Commercial pledge in Lithuania

Commercial pledge regulation in Lithuania

Commercial pledge in Lithuania is governed by the Civil Code and the Law on the pledge of movable property. Under Lithuanian law, a pledge is a device of granting security for the discharge of obligations when the collateral is transferred to the creditor, a third person or remains in the pledgor’s possession.

Commercial pledges are registered in the Register of Mortgages administered by the mortgage departments of district courts.

In Lithuania, object of the pledge can be movable assets and rights, including securities, intellectual property rights, money in the bank account of the debtor, etc. Pledge cannot be created over the assets in respect of which enforcement may not be levied (e.g. recovery cannot be directed to any necessary clothing, home furnishings, and household items; in performing a recovery from a person, whose principal business is farming, the recovery cannot be directed to the fodder necessary for the winter for the livestock, etc.). The object of a mortgage may be individual immovable asset, which is registered in the public register, not withdrawn from the civil circulation and eligible for a public foreclosure sale (i.e. is transferable).

If the debtor fails to discharge the secured obligation, the creditor (pledge) has the right to satisfy his claim from the value of the collateral before other creditors on the basis of the pledge. 

Registration of commercial pledge in Lithuania

A commercial pledge is created when a written pledge agreement is concluded between the debtor or another person (the pledgor) and the creditor (the pledgee), and the transaction involving the pledge is registered in the Register of Mortgages; or when the transaction involving the pledge is registered in the Register of Mortgages by a unilateral declaration of the pledgor.

The legal effect of a commercial pledge begins from the moment of its registration in the Central Register of Mortgages. After the registration of a pledge, the registered original of the collateral bond and the certificate about the registration of the pledge in the Central Register of Mortgages shall be mailed to the creditor.

The pledge is terminated by its deregistration from the Register of Mortgages. The following persons have the right to apply to with the request to deregister the pledge:

  1. the creditor (the pledgee) upon filing the collateral bond;
  2. the debtor or the pledgor (when the debtor and the pledgor is not the same person) upon filing the collateral bond confirming that the creditor’s claim secured by the pledge registered in the Register of Mortgages has been satisfied.

Where the pledge agreement, in the manner prescribed by law, is recognized invalid, the pledge registered in the Register of Mortgages is deregistered on submitting to the department of mortgages an effective court decision.

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