Security over Collateral. MEXICO Basham, Ringe & Correa S.C.

Transcription

1 Security over Collateral MEXICO Basham, Ringe & Correa S.C. CONTACT INFORMATION Miguel Angel Peralta Isaac N. Beja Basham, Ringe & Correa S.C. Paseo de los Tramarindos 400-A, 9th Floor Bosques de las Lomas, Mexico, City / 1. Can assets be charged, liened and/or encumbered in your jurisdiction? Please insert any exemptions, if any. Yes, under Mexican law, assets can be charged, liened or encumbered, taking into account the following exemptions: basic assets needed for subsistence, such as shelter; assets needed to execute a job, occupation or profession; military assets, such as weapons, vehicles or horses; grains that have not been harvested; usufruct rights; use or habitation rights; family estate; salary or wages; retirement income; ejidos (land with special privileges for farming uses). 2. In your jurisdiction, under what circumstances may security arrangements be subjected to choice of law and/or choice of forum clauses (does it matter, whether the security itself is located abroad and/or governed by foreign law [e.g. a pledged claim])? What is the market practice in your jurisdiction? Is there a treaty on this in your jurisdiction, whether bilateral or multi-lateral? Are there any requirements for enforcement in your jurisdiction? (a) Assets subject to the security located in Mexico may be subject to security agreements governed by foreign law; however, when enforcing the execution of the security, then Mexican laws apply. (b) The market practice in Mexico is that banks and lenders subject and govern their respective securities located in Mexico in accordance with Mexican Law.

2 (c) Mexico is not party to any treaty (bilateral or multilateral) regarding guarantees or securities. 3. In your jurisdiction, are floating charges or security over the overall assets of an entity accepted, and if so in what terms? Yes, security over the overall assets of an entity is accepted by means of an industrial mortgage or a pledge without transfer of possession of the assets. There are no floating charges under Mexican Law. 4. In relation to the following types of assets, please explain in your jurisdiction the types of security that can be created or granted, if the security requires any type of registration or perfection requirements, an estimate of cost (including applicable taxes and any other duties/ costs) and timing for granting such security, and any special considerations regarding the asset type: (a) Aircraft: Special mortgage regulated under the Civil Aviation Law which must be registered with the Aeronautic Registry for its perfection. (b) Bank Accounts: Rights under bank accounts may be pledged, either by a traditional pledge or a pledge without transfer of possession ("PWTP"). (c) Animals, Crops (in ground and harvested) and Timber: Animals may be subject of an industrial mortgage or a PWTP. Crops may not be subject of any kind of guarantee. (d) Equipment: Equipment may be pledged, either by traditional pledge, PWTP or by Industrial Mortgage. (e) Intellectual Property: Rights under intellectual property may be pledged, either by traditional pledge or by PWTP. (f) Inventory: Inventory may be pledged, either by traditional pledge or by PWTP. (g) Leases: Rights under leases may be pledged, either by traditional pledge or by PWTP.

3 (h) Mineral Interests, including Hydrocarbons: Hydrocarbons may not be pledged, either by traditional pledge or by PWTP. (i) Promissory Notes and Chattel Paper: Rights under promissory notes and chattel paper may be pledged, either by traditional pledge or by PWTP. (j) Real Estate: Real estate may be mortgaged. (k) Receivables (credit rights under contracts or invoices): Receivables may be pledged, either by traditional pledge or by PWTP. (l) Rights under Contracts (excluding Receivables): Rights under contracts may be pledged, either by traditional pledge or by PWTP. (m)shares (in book-entry and certificate form and other securities): Shares (in book-entry and certificate form and other securities) may be pledged, either by traditional pledge or by PWTP. (n) Vessels: Special mortgage regulated under the Navigation Law through an agreement in public document and registered at the Maritime Public Registry. (o) Vehicles: Vehicles may be pledged, either by traditional pledge or by PWTP. (p) Business as an going concern; Business as an ongoing concern may be pledged, either by traditional pledge or by PWTP: Costs may vary according to the particular transaction and the security may be created and registered in a period of between 2 and 4 weeks. 5. Please explain briefly for each type of assets the procedure for enforcement (judicial and extra-judicial). Is it possible to enforce security governed by another jurisdiction? If yes, what is the procedure? The seizure of an asset is solely allowed by means of a judicial order and there are different types of seizures for specific cases. In some cases a sentence is needed to execute the seizure, in other cases, such as executive judgments, the document

