MEXICO Law and Practice Contributed by: Alejandro Stamoglou, Jesús Pérez Alcántar and Julio Jiménez Manrique, Bello, Gallardo, Bonequi y García, S.C.
security interests are generally perfected in accord - ance with applicable Mexican law, which may require registration with the Public Registry of Commerce or other relevant registries, depending on the nature of the asset. The form of security generally depends on the nature of the asset, but commonly these forms include share pledge agreements, non-possessory pledge agreements, security trusts to which receivables are assigned and that serve as a source of payment, and mortgages over real estate. Additional mechanisms to secure payment obliga - tions under credit agreements include the issuance of promissory notes by the borrower in favour of the lender, which may be guaranteed by a third party ( aval ), as well as the granting of joint and several obli - gations, typically assumed by entities affiliated with the borrower. Regarding formalities and perfection requirements, the following applies. • Share pledge agreements must be executed in writing between the borrower’s shareholders, as pledgors, and the lender, as pledgee, with the bor - rower also appearing. To perfect the pledge over shares, endorsement and delivery of the share cer - tificates to the pledgee is required, together with registration of the pledge in the borrower’s share registry book. • Non-possessory pledge agreements must be executed and ratified before a notary public or a commercial broker ( corredor público ) by the bor - rower, as pledgor, and the lender, as pledgee. In addition, to be effective against third parties, the pledge must be registered with the Sole Registry of Movable Guarantees (RUG). • Security trusts must also be ratified before a notary public or a commercial broker ( corredor público ) (and, in the case of trusts including real estate, ratification must be before a notary public) and reg - istered in the RUG; if the trust includes real estate, it must also be registered with the Public Registry of Property of the location where such real estate is situated.
• Assignments of receivables or other rights gener - ally require written notice to the underlying obligor of the assignment. Such assignments become enforceable against third parties on the date they are registered in the RUG. Additionally, it is common practice to review the bor - rower’s bylaws, as well as those of any entities grant - ing guarantees, to verify their corporate purpose and confirm their capacity to enter into the relevant agree - ments. This review also serves to determine whether any corporate authorisations are required for such acts. Even when it is concluded that no such authori - sations are legally necessary, lenders typically request them as a matter of practice. Registration fees and notarial fees should be consid - ered by the parties; however, market practice dictates that these costs are typically borne by the borrower. 5.2 Floating Charges and/or Similar Security Interests Mexican law does not recognise the concept of a “floating charge” as understood in common law juris - dictions. However, there are security mechanisms that can effectively cover substantially all of a borrower’s present and future assets. The most common structure is the non-possessory pledge, under which the borrower grants a pledge over all of its movable assets (such as equipment, machin - ery, accounts and other property) without transferring possession. This arrangement is designed to allow the borrower to continue operating its business in the ordinary course, thereby generating the cash flows necessary to service the debt. Such pledges may be structured as general pledges over all assets or limited to specific categories. Additionally, it is common practice to establish secu - rity trusts ( fideicomisos de administración y fuente de pago ), to which assets are transferred and which serve as the source of payment for the borrower’s obliga - tions. Typically, these assets consist of rights to col - lect receivables arising from underlying credits held by the borrower, and the cash flows generated from such receivables are applied to repay the credit granted by private credit lenders.
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