
1) the name, legal address, and registration number of the
commercial pledgor and the commercial pledgee (for a natural
person - the given name, surname, address where he or she can be
reached, and personal identity number; if the person does not
have a personal identity number - the date of birth, the number
and date of issue of the personal identification document, the
country and institution that issued the document);
2) the commercial pledge registration number;
3) description and characterisation of the pledged asset
according to the information indicated in the application;
4) the amount in euros covered by the pledge liability;
5) information regarding deletion of the commercial
pledge;
6) the date of making each entry.
(2) In addition the following information shall be entered in
the Commercial Pledge Register:
1) the name and registration number of the debtor (if it is
not the commercial pledgor) and the manager of the commercial
pledge (for a natural person - the given name, surname, and
personal identity number; if the person does not have a personal
identity number - the date of birth, the number and date of issue
of the personal identification document, the country and
institution that issued the document);
2) the right of the commercial pledgee to sell the pledged
asset without an auction;
3) the prohibition to take the pledged land vehicle or its
trailer outside Latvia;
4) the prohibition to pledge the subject of the commercial
pledge repeatedly;
5) the date on which the application for the exercising of the
commercial pledge right has been appended to the registration
file of the commercial pledge;
6) information regarding the exercising of the commercial
pledge right;
7) order of the commercial pledgee if the subject of the
commercial pledge is pledged repeatedly to another commercial
pledgee;
8) other information which is essential for the registration
of the commercial pledge and exercising of the commercial pledge
right.
(3) If the entire assets of a merchant or another legal person
are pledged or an aggregate of properties is pledged, and it is
comprised of the properties subject to the registration, they
shall be indicated separately in the application. If any of the
abovementioned properties is not included in the application, the
commercial pledgee may not exercise the commercial pledge right
and the commercial pledge on such properties shall not be
effective against third persons. The commercial pledgee has the
rights provided for in Section 9, Paragraph two of this Law.
[12 June 2014]
Section 11. Making of an Entry in
the Commercial Pledge Register
Entries in the Commercial Pledge Register shall be made on the
basis of an application submitted by the person interested. The
Cabinet shall determine the application forms and the procedures
for filling them in.
[12 June 2014]
Section 12. [12 June 2014]
Section 13. Documents to be Attached
to the Application
(1) The contract on commercial pledge and the document which
serves as basis for the claim to be secured shall be attached to
the application.
(2) If the commercial pledge is registered on the grounds of a
court judgment (Section 9, Paragraph two), the true copy of the
court judgment shall be also attached to the application.
(3) If the commercial pledge is created on the basis of a
court ruling (Section 9, Paragraph three), the true copy of the
court ruling and the document certifying the preconditions for
creating the commercial pledge specified in Section 9, Paragraph
three of this Law shall be attached to the application instead of
the contract on commercial pledge.
[20 December 1999; 12 June 2014]
Section 14. Submission of an
Application
(1) The application and the documents attached thereto shall
be submitted electronically to the holder of the Commercial
Pledge Register, using the online form indicated by the holder of
the Commercial Pledge Register.
(2) The application shall be signed by the commercial pledgor.
If the application is drawn up on the basis of a court ruling
(Section 9, Paragraphs two and three), it shall be signed by the
commercial pledgee. An official of the holder of the Commercial
Pledge Register shall verify the capacity to act of such persons
and the scope of authorisation of the authorised person or
representative.
(3) If another person signs the application on behalf of the
commercial pledgor or commercial pledgee, the authorisation shall
be notarized or a power of attorney with a secure electronic
signature of the authorised person shall be appended to the
application.
(4) [7 January 2021]
[12 June 2014; 7 January 2021]
Section 15. Examination of an
Application
(1) The holder of the Commercial Pledge Register shall record
the applications received according to their submission order,
indicating the date of receipt and the registration number
assigned in record-keeping.
(2) The holder of the Commercial Pledge Register shall examine
the application within five working days. If several applications
are received from one commercial pledgor, the application which
has been received at the earliest date shall be examined
first.
(3) Upon examining the application, the holder of the
Commercial Pledge Register shall verify whether:
1) the application has been drawn up in accordance with the
provisions of the Law;
2) the documents attached to the application do not contain
anything which is obviously illegal;
3) the information indicated in the application and the
documents attached thereto are not mutually contradictory;
4) the information included in the application conforms to the
information included in the Population Register, as well as in
the registers maintained by the Enterprise Register and in the
registers of properties subject to the registration;
5) according to the information from the Register of
Properties Subject to the Registration, there are no legal
impediments for the creation of the commercial pledge;
6) according to entries made in the Commercial Pledge
Register, there is no prohibition on repeated pledging, except
for the case where the commercial pledge has been created in
accordance with the procedures laid down in Section 9, Paragraph
three of this Law;
7) according to the information from the Insolvency Register,
the commercial pledgor is not subject to the legal protection
proceedings or insolvency proceedings thereof have not been
declared, except for the case where pledging is provided for in
the plan of measures for legal protection proceedings or pledging
is carried out by an administrator of insolvency proceedings;
8) a State fee has been paid.
