PANAMA Law and Practice Contributed by: Kharla Aizpurúa Olmos, Mónica Moreno and Eduardo Oteiza, Morgan & Morgan
According to Article 1660, the following order of pref- erence applies to credits related to specific movable assets of the debtor: • credits regarding the construction, reparation, conservation or sale price of moveable goods or assets that are in possession of the debtor, up to the value of said moveable goods; • those guaranteed by a pledge that are in the credi- tor’s power, over the thing pledged and up to its value; • credits secured by a guarantee ( fianza ) with respect to effects or securities, and granted in a public or commercial establishment; • credits relating to transportation, regarding trans- ported goods, up to the time of delivery and up to 30 days afterwards; • credits relating to lodging, regarding movable goods of the debtor at the place of lodging; • credits relating to seeds and expenses related to crops; and • credits relating to leases of one year, regarding movables of the debtor on the leased property and the proceeds from such leased property. According to Article 1661, the following order of pref- erence applies to credits related to real property rights: • credits in favour of the state for the amounts of taxes owed in relation to said real property; • credits of insurers, over insured assets; • mortgage and antichresis credits registered at the Public Registry over mortgaged, and subject to antichresis, goods; and • credits annotated in the Property Registry, on a preventive basis, pursuant to a judicial order, embargoes, attachments or executions of judicial resolutions over the annotated goods and are pre- ferred only in relation to subsequent credits. Article 1662 relates to the qualification of credits in connection with other moveable and immoveable goods not included in the lists of Articles 1660 and 1661, such as tax credits of municipalities; credits related to judicial expenses; credits related to the debtor’s funeral; and credits regarding a debtor’s last illness expenses, stipends or salaries of a debtor’s dependants, alimony, etc.
Finally, Article 1663 provides that credits of any other class (other than those listed in Articles 1660 through 1662) shall not enjoy any preferred rights. Thereafter, Articles 1664 through 1667 concern the order of priority of credits. Article 1664 relates to pri- ority of payment in terms of preferred credits in con- nection to certain moveable assets, and establishes that (i) credits secured by pledge exclude other credits up to the value of the pledged asset; (ii) in the case of sureties, if a surety is granted to more than one creditor, preference shall be determined by the date of constitution of such guarantee; (iii) credits relating to seeds and expenses related to crops shall have prior- ity over credits relating to leases; and (iv) in all other cases, the value of the goods shall be distributed pro- portionally among the creditors that have priority. Lastly, in general terms, creditors secured by immov- able assets have priority and exclude any other credi- tors up to the amount of the value of such assets. If, after paying the preferred creditors, any remaining amounts or assets of the borrower are available, they are distributed among the remaining creditors. 7.3 Length of Insolvency Process and Recoveries The Insolvency Law establishes that the financial protection period shall last no more than six months; however, in practice, these proceedings have taken between one and two years, with the financial pro- tection lasting for the duration of the proceeding. The timing will depend on the complexity of the debts of the insolvent company and the number of creditors that are part of the process. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency Typically, credit agreements between banks (as the most common creditors) and debtors involve various security arrangements, such as mortgages, pledges, assignment of credit rights and personal bonds. Thus, usually, it may be more convenient (depending on the financed amount, the debtor and other factors) to renegotiate, refinance and/or reach an extrajudicial agreement (which can include settlement of debt by granting the title over certain assets). For instance, in a syndicated loan agreement (typical in Panama)
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