Improving The Position Of Secured Creditors Under Registered Pledges In Bulgaria

Almost two decades after being adopted following the model of the World Bank and UNCITRAL for non-possessory registered pledges, the Special Pledges Act (the "Act") was substantially amended at the end of 2016. Most of the amendments take immediate effect while those concerning the digitalization of the Central Register of Special Pledges (the "Register") will come into force on 1 September 2018.

Overcollateralization

The effectiveness of the non-possessory pledges was questioned due to certain ambiguities in the Act and their diverse interpretation by the courts. The creditors thus preferred using this security instrument mainly in combination with the traditional mortgage where cohesive and unified case law exists. This practice undermined the otherwise flexible and inexpensive security which should suit well both vanilla financings and more complex structures. It further led to overcollateralization and tied up assets that can be better used in the operations of