REPUBLIC OF LITHUANIA

REPUBLIC OF LITHUANIA REPUBLIC OF LITHUANIA LAW ON THE PLEDGE OF MOVABLE PROPERTY 10 June 1997 No. VIII-250 (as amended by 9 December, 1997, No. VIII-568) Vilnius Chapter I GENERAL PROVISIONS Article

Objectives of the Law
This Law regulates the procedure of pledging movable property as a security for the discharge of obligations and satisfaction of claims arising from said obligations.
This Law shall not be applicable to mortgages effected in accordance with the Law on Mortgage or when the property is transferred into possession of the pledgee, or when the property is pawned, or when the securities of the Government of Lithuania or of the Bank of Lithuania are offered as a collateral for loans. Article
Definitions
Property - immovable property (things and property rights) specified in Article 15 of this Law.
Pledge of movable property (hereinafter - the pledge) - a device of granting security for the discharge of obligations when the property right to the collateral as well as the right to use the proceeds from the pledged property at his/her discretion remains with the owner of the pledged property. If the obligation has not been discharged within the set term (in the event of default), the creditor shall have the right to demand that his/her claim be satisfied from the value of the collateral.
Registration of the pledge - registration of the transaction involving the pledge of movable property in the Register of Mortgages. Article
Grounds for the Pledge 1.A pledge shall be created when: 1) in a manner set forth by this Law, a written pledge agreement is concluded between the debtor or another person (the pledgor) and the creditor (the pledgee), and the transaction involving the pledge is registered in the Register of Mortgages; 2) the transaction involving the pledge is registered in the Register of Mortgages by a unilateral declaration of the pledgor.
The owner of the property or a person holding the property in trust, or in cases set forth by this Law - the future owner of the property (hereinafter - the owner) has the right to pledge the property. Jointly owned property may be pledged only upon a written agreement of all the co-owners. Article
Claims Secured by the Pledge
A pledge may secure the discharge of any contractual obligation arising from (loan, purchase-sale and other) agreements.
Unless otherwise provided in the agreement, a pledge shall secure a claim to the extent it is at the time of its satisfaction including interest, punitive interest, losses incurred due to delay, and recovery expenses. Article
The Subject of the Pledge
Property specified in Article 15 of this Law which is owned by the pledgor as well as property which will come into the pledgor’s ownership in the future in cases established by this Law may be used as the subject of the pledge.
Property which belongs to state and local government institutions, also institutions and organisations maintained on the funds from the state or local government budgets, may not be used as the subject of the pledge. Property withdrawn from the civil turn-over, attached property as well as property to which, under the existing laws, enforcement may not be levied, may not be the subject of the pledge. Article
Priority of Claims Secured by the Pledge Claims secured by the pledge registered in accordance with the procedure set forth in this Law shall be satisfied prior to all other claims. Article
Satisfaction of Claims Secured by the Pledge of Future Property When the property which will come into the pledgor’s ownership in the future is pledged, enforcement may be levied to said property only subject to the acquisition of title to that property by the pledgor. Article
Legal Status of the Information about Pledges Contained in the Register of Mortgages
Information contained in the Register of Mortgages shall be regarded accurate and complete as long as it has not been contested in accordance with the procedure prescribed by law.
In the event of a dispute over the pledge entered in the Register of Mortgages, the individuals may not claim ignorance of the existence of the pledge. Article
Public Access to the Information about Pledges Contained in the Register of Mortgages Everybody shall be entitled to have access for a fee to the information contained in the Register of Mortgages in conformity with the procedure established by the regulations of the Register of Mortgages about the pledges which are in the process of registration and which have been registered. Article
Assignment of the Collateral
The owner of the collateral may assign it to another person if this has been provided for in the pledge agreement. When the assignment of the collateral is being effected, its owner must advise the assignee on the existing pledge and notify the creditor about the assignment of the collateral.
