Pledge
A security right over movable property or claims giving the holder priority on enforcement.
Definition
A pledge (pandrecht) is a security right over movable assets, rights or claims that entitles the pledgee to satisfy its claim from the pledged object with priority over other creditors. Dutch law recognises both a possessory pledge and an undisclosed (silent) pledge created by registered or notarial deed, the latter common over receivables and stock. On default the pledgee may sell the asset and recover from the proceeds.
Example
A bank takes an undisclosed pledge over a borrower receivables as security for a working-capital facility.
Why this is a business risk
A pledge that is not properly created or registered may be unenforceable, leaving the secured creditor as an unsecured creditor in insolvency. For debtors, granting a pledge without tracking what has been pledged to whom can create conflicting security interests or inadvertent breaches of negative pledge covenants in other contracts. Managing pledge registrations across a portfolio requires close coordination between legal and finance teams.
How to manage it
- Ensure the pledge is created in the correct form: a registered or notarial deed for an undisclosed pledge, or actual transfer of possession for a possessory pledge.
- For a silent pledge over receivables, set up a process to notify debtors when required (on default) and to regularly update the pledged receivables register.
- Check your existing contracts for negative pledge clauses before granting new security to avoid inadvertent breaches.
- Track the pledged assets and their estimated value relative to the secured obligation, requesting additional security if the value of pledged assets falls materially.
- On default, take prompt enforcement steps; delay may affect priority against other creditors or reduce realisation proceeds.
Legal references
Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.
Frequently asked questions
Common questions about this term.