(4) The holder of the Commercial Pledge Register shall take
the decision to register the commercial pledge if the
requirements of Paragraph three of this Section are met.
(5) The holder of the Commercial Pledge Register shall take
the decision to refuse to register the commercial pledge if the
requirements of Paragraph three of this Section are not met. In
such case the State fee is not reimbursed. If an application
where the deficiencies established are rectified is submitted
within a month from the date of notifying the decision, the State
fee need not be paid repeatedly.
(6) The holder of the Commercial Pledge Register shall not be
responsible for internal defects of transactions.
[12 June 2014]
Section 16. [12 June 2014]
Section 17. [12 June 2014]
Section 18. Additional Provisions
for the Registration of the Commercial Pledge if a Property
Subject to the Registration is Pledged
(1) If the subject of the commercial pledge is a property
subject to the registration, a document certifying payment of the
fee specified for the registration of the commercial pledge entry
with the Register of Properties Subject to the Registration shall
be attached to the application. The holder of the Commercial
Pledge Register shall verify the abovementioned information and
whether there are no legal impediments for creating the
commercial pledge according to the information available in the
Register of Properties Subject to the Registration.
(2) If according to the information from the Register of
Properties Subject to the Registration there are legal
impediments for creating the commercial pledge, the holder of the
Commercial Pledge Register shall register the commercial pledge,
shall exclude from the pledged assets such property the pledging
of which has legal impediments, and it shall be indicated in its
decision.
(3) The holder of the Register of Properties Subject to the
Registration, on the basis of the information provided by the
holder of the Commercial Pledge Register, shall register the
commercial pledge entry in respect of the properties subject to
the registration indicated in the application.
(4) If the entire assets of a merchant or another legal person
are pledged or an aggregate of properties is pledged, including
also future properties, and if the commercial pledgor acquires in
possession a property or adds it to the pledged aggregate of
properties which should be indicated separately in the
application in accordance with Section 10, Paragraph three of
this Law, the commercial pledgor shall apply such amendment to
the information of the Commercial Pledge Register to the holder
of the Commercial Pledge Register within five days from
acquisition of the property. If this provision is not conformed
to, the commercial pledgee may request the registration of the
amendment through court.
[12 June 2014]
Section 19. [12 June 2014]
Section 20. Changes in Entries of
the Commercial Pledge Register
(1) The application for changes in entries in the Commercial
Pledge Register shall be signed by the commercial pledgee and the
commercial pledgor, if it has not been specified otherwise in
this Section. The application shall be drawn up and submitted in
accordance with the procedures laid down in Sections 11, 13, and
14 of this Law. If the secured claim is amended, the text of
amendments to such document from which the secured claim derives
shall be attached to the application.
(2) The commercial pledgor shall submit the application for
changes in the information referred to in Section 10, Paragraph
one, Clause 1 of this Law regarding the commercial pledgor.
(3) The commercial pledgor shall submit the application for
changes in the following cases:
1) for changes in the information referred to in Section 10,
Paragraph one, Clause 1 of this Law regarding the commercial
pledgee;
2) for the reduction of the amount (in euros) covered by the
pledge liability;
3) for the removal of a property from the content of the
pledged assets;
4) for the appointment and removal of the manager of the
commercial pledge;
5) for the registration of the assignment of the secured
claim;
6) for exercising of the commercial pledge right.
(4) Concurrently with submitting the application referred to
in Paragraphs two and three of this Section the applicant shall
inform the other party to the contract on commercial pledge of
the respective changes.
(5) If the change of the commercial pledgee occurs upon the
novation of the liability, the application for making an entry on
the novation in the Commercial Pledge Register shall be submitted
by the current commercial pledgee, the commercial pledgor, and
the new commercial pledgee.
(6) If the change of the commercial pledgee occurs in case of
reorganisation or transfer of an undertaking, the application for
making an entry on the change of the commercial pledgee in the
Commercial Pledge Register shall be submitted by the current
commercial pledgee and the new commercial pledgee. If as a result
of reorganisation the current commercial pledgee has ceased to
exist, the application shall be signed only by the new commercial
pledgee.
(7) In the case referred to in Paragraph six of this Section
the new commercial pledgee shall notify the commercial pledgor of
registration of the change of the commercial pledgee within 30
days from the date of registering the change of the commercial
pledgee in the Commercial Pledge Register, indicating the
following:
1) the information referred to in Section 10, Paragraph one,
Clause 1 of this Law regarding the new commercial pledgee;
2) the registration date and number of the commercial
pledge;
3) justification for the change of the commercial pledgee;
4) the date on which the change of the commercial pledgee is
registered in the Commercial Pledge Register.