After the assignment of the collateral, the assignee shall be liable to the creditor to the extent of the value of the collateral under the obligation secured by the pledge, with the exception of cases set forth in Article 23 of this Law. Article
Prohibition of Waiver of the Secured Right of Claim A person who has pledged the right of claim shall be prohibited from waiving the right of claim arising from the pledge. Article
Invalidity of the Agreement on the Assignment of the Collateral in the Event of its Violation
When the collateral is assigned to another person regardless of the prohibition in the pledge agreement and the assignee knew about it or could have known about it, the agreement on the assignment of the collateral shall be invalid.
If, upon the invalidation of the pledge agreement, the assignee fails to return the collateral to its former owner, the assignee shall be liable to the creditor to the extent of the full value of the collateral.
If, upon the invalidation of the pledge agreement, the value of the collateral returned to the former owner is smaller than it was at the time of the assignment, the assignee shall be liable to the creditor to the extent by which the value decreased. Article
The Right to Accelerate the Satisfaction of a Secured Claim The creditor may demand that his/her secured claim be satisfied before the expiration of the maturity date when: 1) other creditors, in cases established by law, demand the sale of the collateral at an auction; 2) the debtor is dead (when the debtor is a natural person); 3) bankruptcy proceedings are instituted against the debtor or there is a decision on the liquidation of the debtor (when the debtor is a legal person or an enterprise with no rights of a legal person); 4) the debtor has failed for over one month to make timely payments of the principal and/or interest as set forth by the agreement unless a shorter term is established by the agreement; 5) the owner of the property, in breach of the pledge agreement, has assigned the collateral or has re-pledged it; 6) the owner of the property, in breach of the conditions of the pledge agreement, has not marked the collateral or has not preserved the marks during all the period of the pledge agreement; 7) the owner of the property, in breach of the conditions of the pledge agreement, fails to make the necessary stocktaking of the collateral and registration of its movement; 8) the owner of the collateral uses it not according to its intended use or improperly, which may result in the decrease of its value; 9) the owner of the collateral prevents the creditor from inspecting the state of the collateral; 10) the collateral is lost or its value has decreased by more than 30 % for reasons other than the fault of the owner; 11) the insurance contract of the collateral is terminated before its expiration; 12) the owner of the collateral fails to comply with the conditions and requirements set forth in the pledge agreement which may result in the decrease of the value of the collateral. Article
Re-registration of the Pledge into a Mortgage and Priority of Satisfaction of the Creditors’ Claims
If the pledged movable property is registered as a fixture of the immovable property, the creditor may request that the pledge of movable property registered in the Register of Mortgages be re-registered as a mortgage. In such cases the priority of satisfaction of creditors’ claims shall be established according to the date of filing of the application for the change of the type of the pledge.
When the pledged movable property is subsequently pledged as a fixture of immovable property, the claims arising from the pledge of movable property shall prevail over the claims arising from the mortgage. Chapter II PROCEDURE OF PLEDGING MOVABLE PROPERTY Article
Types of Collateral Under this Law the following items may be offered as a collateral: 1) any movable object defined by individual or species characteristics except things subject to mortgage under the Law on Mortgage; 2) securities; 3) intellectual property rights; 4) money in the bank account of the debtor; 5) rights in rem; 6) rights in personam arising from a written agreement. Article
The Pledge Administrator If a pledge secures the performance of a loan extended by several creditors, they may appoint a pledge administrator who shall be authorised on behalf of the creditors, in the manner prescribed by the Civil Code of the Republic of Lithuania, to conclude a pledge agreement, to have the pledge registered and to represent the interests of all the creditors. Article
The Form of the Pledge Agreement and of the Unilateral Declaration of the Property Owner to Pledge the Property
The pledge agreement shall be concluded or a unilateral declaration of the owner of property to pledge it shall be drawn up by perfecting a collateral bond of the movable property (collateral bond hereinafter) in the form established by the Ministry of Justice. When property is pledged under a pledge agreement, the collateral bond shall be signed by the debtor, the owner of the charged property (if the debtor and owner of the property is not the same person) and the creditor; when property is pledged by a unilateral declaration of the owner of said property - by the owner of the property.
