MEXICO Law and Practice Contributed by: Julián J. Garza Castañeda and Paulina Bracamontes Belmonte, Nader Hayaux & Goebel
5. Guarantees and Security 5.1 Assets and Forms of Security
must be registered with the Movable Property Registry ( Registro Único de Garantías Mobiliarias or RUG) to be effective against third parties. A guarantee trust over real estate property shall also be registered with the corresponding local Public Registry of Property ( Registro Público de la Propiedad or RPP). Also, the most common form of granting a security interest over real estate is through a mortgage, which must be registered with the Public Registry of Prop- erty that has jurisdiction over the place where the real estate is located. See 6.1 Enforcement of Collateral by Secured Lend- ers for further information regarding formalities and perfection requirements. 5.2 Floating Charges and/or Similar Security Interests Mexican law permits a security interest over all pre- sent and future assets of a company, primarily through a non-possessory pledge or a guarantee trust. 5.3 Downstream, Upstream and Cross- Stream Guarantees It is possible for entities in Mexico to give down- stream, upstream and cross-stream guarantees. There are typically no associated limitations; however, the guarantee shall generally create a benefit for the guarantor to avoid the risk of being considered null in a bankruptcy scenario. There are a number of additional Mexican legal con- siderations in connection with loans to borrowers and the granting of security interests or guarantees. Please refer to the responses throughout this chapter in this respect. Each transaction must be assessed considering a variety of factors, including tax treatment, the regu- latory framework, bankruptcy scenarios, the parties involved and the nature of collateral. The issue of costs must also be taken into consideration. Imple- menting collateral structures involving trustees or real 5.4 Restrictions on the Target There are no particular restrictions. 5.5 Other Restrictions
Assets typically available as collateral include real estate, machinery and equipment, stock or equity interests, receivables and collection rights, among many others. There are generally no restrictions with respect to creating security interests over any sort of movable assets that can be transferred, including rights. Collateral instruments include: • the traditional pledge, where the collateral is (in principle) delivered to the secured party or a depositary; • the non-possessory pledge ( prenda sin transmisión de posesión ), which permits the borrower to main- tain custody and use of the pledged assets; and • the guarantee trust ( fideicomiso de garantía ), where the collateral is actually transferred to a Mexican trustee (ie, a Mexican banking institution). Pursuant to a guarantee trust, a borrower may transfer to a trustee ownership of certain assets. The trustee will hold ownership of such assets as collateral for the primary benefit of the corresponding lender, who will be appointed as a beneficiary ( fideicomisario ) of the guarantee trust. The guarantee trust permits: • borrowers to continue to use and manage the col- lateral and maintain regular business activities; and • parties to the guarantee trust to contractually establish their own tailor-made rules of extrajudicial foreclosure (within reasonable due process and other requirements). Such foreclosure procedure permits the transfer of collateral to a lender, subject to compliance with the applicable legal requirements. Similar benefits may be attained through a non-possessory pledge, with respect to the use of collateral and business activities of the borrower. The non-possessory pledge and the guarantee trust are the most common forms of granting and perfect- ing a security interest in receivables and accounts. The non-possessory pledge and the guarantee trust
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