Security – general

Security agreements
Is it possible to create a security interest over all assets of an entity? If so, would a single security agreement suffice or is a separate agreement required for each type of asset?

Blanket liens or pledges, in which a security is automatically registered against all assets of the debtor, are not allowed in the Dominican Republic. Nevertheless, depending on the types of asset involved, different agreements may be required to perfect such securities. Mortgages, pledge agreements, financial instruments, moveable assets, receivables and contractual rights and so on all require different steps to be perfected.

Release of security
What are the formalities for releasing security over the most common forms of assets?

The formalities will depend on the type of security.

For instance, to release a mortgage, the following documentation is required:

  • the release agreement;
  • identification of the parties;
  • a certificate of good standing from the Dominican tax authorities;
  • the owner’s certificate of title;
  • the original creditor’s certificate;
  • identification of the person who is depositing the file; and
  • confirmation of payment of filing taxes and stamp duty.

To release a chattel pledge, the following documentation is required:

  • the original pledge agreement certificate,
  • a total or partial release agreement;
  • identification of the moveable assets to be released; and
  • a formal request deposited with the peace court (the lowest-ranked court, designated by law as the registrar of such securities).

The parties are free to agree on a partial release of security under certain conditions agreed in the credit agreement. Normally, in the case of bank loans, financial institutions release no collateral until the principal has been paid. This is reinforced by the fact that almost all government institutions require a release receipt as part of their formalities.

Asset classes used as collateral for security

Real estate
Can security be granted over real estate? If so, what are the most common forms of security granted over real estate and what is the procedure?

Mortgages over real estate are created by the execution of a mortgage agreement between the owner of the property or its representative and the creditor. The mortgage is subject to local law and must be recorded with the registrar of title; however, the underlying credit agreement may be subject to foreign law and executed abroad. Priority and enforcement rights regarding third parties are perfected by filing the corresponding documentation with the registrar of title where the property is located. The first creditor that files its mortgage security obtains a first-ranked security through the issuance of a creditor’s registration certificate, which enables the creditor to collect its debt through foreclosure of the collateral, before any other lower-ranked registered mortgage creditors.

The following documentation is required:

  • the mortgage agreement, authenticated by a Dominican notary domiciled at the place where the property is located (including evidence of the authority of the signatories) (the notary must also have a certification of legal status of the property issue by the registrar of title, according to the new Notary Law);
  • the owner’s certificate of title;
  • certification confirming that the owner is up to date with payment of the corresponding property tax or asset tax, as applicable; and
  • receipt of payment of 2% mortgage registration taxes.

Machinery and equipment
Can security be granted over machinery and equipment? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Various pledges over moveable assets may be established under local laws. For instance, in order for a civil pledge to be valid, the debtor must hand over possession of the asset to the creditor or to a designated third party. Chattel mortgages created under the Agricultural Promotion Law (6186) are commonly used to secure machinery, inventory and other moveable assets. This type of pledge allows the debtor to keep possession of the asset while the security is in place. In this case, the pledge agreement must be governed by local law, even though the financing agreement itself may be governed by foreign law.

In both cases, the assets cannot be pledged to more than one creditor at the same time.

In the case of chattel mortgages, registration is undertaken by filing the documents with the corresponding peace court (the lowest-ranked court, designated by law as the registrar of such securities). On the other hand, civil pledges are registered with the Civil Registry Office.

With respect to motor vehicles, creditors may file a transfer opposition with the Department of Motor Vehicles and the Internal Revenue Office to further secure the pledge and make it effectively enforceable against third parties.

With respect to aircraft, security agreements must be drafted before a notary public and executed and filed before the Civil Registry Office and the National Institute of Civil Aviation.

Security over ships must be registered with the Mercantile Marine Agency and the Navy.

The following documentation is required:

  • the pledge agreement, duly executed and notarised;
  • an inventory of assets; and
  • the original copy of the ownership certificate, for aircraft, ships and vehicles; otherwise, a list of the assets that are subject to the pledge will suffice.

Receivables
Can security be granted over receivables? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Receivables are collateralised through the execution of a pledge agreement, notification to the corresponding debtors and registration with the Civil Registry Office. Receivables cannot be pledged more than once. To guarantee its enforceability against third parties, the pledge agreement must be notified via a bailiff’s act (a document notified by an officer of the court) and registered as detailed above.

The following documentation is required:

  • the pledge agreement; and
  • the bailiff’s act.

Financial instruments and cash
Can security be granted over financial instruments? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Various pledges over financial instruments and securities may be established under local laws. For instance, a pledge over financial instruments must be performed through a notarised agreement between the parties and must be duly notified to the financial entity where the instrument is held.

With regard to the endorsement of certificates of deposit and insurance policies, the agreement must be notified to the issuing institution for its final approval (if necessary) and formal registration.

The following documentation is required:

  • the pledge agreement, duly notarised;
  • the original certificate of deposit; and
  • the original insurance policy certificate.

Can security be granted over cash deposits? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Article 91 of the Commercial Code allows lenders to secure transactions using cash deposits as security. A separate security/pledge agreement must be signed between the parties; this kind of agreement is usually referred to as a ‘fiduciary cession’ and entails transfer of the credit to the bank upon the occurrence of certain events, such default of obligations or breach of contract. This agreement must be notified to the financial institution where the deposits are held. The agreement must also be registered by the lender. A cash deposit can also be held in escrow with instructions on how to proceed in the event of default.

Intellectual property
Can security be granted over intellectual property? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

IP rights are collateralised through the execution of a pledge agreement and its registration with the National Office of Intellectual Property.

The following documentation is required:

  • the pledge agreement, duly notarised; and
  • the original certificate of registration of the corresponding IP right.

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