Typical security for corporate financing in Poland

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When providing financing to corporate clients, banks require that the borrower, and frequently also companies from its group, offer security in case the liabilities are not repaid on time. This article presents instruments under Polish law that are most commonly used by Polish and foreign financing entities to secure their claims against corporate borrowers.


A pledge may be created to secure a debt on movable property and transferable rights. Polish law does not allow for real estate to be pledged – it is mortgage that serves as security in the case of real estate. A pledge gives the pledgee priority in satisfying its claims from the pledged item over the pledgor’s personal creditors (also in the event of the debtor’s bankruptcy). In practice, this means that if the pledged item is attached and sold by way of mandatory enforcement procedure, the pledgee is entitled to be the first to receive the proceeds from the sale of the pledged item.

There are various types of pledges, but the registered pledge and the financial pledge are the ones with the greatest practical importance – mainly because they enable the pledgee to take over the ownership of the pledged item or sell it under a simplified procedure. A pledge is created on the basis of an agreement between the debtor (pledgor) and the creditor (pledgee) and in the case of a registered pledge also on the basis of an entry into a public register maintained by the court.

To ensure security for corporate financing, banks usually require that various items should be pledged separately. Typically, the pledged items include:

·     shares,

·     assets,

·     bank accounts,

·     trademarks.

Power of attorney

Irrespective of the pledge, the financing entities generally demand to be granted powers of attorney, for instance, to vote the pledged shares and powers of attorney to use the funds held in the pledged bank accounts. Those powers of attorney constitute separate security and cannot be revoked by the pledgor during the financing period.


Mortgage is a limited right in rem created on real estate to secure a debt. It is established when a relevant entry is made in the land and mortgage register maintained by the court. Land and mortgage registers are available online, which enables any prospective buyer of the real estate to check whether it is encumbered or not. Mortgage gives the creditor priority in satisfying its loan claims from the encumbered real estate (also in the event of the borrower’s bankruptcy).


The assignment of receivables is frequently used as security for loan agreements. It is a solution where receivables owed to a borrower (or companies from its group) by a third party is transferred to the bank. It usually refers to receivables under trade agreements and/or insurance agreements.

Assignment agreements usually provide that until the borrower defaults on the loan agreement, all amounts in respect of the transferred receivables are paid directly to the assignor (borrower). Only when the financing is not repaid on time and the so-called Default Notice is received is the debtor of the transferred receivable (i.e. the borrower’s counterparty) obliged to make all the payments directly to the assignee (the bank).


Under a surety agreement, the guarantor undertakes to the creditor to perform an obligation in the event that the principal debtor (borrower) fails to perform that obligation. The guarantor’s undertaking usually includes the obligation to pay all the amounts under the loan agreement (the principal, interest, additional costs and charges, etc.). As regards corporate financing in practice, surety is most often used for the financing of groups of companies – in such an event companies from the borrower’s group act as guarantors.

Voluntary submission to enforcement proceedings (the so-called “clause 777”)

A notarized statement on the voluntary submission to enforcement proceedings pursuant to Art. 777 of the Polish Code of Civil Procedure includes a declaration by the debtor (borrower/guarantor) that they voluntarily submit themselves to enforcement in favour of a designated creditor (e.g. the financing bank) directly from the notarial deed. This means that the party entitled under the notarial deed (the bank) can, in the event of default on repayment of the loan, commence the enforcement procedure without the need for lengthy court proceedings. The only prerequisite for the commencement of the enforcement procedure is obtaining a writ of execution issued by the court. When issuing a writ of execution the court examines only whether formal conditions have been met (it makes no determination on the merits of the case, takes no evidence, etc.), which means that the procedure is usually short.

Subordination agreement

In the case of corporate financing the parties to a subordination agreement usually include the bank (senior creditor), the borrower (subordinated debtor) and entities from the borrower’s group (subordinated creditors).

Under such an agreement, the subordinated creditors (companies from the borrower’s group) undertake to the bank to refrain from requiring the borrower to pay any amounts of money in certain respects (subordinated claims) before the loan (senior claim) is repaid. What this means in practice is that until the loan is fully repaid, the payment of the borrower’s debt to other designated entities from the group is suspended.


Wiewiórski Legal specializes in providing comprehensive legal services related to financing on the banking market, in particular bank loans, including loan agreements of all types with the participation of one or many lenders (club deals), investment and refinancing loans, working capital facilities, overdrafts, loans to finance real estate acquisition and others, including those based on the Loan Market Association (LMA) standards. Wiewiórski services also cover all types of loan security interest such as mortgages, ordinary, financial and registered pledges (e.g. on assets, shares or bank accounts), security assignment agreements, powers of attorney, subordination agreements, etc.

Marcin Wojtasik & Marcin Iwaniak

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