Published and draft legislation - Nicaragua

Secured Transactions Act

Secured Transactions Act 936

The Nicaraguan National Assembly has passed the Secured Transactions Act to enable small and medium enterprises to get credit.

La Secured Transactions Act aims to create the conditions needed for small entrepreneurs to access funding to develop their productive activity.

The law aims to provide credit for small and micro Nicaraguan enterprises. This is a joint initiative agreed between the government, microfinance institutions, commercial banks, the Supreme Court of Justice and SME entrepreneurial organisations.

The regulation has 5 headings and covers all categories of secured transactions; it allows for more goods, rights and acts in Nicaragua to be treated as secured obligations, laying down the standards for determining collateral items, constituting them, advertising and ranking them, their execution, cancellation and other inherent activities.

The Act specifically makes clear that anyone may be a creditor, debtor, guarantor, assigning or assigned party of a current or future obligation if this is backed up by a secured transaction that has been regulated under this law.

The secured transaction is set up with a document signed by the guarantor and the creditor. This collateral agreement is effective on both sides from the moment it is signed, unless the parties concerned have expressly agreed otherwise.

Articles 20-22 lay out each party’s duties and rights:

A. The guarantor or party owning the good or security right must fulfil the following obligations:

1) Exercise reasonable care over the goods and rights being secured and protect them, preventing loss or damage.

2) Inform the creditor immediately in the event of the collateral good being destroyed, damaged or lost, whether through force majeure or chance;

3) Cease to exercise their rights when the creditor, in the event of non-compliance, has demanded payment;

4) Allow the creditor to inspect the collateral goods at the location agreed, to verify their quantity, quality or state of repair;

5) Informing the secured creditor of the location, removal, sale, transformation or transfer of the secured collateral, if the contract permits such actions.

6) Any others as may be agreed by the parties provided they do not contravene this law.

B. When the secured collateral is in the possession of the creditor or third party, they will take on all the obligations stipulated in the Civil Code referring to voluntary deposit.

The secured creditor should:

1) Exercise reasonable care in the custody and preservation of any collateral items in their possession.

2) Keep the collateral items in such a way that they remain identifiable; if these are fungible, retain the same quantity and quality;

3) Use the collateral items in their possession only within the scope provided for in the collateral agreement;

4) Inform third parties in writing, at the debtor’s request, of the balance of the secured obligation and describe the guarantee;

5) Return the collateral when the secured obligation has been fulfilled, being liable for damages in the event of loss or unjustified delay in its return, including in the event of unjustified resistance to receiving payment for the secured obligation and the resulting cancellation of the encumbrance.

C. The debtor may require from the creditor at any time a statement with the balance remaining of the secured obligation. The debtor may include in their request an estimate of the amount so that the creditor can correct or approve this.

Advertising a secured transaction for the purposes of its impact on third parties, is to be conducted by registering it on the Public Secured Transactions Register; the priority of a secured transaction is decided when it is advertised.

All creditors have priority or greater right over the security than a third party, against whom it is enforceable, and over whom they enjoy preference or priority in payment from the moment it is advertised.

A Public Register of Secured Transactions will be created by virtue of this Act, for the purpose of constituting, amending, granting, extending, extinguishing and executing secured transactions and, arising from this, advertising of the same. The Register will form part of the National Register System (SINARE).

The parties in the secured transactions contract may agree on an out-of-court resolution and arbitration procedure as alternative mechanisms for resolving conflicts in the event of non-compliance with the secured obligation. If such procedures have not been agreed upon, the execution will take place through the courts, and processed under the Republic of Nicaragua’s Code of Civil Procedure.  


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