CHILE Law and Practice Contributed by: Macarena Ravinet and Federico Espinosa, Cuatrecasas
However, proceeds cannot be used for activities that are unlawful under Chilean law, such as money laundering or the financing of terrorism. Lenders are required to comply with anti-money laundering and know-your-customer obligations. Aside from these contractual and regulatory consid- erations, there are no broad restrictions that prevent Chilean borrowers from freely applying loan or bond proceeds in line with their financing needs. 3.5 Agent and Trust Concepts Chile recognises both agent and trust concepts, each with distinct local characteristics. Administra- tive agents are commonly used in syndicated loans, where one lender manages disbursements and rights on behalf of others; this role is enforceable under Chil- ean law through contractual arrangements. Additionally, collateral agents, expressly recognised by law, frequently hold guarantees for all creditors in syndicated and project financings. The concept of trust also exists, but it is not used in financing transactions because it is regulated dif- ferently than in common law or other Latin American jurisdictions. 3.6 Loan Transfer Mechanisms Loan transfers in Chile are primarily executed through the assignment of credits, which requires a written agreement and becomes effective against the debtor upon notice or consent. Syndicated loan agreements typically include standard assignment and transfer provisions to facilitate this process. A key issue in syndicated lending is whether the assignment of a lender’s participation automatically transfers the benefit of associated security interests, including both real (in rem) and personal (in personam) guarantees. Real Guarantees (Garantías Reales) These include mortgages over real estate, water rights, and certain concessions, as well as pledges over movable assets or rights. Chilean law follows the principle that accessories follow the principal obliga- tion, so the assignment of a credit generally includes
its security, unless otherwise agreed. Article 1902 of the Civil Code confirms that assignment of a credit includes its accessories, such as interest, penalties, and guarantees. However, for the transfer of real guar- antees to be effective against third parties, specific formalities must be met: • mortgages – the assignment must be registered in the Real Estate Registry where the property is located; and • pledges – the assignment of a pledge must be recorded in the Pledge Registry ( Registro de Prendas ) or, in the case of certain types of pledges ( prenda sin desplazamiento ), in the relevant public registry. Personal Guarantees (Garantías Personales) Personal guarantees, such as sureties ( fianzas ) or cor- porate guarantees, are also accessory to the principal obligation. Assignment of the underlying credit typi- cally transfers the benefit of the personal guarantee, unless the guarantee restricts assignment or requires the guarantor’s consent. Guarantee agreements, especially from sponsors or related parties, often require prior written consent for assignment. Security documents in syndicated facilities typically permit the free transfer of guarantees; however, this should be
confirmed on a case-by-case basis. Agency and Security Agent Structures
To facilitate the transferability of loans and the associ- ated security package in syndicated transactions, it is standard practice to appoint a collateral or administra- tive agent to hold security interests for all lenders. This allows new lenders to benefit from existing security
without re-registration or re-execution. Novation as an Alternative Mechanism
Novation is recognised but rarely used, as it extin- guishes the original obligation and may result in loss of accessory rights unless expressly preserved. Assign- ment remains the preferred transfer mechanism. 3.7 Debt Buyback Debt buybacks by borrowers or sponsors are gen- erally allowed under Chilean law, with no statutory prohibitions, provided the terms of relevant financing agreements are followed. Loan and bond documents
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