(8) The holder of the Commercial Pledge Register, on the basis
of the information in the registers maintained by the Enterprise
Register, has the right, without taking a separate decision, to
update the information recorded in the Commercial Pledge Register
in relation to the name, legal address, and registration number
of the commercial pledgor, commercial pledgee, debtor, and
manager of the commercial pledge.
[12 June 2014]
Section 20.1 [12 June 2014]
Section 21. Transparency of the
Commercial Pledge Register
(1) Any person, for a fee, may become acquainted with entries
in the Commercial Pledge Register, with the submitted
applications for registration of the commercial pledge and may
receive extracts from entries in the Commercial Pledge Register
and the submitted applications for registration.
(2) The holder of the Commercial Pledge Register shall ensure
at least the following information from the Commercial Pledge
Register on its website free off charge: commercial pledgor (for
a natural person - the given name, surname, for a legal person -
the name and registration number), the registration number of the
commercial pledge, the registration date of the commercial
pledge, and the deletion or novation date of the commercial
pledge.
[12 June 2014]
Section 22. Corrections of an
Entry
(1) If a typographical error or a discrepancy between the
Commercial Pledge Register entries and the registration
application is detected, the error shall be corrected upon
initiative of the holder of the Commercial Pledge Register or the
person interested. The holder of the Commercial Pledge Register
shall notify the commercial pledgor and all commercial pledgees
of the detected error and shall determine the term for the
submission of a comment.
(2) After expiry of such term the holder of the Commercial
Pledge Register shall decide on the issue of correction of the
entry. The non-submission of a response or a negative comment
shall not be an obstacle for the correction of an error. Obvious
errors may be corrected without requesting a comment.
(3) The decision to correct the error shall not affect the
rights of other commercial pledgees, acquired prior to making
corrections in the Commercial Pledge Register.
Section 23. State Fee
(1) A State fee shall be paid for making of an entry in the
Commercial Pledge Register.
(2) The amounts of the State fee shall be determined by the
Cabinet. The Cabinet may also determine the scope of persons
fully or partially exempt from the payment of the State fee.
(3) If the application is revoked and the holder of the
Commercial Pledge Register has not taken any decision in this
regard, the State fee shall be reimbursed in accordance with the
procedures laid down in the law On Taxes and Duties.
[16 December 2010; 6 November 2013; 12 June 2014]
Chapter III
Consequences of a Commercial Pledge
Section 24. Rights of a Commercial
Pledgor
Pledging shall not terminate the ownership rights of the
commercial pledgor to the pledged property. If the parties have
not agreed otherwise, the commercial pledgor may administer and
use the pledged property, as well as consume it for personal
needs within the scope of commonly accepted standards until the
commercial pledgor transfers it into the possession of the
commercial pledgee out of good will or he or she is forced to do
so as a result of judicial enforcement.
Section 25. Rights and Obligations
of the Commercial Pledgee if the Subject of the Commercial Pledge
has been Transferred into the Possession Thereof
(1) The commercial pledgee must maintain the pledged property
during the whole period of possession thereof as a careful owner.
The pledged property shall be deemed to be in the possession of
the commercial pledgee if the possession has been established in
accordance with Section 883, Clause 1, 3, 4, 5, or 6 of The Civil
Law.
(2) If the pledged property is damaged or has perished through
the fault of the commercial pledgee (as a result of insufficient
care, gross negligence, or a malicious intent), the commercial
pledgee shall reimburse the losses to the commercial pledgor.
(3) If the pledged property is damaged or has perished as a
result of a criminal offence or force majeure, the
commercial pledgee shall bear no responsibility for it and the
losses shall be incurred by the owner of the property.
(4) The commercial pledgee may not use the property pledged
thereto, unless the parties have agreed otherwise.
(5) If the commercial pledgee uses the pledged property,
damages or destroys it, the commercial pledgee shall bear
liability for the incurred loss also if it has arisen through
accident or as a result of force majeure.
(6) If the claim of the commercial pledgee is discharged or
his or her commercial pledge right has ceased any other way, he
or she must immediately return the pledged property to the
commercial pledgor, unless the commercial pledgee has had the
right to retain the property or he or she has become its owner
and can prove it.
(7) The commercial pledgee may retain the subject of the
commercial pledge also for all other (including personal) claims
against the commercial pledgor, but he or she shall possess this
right only against the commercial pledgor himself or herself and
his or her heirs, but not against third persons. Moreover, the
right to retain the property shall not include the right to sell
it for the coverage of some other claim.
(8) If a property bearing fruits is pledged and transferred
into the possession of the commercial pledgee, the provisions on
the usufructuary pledge shall apply, unless the parties have
agreed otherwise.
[20 December 1999]
Section 26. Consequences of Pledging
a Property of Another Person
(1) The commercial pledge right shall remain valid if someone
accepts such movable property in good faith as a commercial
pledge for securing his or her claim which has been entrusted to
the commercial pledgor by the owner voluntarily.