The collateral bond shall be certified by a notary and, in a manner prescribed by this Law, shall be registered in the Register of Mortgages.
All the amendments in the pledge agreement shall be entered in the collateral bond and shall be registered in the same manner as the pledge. Article
Contents of the Collateral Bond
The collateral bond shall comprise the following particulars: 1) the venue and the date of executing the security transaction; 2) the debtor (if he is a natural person, his first name, family name, address, and the identification code; if it is a legal person or an enterprise without the rights of a legal person - its name, head office and the identification code); 3) the owner of the collateral when the debtor and the owner of the collateral is not the same person ( if he is a natural person - the first name, family name, the address and the identification code; if it is a legal person or an enterprise without the rights of a legal person - its name, head office, and the identification code); 4) the creditor (if he is a natural person - his first name, family name, address, and the identification code; if it is a legal person or an enterprise without the rights of a legal person - its name, head office and the identification code); 5) description of the collateral for the purposes of its identification. If there is a provision for specific marks on the collateral - the description of the marks; 6) the value of the collateral; 7) the contractual obligation, its amount and the maximum amount of the secured claims; 8) the interest rate; 9) the maturity date for the discharge of obligations and if the obligations are to be discharged at the creditor’s request - the moment from which the creditor may make this request.
The collateral bond may also provide for additional terms and requirements: 1) a permission to assign the collateral to a third person; 2) a requirement to maintain a special record of stock taking of the collateral and its movement; 3) a prohibition from pledging the collateral; 4) a prohibition from changing the location of the collateral; 5) a provision whereunder the creditor’s claim is effective or upon the fulfilment whereof the creditor’s claim shall become effective; 6) terms and conditions to be agreed upon in the future; 7) the date of fixing the debt amount; 8) other provisions.
When property is pledged by a unilateral declaration of the owner of the property, the creditor need not be indicated in the collateral bond. In such cases a bearer collateral bond shall be drawn up. At the request of the holder of such a bond, the bearer collateral bond may be perfected as a personal collateral bond. Article
Pledge of the Property which is the Subject of Purchase-Sale or Lease
As set forth in this Law, the property which is the subject of a purchase-sale agreement may be pledged with the aim of securing: 1) the claims of the seller; 2) repayment of the loan extended to the buyer by a third party in order to satisfy fully or partly the seller’s claims.
Provisions of paragraph 1 of this Article shall be also applicable in those cases when the seller or the creditor granting a loan to the buyer retains title to the property on sale, until the full purchase price is paid or the loan is fully repaid, also in cases when the collateral is used to secure carrying out the lease agreement under which the lessee becomes the owner of the leased property upon the expiration of the lease term. Article
The Maximum Pledge
A pledge agreement wherein instead of the amount of the debt its maximum possible amount is indicated may be concluded for a period not exceeding five years. Upon the expiration of this term, the amount of the debt shall be fixed and debt obligations assumed thereafter shall not be secured by the collateral.
The date for the fixation of the debt amount may be set forth in the agreement, otherwise the creditor may demand that the debt amount be fixed at any moment, but not before the expiration of three years from the date of the registration of the pledge agreement.
The amount of the debt shall also be fixed: 1) when other creditors demand the sale of the collateral at an auction; 2) upon the attachment of the collateral; 3) upon the death of either a debtor or a creditor (when the debtor or the creditor are natural persons); 4) upon the institution of bankruptcy proceedings against the debtor or the creditor or after adopting a decision on the liquidation of the debtor or the creditor (when the debtor or the creditor are legal persons or enterprises having no rights of a legal person).
Fixing of the debt amount may be revoked if the creditors recall their demand to sell the collateral at an auction, also if the attachment of the collateral is cancelled or if the bankruptcy proceedings against either the debtor or the creditor are terminated.
