News

Recently the Congress of the Republic of Guatemala approved substantial modifications to the Secured Transactions Law (Decree 51-2007). The purpose of such reforms is to achieve that micro, small and medium enterprises have new financing alternatives. Such reforms aim to simplify the procedures of constitution, modification, extension and extinction of the secured transactions.

Guatemala was the first country of Latin America that enacted a Secured Transactions Law with the purpose of generating more economic activity in different sectors of the country. This Law created a legal framework to promote the use of this type of instruments to properly guarantee credit obligations.

Among the modifications to the Secured Transactions Law, we can mention the followings:

1. The secured transaction can be constituted through private agreement, by contract, or clause where the secured transaction is constituted or through an agreement annexed to another contract. Said agreement won’t require any formality and may be documented by any means, including electronic communications.
2. The agreement must contain a reasonable description of the personal property given as collateral, present or future and derived or derivable, or floating assets.
3. The Registry of Secured Transactions may not qualify nor prejudge the validity of the actions registered. The previous due that its function consists merely in making public the fact that a secured transaction has been constituted, executed or extinguished.
4. Said Registry operated through standard forms and organizes under a system of personal electronic folio, and for its operation the tariff of said Registry may not be progressive or be based in the amount of the credit or of the secured obligation.

All of these are some of the modifications made to the Secured Transactions Law that will give place to greater efficiency and transparency to the secured obligations.

José Rosales Cano
Associate
García & Bodán
Guatemala