(2) If a property acquired by criminal means is pledged, the
commercial pledge right shall remain valid until the property is
claimed back by its owner. If the property is claimed back, the
commercial pledge right shall expire and the commercial pledgee
may institute his or her claim,as well as demand the recovery of
expenses and losses only against the commercial pledgor.
Section 27. Priority Right of the
Commercial Pledge
(1) The commercial pledgor may grant more than one commercial
pledge on the same subject of the commercial pledge if a
prohibition of repeated pledging does not arise from a previously
registered contract on commercial pledge.
(2) The priority right of commercial pledges shall be
determined according to their registration order in the
Commercial Pledge Register.
(3) The priority right may be changed upon a written agreement
among commercial pledgees.
(4) The change of the priority right shall be registered in
the Commercial Pledge Register. The application for the
registration of the change of the priority right shall be signed
by the person authorised by the agreement and the consent of all
other commercial pledgees who are subject to the change of the
priority right of the commercial pledge or whose interests are
affected shall be attached thereto.
[12 June 2014]
Section 28. Litigation and
Deficiencies
If a property which has been received by the commercial
pledgee as a commercial pledge in good faith is litigated by a
third person or if such material deficiencies are found in the
property which reduce its value to the extent that it does not
cover the amount of the secured claim, the commercial pledgee has
the right to claim a compensation for all the losses thus
incurred from the commercial pledgor.
Chapter IV
Manager of a Commercial Pledge
Section 29. Manager of a Commercial
Pledge
(1) The commercial pledgee may at any moment appoint a manager
of a commercial pledge for a registered commercial pledge. The
manager of a commercial pledge may be both a natural person and a
legal person.
(2) The manager of a commercial pledge shall act as an
authorised person of the commercial pledgee in accordance with
the provisions on authorisation provided for in The Civil Law
insofar as it is not provided for otherwise in this Law.
Section 30. Appointing of a Manager
of a Commercial Pledge
(1) The appointing of a manager of a commercial pledge shall
be recorded in the Commercial Pledge Register. If the appointing
of the manager of a commercial pledge is registered concurrently
with the creation of the commercial pledge, information regarding
the manager shall be included in the application for the
registration of the commercial pledge. If the appointing of the
manager of a commercial pledge is registered later, it shall be
registered on the basis of a written application of the
commercial pledgee. In such case, prior to the registration of
the appointing of the manager of a commercial pledge, the
commercial pledgee shall inform the commercial pledgor thereof in
writing.
(2) If the same subject of the commercial pledge is granted to
several commercial pledgees of different priorities, the manager
of a commercial pledge may be appointed or removed by the
commercial pledgee holding the highest priority. If the
commercial pledgee does not want to exercise the given right, he
or she may transfer the given right to another commercial pledgee
in conformity with the priority right of the commercial
pledge.
(3) If the commercial pledge to the same subject of the
commercial pledge has been granted to several commercial pledgees
of the same priority, the manager of a commercial pledge may be
appointed, removed or the right to appoint the manager of a
commercial pledge may be waived in favour of another commercial
pledgee only upon mutual agreement by the commercial
pledgees.
Section 31. Authorisation of a
Manager of a Commercial Pledge
(1) A manager of a commercial pledge has the right to act on
behalf of the commercial pledgee in all relations arising from
the law and the contract on commercial pledge, but the manager of
a commercial pledge shall be allowed to make novations, to waive
some rights, or to exercise the commercial pledge right only if
it has been particularly specified in the authorisation. Other
restrictions of authorisation shall be effective against third
persons only if such persons have known or they should have known
about such restrictions.
(2) If a person is registered as a manager of a commercial
pledge in accordance with the provisions of this Law, any action
of such person shall be binding for the commercial pledgee within
the scope of the granted authorisation.
(3) If the secured claim is transferred by the commercial
pledgee to another person, the authorisation of the manager of a
commercial pledge shall be retained and the manager of a
commercial pledge shall act on behalf of the new commercial
pledgee, unless the parties have agreed otherwise. Also the death
of the commercial pledgee - natural person - and termination of
the existence of the commercial pledgee - legal person - shall
not cease the authorisation of the manager of the commercial
pledge per se. It shall remain effective and upon transfer
of the pledged asset to the new possessor actions undertaken by
the manager of a commercial pledge shall become binding for the
new possessor.
Section 32. Removal of a Manager of
a Commercial Pledge and Termination of the Authorisation
Thereof
(1) The authorisation of a manager of a commercial pledge
shall cease upon expiry of the commercial pledge right.
(2) The commercial pledgee may remove the appointed manager of
a commercial pledge at any moment.
(3) The manager of a commercial pledge, if he or she has
justified grounds, may refuse to perform the obligations of the
manager of a commercial pledge, notifying the commercial pledgee
thereof two months in advance. Parties may also provide for a
shorter period of time for notification in the contract on
commercial pledge.
(4) The expiry of the authorisation of the manager of a
commercial pledge shall be registered in the Commercial Pledge
Register on the basis of a written application of the commercial
pledgee. Prior to expiry of the authorisation of the manager of a
commercial pledge, the commercial pledgee shall notify the
commercial pledgor thereof in writing.