The amount of the debt shall be fixed and the fixation shall be registered in the manner prescribed by the regulations of the Register of Mortgages. Article
Marking of the Collateral The pledge agreement may provide for marking the collateral by special marks. In such a case the owner of the collateral shall be responsible for the preservation of such marks on the collateral until the moment of re-registration of the pledge agreement. Article
Stocktaking of the Collateral The creditor, pursuant to the pledge agreement, may request the owner of the collateral to keep records of stocktaking of the collateral and its movement. Article
Pledge of the Goods in Stock
The pledgor who has given goods in stock (goods, raw materials, semi-finished and finished goods) as a collateral shall have the right to change the composition and the form of the pledged goods in stock provided their total value has not been reduced.
The sale of the pledged goods to the pledgor while he is engaged in business as set forth in his bylaws( statutes) shall release the goods from the pledge, while new goods in stock acquired by the pledgor shall become the subject of the pledge from the moment of acquisition of the goods into ownership. Article
Pledge after the Merger of the Collateral with Other Property
If in the course of production the collateral is merged with other movable property or if it is transformed in such a way that the restoration of its initial form is impossible, the pledge shall extend to the newly created property. If there is more than one claim to the newly-formed property as a whole, arising from the pledge of its components, the maximum amount of each secured claim shall be calculated with regard to the comparative value of the pledged components in the production costs of the newly-formed property. Creditors’ claims shall be satisfied in the order of the date of filing applications for the registration of the pledge.
If the collateral is joined to other property in such a way that they may be separated without decreasing their value, the pledge shall not extend to the newly-formed property.
If a pledge is created in a newly-formed property the components of which are already subject to a pledge, the claims secured by the pledge of the components shall prevail over the claims secured by the pledge in the entire property. Article
Re-pledging of the Collateral
Unless prohibited by the pledge agreement, the owner of the collateral may create a new pledge in it in accordance with the procedure set forth by this Law. The owner shall notify the first creditor about re-pledging of the collateral in accordance with the procedure prescribed by the pledge agreement.
Unless otherwise provided by the pledge agreement, it shall be prohibited to re-pledge the property already subject to a pledge in accordance with the procedure prescribed by this Law, by delivering it into possession of the pledgee.
Violation of the provisions of this Article shall invalidated the pledge agreement under which a new pledge is created. Article
Priority of Claims to Property Subject to Multiple Pledges
Where the property is subject to multiple pledges, the creditors’ claims shall be satisfied in the order of the date of filing for the registration of the pledge. Claims of lower-priority creditors shall be satisfied from the value of the collateral only after the claims of the higher-priority creditors have been satisfied in full.
Claims of creditors who have filed their applications to register a pledge in the same property shall be of equal priority and shall be satisfied pro rata to the total amount of the secured claim.
If a pledge is created in a component of the property already subject to a pledge, the claim arising from the pledge in the component may not be satisfied before the satisfaction of the claim arising from the pledge of the whole collateral. Article
Satisfaction of a Claim Secured by the Pledge of Several Items of Property
If the debtor (debtors) pledged several items of property to secure one definite claim, in case of enforcement only as many items of the property may be sold as is necessary to satisfy the claim. The owner (owners) of the property shall decide in what order the items of property should be sold, unless otherwise provided in the pledge agreement. Article
Rights of the Pledgor
The owner of the collateral may: 1) use the collateral in accordance with its destination; 2) obtain products and receive proceeds from the collateral and use these at his/her own discretion; 3) transfer of the collateral into possession of the third party unless otherwise provided by the agreement; 4) assign the collateral to the third party if this is permitted by the pledge agreement and notify the assignee about the encumbrance on the collateral; 5) create a new pledge on the collateral provided it is not prohibited by the pledge agreement.
If satisfaction of the creditor’s claim is secured by the pledge of the collateral owned not by the debtor but by the third party, the latter (the pledgor) shall not be liable for the performance of the debtor’s obligation to the extent of his/her other property.
