Saturday, January 20, 2018

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Questions and Answers

What is an Agreement on financing agricultural production?

Answer:
An agreement on financing agricultural production is a form of short-term financing for agricultural production under which the creditor undertakes to finance debtor’s agricultural production by granting him money and/or other resources while the debtor undertakes to deliver a certain non-monetary (commodity) or monetary obligation in return.   

What is the Register of agreements on financing agricultural production?

Answer:
The Register of agreements on financing agricultural production is an integrated, centralized, public, electronic repository of data on stipulated agreements on financing agricultural production and documents submitted in support of the registration of these agreements.

Who may appear as the creditor in an agreement on financing agricultural production?

Answer:
Any legal entity, entrepreneur or natural entity may be a creditor and approve, i.e., grant cash or other resources to the debtor under the terms of a financing agreement.     

Who may appear as the debtor in an agreement on financing agricultural production?

Answer:
Any legal entity, entrepreneur or natural entity may be a debtor by undertaking certain obligations in accordance with a stipulated financing agreement.

Must the debtor be registered as an agricultural holding?

Answer:
The debtor can also be an agricultural holding in which case it must be registered with the Register of agricultural holdings.

What can a debtor’s obligation be?

Answer:
The obligation of the debtor can be a commodity, cash or a commodity & cash obligation. A commodity obligation implies the delivery of a certain quantity of agricultural products and if the debtor’s obligation is a cash one, the debtor must pay to the creditor the agreed amount in cash.  In case of a commodity & cash obligation, the debtor has to deliver commodities to satisfy a certain part of his obligation whereas the remaining part of his obligation requires cash payment, in accordance with the terms of the financing agreement.  

What can be used to secure a debtor's obligation under the agreement on financing agricultural production?

Answer:
The debtor may secure the fulfillment of his obligation under an agreement on financing agricultural production by pledging future agricultural products, pledging other movable assets and rights, mortgaging immovable assets as well as by signing some other security instrument (a promissory note, for instance).

What are future agricultural products?

Answer:
Future agricultural products are agricultural products that will be produced at the production venue in accordance with the financing agreement.

What is a production venue?

Answer:
Production venue is agricultural or other land or agricultural building or block of buildings on the territory of the Republic of Serbia where the pledger produces future agricultural products.

Can a third party guarantee the fulfillment of the debtor’s obligation by pledging its own assets?

Answer:
Any agreement on financing agricultural production may foresee that the debtor’s obligation be secured by way of pledging future crops or other movable assets and rights owned by a third party (pledger).  

Where should one register a pledge right on future agricultural products and other movable assets and rights?

Answer:
Pledges on future agricultural products and other movable assets and rights should be registered with the Register of pledges on movable property and rights.

Is the registration of a pledge with the Register of pledges mandatory?

Answer:
Registration with the Register of pledges on movable property and rights is of a constitutive nature and the creditor effectively acquires the pledge right with the registration thereof in the Register.

Who can register a pledge in the Register of pledges on movable property and rights?

Answer:
A right of pledge on future agricultural products can be registered by the pledge creditor and/or the pledger.

Should the pledge agreement be concluded separately or as part of a financing agreement?

Answer:
The pledge agreement can be concluded either as a separate agreement or as part of a financing agreement.  

What is the required form and content of an agreement on financing agricultural production?

Answer:
The agreement must be concluded in writing and contain the material elements prescribed by Article 4 of the Law on financing and securing financing of agricultural production. The law can be found in the "Regulations” section of the website of the Serbian Business Registers Agency.  

Can the provisions regulating the pledge as a security instrument be contained in an agreement on financing agricultural production or is it necessary to draft a separate pledge agreement?

Answer:
An agreement on financing agricultural production can contain provisions governing the pledge on future agricultural products or on other movable property and rights. Such an agreement must contain all material elements prescribed by the Law on the right of pledge on movable assets and right.

Does the agreement on the right of pledge on future agricultural products made as a separate agreement have to be notarized?

Answer:
The agreement on the right of pledge on future agricultural products does not need to be notarized.

Does the agreement on financing agricultural production have to be notarized?

Answer:
The agreement on financing agricultural production does not need to be notarized.

How are future agricultural products specified as pledged assets in a pledge agreement?

Answer:
Future agricultural products in a pledge agreement are specified by the name of the crop, its variety or the sum of one or more different agricultural products, by the assessment of the expected quantity of these agricultural products, by the venue of production (cadastral municipality, parcel number, description of the land or facility and other data from the real estate cadastre).

