Finance glossary

What is a pledge with delivery?

Qu’est-ce que le gage avec dépossession ?

Today, a pledge with delivery represents an excellent level of security for a creditor in the event of a company defaulting on payment.

If you want to obtain new financing, this is a very attractive solution. You can use your stocks as collateral for your creditors.

In this article, you will find the definition of a pledge with delivery, its advantages and we will highlight the steps involved in setting up this type of arrangement.

1. What is the definition of a possessory pledge?

When a company pledges one of its assets, it is using it to secure a debt. It retains full ownership of the asset until the loan becomes due and payable.
Pledging with dispossession is a form of guarantee that makes it possible to secure a debt by adding a right of retention to the simple pledge.
The retention or dispossession is characterised by the handing over of the material asset to the creditor as security for a loan. This may be stock. The pledge is entrusted to a trusted third party.
There is no transfer of ownership; the company temporarily transfers possession of the asset until the debt is repaid. This arrangement serves as a guarantee in the event that the debtor fails to meet its obligations. A pledge with delivery provides additional security in the event of default.

Please note that there are two different terms for pledges: pledge “with” or “without” dispossession.
These two guarantees should not be confused.
In both cases :

  •  there is no transfer of ownership
  • the creditor can become the owner of the asset in the event of the company’s default.

On the other hand, in the case of a pledge with dispossession :

  • the pledged inventory is entrusted to a trusted third party called the pledgee
  • advertising to third parties is carried out on site

In the case of a non-possessory pledge :

  • the pledged stock remains under the responsibility of the pledgor, the company
  • disclosure is made by means of a transcript filed with the commercial court registry and can be consulted on the internet.

In the case of a pledge with dispossession, either :

  • the stock is already with a warehouse keeper; this will not change the day-to-day running of the business in any way
  • the stock is on the company’s premises, and it must be possible to isolate it in a lockable logistics warehouse containing only pledged products.
    In both cases, fungibility is maintained in normal operation. The company or warehouse keeper must communicate its stock levels to the pledgee at defined intervals, and the pledgee will regularly check the physical presence of the stock.

2. What are the advantages of a pledge with delivery?

There are many advantages to a pledge with delivery for creditors and debtors alike:

  • Firstly, it provides two levels of security for the creditor, who has :
    • a guarantee with its pledge on inventory in the event of non-payment
    • a right of retention on inventory

This reduces the risk for the creditor.

  • In addition, this form of security is more flexible than a non-possessory pledge, which requires registration with the Commercial Court.
  • At the margin, under certain conditions, a pledge with delivery can be used to obtain more favorable financing terms.
  • This type of guarantee is also very simple to put in place. Once the contract has been signed, the transaction can be completed quickly and with few formalities.
  • And finally, the property can be sold easily in the event of default on the loan.

However, since every situation is different, it is important to call on a consultancy firm such as Chetwode, as part of our partnership with ACTENE, to study the possibility of obtaining financing backed by a pledge with delivery in your business.

3. How do you set up a pledge with delivery?

If you want to take out a loan backed by a pledge with delivery, here are the various steps you need to take:

  • First of all, it’s important to get to know the different parties. Which party will transfer the pledged asset: the debtor. And which other party will obtain the security: the creditor. Which party will be the third-party pledgee.
  • The second step is to consider :
    • the creditor’s interest in arranging the financing
    • the feasibility and audit the stocks in situ to define and structure the guarantee
  • Then, in the third stage, the contract is created. The various parties draw up a detailed contract setting out the terms and conditions of the pledge. This will include a description of the asset, the obligations of the parties, the duration and details of any payment defaults.
  • Then, once the contract has been signed, the debtor will physically transfer the asset by means of a special deed that clearly signifies the legal transfer of the location of the inventory.
  • Third parties will then be notified locally.
  • Another step that must be taken into account is management and compliance with the terms of the contract throughout the term of the pledge with delivery.
  • Finally, the pledge is terminated when the debt is repaid, the pledge is fully released and the stock is returned to the company.


A pledge with delivery is relatively simple to set up and flexible to manage on a day-to-day basis. It also makes it easier to access new lines of finance.

If you would like to find out more about this type of guarantee and financing, we will be happy to discuss it with you.

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