When the collateral is compulsorily sold the debtor shall have the right of recourse for the compensation of his/her losses to the person the performance of whose debt was secured by the compulsory sale of the collateral. Article
Duties of the Pledgor The pledgor must: 1) use reasonable care in the custody and maintenance of the collateral; 2) insure the collateral at his/her own expense in such a way as to make it useful to the creditor unless otherwise provided in the agreement; 3) notify the creditor of the depreciation of the collateral also of its destruction or loss; 4) provide a possibility for the creditor to inspect the state of the collateral and the conditions of its use; 5) notify the creditor of the pledge or assignment of the collateral as set forth in the pledge agreement; 6) perform other obligations set forth in the pledge agreement. Article
Discharge of Secured Obligations
Secured obligations shall be discharged by presenting the collateral bond. If the creditor fails to present the collateral bond the debtor may refrain from discharging his/her obligation.
Upon the discharge of the secured obligation in full, the creditor must return to the debtor the collateral bond with the inscription that the obligation has been discharged.
Upon the discharge by the debtor of the secured obligation in part, the creditor must make an entry thereof in the collateral bond and issue, at the debtor’s request, a receipt. Article
The Right of the Creditor to Satisfy his/her Claim from the Value of the Collateral
When the debtor is in default, the creditor shall have the right to satisfy his/her claim from the funds received after a compulsory sale of the collateral as specified in this Law.
If the amount received after a compulsory sale of the collateral is not sufficient to fully satisfy the creditor’s (the pledgee’s) claim, the latter shall have the right to recover the remaining amount from other assets of the debtor on the equal basis with other creditors.
If the collateral is lost, destroyed or its value has decreased, the creditor shall have the right to satisfy his/her claim from all the monetary and in-kind compensations due to the owner of the collateral for the damage inflicted to the collateral. Article
Termination of the Pledge
The grounds for the termination of the pledge shall be: 1) expiration of the obligation secured by the pledge; 2) expiration of the right which is the subject of the pledge; 3) perishing of the collateral; 4) an assignment of title in an item of goods or rights covered by a pledge to the pledgee; 5) a compulsory sale of the collateral.
A compulsory sale of the collateral with the purpose of recovery shall release the property from all pledges.
The pledge shall terminate upon its de-registration from the Register of Mortgages. Chapter III ASSIGNMENT AND CREATION OF A PLEDGE IN THE RIGHT OF CLAIM ARISING FROM A PLEDGE IN PROPERTY Article
Assignment of the Right of Claim The right of claim arising from a pledge in property may be assigned by the creditor to a third party unless it is prohibited by the agreement for the creditor to do so. Article
Procedure for the Assignment of the Right of Claim
The assignment of the right of claim arising from a pledge of property shall be effected by way of assignment of the collateral bond by endorsement.
The endorsement must be written on the collateral bond by naming the assignee. It must bear the signature of the endorser (holder of the collateral bond) and be registered in the Register of Mortgages. 3.The assignment of the right of claim (endorsement of the collateral bond) shall be filed in the Register of Mortgages in the same manner as the pledge. Article
Pledge of the Right of Claim The right of claim arising from the pledge may be made pledged as security for a loan. Article
Procedure of Pledging the Right of Claim
The right of claim arising from a pledge in property shall be pledged by a mutual agreement of the parties. An inscription to this effect shall be made in the collateral bond.
The agreement of the pledge of the right of claim arising from a pledge of property shall come into force as of the date of its registration in the Register of Mortgages. 3.Failure to conform to the rules set forth in this Article shall invalidate the pledge of the right of claim agreement. Article
Deadline for Discharging the Obligation Secured by a Pledge of the Right of Claim When pledging the right of claim arising from a pledge of property, the deadline for discharging the obligation secured by said pledge shall not exceed the term of maturity of the claim. Chapter IV REGISTRATION OF THE PLEDGE Article
Place of Registration
Pledges shall be registered in the Register of Mortgages administered by the mortgage departments of district courts ( hereafter - mortgage departments).
