On Wednesday May 20, 2015 came into force in Costa Rica the Movable Property Guarantees Law (N° 9246), whose purpose is that entrepreneurs and SMEs (small and medium-sized enterprises) obtain credits more easily.

The Law expanded the number of goods that can be used as a backup to opt for loans, i.e., now are admitted as guarantees, besides accounts receivable:

• Crops
• Livestock
• Inventories
• Machinery and equipment
• Contracts
• Intellectual property: trademarks, copyrights, commercial names, drawings, designs, etc.
• Patents

Prior to Law 9246 the most common was for financial institutions or creditors to support credits by using pledges (vehicles ) and mortgages (real estate).

Costa Rica joins other nations such as Mexico, Honduras and China, which have implemented similar laws for the benefit of SMEs.

The benefits will be, mainly, for the smaller economic actors, so the employment opportunities and national productivity will increase. The new system will allow a better use of financial resources currently directed to the SMEs sector and with this we will promote financial inclusion and a better distribution of wealth, says the Costa Rican Minister of Economy, Welmer Ramos.

Overall benefits of the Movable Property Guarantees Law

– More goods for the small businesses and entrepreneurs to support their credits

– The Law is accompanied by the Information System of Movable Property Guarantees, in charge of the Registro Nacional (National Registry). The system will be used to directly register the Movable Property Guarantees result of the obligations between debtors and creditors. Online registration is a responsibility of the creditor, who will need an electronic signature to begin the procedure.

– The new law means less registration fees. Today, if you request a pledge on an asset, the stamps charged are related to the amount borrowed. With the System of Movable Property Guarantees, the cost or rate will be fixed and, internationally, it will be between $15 to $20, as told to the weekly El Financiero, Mauricio Soley, director of Movable Properties of the National Registry.

– Once the creditor enters the data of the SMEs, it is immediately registered in the system. Currently, register a movable guarantee takes about five days or more.

– The credits facilitated by the Law mean an increase in the productivity of the companies.

– With credit the companies are strengthened and thereby the employment opportunities increase.

Exceptions to present as guarantees

According to Article 4 of the Movable Property Guarantees Law, can´t be used as a movable property guarantee:

– Vehicles of all kinds that require to circulate on public roads making necessary its registration on the Public Registry, except those within the following categories: generic special equipment, special agricultural equipment, special equipment for civil works, generic trailers, light trailer or semitrailer, on which the Movable Property Guarantees and its effects will apply.

– Movable properties such as aircraft, aircraft engines, helicopters and railway equipment.

– Intermediated values or financial instruments regulated by the Ley Reguladora del Mercado de Valores.

– A money deposit in guarantee, when the depositary is a creditor of the depositor and he/she is explicitly authorized by the depositor to use its right to compensation.

Legal advice on movable guarantees

The creditor registers the movable guarantee in the Information System of Movable Property Guarantees, but, once log in the program, may authorize other figures to monitor the formalities and/or to make other in the future: lawyers or notaries.

ERP Lawyers & Associates, your law firm in Costa Rica, will provide you legal advice for the request of credits under the Movable Property Guarantees Law, in addition to help you with all the respective procedures. Contact us: (506) 2520-1122 or eduardo@erplawyers.com

Consulted sources: pgrweb.go.cr / meic.go.cr / nacion.com / elfinancierocr.com