CHILE Law and Practice Contributed by: Macarena Ravinet and Federico Espinosa, Cuatrecasas
clauses to allow borrowers to bear the withholding tax costs. Careful structuring is essential.
used for equipment, inventory, receivables, and shares; and • special pledge over securities – for shares and other securities, often in favour of banks or finan- cial institutions; or • assignment of receivables ( cesión de créditos ) – used to secure rights to future payments or cash flows. Perfection Requirements and Formalities Each form of security has specific perfection require- ments, as outlined below. • Mortgage: (a) must be granted by public deed before a Chil- ean notary; (b) registration in the relevant Real Estate Registry ( Conservador de Bienes Raíces ) is mandatory; (c) priority is determined by the order of registra- tion; and (d) if not registered, the mortgage is not effective against third parties and cannot be enforced. • Pledge without conveyance: (a) executed by public deed or private instrument authorised by a notary; (b) registration in the Registry of Pledges Without Conveyance ( Registro de Prendas sin Desp- lazamiento ) maintained by the Civil Registry Service; (c) for assets subject to other registries (eg, vehicles), an annotation must be made in the relevant registry; (d) priority is based on registration order; and (e) lack of registration means the pledge is not op- posable to third parties. • Pledge over shares and securities: (a) executed by public deed or private instrument; (b) notification to the issuing company is required for shares; (c) for bearer securities, physical delivery to the creditor is necessary; (d) for order securities, endorsement in guarantee is required; (e) for share pledges, registration in the company’s shareholders’ ledger is required; and (f) for money deposited into accounts, notice to the bank is generally needed to perfect the security.
5. Guarantees and Security 5.1 Assets and Forms of Security Assets and Forms of Security in Chilean Financing Transactions Types of Collateral Commonly Used In Chile, a wide range of assets can be offered as col- lateral to lenders. The most typical forms of collateral include: • real estate – and, buildings, and other immovable property; • movable assets – equipment, machinery, vehicles, inventory, and other tangible personal property; • receivables – rights to payment under contracts, including accounts receivable and future cash flows; • shares and securities – equity interests in compa- nies, bonds, and other marketable securities; • money – monies deposited in current or savings accounts; and • concession rights and intangibles – rights under public concessions, intellectual property, and other intangible assets. Forms of Security and Applicable Legal Instruments The form of security depends on the nature of the asset: • mortgage ( hipoteca ) – used for real estate, certain mining rights, water rights, aircraft, and vessels (the mortgage is a real right that grants the lender a preferential claim over the mortgaged property); • pledge ( prenda ) – several types of pledges for mov- able assets and rights: • civil pledge – requires delivery of the asset to the creditor; • commercial pledge – used for commercial obliga- tions; may also require delivery; • pledge without conveyance ( prenda sin desplazam- iento ) – the debtor retains possession; commonly
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