The procedure for the establishment and functioning of the Register of Mortgages shall be regulated by the Law on the Establishment of the Register of Mortgages, the Mortgage Law and the Regulations of the Register of Mortgages approved by the Government of the Republic of Lithuania. Article
The Place of Filing the Application for Registration
An application for registering a pledge of movable property may be filed with any mortgage department, while an application for registering an amendment of a pledge agreement and for a deregistration of the pledge shall be submitted to the mortgage department where the pledge was initially registered.
An application for registering a pledge shall be filed upon submitting a collateral bond in the same manner as an application for registering of a mortgage except that the time of filing an application for registering a pledge (the hour and the minutes) shall not be indicated. Article
Registration of a Pledge and Issuance of Instruments Confirming a Pledge
A pledge shall be registered in the same manner as a mortgage pursuant to the Mortgage Law and the Regulations of the Register of Mortgages. A pledge shall be regarded as registered from the moment of its registration in the Central Register of Mortgages.
After the registration of a pledge, the registered original of the collateral bond and the certificate about the registration of the pledge in the Central Register of Mortgages shall be mailed to the creditor. Where the creditor is not indicated in the collateral bond, the said documents shall be mailed to the owner of the collateral by whose unilateral declaration the pledge was registered. The content and the form of the registration certificate shall be established by the regulations of the Register of Mortgages.
A copy of the collateral bond shall be held at the mortgage department as set forth by the regulations of the Register of Mortgages. Article
Transfer of the Data to the Registers of Property and the Procedure for the Exchange of the Data 1.Upon the registration of the pledge of movable property in the Register of Property, the data about the registered pledge of the property must be transferred to the Register of Property within 24 hours. 2.Registers of Property shall transfer the data about the property which is going to be pledged or which has already been pledged to the Register of Mortgages in the manner prescribed by the regulations of the Register of Mortgages. Article
Deregistration of the Pledge 1.The following persons shall have the right to apply to the Registrar of Mortgages with the request to deregister the pledge: 1) the creditor (the pledgee) upon filing the collateral bond; 2) the debtor or the pledgor (when the debtor and the pledgor is not the same person) upon filing the collateral bond confirming that the creditor’s claim secured by the pledge registered in the Register of Mortgages has been satisfied; 3) the person who has acquired the collateral as set forth in Article 52 of this Law upon filing the collateral bond and other documents certifying the acquisition of the collateral in enforcing the recovery. 2.Where the pledge agreement, in the manner prescribed by law, is recognised invalid, the pledge registered in the Register of Mortgages shall be deregistered on submitting to the department of mortgages an effective court decision. 3.A pledge shall be removed from the Register in the same manner as a mortgage. Article
Duration of Storing the Data about a Pledge Data about a pledge shall be stored at the Register of Mortgages for 5 years after the removal of the pledge from the Register. Chapter V ENFORCEMENT ON THE COLLATERAL Article
The Right of the Creditor to Commence Enforcement 1.Upon the debtor’s failure to discharge his secured obligation or the presence of other reasons provided for in Article 13 of this Law, the creditor has a right to demand satisfaction of his claim from the value of the collateral and to commence enforcement by warning the debtor that unless the debt is paid within 20 days the enforcement proceedings will commence. A warning notice in writing shall be delivered to the debtor through the mortgage department as set forth by the Law on the Register of Mortgages. 2.An entry shall be made in the Register of Mortgages about the delivery of a warning notice to the debtor as set forth by the Register of Mortgages. Article
The Contents of the Warning Notice 1.The warning notice about the enforcement must contain: 1) the names and addresses of the debtor and the owner of the pledged property; 2) the date and number of registration of the pledge in the Register of Mortgages; 3) the obligation secured by the pledge; 4) the property against which the enforcement is levied; 5) the contents of the claim for the discharge of the secured obligation. 2.The warning notice must be signed by the creditor or his/her authorised representative. Article