How are the expected quantities of agricultural products appraised?

Answer:
The expected quantities of agricultural products are appraised in the manner agreed upon by the pledge creditor and the pledger, preferably resulting in equivalency of mutual obligations of the parties to the agreement.   

Is it possible to acquire a right of pledge on future agricultural products produced at a production venue owned by a third party?

Answer:
It is possible to acquire a right of pledge on future agricultural products produced at a production venue used based on a land lease agreement.

Is the consent of the lessee as the owner of the production venue necessary for pledging future agricultural production?

Answer:
The consent of the lessee as the owner of the production venue is not required.

What is the right to limited duration of a pledge?

Answer:
The right to limited duration of a pledge is the right of a pledge creditor to offset the claim from the value of the pledged products if the pledger should lose the right to the use of land where the pledged agricultural products are produced before the harvest, or by enforcing the mortgage on the production venue land, in case the claim settlement procedure should start.

Is the right to limited duration of a pledge subject to registration?

Answer:
The right to limited duration of pledge is registered in the Pledge Register as an annotation relevant for payment transactions and the application for registration is filed by the pledge creditor.

What is the statutory pledge right?

Answer: Statutory pledge right is the right that a pledge creditor acquires over all agricultural products owned by the pledger, which the pledger produced at the production venue, irrespective of the crop and variety, in sufficient quantities and values to settle the matured claim of the pledge creditor, if on the maturity date of the claim secured by a pledge on future agricultural products there are no pledged products at the production venue.

Is the statutory pledge right subject to registration and where?

Answer:
Statutory pledge right is registered in the Pledge Register as an annotation relevant for payment transactions and the application for registration is filed by the pledge creditor.

What are the effects of entering the annotation on the creation of a statutory pledge right?

Answer:
As of the date of entry of the annotation on the creation of a statutory pledge right in the Pledge Register, the pledge creditor acquires the right of priority in the satisfaction of his claim relative to any other creditor who failed to register his right of pledge on the same pledger’s property in the Pledge Register, irrespective of the time of creation of the pledge right, or who registered his pledge right in the Pledge Register but only after the entry of the annotation on the creation of a statutory pledge right.

In case an annex is stipulated, is it necessary to register the change of data in the Register of agreements on financing agricultural production?

Answer:
If any changes are made with respect to the registered data, such changes are registered in the Register by filing the application for registration of changes of data.

Which changes of data affect the order of priority of the pledge creditor who secured his claim by registering it in the Pledge Register, and which do not?

Answer:
Any change with respect to obligations under a financing agreement, specifically, increase of commodity obligation, i.e., increase of the principal amount of debt or the interest rate, in case of cash obligation, has the nature of a new registration and impacts the  pledge creditor’s order of priority.  A change entailing an agreement on changing a pledged asset also has the nature of a new registration and impacts the order of satisfaction of claims.

On the other hand, a change of the pledge creditor or that of the pledger has no impact on the order of satisfaction of claims.

What happens if the debtor defaults?

Answer:
If, at the moment of maturity, the debtor fails to repay the debt, the creditor is entitled to resort to a court or out-of-court settlement.
    
Is it possible to terminate an agreement on financing agricultural production on the grounds of a change in debtor’s circumstances?

Answer:
The Law excludes the possibility of terminating an agreement on the grounds of changed circumstances, as well as due to force majeure and the inability to fulfill obligations. Should such circumstances arise, the debtor is required to return/repay the resources he received under the agreement on financing agricultural production.  

When can the creditor proceed with out-of-court sale of future agricultural products?

Answer:
The pledge creditor can proceed with out-of-court sale if his claim is not satisfied on maturity and as soon as his annotation on commencement of the settlement procedure is entered the Pledge Register.

When can the creditor commence out-of-court public sale?  

Answer:
The creditor can commence out-of-court public sale with the expiry of one day following the entry of annotation on commencement of settlement in the Pledge Register.

Can the pledger contest the entitlement of the pledge creditor to satisfy his claim by way of out-of-court public sale and prevent the settlement procedure?

Answer:
Yes, if he files a lawsuit with the court with an attached, duly validated public or private document proving that the claim of the pledge creditor is non-existent, that it is not mature or that the debt has been repaid.

When can an agreement be deleted from the Register?

Answer:

An application can be filed for strike-off of the agreement from the Register when the debtor has satisfied his obligation, i.e., when the obligation has ceased to exist due to termination of the agreement, or in any other way prescribed by Law.

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