Chapter V
Third Persons
Section 33. Binding Effect of
Entries in the Commercial Pledge Register
(1) Entries in the Commercial Pledge Register shall be binding
on third persons and the failure to know them may not be used as
a valid excuse.
(2) Entries in the Commercial Pledge Register with respect to
third persons shall be deemed correct and third persons shall be
under no obligation to examine the conformity of the entries in
the Commercial Pledge Register with the Law.
Section 34. Right of the Commercial
Pledgor to Alienate the Pledged Asset
(1) The commercial pledgor may alienate the pledged asset only
with a written consent of the commercial pledgee (authorised
alienation). In the absence of any other agreement with the
purchaser of the subject of the commercial pledge the commercial
pledge to the alienated property shall expire. If in case of
alienation the information included in the Commercial Pledge
Register changes, the commercial pledgor and the commercial
pledgee shall apply such changes in the Commercial Pledge
Register in accordance with procedures laid down in Section 20 of
this Law.
(2) If properties subject to the registration, co-operative
shares, stocks, bonds are alienated or if a merchant or another
legal person alienates a property which clearly is not a property
of its regular manufacture or trade, or if properties of regular
manufacture or trade are alienated in unusually large volumes,
the purchaser must ascertain whether the properties have not been
pledged and, if they have been pledged, whether the alienation
has been permitted.
(3) If the commercial pledgor alienates the pledged asset
without the permission of the commercial pledgee (unauthorised
alienation), the commercial pledge on the alienated asset:
1) shall be transferred to the new possessor within the amount
of the value of the alienated asset if he or she has known or
should have known in accordance with Paragraph two of this
Section that the asset has been pledged and the alienation is not
permitted (malicious acquisition);
2) shall cease if the new possessor has acquired it in good
faith.
[20 December 1999; 21 April 2005; 3 December 2009; 12 June
2014]
Section 35. Assignment of a Secured
Claim
(1) Upon assigning a secured claim, all the rights of the
commercial pledgee are transferred to the assignee, unless the
assignor and the assignee have agreed otherwise.
(2) If the assignee takes over the rights of the commercial
pledgee, the commercial pledgee (assignor) shall submit an
application for the registration of the assignment.
[12 June 2014]
Chapter VI
Exercise of the Commercial Pledge Right and Expiry Thereof
Section 36. Exercise of the
Commercial Pledge Right
(1) If the claim secured by a commercial pledge is not
executed in due term, moreover, the execution of the claim has
been divided into several terms, the commercial pledgee has the
right to take over the pledged asset into his or her possession
(unless the pledged asset has already been under his or her
possession) if one of the abovementioned terms has been missed,
and to sell the pledged asset.
(2) If the commercial pledgee has not taken over the pledged
asset into his or her possession, the commercial pledgee may
request the undisputed enforcement of the liabilities in
accordance with the procedures laid down in law, but, if the
commercial pledge is created on the basis of a court ruling
(Section 9, Paragraph three) - request the enforcement of the
ruling.
(3) If the commercial pledgee delays the sale of the subject
of the commercial pledge without a justifiable reason, the
creditors who have directed recovery on the surplus may request
the court to determine the time for the sale of the commercial
pledge for the commercial pledgee.
(4) If legal protection proceedings are initiated for the
commercial pledgor or insolvency proceedings thereof are
declared, the right of the commercial pledgee to exercise the
commercial pledge right are restricted in accordance with the
procedures laid down in the Insolvency Law.
(5) In cases where the commercial pledge right is exercised by
the commercial pledgee in relation to which other commercial
pledgees have priority, the pledged asset may only be sold if its
sales price exceeds the aggregate of the prioritised claims and
expenses to be covered prior to settling the claim of
creditors.
[20 December 1999; 3 December 2009]
Section 37. Sale of the Pledged
Asset at an Auction
(1) If the commercial pledgor has not granted the commercial
pledgee the right to sell the pledged asset without an auction,
the pledged asset shall be sold at an auction in conformity with
the provisions of Section 2073 and subsequent Sections of The
Civil Law.
(2) The commercial pledgee shall announce the auction of the
assets in the official gazette Latvijas Vēstnesis and at
least in one more newspaper not later than a month prior to the
auction date.
(3) The following shall be indicated in the announcement:
1) the name and location (legal address) of the commercial
pledgor and the commercial pledgee and their registration data,
but for natural persons - the given name, surname;
2) a brief description of the asset to be sold and its
location;
3) the place where one may become acquainted with the terms of
auction and the starting price of the auction;
4) the time, place of the sale, as well as the auctioneer if
the sale has been entrusted to a third person;
5) other terms of the auction considered necessary by the
commercial pledgee.