The Duty of the Department of Mortgages to Notify the Interested Persons about the Commencement of the Enforcement The mortgage department, after having delivered the warning notice to the debtor, must notify thereof other persons whose names are entered in the Register of Mortgages and who are entitled to the property against which the enforcement is levied. Article
Prohibition from the Assignment and Encumbrance of the Collateral After having received the warning notice about the enforcement on the property, the debtor shall have no right to sell, lease or otherwise encumber the collateral. Article
Placing of the Collateral at the Disposal of the Creditor 1.Upon the delivery to the debtor of the warning notice about the enforcement, the collateral must be placed in the possession of the creditor. 2.If the debtor, after having received the warning notice about the enforcement, does not place the collateral in the possession of the creditor upon the request of the latter, the creditor may apply to a mortgage judge with the request of the seizure and transfer of the collateral to him (the creditor). The request shall be considered and the ruling of the mortgage judge shall be made pursuant to the terms and procedure set forth in Article 49 of this Law. The collateral shall be seized and transferred to the creditor by the bailiff in accordance with the manner prescribed by the Civil Procedure Code. 3.The creditor to whom the collateral has been transferred must take proper care of the property. He shall be held liable for the preservation of the property if he fails to prove that the property has been lost, that its value has decreased or that it has been damaged through no fault of his. Article
Consideration of Requests for Seizure of the Collateral and its Transfer to the Creditor 1.Requests for seizure of the collateral and its transfer to the creditor shall be considered by a mortgage judge of the mortgage department where the pledge was registered. The request must be considered within 3 days after its filing. 2.The ruling of the mortgage judge on the seizure and transfer of the collateral to the creditor must be mailed to the parties concerned within 3 working days. Article
Procedure of Satisfaction of the Creditor’s Claims Secured by the Funds in the Bank Account of the Pledgor
In cases where funds in the bank account of the pledgor were given as a collateral to secure the discharge of an obligation, upon delivery of a warning notice about the enforcement, the right to operate the bank account of the pledgor shall be assigned to the creditor. The right to operate the bank account shall be assigned by a written application of the debtor or, if the debtor objects, by an order of the mortgage judge.
The creditor to whom the right to operate the pledgor’s bank account has been assigned shall have the right to dispose of the receipts into the account for the purpose of satisfaction of his claims.
The creditor’s right to operate the account of the pledgor shall terminate upon the satisfaction of the claim secured by the pledge. The creditor whose claim has been satisfied from the funds in the pledgor’s bank account, shall return to the pledgor, within 3 working days, the collateral bond with an inscription therein about the satisfaction of the claim. Article
The Rights of the Debtor during the Enforcement Upon receiving a warning notice about enforcement, the debtor shall have the right: 1) to contest, in accordance with the enforcement procedure, the acts of the creditor related to enforcement; 2) to discharge the obligation secured by the pledge and upon its discharge - to redeem the collateral. Article
Sale of the Collateral Assigned into Possession of the Creditor 1.The collateral assigned into possession of the creditor shall be sold: 1) by the creditor if this is provided by the pledge agreement; 2) by the person authorised by the creditor and the debtor; 2.The creditor shall sell the collateral at an auction; the person authorised by the creditor and the debtor shall sell the collateral in the manner as instructed by the creditor and the debtor. Securities registered with the Securities Commission shall be sold in accordance with the procedure established by the Law of the Republic of Lithuania on Public Trading in Securities. 3.The collateral seized pursuant to other laws, shall be sold in accordance with the procedure prescribed by the Civil Procedure Code of the Republic of Lithuania. 4.The property of the pledgor against whom bankruptcy proceedings are initiated shall be sold and the creditors’ claims shall be satisfied as specified by the Law of the Republic of Lithuania on Enterprise Bankruptcy.
