Historical yellow tram in front of the Lisbon cathedral, Alfama, Lisbon, Portugal

With the aim of pursuing its objectives of re-launching the Portuguese economy and creating employment by reducing the high level of corporate indebtedness and improving conditions for investment, in particular by eliminating or mitigating the constraints currently faced by companies in the access to the financing (own or before third parties), Portuguese Government established a new regime respecting the appropriation of the assets / rights pledged through a commercial pledge – Decree-Law 75/2017, dated June 26, an in force since July 1, 2017.

The civil law already provided a mechanism that allowed the creditor to award the asset that had been given to him as guarantee, but there was no special procedure in the Portuguese legal system that allowed this faculty.

This new scheme corresponds to an agreement between the collateral grantor and the creditor (a pledge agreement to guarantee a commercial obligation in which the collateral grantor is a merchant) whereby, in the event of default by the debtor, the asset or right given as collateral is transferred to the creditor, but the creditor is obliged to repay to the debtor the sum corresponding to the difference between the value of the asset / right and the amount owed. The value of the asset must result from valuation carried out after the default and the method and criteria for its assessment shall be established in the contract.

Furthermore: (i) the pledge agreement must be execute in written and the signature of the legal representatives of the parties must be recognized in person; (ii) the right of appropriation can only be agreed upon when the asset or the right given in pledge does not bear a higher-ranking pledge.