Structuring a lending transaction


Who are the active providers of secured finance in your jurisdiction (eg, international banks, local banks or non-bank financial institutions)?

International and local commercial banks, savings and credit banks, savings and credit associations and credit corporations are the standard investors in bank loan financings. Several state-owned financial institutions also provide dedicated lending to sectors such as exports (BANDEX) and agricultural and agroforestry activities (Banco Agrícola). Finally, multilateral financial institutions have been actively involved in secured financing in the Dominican Republic for decades, mostly for large infrastructure projects.

Is well-established market-standard facility documentation used in your jurisdiction for secured lending transactions?

Generally, all deals are negotiated between the parties on a case-by-case basis. However, the big players in the financial industry have developed their own templates for secured lending transactions. The formalities for the registration of securities will vary depending on the type of security in question.


Are syndicated secured loan facilities typical in your jurisdiction?

Yes – financing through syndicated credit facilities is very common in the Dominican Republic.

How are syndicated facilities normally structured? Does the law in your jurisdiction allow a facility agent to be appointed to act on behalf of other banking syndicate members?

The arranger of syndicated bank loan facilities can act on behalf of banking syndicate members. Its responsibilities include the following:

  • collection of payments;
  • distribution of payments to other creditors;
  • compliance supervision;
  • collateral agents;
  • administration of the operation (correspondence); and
  • pursuit of legal actions.

Fees and commissions vary. The standard industry average is 0.2%, while investors charge 0.25% of their participation.

Does the law in your jurisdiction allow security and guarantees to be held on trust by a security trustee for the benefit of the banking syndicate?

Yes – this has been allowed since the enactment of the Trust Law in 2011.

Special purpose vehicle financing

Is it common in secured finance transactions for special purpose vehicles (SPVs) to be used to hold the assets being financed? Would security generally be given over the shares in the SPV or would lenders require direct asset security?

This will depend on the type of transaction. Normally, SPVs are used only in highly specialised transactions. It is also recommended for creditors that will hold a mortgage in the Dominican Republic, since after January 2017, all mortgage creditors must have a tax identification in the Dominican Republic. 


Is interest most commonly calculated by reference to a bank base rate or a market standard variable reference rate (eg, LIBOR, EURIBOR or HIBOR)? If the latter, which is the most commonly used reference rate in your jurisdiction?

Under Dominican law, the parties may freely agree on the applicable interest rate (eg, percentage, fixed, floating). For loan transactions in dollars, LIBOR is regularly used as the reference.

Are there any regulatory restrictions on the rate of interest that can be charged on bank loans?

There are no regulatory restrictions on the interest rate that can be charged on bank loans. The parties to a loan agreement can freely agree on the interest rate.

Use and creation of guarantees

Are guarantees used in your jurisdiction?

Yes – Dominican banks usually ask for at least one guarantee or co-signer to any loan, sometimes more. This means that the borrower must demonstrate collateral or at least have one or more co-signors when applying for a loan.

What is the procedure for their creation?

The procedures to create and perfect a guarantee depend on the nature of the collateral. Multiple legal provisions may apply.

For instance, a conventional mortgage over real estate is governed by the general provisions set forth in the Civil Code (Articles 2114 and following) and by the Real Property Registration Law (108-05), also available under the special provisions of Law 189-11.

On the other hand, various types of pledge may be established over moveable property (eg, vehicles, boats, aircraft, machinery, equipment, inventory, existing and future agricultural crops, goods) pursuant to local laws:

  • Civil pledges are governed by the Civil Code;
  • Standard commercial pledges are governed by the Commerce Code;
  • Chattel pledges – commonly used to secure vehicles, machinery, inventory and other moveable assets – are governed by Law 6186;
  • All security agreements over aircraft and ships are governed by the National Institute of Civil Aviation, the Mercantile Marine Agency and the Naval Office, respectively;
  • Pledges over intellectual and industrial property rights (eg, patents, industrial designs, trademarks, trade names) are governed by Law 20-00;
  • Pledges over public company shares are governed by the Company Law (479-08); and
  • Pledges over financial instruments and securities (eg, bank accounts, investments, certificates of deposit, shares, bonds, income derived from securities) are governed by the Monetary and Finance Code, the Stock Exchange Law and similar regulation.

Do any laws affect or restrict the granting or enforceability of guarantees in your jurisdiction (eg, upstream guarantees)?

The procedures for creating and enforcing guarantees depend on the type of collateral involved. Under the new Bankruptcy and Restructuring Law, in the event of the commencement of bankruptcy proceedings, the enforceability of collateral and foreclosure proceedings could be suspended. 

Other special provisions may apply in regulated sectors.

Subordination and priority

Describe the most common methods of structuring the priority of debts and security.

The most common methods of structuring the priority of debts and security are via liens or mortgages and pledge agreements (eg, shares, financial instruments, moveable assets, receivables and contractual rights). The methods for establishing priority and the conditions for perfecting the security will depend on the nature of the collateral. The creditor must also take into account the established privileges set forth in the Civil Code. In most cases the initial lender explicitly prohibits the borrower from pledging the assets to additional lenders without its express authorisation. In syndicated loans, intercreditor agreements may define the terms and details of priorities and subordination. In general, creditors may privately negotiate and agree the priority and subordination of each other’s claims.

Documentary taxes and stamp duty

Are any taxes, stamp duty or other fees payable on the granting of a loan, guarantee or security interest, or on its enforcement?

The perfection of security or collateral is subject to fees which will vary depending on the type of security. For instance:

  • mortgage securities incur a 2% tax on the secured amount;
  • for pledges over shares, minimum registration fees must be paid at the Mercantile Registry Office;
  • for chattel pledges, minimum registration fees must be paid at the corresponding peace court (the lowest-ranked court, designated by law as the registrar of such securities);
  • for IP pledges, government fees must be paid at the Dominican Intellectual Property Office;
  • for certain types of civil pledge, registry office taxes must be paid; and
  • electronic wire transfers are subject to 0.15% on the value of the transferred amount.

In regulated sectors, additional costs may be incurred for the registration of pledges.

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