New secured transactions law
On October 25 2017, the Law of Secured Transactions (Law 936) came into force with the purpose of stimulating access to credit for individual traders, small and medium enterprises, and other institutions that due to the nature of their assets were not subject to financing at competitive interest rates.
Law 936 overcomes the inadequacies of the previous pledge laws, which in some cases were simply inapplicable due to the nature of the assets or the obligations to be guaranteed. The new law creates a uniform system of security interests that, on the one hand, provides debtors with the possibility of using their assets in the creation of obligational guarantees and, on the other hand, provides creditors with the assurance that the agreed obligations are duly guaranteed or that in case of default by the debtor or obligor, creditors will have a fast and efficient method of recovering the investment.
Under the new scheme, all types of obligations – monetary or non-monetary – can be guaranteed by a security interest. Additionally, Law 936 extends the spectrum of assets that are capable of guaranteeing obligations. This is important since all the movable assets, rights and actions of the debtor or guarantor, as a whole or specifically, whether they are present or future, tangible or intangible, determined or determinable, susceptible of the pecuniary valuation at the time of the constitution or later, are capable of securing obligations.
For the protection of the creditor, the legislator has centralised the registration of security interests in a single registry. This registry can be accessed physically or electronically, so that the creditors can know the liens previously constituted on the assets granted in guarantees, this being an indispensable tool for credit analysis.
Therefore, there is no doubt that the multiple alternatives provided by Law 936, accompanied by due legal advice, will help to boost trade relations in Nicaragua. As a result, entrepreneurs – who were previously not able to finance their business through the creation of traditional guarantees over real estate – now have access to credit using alternative means to secure their obligations. In addition, it will increase the competitiveness of our companies, and encourage potential investors to feel safe and confident in doing business, which will be a driving force for the growth of the Nicaraguan economy and the development of its commercial relations.
Olga Barreto
Consortium Legal