Peculiarities of Enterprise Mortgage as a New Form of Commercial Charge

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Abstract

Enterprise mortgage is a new form of commercial charge applicable in the law of Lithuania since 1 July 2012. An enterprise mortgage as set out in the national law is distinct by its object, i.e. that an enterprise mortgage allows charging an enterprise as a whole, as an immovable property item; by the debtor’s (grantor’s) right to use the mortgaged assets in the ordinary course of business by transferring them to third persons free from encumbrance; also by the opportunity for the enterprise mortgagee to enfroce his rights by special method of enforcement: the enterprise purchase and sale. As a result of its wide scope, embracing both the existing and future assets of the debtor, as well as due to the absolute priority granted to the mortgagee to get all proceeds from the sale of the charged property, enterprise mortgage affects not only the debtor but also other creditors of the debtor (grantor). The method of minimum regulation for enterprise mortgage chosen in the law leaves a number of open questions for practical and doctrinal development. The article presents an analysis of the content of object of enterprise mortgage, explores the impact of enterprise mortgage on the satisfaction of claims of other creditors of the debtor (grantor) both in enforcement and insolvency proceedings, the rationale behind absolute priority of the enterprise mortgagee, effectiveness of the enterprise purchase, and sale as a method of enforcement of enterprise mortgagee’s rights. The article also analyses the relevance and adequacy of the existing legal regulation.

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Baltic Journal of Law & Politics

A Journal of Vytautas Magnus University

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