Types of Pledge and Its Scope
Proper documentation of security begins with determining the type of pledge. The law distinguishes possessory and registered pledge, and this choice determines which documents and formalities are required. The pledge secures the claim and the accessory rights connected with it — including interest and penalties — as well as the costs of maintaining, litigating and realizing the property, unless otherwise provided by law or agreement. The pledge right also extends to fruits received from the pledged item unless the parties agree otherwise, which means the documentation should expressly clarify whether fruits are covered.
Possessory Pledge
A possessory pledge of a movable arises through the agreement of the parties and the transfer of the item into the possession of the pledgee or a third person designated by him. Where the item is already in the possession of the pledgee or a person authorized by him, the agreement of the parties alone suffices — no physical transfer is required. The advantage of this form is speed; the drawback is that the creditor becomes the actual holder of the item and must care for its storage.
Registered Pledge and the Content of the Transaction
A registered pledge requires a transaction in written form and registration of the pledge right in the public registry; transfer of the movable to the pledgee is then not required. The transaction must indicate its date, data on the pledgee, the pledgor and any possible debtor third person, a description of the pledged item by general or specific features such that it can be identified, and a general or specific description of the secured principal claim together with the maximum amount within which the claim is to be satisfied. Where the pledged item is the entire movable property, its description is required only if so agreed. A pledge of a vehicle or agricultural machinery is registered at the Service Agency of the Ministry of Internal Affairs, and authentication of signatures is not required where the parties sign before the registering authority in the presence of an authorized person or where an electronic document exchange agreement exists between the pledgee and the Agency. Financial collateral is regulated by a separate law.
The Pledge Certificate and the Pledging of Claims
Upon the debtor's failure to perform, within two weeks of the pledgee's written demand, the Agency issues a pledge certificate — an act subject to execution confirming the fact of registration of the pledge and, where the circumstances defined by law exist, the pledgee's right to demand transfer of the pledged item into his possession for satisfying the claim. The certificate is not issued if the transaction lacks the parties' agreement on securing the claim required by the Code, and the pledgee is responsible for the lawfulness of the demand. A claim is pledged by a written transaction and registration of the right in the public registry; until the debtor is notified in writing of the pledge, he may perform the obligation towards the owner of the claim. Securities are pledged according to the rules established for their acquisition, and dematerialized securities under the special law.
The architecture of documentation is completed by the institute of the pledge certificate. Where, within two weeks of the pledgee's written demand, the debtor fails to perform the corresponding obligation, then upon the pledgee's application the legal entity of public law — the Service Agency of the Ministry of Internal Affairs of Georgia — issues a pledge certificate, which is an act subject to enforcement: with the registered fact confirmed and the circumstances established by legislation present, the pledgee may demand from the authorized organ the transfer of the pledged item into its possession. The certificate is not issued if the transaction lacks the parties' agreement required to secure the claim; the lawfulness of demanding issuance rests with the pledgee itself. The pledge of claims and securities is effected by a written transaction and the registration of the defined right in the public registry. Thus form, description, registration and, where needed, an act of enforcement settle into a single chain.
Frequently Asked Questions on Security Documentation
Below are concise answers to the questions most frequently raised about security documents.
What is the difference between possessory and registered pledge?
The first arises by transfer of the item, the second by a written transaction and registration in the registry, without transfer.
What must a pledge transaction contain?
The date, data of the parties, an identifiable description of the item and a description of the secured claim with the maximum amount.
Where is a pledge of a vehicle registered?
At the Service Agency of the Ministry of Internal Affairs; authentication of signatures is not needed when signing before the registrar or under an electronic document exchange agreement.
What is the pledge certificate?
An act subject to execution, issued within two weeks of the pledgee's demand upon the debtor's default, securing the right to claim the item.
How is a claim pledged?
By a written transaction and registration in the registry; until written notice, the debtor performs towards the owner of the claim.
How We Help on Legal.ge
The lawyers of Legal.ge will help you choose the type of pledge, draft and register the transaction, correctly describe the item and the claim, and navigate the pledge certificate procedure. Contact us — a single error in documents often destroys the entire security, so correct documentation is the foundation of your position.