[20 December 1999; 12 June 2014]
Section 38. Right to Sell the
Pledged Asset Without an Auction
(1) The commercial pledgee may sell the pledged asset without
an auction if the commercial pledgor has granted such right to
the commercial pledgee and this right has been registered in the
Commercial Pledge Register. The right may be revoked only by
mutual agreement of the commercial pledgor and the commercial
pledgee.
(2) If the commercial pledge to the same subject of the
commercial pledge has been granted to several commercial
pledgees, the right to sell the pledged asset without an auction
may be granted only to all commercial pledgees. If such right was
granted upon creation of the first commercial pledge, it shall be
deemed that such right is also granted to all future commercial
pledgees. The right may be revoked upon creation of the second
commercial pledge only by a mutual agreement between the
commercial pledgor and all commercial pledgees.
Section 39. Exercising of the
Commercial Pledge if the Entire Assets, Undertaking of the
Commercial Pledgor or Its Independent Entity are Pledged
If the entire assets of the commercial pledgor are pledged and
the commercial pledgor has not terminated its economic activity,
the entire assets shall be sold as aggregate, unless the parties
have agreed otherwise. If the undertaking of the commercial
pledgor or its independent entity is pledged and the commercial
pledgor has not terminated its economic activity, the undertaking
or its independent entity shall be sold in aggregate as a
functioning body, unless the parties have agreed otherwise.
[12 June 2014]
Section 39.1 Exercising
of the Commercial Pledge if a Property Subject to Rapid
Deterioration is the Subject of the Commercial Pledge
If the commercial pledgee takes the possession of a pledged
property subject to rapid deterioration, the commercial pledgee
may sell such property immediately on the open market without an
auction, without prior notification of the commercial
pledgor.
[12 June 2014]
Section 39.2 Exercising
of the Commercial Pledge if the Right to Claim is the Subject of
the Commercial Pledge
(1) If the right to claim is pledged, the commercial pledgee
may sell such right in accordance with the provisions of this Law
or may claim for satisfaction from the third person who is in
debt to the commercial pledgor on the basis of the respective
right to claim. The right to claim for satisfaction from the
third person shall not be limited by the circumstance that the
commercial pledgor has not granted the right to sell the pledged
asset without an auction in accordance with Section 38 of this
Law.
(2) The commercial pledgee may claim for satisfaction from the
third person if the notification procedures specified in Section
42 of this Law have been conformed to and an entry on the
exercising of the commercial pledge right has been made in the
Commercial Pledge Register.
(3) The commercial pledgee shall sell a tangible property
obtained as a result of claiming for satisfaction from the third
person. Prior to such sale it is not required to conform
repeatedly with the notification procedures specified in Section
42 of this Law.
[12 June 2014]
Section 40. Commercial Pledge and
Right of Detention
If any person has the right of detention in relation to the
subject of the commercial pledge in accordance with Sections
1734, 1735, 1736, 1737, 1738, 1739, and 1740 of The Civil Law,
such person may not exercise its right of detention towards the
commercial pledgee and the detained asset must be returned to the
commercial pledgee without delay after making an entry on
attaching the application for the exercising of the commercial
pledge right to the registration file of the commercial pledge in
accordance with Section 42, Paragraph five of this Law.
[12 June 2014]
Section 41. Exercising of the
Commercial Pledge Right Prior to Maturity
(1) The commercial pledgee is entitled to exercise the
commercial pledge right prior to maturity and to satisfy his or
her secured claim if:
1) the pledged asset is divided;
2) commercial activities of the commercial pledgor have been
suspended or terminated or insolvency proceedings of the
commercial pledgee have been declared;
3) the pledged asset is alienated without the permission of
the commercial pledgee;
4) the largest portion of the pledged asset has perished or
its value has significantly decreased as a result of actions of
the commercial pledgor;
5) the pledged asset is abandoned.
(2) Parties may also stipulate other cases when the commercial
pledge right may be exercised prior to maturity.
[21 April 2005; 12 June 2014]
Section 42. Notice on Exercising of
the Commercial Pledge Right
(1) If the pledged asset is sold without the intermediation of
a court, the commercial pledgee, prior to the sale of the pledged
asset, shall notify in writing the commercial pledgor of
exercising the commercial pledge right (hereinafter - the
notice). The notice shall be sent as a registered postal item to
the address of the commercial pledgor recorded in the Commercial
Pledge Register, issued in person in exchange for a signature, or
notified according to other procedures if the parties have agreed
thereupon.
(2) The following information shall be indicated in the
notice:
1) the information referred to in Section 10, Paragraph one,
Clause 1 of this Law regarding the commercial pledgee and the
commercial pledgor;
2) the registration date and number of the commercial
pledge;
3) the description of the pledged asset;
4) the claim according to which the commercial pledge right is
exercised;
5) the circumstance which gives the right to the commercial
pledgee to exercise the commercial pledge right;
6) the information regarding properties already sold or to be
sold in accordance with Section 39.1 of this Law.
(3) If there are several commercial pledgees, the commercial
pledgee exercising the commercial pledge right, along with the
notification of the commercial pledgor, shall send a copy of the
notice to other commercial pledgees.
