Secured Transactions in Mexico: Strategies for Trade Creditors

Transcription

1 Secured Transactions in Mexico: Strategies for Trade Creditors June 13, :30 to 10:00 am Session Romelio Hernandez

2 The good old days Financing agreement with USA Co. Promissory notes for $1.9M and $3M. Security agreement over inventory Guarantee agreement by Mx Co.

3 Cross-border transactions merit attention. Failure to secure them properly based on sound strategy can result in a serious loss.

4 Our program 1. Secured transactions 2. Enhancing security devices 3. Problems with cross-border

5 Secured Transactions 1. When you get collateral 2. When you put in place contracts that create strong obligations from debtor or third party that are efficiently enforced.

6 Privileged actions Promissory note Executive proceeding Pledge Special proceeding Mortgage Summary proceeding Invoices Ordinary proceeding

7 Challengers Bankruptcy Taxes Employees Creditors Debtor

8 Security Devices

9 Personal Guarantee Someone else responding for the debt of your debtor 1. Financial condition of guarantor is key 2. No privileged action available 3. Debtor is not joint obligor, unless

10 Title retention You are still the owner until you get paid in full 1. Good for machinery or equipment 2. Defeats all creditors in bankruptcy 3. No privileged action available

11 Pagaré An enforceable unconditional promise to pay 1. Immediate attachment order 2. Presumption of debt favors creditor 3. Bankruptcy stay on proceedings

12 Bond A bank responding for the debt of your debtor 1. You will collect as long as you win 2. No execution over assets needed 3. Voluntary payment not guaranteed

13 Bond Timeline of full case to enforce a bond

14 Classic pledge Security interest over tangible movable assets 1. Bailment creates criminal liability 2. Not ideal for inventory or receivables 3. Not effective in bankruptcy unless

15 Non-possessory pledge UCC Article 9 security interest in movable assets 1. Intangibles allowed (proceeds) 2. Purchase money security interest 3. Special enforcement proceeding

16 Mortgage A security interest in real estate property 1. Real estate will preserve value 2. No need for deficiency claim 3. Vulnerable to labor and tax claims

17 Guaranty Trust Debtor entrusts assets to trustee as guarantee 1. Debtor conveys title to trustee 2. Trustee is always a bank 3. Private enforcement (self-help)

18 Assessing security 1. Implementation 2. Enforcement 3. Security

19 Implementation

20 Assessing security Personal Guarantee Pagare Bond Trust Implementation Enforcement Security

21 Enhancing Security Rights and obligations Right incentives Preferred agreed proceeding Jurisdiction and venue

22 Right Incentives Timeline of full case to enforce a bond

23 Preferred agreed proceeding Think fast-track arbitration We could improve: Experts Personal notices Limits on evidence and appeals Execution process (auction)

24 Jurisdiction and venue *Infographic published by El Financiero newspaper on July 21, 2015

25 Cross-border risk Assuming that law is law Legal concepts may have no meaning across the border Remedies lacking recognition or privileged action

26 Additional risk Consignment Lease or commodatum Warehousing or bailment Joint ventures

27 What to Do? Financing agreement with USA Co. Promissory notes for $1.9M and $3M. Security agreement over inventory Guarantee agreement by Mx Co.

28 RUG Filings 1,400,000 Total RUG Filings: 3'387,474 (to Sep-2017) 1,200,000 1,220,512 1,000, , , , , , , ,783 45,780 66,339 74,

29 Due Diligence!!!

30 CONCLUSIONS 1. Cross-border transactions merit special attention. 2. Failure to secure them properly based on sound strategy can result in a serious loss. 3. To secure properly based on strategy you need ask at least the following questions:

31 Question-checklist 1. Did local attorney review the security device? 2. Are agreed remedies enforceable in court? 3. Is venue the best forum for creditor? 4. Is security device afforded a privileged action? 5. Have creditor s rights been further enhanced?

32 HAPPY SALES! For additional information please visit us at w w w.hmhlegal.com