|Rodrigo Taboada||Ana Carolina Álvarez|
On October 6 2016, the Nicaraguan Congress approved the Ley de Garantías Mobiliarias (the Law of Security on Movable Assets). This has been described as a legal instrument that will, among providing other benefits, enable small producers, and micro- and medium-sized companies to access bank credit and micro finance institutions using their own assets as security. This will be done through the subscription of a written agreement between the grantor and the creditor that may be in a public, private or electronic document.
The Law will apply, within the national territory, to all credit relationships, and/or legal acts in general that involve the constitution, publicity, priority, execution and cancellation of security over movable assets. The security may be constituted over one or multiple specific movable assets, or over all the movable property of the debtor or the guarantor. This may consist of present or future assets, corporeal or incorporeal, determined or indeterminate, as long as they have monetary value when creating the security right over them or subsequently. The provisions of the Act will apply regardless of whether the guarantor has documented ownership of the assets subject to the security.
The Law establishes that security over movable assets must be registered through an application form in a physical or electronic standardised format that will be provided by the public registry of security on movable assets, an entity created by this Law.
In the event of default of the credit agreement, the parties may agree to an extrajudicial procedure and arbitration as alternative mechanisms for dispute resolution. If these procedures have not been previously agreed, the foreclosure of the security will be followed before a judicial court. The financial entities supervised by the National Commission of Microfinance and the Superintendence of Banks and Other Financial Institutions may also apply this law but shall maintain the privileges granted to them by the special laws of their industry.
Besides the benefits regarding the promotion of access to credit for micro, small and medium-sized companies, the new law contributes to the integration of the legal framework on security over moveable assets. Before its approval, the legal framework of securities was dispersed over several laws and was incomplete.
The Law was officially published on October 25 2016 in the Official Gazette No. 200. It will enter into force one year after its publication.
Rodrigo Taboada and Ana Carolina Álvarez