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What is a Notarial Bond

 

 

A notarial bond is a limited real security which hypothecates movable property in an attempt to secure the bondholder’s ranking for the satisfaction of a debt.[138] To be valid, a notarial bond must be notarially executed, and to be enforceable against third parties, it must be registered in the Deeds Registry at the bond debtor’s place of residence or registered office within three months of execution.[139] A notarial bond can only be taken over movable property and merely grants the bondholder a right of preference (prior ranking) over unsecured creditors and hypothec holders at the debtor’s insolvency.

 

 

Generally, the bondholder does not possess the bonded property, and therefore notarial bonds usually contain “perfection clauses” allowing the bondholder to seize and dispose of the bonded property when the debtor defaults. A notarial bondholder does not acquire a security right until the bond is perfected by taking possession of the bonded property,[140] which may be construed by an attachment by a sheriff or messenger on the bondholder’s behalf.[141] In other words, the requirements for a valid pledge must be fulfilled. A bondholder may not exercise this right without a court order or the debtor’s consent; moreover, the perfection clause must be included in the bond. Notarial bonds take two forms: general and special.

Louwrens Koen Attorneys can assist with the registration and cancellation of Notarial Bonds.

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Louwrens Koen

 

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