On October 6th, the National Assembly of Nicaragua unanimously approved the Law No. 936 “Law on Secured Transactions”, which was published this Tuesday 25th of October, 2016 in the Official Gazette No. 200. The purpose of this law is to promote the access to credit for micro, small, and medium-size companies, through the expansion of security rights in movable property, rights and assets. A security right is created by means of a written agreement between the grantor and the creditor.
The Article 9 of the Law No. 936, stipulates that the security rights on movable property can be created over one or multiple movable properties, of the debtor or the guarantor, and may be present or future assets, corporeal or incorporeal, determinate or indeterminate, if they are capable of being subject of a monetary value in the moment of the creation of the security right or subsequently. A security right may encumber: a movable asset that is an attachment to immovable property, future assets, all of grantors movable assets, rights or contracts with an economic value, among others.
Likewise, the Law No. 936 provides the creation of the Public Registry of Movable Assets for the registration of the incorporation, amendments, assignments, extension, cancellation and enforcement of the secured transactions, and consequently the publicity of the security rights. The priority of a security right is determined by its publicity, granting to the creditor a better right and payment preference before third parties, therefore, is highly advisable to proceed with the registration of the security rights on movable assets. This registration will be conducted through a physical or electronic standardized format, previously indicated in the technical regulations of the Registry.
On the other hand, the Law No. 936 also establishes that the parties may agree an extrajudicial proceeding and Arbitration as alternative dispute resolutions mechanisms in the occurrence of an event of default of the agreement. In the case that any special proceeding was agreed by the parties, the enforcement of the security right will be processed in accordance with provisions established in the Civil Procedure Code of the Republic of Nicaragua. It’s important to take into consideration that the supervised entities by the Microfinance Nacional Commission (“CONAMI”) and the Superintendence of Banks and other Financial Institutions (“SIBOIF”) maintain the privileges granted in its special legislation.
The Law No. 936 shall enter into force one year after its publication in the Official Gazette.
We invite you to know more about the implications of this new law, and how can it benefit you and your business. If you have further questions or doubts, do not hesitate to contact us.