(4) The commercial pledgor and other commercial pledgees may
contest the notice before a court.
(5) Concurrently with notifying the commercial pledgor, the
commercial pledgee shall submit an application to the holder of
the Commercial Pledge Register for exercising of the commercial
pledge right where the fact of notification is confirmed. The
holder of the Commercial Pledge Register shall, within one
working day, examine the submitted application and, if there are
no legal impediments, shall take the decision to attach the
application to the registration file of the commercial
pledge.
(6) The holder of the Commercial Pledge Register shall take a
decision to make an entry on the exercising of the commercial
pledge right within 30 days after attaching the application to
the registration file of the commercial pledge, if there are no
legal impediments for exercising of the commercial pledge
right.
[12 June 2014]
Section 43. Sale of the Pledged
Asset
(1) The commercial pledgee may sell the pledged asset without
the intermediation of a court after an entry on exercising of the
commercial pledge right has been made in the Commercial Pledge
Register.
(2) The sale of the pledged asset may be undertaken by the
commercial pledgee himself or herself or it may be entrusted to a
third person.
(3) The commercial pledgee must sell the pledged asset at the
highest price possible during the sale and shall not delay its
sale. If the pledged asset is sold without an auction and the
commercial pledgor contests the determined price, the commercial
pledgee must justify the price set. The contesting of the price
shall not suspend the sale of the pledged asset.
(4) The sale of the pledged asset shall be conducted at the
expense of the commercial pledgor.
[20 December 1999; 12 June 2014]
Section 44. Revenue Depository
(1) If the pledged asset is sold without the intermediation of
a court and several commercial pledges have been created on such
asset, the commercial pledgee who exercises the commercial pledge
right, prior to the sale of the pledged asset, shall appoint the
person who will sell the pledged asset and receive the proceeds
from the sale - the revenue depository.
(11) The commercial pledgee shall inform the
commercial pledgor and other commercial pledgees in writing
regarding the appointed revenue depository, indicating the name,
legal address, and registration number thereof (for a natural
person - the given name, surname, and address where he or she can
be reached).
(12) The commercial pledgees shall, within 10 days
after receipt of the information referred to in Paragraph
1.1 of this Section, notify the revenue depository in
writing of the amount of the secured claim thereof which cannot
exceed the amount in euros covered by the pledge liability.
(2) The revenue depository may be a credit institution, a
sworn auditor, a sworn advocate, or a bailiff, but with the
consent of all commercial pledgees - one of the commercial
pledgees or another third person.
(3) The commercial pledgor cannot be the revenue
depository.
[12 June 2014]
Section 45. Payment for the Purchase
of the Pledged Asset if there are Several Commercial Pledgees
(1) The revenue from the sale of the pledged asset must be
deposited in a separate account in a credit institution.
(2) The revenue depository shall, on the basis of the
information submitted by commercial pledgees and the information
of the Commercial Pledge Register, make a list, indicating
therein:
1) the commercial pledgees who have the right to the revenue
from the sale according to their priority right of claim;
2) the amount to which each commercial pledgee has the
right.
(3) When the list has been drawn up, the compiler thereof
shall deliver a copy of the list to the commercial pledgor and
all commercial pledgees registered in the Commercial Pledge
Register who have the commercial pledge right to the asset to be
sold.
(4) If the commercial pledgee or the commercial pledgor does
not agree with the list drawn up, he or she may inform the
compiler of his or her objections within five working days from
the moment of delivery of the list. In such case the compiler of
the list has an obligation to deliver either an amended list to
all the persons mentioned in it, or a notice that objections have
been taken into consideration, however, the list is to remain
unchanged.
(5) If drawing up of the final list is for some reason
delayed, a temporary list may be drawn up, leaving a sufficient
reserve for any uncertain or challenged amounts.
[12 June 2014]
Section 46. Distribution of the
Revenue from the Sale
(1) The revenue from the sale shall be distributed within 30
days from the day of the sale.
(2) If there are several commercial pledgees, the initial
distribution of the revenue from the sale may be performed on the
basis of the temporary list drawn up in accordance with Section
45 of this Law.
(3) The revenue from the sale shall be distributed in the
following order:
1) remuneration for the revenue depository if such was agreed
upon;
2) sales expenses;
3) expenses for the storage and management of the commercial
pledge;
4) claims of commercial pledgees according to their priority
right;
5) unsecured claims associated with the commercial pledge
(claims exceeding the agreed amount of the secured claim).
(4) The remaining amount shall be disbursed to the commercial
pledgor.
(5) The revenue shall be calculated and disbursed in
euros.
(6) If, upon sale of the pledged asset, such amount is gained
which is not enough for the full satisfaction of the claims of
commercial pledgees, they have the right to claim the outstanding
debt amount from the debtor.
(7) After disbursement of the revenue from the sale, the
commercial pledgee who has exercised the commercial pledge right
shall present a settlement of accounts to the commercial
pledgor.
