Right of pledge

Legal assistance on pledge agreements

At Ploum, our specialists can draw up the notarial or privately-executed deed you require for pledging rights or movable property (undisclosed or non-possessory pledge). The pledging of shares in a Dutch private limited company may only be done through a notarial deed.

Parallel debt

In case of a syndicate of financiers, for example in LMA based transactions, it is possible to create security on behalf of a security agent or a security trustee (generally one of the banks) by inserting a parallel debt clause in the deed of pledge. This security agent or trustee exercises the right of pledge on behalf of the syndicate in the case in question. But there is some doubt in Dutch law concerning the options for creating independent security on behalf of a party that is not a creditor, or is only a partial creditor. For this reason, the deed of pledge (or the credit document or intercreditor agreement) provides that the entire amount is also payable to the security agent as a separate debt. This separate debt decreases in proportion to the repayments made or the security enforcements carried out. In the past, parallel debts were only arranged for certain jurisdictions, mainly the Netherlands. However, they are currently gaining popularity under English law as well.

Security for third-party debts

Security for third-party debts is sometimes issued in the form of a pledge. In such cases, it is important to make absolutely sure that the relevant company is authorised to enter into the transaction. The management at the local company also wishes to ascertain that it is not assuming any kind of liability by agreeing to this kind of security.