do business in the Dominican Republic - Pellerano & Herrera

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DOING BUSINESS INTHE DOMINICAN REPUBLICCOLLATERALSThe Civil Code, the Commercial Code, the Land Registration Law and other speciallaws regulate the granting of mortgages and liens.a) MortgagesIn general, any kind of real property right may be mortgaged, whether ownership,use or exploitation rights. Fixtures are deemed to be real property and assuch can also be mortgaged. Mortgages on future real property are not valid, butcreditors' interests extend to improvements made to the property after the mortgageis granted.The secured obligation must be valid, and its nullity would also invalidate themortgage. The secured obligation may however be eventual or conditional, inwhich case the mortgage would also be so. Furthermore, mortgages may begranted as security for future obligations, such as financial instruments like creditlines and credit cards.For the mortgage to be valid and binding upon third parties the debtor must havea duly registered title. Persons with conditional property rights may grant mortgagesunder the same conditions that affect their rights.Mortgages must be registered at the Registry of Titles of the place where theproperty is located by filing the mortgage agreement and the PropertyCertificate.The Registry makes a note of the mortgage on the Property Certificateand issues a Mortgage Certificate on behalf of the creditor.The date of registrationis the date of filing, although the material issue of the certificates takes placea few weeks later.The following taxes must be paid upon registration:5/1,000 of the loan amount;12% of (i);Internal Revenue Stamps of RD$8.00 for the first RD$2,000 and RD$2.00 forevery 1,000 or fraction; andStamps under Law 80-99, calculated in the same manner as for real propertytransfers.The registration gives the creditor priority rights over all other creditors whohave not registered their security interest on the property before him.In this casethe creditor will be entitled to be paid first from the proceeds of the sale of theproperty, with the sole exception of privileged creditors (employees, tax office,legal fees, etc.).Any creditor with a mortgage may initiate a procedure to seize the property,being bound to comply with certain publicity and notice requirements in orderto allow other creditors to join the process.All registered creditors must be notified,but whoever registered his security interest first recovers first.The creditormay, by virtue of a “persecution right” granted by the law, seize the property inthe hands of third parties who may have gained title after the mortgage was registered.118
Pellerano & HerreraAttorneys at lawb) LiensLiens on personal property may be non-possessory and possessory,depending onwhether the debtor keeps the goods in his possession or not, but in businesspractice possessory liens are very rare.Registration of liens. In the case of non-possessory liens certain registration systemsare available in order to protect creditors against an eventual transfer oradditional lien of the pledged assets by the debtor. In the absence of these mechanisms,the legal presumption that “whoever has possession of a good has titleover it” will protect any third party who has acquired the property against thecreditor's tries to execute the pledge.Law 6186 of 1966 regulates non-possessory liens on consumer goods, equipment,inventories and agricultural products.The creditor may register its securityinterest at the Peace Court, and this registration will allow him to seize andexecute the pledged assets, even when they have been transferred to third parties.Furthermore,theregistration of additional pledges is forbidden,and the creditorwill thus have priority over any other creditors.Another system that can be used is the one provided by Law 483 onConditional Sales.The parties may agree that the seller will keep the propertyrights over the goods until receiving full payment of the sale price, and registersuch agreement in the office established for these purposes.Upon non-complianceby the debtor, the creditor may as owner recover the goods from anythird person.This registry works better than the one created by Law 6186, and some creditorsthus prefer to structure their transactions under this scheme.The only drawbackto this mechanism is that the taxes applying to the transfer of property will haveto be paid at the time of registration.Finally,when vehicles are pledged the creditor may,in addition to any other measures,file a transfer opposition to the Vehicle Department, which will then bementioned in the vehicle registration.There are also registration systems for shipsand aircrafts, under Laws 607 and 505, respectively.Liens on intangible property. Liens may be granted on intangible property likestock, securities, credits, bank accounts, contracts, etc. When an intangible ispledged the creditor is required to give notice to the debtor of the pledged obligation.These liens may also take the form of “accessory transfers”, where thedebtor transfers intangibles to the creditor as a secondary method of payment.This method is mostly used with receivables.The creditor wishing to execute a lien on intangible assets (or a possessory lien)has the choice of provoking a public sale or requesting to the court that the assetbe transferred to him. In this last case the court appoints an officer to evaluatethe assets, and the creditor is bound to pay any difference between the amountsowed and the value of the lien.119
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DOING BUSINESS INTHE DOMINICAN REPU
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FOREWORDA place to invest ...The Do
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Pellerano & HerreraAttorneys at law
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INTERNATIONALTRADEInternational tra
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MAININVESTMENTSECTORSThe Dominican
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Page 69 and 70: Pellerano & HerreraAttorneys at law
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