Special Pledge Agreements in Bulgaria

A special pledge agreement is becoming an increasingly popular way of securing claims between traders. Unlike an ordinary (possessory) pledge under Art. 156 of the Obligations and Contracts Act, which is valid only if the pledged item is handed over to the creditor or to a third party chosen by the creditor and the pledgor, a special pledge under Art. 1(1) of the Special Pledges Act is created without transferring possession of the pledged assets.

This gives the pledgor a number of advantages, such as continuing to use the pledged assets in its business in accordance with their purpose. The pledgee, for its part, may satisfy its claim under the Special Pledges Act by selling the pledged assets itself, or under the Civil Procedure Code by opening enforcement proceedings on the basis of an extract from the relevant register showing the registered commencement of enforcement against the pledged assets. The pledgee is also a creditor joined by operation of law in any enforcement proceedings under the Civil Procedure Code and the Tax and Social Security Procedure Code that are directed against the pledged assets.

Form of the Agreement

A special pledge agreement is concluded in writing and, in the cases expressly provided for in the Special Pledges Act, in writing with notarised signatures.

Subject Matter of a Special Pledge

The following may be pledged under a special pledge agreement:

• Movable assets, except ships and aircraft;
• Machinery and equipment;
• Receivables, book-entry securities and units in collective investment schemes;
• Shares in general and limited partnerships, partnerships limited by shares or limited liability companies;
• Rights in patents for inventions and utility models, registered trade marks, industrial designs, topographies of integrated circuits and certificates for plant varieties and animal breeds;
• Commercial enterprises;
• Agricultural produce, raw materials, goods and materials;
• Pools of receivables, machinery and equipment, goods or materials and book-entry securities, as well as units in collective investment schemes;
• The pool of cover assets entered in the cover register under the Covered Bonds Act.

The pledged assets may also be generically defined or future assets. A future harvest may be pledged from the current or the following farming year. The pledge also extends to the interest on a pledged receivable.

Where a pledged item is processed or incorporated into another item, the pledge follows the new item.

Registration of the Special Pledge

Once concluded, the special pledge agreement must be entered in the Central Register of Special Pledges and in any other registers where required by law.

The Central Register of Special Pledges is an electronic database of the circumstances and acts entered or announced under the Special Pledges Act. The agreement is entered electronically in the pledgor's personal file.

The register is public. Everyone has free access to the database that makes up the register.

Since 1 July 2023, the Central Register of Special Pledges has been part of the Registry Agency. A special pledge agreement is entered immediately, that is, on the day the documents are submitted to the register. A registered special pledge remains effective until the circumstances change.

If you need a special pledge agreement drafted or assistance with enforcement, our commercial law and dispute resolution and debt collection teams are here to help.