Movable Warranties Law – Part 1
Law 1676 of 2013 that promotes access to credit and regulates the movable warranties, will be in force as of February 21st, 2014.
On February 21st, 2014 will enter into force Law 1676, which was sanctioned on August 20th, 2013. This Law promotes access to credit through the use of certain goods and rights that could be considered collaterals, and by simplifying the creation, third-party opposability, priority and enforcement of these collaterals in Colombia.
It consolidated the property that may be granted as collateral about its financial feasibility, to any rights or obligations, tangible and intangible, existing and future assets, and in general all kinds of movable property to which the parties may attribute economic value as for example inventories, equipment and raw materials, which in the past were not accepted to guarantee credits.
Moreover, it creates the National Registry of Movable Warranties, which has not been yet regulated by the National Government; however the Law states that: (i) the registration will be national, of low cost and will have a personal nature; ii) the registration process and the consultation of information could be made electronically, (iii) Confécamaras (National Confederation of Chambers of Commerce) will be in charge of this registration system, and (iv) the registration shall make the collateral opposable against third parties and shall generate a security interest over the collaterals unregistered or registered subsequently.
Regarding the enforcement of the guarantee, it brings new mechanisms that would facilitate its enforcement. For example, it provides the possibility of stipulating in the contract that the creditor can collect the debt, in full or in part, with the pledged assets. Similarly, considering that the value of the collateral may vary during its enforcement, said Law provides for the possibility of ordering the auction of the assets from the beginning of the judicial procedure at the request of either party. Additionally, the Law provides for the possibility of agreeing a special extrajudicial proceeding for the enforcement of the collateral that could be carried out in its early stages before a Notary Public, or before the Chambers of Commerce, as has been agreed by the parties.
Finally, in connection with the existing collaterals, the security interests established before the effective date of the Law (February 21st, 2014), will be determined by the date of registration in the corresponding Chamber of Commerce, and if the parties want to apply the new rules of enforcement, they should modify the agreement and register the collateral on the National Register of Security Interests.
Any further information in connection with this new legal provision or questions related hereto please do not hesitate to contact us.