On August 20, 2013 the Colombian Congress enacted law 1676 of 2013 ("Law 1676").  The purpose of Law 1676 is to increase the access to credit by extending the assets, goods, rights and shares that may be subject to be given as guarantee or security.  Law 1676 simplifies the creation, publicity, order of priority and enforcement of guarantees over movable assets in Colombia.

Law 1676 provides for a new and innovative regulation for the granting of security in Colombia, overcoming certain concepts and formalities that made it cumbersome for the debtor to offer guarantees and for the lenders to enforce them. 

The main points to highlight are:

  1. Law 1676 will enter into effect starting on February 20, 2014.
  2. The guarantees (security) over movable assets (garantia mobiliaria) are available to be granted over any type of goods, agreements, or rights subject to an economic valuation by the parties. This allows the lender to take security over tangible or intangible assets, cash available in bank accounts, contracts, receivables and others.
  3. The guarantee may be granted over current and future assets and may include (unless otherwise agreed) the goods or assets attributable or derived from the guaranteed asset. The attributable or derived assets are assets that come from the guaranteed asset, such as results from a sale, transformation or substitution of the guaranteed asset, payment of insurance over the collateral, and the like.
  4. The execution of accounts control agreements, which were previously not regulated under Colombian law are now permissible under Law 1676. This is an agreement between the bank, the guarantor and the guaranteed party whereby the bank accepts to follow the instructions of the guaranteed party with respect to the funds deposited in the bank account(s).
  5. Provides for a special priority treatment for the lender that finances the acquisition of movable assets.
  6. A national registry of movable collateral that will be publicly available will replace the local registrations in the Chambers of Commerce of the place where the collateral was located (the “New Registry”). The registration proceeding is now an obligation of the lender. Regulation of this registration system is still pending; its costs are expected to be lower than the current costs.
  7. Private enforcement is allowed. It is now possible to agree that the lender will receive the collateral as payment of the guaranteed obligations in the event there is a default under the guaranteed agreement. No enforcement before the Colombian courts will be longer required if this alternative is established in the agreement.

Also a special enforcement proceeding before public notaries and chambers of commerce is also provided by Law 1676. Although Law 1676 provides for a procedure for the enforcement before these entities, this procedure can be modified by the parties in the guaranty agreement.

If none of the alternatives for enforcement above-mentioned is agreed between the parties, the judicial foreclosure is available.

  1. In a reorganization proceeding the duly registered collateral that it is not a fundamental asset for the business may be enforced by the lender.  In a liquidation proceeding that is duly registered collateral may be excluded from such proceeding.
  2. The regulations related with the registry, enforcement and fees is still pending.