Criteria for enforcement What are the common enforcement triggers for loans, guarantees and security documents?

The lender and borrower negotiate the events of default that will trigger enforcement of the collateral. Normally, these can include failure to make timely payments, if the borrower is subject to a foreclosure proceeding against any of its assets, breach of contract and so on. The borrower must waive its right on the term of the loan for the lender to be able to legally enforce the security; such waivers are found in almost all commercial contracts.

Process for enforcement What are the most common procedures for enforcement? Are there any specific requirements with which lenders must comply?

Where foreclosure is the appropriate course of action, the steps will vary depending on the type of collateral, but all of them involve:

  • notice to the debtor through a bailiff’s act (a document notified by an officer of the court) indicating the existence of an event of default;
  • a request for foreclosure of the assets granted as security (filed either before the court or extra-judicially, depending on the asset); and
  • the sale of the assets at a public auction; in the absence of third-party bidders, the lenders will automatically receive the asset in full as payment of the debt.

These processes are carried out in the local currency of the Dominican Republic. The proceeds of sale may be converted into foreign currency without restriction and can be transferred abroad as desired.

The private disposition of collateralised assets, enabling a creditor to take control of them without undergoing a public process, is prohibited under Dominican law. Creditors can call for a bid on the assets or request the court overseeing the process to assign them the assets for the amount of the debt.

Law 189-11 established an accelerated foreclosure proceeding for mortgages granted to secure a bank loan.

Ranking in insolvency In what order do creditors rank in case of the insolvency of a borrower?

Bankruptcy proceedings are regulated by the Commercial Code, but are seldom commenced or completed due to their complexity and length. Secured creditors, regardless of nationality, are not affected by the initiation or continuation of bankruptcy proceedings. They still maintain their priority rights over the collateral granted to them, although labour debts and tax obligations are generally privileged claims and thus, upon collection, precede other claims; however, there are exceptions to this rule. A secured creditor may voluntarily release its collateral during the process and be entitled to pro rata distributions as an unsecured creditor upon the debtor’s liquidation.

The new Bankruptcy and Restructuring Law (141-15) enacted in 2015 will take effect in February 2017. Under the new law, there are three types of claim:

  • guaranteed or privileged claims;
  • unsecured claims; and
  • subordinated claims.

Labour claims (salary and severance) are privileged over all other claims.

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