Proceeds from the sale of the collateral pursuant to paragraphs 2 and 3 of this Article shall be transferred to the deposit account of the mortgage department.
Failure to observe the rules set forth in this Article shall invalidate the collateral purchase- sale agreement. Article
Termination of the Enforcement against the Collateral The creditor must terminate the enforcement when: 1) the court decides that the creditor has no right to proceed with enforcement; 2) the debtor performs the obligation. Article
The Debtor’s Right to Compensation for Losses The debtor shall have the right to claim from the creditor compensation for losses incurred during the enforcement proceedings, also losses arising from an improper custody of the property or from a compulsory sale. Article
Settlements after the Sale of the Collateral
Claims from the proceeds of a compulsory sale of the collateral shall be satisfied in the following order: 1) paying the expenses of the sale; 2) satisfying the claims of creditors arising from the pledge of property registered in the Register of Mortgages in the order of their priority; 3) satisfying the claims of other creditors. 2.If after the sale of the collateral the proceeds are in excess of the amount necessary for the satisfaction of the claims specified in paragraph 1 of this Article the difference in the amount must be paid to the pledgor. 3.The mortgage judge must take a decision on the satisfaction of the creditors’ claims within 7 days from filing of the purchase - sale agreement and transfer of the proceeds of the sale of the collateral to the deposit account of the mortgage department. Article
Distribution of the Proceeds to the Creditors
If the property put up for a compulsory sale was pledged for the satisfaction of claims of several different creditors, the mortgage judge shall prepare a draft on the distribution of the amount due to each creditor and shall mail it to each creditor. 2.Within 10 working days from the receipt of the draft specified in paragraph 1 of this Article, the creditors may submit their comments in writing to the mortgage judge. After the expiration of this term the mortgage judge shall take a decision on the distribution of the proceeds. 3.The proceeds shall be transferred to the accounts given by the creditors within 7 working days after the decision of the mortgage judge on the distribution of the proceeds enters into effect. Article
Termination of the Security Interest after the Transfer of the Proceeds to the Deposit Account of the Mortgage Department
If a creditor refuses to accept the discharge of the obligation secured by the pledge registered in the Register of Mortgages, the debtor may transfer an adequate amount into the deposit account of the mortgage department and apply to the mortgage judge to confirm the termination of the security interest.
The application of the debtor to confirm the termination of the security interest must be considered by the mortgage judge and a decision must be taken within 7 working days of the filing of the application. Chapter VI FINAL PROVISIONS Article
Entry into Force This Law shall enter into force from April 1,
Article
Application of the Law in Satisfaction of the Claims Secured by a Pledge of Property prior to the Entry into Force of this Law
The creditors whose claims were secured by a pledge of property prior to the entry into force of this Law, may apply to the mortgage department by July 1, 1998 with a request to register in the Register of Mortgages a pledge agreement on movable property concluded prior to the entry into force of this Law provided the property was not transferred into possession of the pledgee.
Claims secured by a pledge of property prior to the entry into force of this Law shall be satisfied in a prescribed manner only upon registration of the pledge in the Register of Mortgages. Priority of creditors’ claims shall be established in accordance with the date of concluding the pledge agreement.
A creditor who wishes to register a pledge created prior to the entry into force of this Law must file with the mortgage department a collateral bond duly filled out and signed with the original of the pledge agreement attached to it. In such a case the amount of the secured obligation shall not be indicated in the collateral bond.
When during the satisfaction of creditors’ claims secured by a registered pledge as set forth in paragraph 3 of this Article a dispute arises over the amount of the outstanding debt the mortgage judge shall decline the satisfaction of the creditor’s claims without suit and shall make a reasoned judgement. In such a case the creditor may bring an action in accordance with the claim procedure. After award of the claim by court the creditors’ claims shall be satisfied in accordance with the date of enforcement of the security claim. I promulgate this Law passed by the Seimas of the Republic of Lithuania. President of the Republic ALGIRDAS BRAZAUSKAS

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