DOMINICAN REPUBLIC Law and Practice Contributed by: Marielle Garrigó, Urania Paulino, Eduardo Pellerano and Ricardo Pellerano Nadal, Pellerano Nadal Law & Consulting
6. Guarantees 6.1 Types of Guarantees
Such decisions issued by the Peace Court are subject to appeal within 15 days of their notifi- cation. Once the Peace Court makes the deductions for the costs and expenses of the sale and sei- zure, if applicable, they will deliver the remaining amount to the creditor. In cases of pledge with dispossession (ie, when the debtor does not have the pledge in their pos- session but it is held by a third party or the credi- tor), the pledge creditor may petition the Justice of the Peace to initiate the sale of the property at public auction. If the share pledge was structured correctly, the creditor can enforce the security immediately if a default occurs. Some considerations must be mentioned when enforcing this type of security, according with the General Corporate Law on the Dominican Republic No 479–08, as follows. • In the case of limited liability companies ( sociedades de responsabilidad limitada ), if the company approves the pledge of shares, consent implies acceptance of the transferee in the event of collateral execution, unless the company chooses to repurchase the social quotas without delay, either before or after enforcement. • In the case of corporations ( sociedades anonimas ) and simplified stock corporations ( sociedades anonimas simplificadas ), if the company approves the pledge of shares as provided by the bylaws, consent implies acceptance of the transferee in the event of collateral execution, unless the company chooses to repurchase the shares.
Aside from the security mentioned in 5.1 Types of Security Commonly Used that can be grant- ed as collateral in acquisition finance, there can also be personal guarantees, such as the fianza , which is a contract by which a person (the guar- antor) commits to a creditor to pay the debt of a third party (the debtor). In the event that the debtor does not pay the sums owed to the credi- tor, the guarantor assumes that obligation. For the execution of a personal guarantee con- tract ( fianza ), the following conditions must be met: • consent of the parties; • capacity and power to sign the contract; Similarly, the guarantor must have the capac- ity to fulfil the contract, be solvent and have a domicile within the territory of the Peace Court in which the personal guarantee will be regis- tered. In many cases, this type of guarantee is accompanied by a promissory note issued by the guarantor in favour of the lender to facilitate collection. Promissory notes must comply with certain formalities and, depending on the type of note, require registration. However, these types of personal guarantees are only common in small- to medium-market acqui- sitions. In larger or cross-border transactions, it is more common to see a parent guarantee, granted by the parent of the borrower who is acquiring the target company. • cause of the obligation; and • the object of the contract.
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