4 containing the guaranteed obligation includes prepared execution, which is to say that from the moment of judgment a seizure can be executed in order to seize sufficient assets to guarantee the amount of the unfulfilled obligation. The seizure procedure upon judicial order is as follows: (a) In case of personal assets, it necessary to attend, with a court clerk, the place where the asset is located, and request the debtor to select sufficient assets to cover the amount of the debt; if it declines to do so, the creditor will select such assets. After the assets are selected, a depositary is assigned for the safeguarding and custody of the assets. Once the depository is in possession of the assets, it is necessary to begin a procedure for the judicial sale or for the appointment of the assets. (b) In case of real estate, notice is given to the public registry of the property so that the seizure can be recorded in the book of inscription. 6. Can a trustee or security agent be used in your jurisdiction, or must security be granted in favour of all lenders? A trustee can be used to provide for security to be granted in favor of all lenders. A security agent can be appointed to manage the respective guarantees, however, in any case, such guarantee must be granted in favor of all lenders. 7. In bankruptcy or insolvency scenarios, what are the suspect periods, is clawback possible, and what other types of rights (tax debts, employees, etc.) have preference over security granted? The suspect periods are the 270 calendar days previous to the insolvency judgment. Creditors are classified according to the following degrees, determining the nature of their credits: 1. Privileged creditors. 2. Collateral creditors. 3. Secured creditors. 4. General creditors. Privileged creditors are those whose priority is determined by the holding of a priority claim, consisting in the burial expenses of the merchant in the event that the bankruptcy judgment is previous to the merchant s death, and the medical expenses due to the illness causing the merchant s death in the event that the bankruptcy judgment is subsequent to death. The collateral creditors are the mortgage and pledge creditors. These creditors receive the payment of their credits from the product of the guarantied goods. The secured creditors are those who have a special privilege or a right to retain. General creditors are those not contemplated in the abovementioned categories.

5 Payment to a subsequent category will be made only after the debt in the previous category is fulfilled. The following creditors will have preference in payment over any other creditor: 1. Labor creditors for up to the two years preceding the insolvency judgment. 2. Litigation expenses in defense of the guarantied assets. 3. Repair, maintenance and alienation expenses. 8. In your jurisdiction, can borrowers or guarantors subordinate their claims and if so in what terms? Yes, under Mexican law borrowers and guarantors may subordinate their claims. When subordinated, borrowers and/or guarantors may exercise their rights until the entire obligation to which the subordination relates has been duly satisfied. 9. What are the consequences of a transfer, assignment or novation of an underlying credit in your jurisdiction (is new security necessary, is the security automatically transferred, etc.) There is no need for new security, except in case of novation of a credit. Security is automatically transferred in case of a pledge or a mortgage, since these are rights in rem, but in all other cases it is not. The consequence of a transfer or assignment of an underlying credit is that the same regulations will apply to such acts as applied to the legal act of origin. Also, the original creditor does not respond for the debtor s solvency, unless it is stipulated. If this period of time is not defined, it is limited to one year from the time that it is due and payable. The new creditor must notify the debtor. The consequences of a novation are the termination of the original credit and the creation of a new one. All securities will be terminated, unless it is otherwise agreed between the parties. 10. Can you have on top of a security in your jurisdiction, another layer consisting of an assignment of the collateral concerned conditional upon default by the debtor? No, under Mexican law it is not possible to have on top of any security any layer consisting of an assignment of the collateral which is conditional upon default of the debtor. 11. Are step-in rights lawful in your jurisdiction or does any action to take control require the creditors to go through a court process?

6 No, step-in rights are not lawful in Mexico and creditors will have to file an action through the competent courts, unless an extra-judicial execution procedure has been agreed.