Financing & collateral

Financing & Collateral

In international trade, securities and security documentation are frequently used. In many areas, transport is standardized with standard contracts, insurance, intermediaries (freight forwarders, commercial agents, etc.), certifications, trade papers, and exchange prices. We assist organizations with negotiations and the conclusion of agreements in the sphere of (inter)national trade. Examples include:

• Bills of lading
• Documentary collection
• Documentary credit
• Bearer and order documents
• Exchange

Moreover, we assist organizations with various disputes, such as:

• Liability
• International trade dispute settlement (including arbitration)
• Fraud
• Foreclosure, seizure and execution

We have the knowledge and expertise to assume diverse roles: from advice to dispute resolution. We have an experienced team of lawyers and legal experts in the field of financing and securities. Contact us to discuss the possibilities.

Security rights in financing: pledge and mortgage

Entrepreneurs seeking financing almost always have to deal with collateral. A lender wishes to guarantee repayment and therefore stipulates a security right. Pledge and mortgage are limited rights intended to recover a claim for payment of a sum of money with priority over other creditors (Article 3:227 of the Dutch Civil Code). A mortgage is established on registered property, such as business premises or land, by notarial deed with registration in the public registers of the Land Registry. A pledge right rests on all other assets: inventory, machinery, receivables from debtors, and shares.

The right of pledge takes various forms. With a possessory pledge, the asset is placed in the possession of the pledgee (Article 3:236 of the Dutch Civil Code). In practice, this rarely works; therefore, the non-possessory or silent pledge is often chosen: this is established by authentic or registered private deed without the asset being physically transferred (Article 3:237 of the Dutch Civil Code). When pledging claims, we distinguish between the silent pledge and the public pledge, whereby the debtor receives notification. We draft the pledge and mortgage documentation, assess whether the securities have been validly established, and advise on the consequences for the freedom of movement of your company.

Personal guarantees: suretyship and joint and several liability

In addition to security interests in property, a lender often requires personal security from the entrepreneur or director. In the case of suretyship, a third party, the surety, undertakes towards the creditor to fulfill the obligation of the principal debtor (Article 7:850 of the Dutch Civil Code). Suretyship has a subsidiary character: the surety can only be held liable if the principal debtor defaults. This is different in the case of joint and several liability (Article 6:6 of the Dutch Civil Code): the creditor may hold each jointly and severally liable debtor directly and for the full amount, without first approaching the company.

For the director-major shareholder acting as guarantor in their personal capacity, the protective regime of private suretyship (Articles 7:857 to 7:864 of the Dutch Civil Code) often applies. Special requirements apply in this regard, such as a maximum amount and—very importantly—the written consent of the spouse or registered partner (Article 1:88 of the Dutch Civil Code). If such consent is lacking, the suretyship may be annulled. We assess whether a requested guarantee is genuinely necessary and proportionate, whether the formal requirements have been observed, and what defenses are available to you as guarantor.

Retention of title and other securities

A supplier delivering on credit can protect themselves with a retention of title clause: the delivered goods remain the property of the supplier until the purchase price has been paid in full (Article 3:92 of the Dutch Civil Code). This is a simple yet powerful instrument against non-payment and the bankruptcy of the buyer. In addition, we regularly see the right of retention, warranties, subordinations, and group guarantees in commercial relationships. For international trade, these securities align with the negotiable instruments and security documentation discussed above, such as documentary credit and bills of lading. We ensure that the chosen security is legally sound and suits your position — whether you are an international group or the baker on the corner arranging their first financing.

Enforcement, summary execution and bankruptcy

Security proves its value the moment a debtor defaults. In the event of default, the pledgee is entitled to sell the pledged asset and satisfy their claim from the proceeds — the so-called summary execution (Article 3:248 of the Dutch Civil Code). A similar power of public sale applies to the mortgagee (Article 3:268 of the Dutch Civil Code). In bankruptcy, pledgees and mortgagees hold a strong position: they can exercise their rights as if there were no bankruptcy (separatist), subject to the time limits that the trustee may set. We assist both financiers and suppliers seeking to enforce their security, as well as entrepreneurs facing enforcement, seizure, or execution, while always ensuring the correct sequence and formalities are followed.

Our approach: lawyers and in-house counsel

Financing and security interests require both rigorous contractual documentation and decisive litigation. That is why lawyers and in-house counsel at MKB Juristen collaborate in mixed teams. From drafting and reviewing pledge, mortgage, and surety documentation to enforcing or defending against security interests in a dispute: we serve the entire spectrum, from international corporations to small business owners. Our services align with other areas of Commercial Law, such as commodity trading, transport and logistics, agency , and distribution. Contact us to discuss your financing or security matters.