Law of Secured Transactions in Nicaragua comes into force
Is it possible that a shoemaker, a cheese producer, a taxi cooperative or any other person that needs money can apply for a loan to a bank or credit institutions in order to develop their activities and give as guarantee for the compliance of their obligations their goods and own accessories of their commerce or any other in their possession? And, that also said goods may be registered in a Public Registry in favor of the creditors?
Starting from October 25th of the present year, these type of transactions can be done due to the entry into force of the Law of Secured Transactions in Nicaragua, Law number 936 published in La Gaceta, official diary number 200 of October 25th, 2016. The objective of this law is basically the promotion of credit access to every natural or legal person, national or foreign, domiciled or not in the country, that are able to give their goods as guarantee of compliance of their credit obligation.
What we know as agricultural, industrial, civil, trade or commerce pledges will be obsolete, since by operation of law the regulations related to the pledges were repealed and the only term to use will be “secured transactions”.
These guarantees may be established over movable property, rights and actions existent or non-existent at the moment of the constitution, as long as the parts can attribute them economic value and that its tax is not prohibited by law or that doesn’t enjoy legal privileges (the deposit certificates and warrants are examples of what cannot be object of secured transaction). It is not obligatory that the debtor or grantor of the goods given in guarantee have titles with which it demonstrates to be its owner.
The guarantee contracts will be written either in a private document, public document or an electronic document. Independently of the way that is chosen for its constitution, the law indicates a set of requirements of validity, obligations and rights for each part that interferes on the contract. These guarantees will be able to be registered in a “Public Registry of Secured Transactions”. The publicity will be through the inscription of the guarantee in said Registry, and the right of pre-emption or a better right for the creditor, will be determined generally at the moment of the publicity.
There are big challenges regarding its execution, since the users expect that this new Public Registry to be national, totally online, with expeditious procedures, available for inscriptions and queries twenty-four hours a day and that the board is stable and functional. Another challenge will be the judicial performance of the guarantees, since the enforcement was eliminated as a coercive measure to force the guarantor to exhibit the guarantee before the judicial authority. However, since the law is inspired on the current international regulations, it is also possible that the challenges that they will face during its performance, already have their treatment.
Dania Navarrete Chávez
Senior Associate
García & Bodán
Nicaragua