[12 September 2013]
Section 47. Responsibility of the
Commercial Pledgee for the Sale of the Pledged Asset
The commercial pledgee who is selling the pledged asset
without the intermediation of a court shall bear responsibility
for the sale of the pledged asset as an authorised person and he
or she must reimburse to the commercial pledgor for all the
losses incurred through negligence. If there has been bad-faith
conduct in the sale and the purchaser has participated in the act
of bad faith of the commercial pledgee, the commercial pledgor
has the right to claim the return of the sold asset, reimbursing
the amount of the purchase with interest to the purchaser.
Section 48. Expiration of the
Commercial Pledge Right
(1) The commercial pledge right shall expire if:
1) the commercial pledgor and the commercial pledgee agree
upon in writing;
2) the commercial pledgee waives the commercial pledge right
in writing;
3) the secured claim has been satisfied or otherwise ceases to
exist;
4) the secured claim is transferred, without transferring the
commercial pledge right at the same time;
5) a revoking condition has entered into effect or the
commercial pledge right which had been created under a condition
or for a specific period of time has matured;
6) the pledged asset has been consumed, has perished or
otherwise ceased to exist and such asset has not been insured or
insurance compensation is not due for it because of other
reasons;
7) a third person has acquired the subject of the commercial
pledge into ownership as free from any pledge (Sections 34 and
36);
8) the pledged asset has transferred into ownership of the
commercial pledgee.
(2) It is not sufficient for the deletion of the commercial
pledge that its basis is deleted the commercial pledge must be
deleted in the Commercial Pledge Register. The commercial pledge
shall be deleted if one of the following conditions exists:
1) a respective application which has been drawn up in
accordance with the procedures laid down in Section 14 of this
Law has been received from the commercial pledgee;
2) a court ruling has been received;
3) [12 June 2014].
(3) The commercial pledgee has an obligation, within five days
from the expiry day of the commercial pledge, to submit an
application to the holder of the Commercial Pledge Register for
the deletion of the commercial pledge.
(31) The commercial pledgee may request in the
application for the deletion of the commercial pledge that the
application is examined together with another application for the
registration of the commercial pledge, if the commercial pledgor
is the same person. In such case the holder of the Commercial
Pledge Register shall refuse to delete the commercial pledge if
any legal impediments are discovered for taking of the decision
to register the commercial pledge referred to in the related
application.
(4) Upon deleting a commercial pledge in respect of properties
subject to the registration, the holder of the Commercial Pledge
Register shall notify the holder of the respective Register of
Properties Subject to the Registration thereof for the deletion
of the commercial pledge entry. The registration number of the
commercial pledge, information regarding the pledged asset and
the basis for the deletion of the commercial pledge shall be
indicated in the notice.
[20 December 1999; 12 June 2014]
Transitional Provisions
[20 December 1999]
1. Commercial pledges which have been registered until the day
of entry into force of this Law shall remain in effect and shall
be discussed in accordance with the regulations effective at the
moment of their registration.
2. The Road Traffic Safety Directorate, the State Technical
Supervision Inspectorate of the Ministry of Agriculture, and the
Civil Aircraft Register of the Ministry of Transport shall, by 1
April 2000, register amendments, novations, assignments, and
deletions in respect of all commercial pledges registered in
these institutions until 1 March 1999. The necessary documents
for such commercial pledges shall be transferred to the holder of
the Commercial Pledge Register by 1 April 2000.
3. After 1 April 2000 amendments, novations, assignments, and
deletions in respect of the commercial pledges referred to in
Paragraph 2 of these Transitional Provisions shall be registered
by the holder of the Commercial Pledge Register.
4. The provisions of Section 3, Paragraph four of the Law are
not applicable to pledges created prior to the entry into force
of this norm.
5. [12 June 2014]
6. Financial resources may be applied for registration in the
Commercial Pledge Register until the day of entry into force of
the Financial Collateral Law. The commercial pledge for financial
resources shall remain effective until its deletion.
[21 April 2005]
7. If the commercial pledge is registered in the Commercial
Pledge Register or an application for the registration of the
commercial pledge has been submitted by 31 December 2014 and the
entire assets or an aggregate of properties of a merchant or an
agricultural service co-operative society, which includes also
shares of the equity capital or trade marks, designs,
topographies of semiconductor products registered in accordance
with the national procedure, granted patents and European patents
in which Latvia is the designated state and regarding which a
translation has been published in the Official Gazette of the
Patent Office, is pledged, the abovementioned properties are not
subject to the application of Section 10, Paragraph three of this
Law and such properties shall be regarded as pledged
properties.
[12 June 2014]
This Law shall come into force on 1 March 1999.
This Law has been adopted by the Saeima on 21 October
1998.
President G. Ulmanis
Riga, 11 November 1998
1 The Parliament of the Republic of
Latvia
Translation © 2022 Valsts valodas centrs (State
Language Centre)