Non-Possessory Pledge one step closer to its activation

On 12 January 2023 the Italian Revenue Agency (Agenzia delle Entrate) finally issued the technical standards for the statutory registration of the non-possessory pledge over movable assets (the Non-Possessory Pledge).

The Non-Possessory Pledge is a new form of security interest, introduced by article 1 of Italian law decree no. 56 of 3 May 2016, converted (with amendments) into law no. 119 of 30 June 2016, aimed at enabling entrepreneurs and companies registered with the Italian Companies Register to secure payment obligations arising from and/or relating to their business activity, through a floating charge over their assets.

The Non-Possessory Pledge may be created over current and future movable assets intended for use in the exercise of the business (including intangible assets but excluding registered movable assets, such as motor vehicles and vessels), as well as receivables arising therefrom and/or relating thereto. The pledged assets shall be determined, even by reference to one or more product categories or an overall value.

The hallmarks of the Non-Possessory Pledge are:

a) to allow the pledgor to retain possession, as well as process and/or dispose, of the pledged assets in accordance with their intended economic purpose; and

b) unless otherwise provided in the pledge agreement, to allow an automatic extension of the security interest (without novation effects (senza effetti novativi)) to (i) the processed assets; (ii) the proceeds of the sale of the pledged assets; and/or (iii) any new assets purchased with such proceeds (known as patto di rotatività),

which overcome certain restrictions in the general rules on pledges set forth in the Italian Civil Code, as well as on other types of collaterals contemplated by Italian laws (such as the special lien under article 46 of Italian legislative decree no. 385 of 1 September 1993).

The Non-Possessory Pledge may be established either by way of a public deed (atto pubblico) or by an agreement authenticated by a Notary Public (scrittura privata autenticata) or, alternatively, digitally signed pursuant to article 24 of the Italian Digital Administration Code (in each case drafted in Italian, or in Italian and one other language).

The security has priority ranking and is enforceable against third parties (including in the event of insolvency proceedings) from the date of its registration on the electronic register, managed by the Italian Revenue Agency under the supervision of the Ministry of Justice, which registration will automatically expire after ten years, unless a specific application for extension is submitted before the expiry date.

More specifically, the application to obtain registration of a Non-Possessory Pledge must include, among other things, the following information:

(i) details of each of the secured creditor(s), the debtor and the third party pledgor (if applicable), including the relevant fiscal code, the registration number with the Companies Register and a certified email address (PEC);

(ii) the date of the pledge agreement;

(iii) the maximum secured amount;

(iv) the description of the secured obligations;

(v) a detailed description of the pledged assets, as well as their identifying features;

(vi) the overall value of the pledged assets;

(vii) a declaration digitally signed by the debtor (and the third party pledgor, if applicable) confirming that the pledged assets and the secured obligations are intended for use in the ordinary course of business of the pledgor (destinati all'esercizio di impresa).

However, the operation of the register is provided for in secondary legislation (which came into force in August 2021), whereby the Italian Revenue Agency is mandated to set up the IT system and develop the technical standards relating to the telematic procedure to be complied with when registering a Non-Possessory Pledge.

Now that the required technical standards have finally been issued, the legislation process for the implementation of the Non-Possessory Pledge is complete and, as soon as the Italian Revenue Agency publishes on its website the date on which the electronic register will be activated, this new security interest will be available to Italian businesses (bearing in mind that application for registration of a Non-Possessory Pledge may be submitted as from the day following the publication of the activation date referred to above).

Authors: Paolo Manganelli, Partner; Annalisa Santini, Partner; Anna Giulia Chiarugi, Senior Associate