Law No. 45-20, on Secured Transactions of the Dominican Republic, was promulgated on February 10, 2020 with the indication that it would enter into force ten months after its publication in the Official Gazette, at which time its implementation would be carried out through the Regulation to be issued by the Executive Power. To this date the Regulation has not yet been adopted.
With the aforementioned Law 45-20, the Dominican Republic achieves the standardization of the legal regime of movable guarantees by creating a unitary legal system for the constitution, effectiveness, publicity, registration, priority, execution and everything related to them.
These guarantees can be constituted on all types of personal property, tangible and intangible, present or future; in general, on any asset or right to which its pecuniary value is capable of guaranteeing the fulfillment of obligations. It includes patrimonial rights derived from intellectual property, assignment of accounts receivable and credit rights, letters of credit, right to pay money by virtue of deposits and lines of credit, shares, quotas and parts of interest or participations of the capital of civil or commercial companies.
The granting of a security interest will not require specific formalities. It can be documented in a public or private deed with or without legalized signatures, in an electronic document with or without a digital signature, while preserving its content in a reproducible way, or in any other way that allows proof of the will of the parties to constitute them, which includes electronic communications.
Pursuant to the law only the security interest without possession must be registered and published in the Electronic System of Movable Guarantees (ESMP). The registration in the ESMP confers a preferential right to the secured creditor that has publicized its right, acquiring preference to the possession, dispossession, execution and payment of the assets given as collateral in the event of non-compliance by debtor. The registration will be valid for five years and may be renewed for a period equal to that initially agreed upon by the parties or additional periods.
The ESMP is characterized by the following:
- It is a unique system that will operate nationwide with a centralized electronic database, through remote access by means of the electronic platform specially designed for this purpose.
- Registrations are carried out through standard electronic forms.
- It will update the registration system in real time, allowing any interested person to access it and verify the status of the registered asset.
- It is a computer system equipped with security measures that guarantee and safeguard the information contained in the database.
- The ESMP is organized under a personal folio system based on the identification of the guarantor debtor, so that each guarantor debtor will have a folio.
- The database that is formed by the notices incorporated through the ESMP is public and may be consulted in the manner established by this law and the regulations.
The ESMP will be the only place where security interests, security rights regarding movable property or rights over them are registered. The administration of the ESMP will be in charge of the person with whom the Ministry of Industry and Commerce and MiPymes signs the concession contract.
The rates that will be charged for the service that the managing entity provides will be established through the ESMP Regulation that will be issued by the Executive Power.
This law opens a range of possibilities for informal lenders to be able to equalize in terms of the preservation of guarantees, financial intermediation entities, as well as any company and / or business that ventures into the area of secured loans.
Any types of secured creditors may opt for the execution process of the security interests, including national or foreign financial intermediation entities, individuals or autonomous patrimonies through their trustees or anyone who has the quality of creditor.
Under this law the secured creditor and the guarantor debtor may at the time of constituting the security interest, or at any time, before or during the public auction, sale or adjudication procedures before the judicial bodies, as long as the assets have not been delivered to the creditor or an awardee, agree on an enforcement procedure without judicial intervention.
The contract in which the granting of a security interest is established, accompanied by the electronic certification generated by the ESMP, has executory force and is an enforceable title.
Any controversy that arises regarding the constitution, interpretation, priority, scope of the agreements, terms and conditions established in the guarantee contract may be submitted by the parties to alternative means of dispute resolution, in accordance with the law of the Dominican Republic.
With Law 45-20 former legal provisions ruling civil pledge and commercial pledge, with or without possession are revoked in any matter that contracts its provisions.