Central American Meeting on Secured Financing and Related Commercial Law Reform Tegucigalpa, Honduras, Feb. 28, 2008 Reg

1. Central American Meeting on Secured Financing and Related Commercial Law ReformTegucigalpa, Honduras, Feb. 28, 2008Registration of Security InterestsLegal Issues The EBRD : �It is wrongly assumed that the mere existence of the registry will ensure the secured transaction law�s effectiveness. In reality it is the quality of the registration system that determines the effectiveness of the law�

2. Registries Real Property Registries Real estate finance is long-term Real estate collateral is static Detailed description Require absolute certainty Record ownership rights (title) Verification of legality Asset-based Personal Property Registries Personal property financing is short to mid-term Collateral is dynamic � fluctuates Generic description Provide notice � no absolute certainty Registration is independent of ownership Administrative verification Debtor-based

3. Other Asset-Specific Registries Intellectual Property Registry Car Registry Aircraft Registry Maritime Registry Business Companies Registry Agricultural Pledges Registry (Argentina) Retention of Title Registry (Switzerland) Cape Town Registry

4. Functions of Registries Reduction of credit risk Certainty for assets to be freely traded Publicity of creditors� in rem rights Discoverability of existing rights System of priorities Transparency in general

5. (Perfection) Publication of a Security Interest Registration (accounts, inventory) Possession (documents of title, instruments) � registration for priority with exemptions Control (bank accounts, electronic documents) Automatic (consumer goods, investment property under UCC 9-309) Registration in other registries (fixtures, crops) Other: tagging, branding, advertising, notification of the third party, agreement

6. Publicity or Secrecy of Rights Unitary and functional systems subject all security devices to a single publication regime (the U.S., Canada, Guatemala, Honduras, UN) Some countries exempt ownership-security devices from registration requirements (the U.K., Australia, France) No registration of security devices (Germany, the Netherlands) � �false poverty�

7. Two Types of Registration Systems Transaction-filing Record underlying loan documents Require detailed scrutiny Registration is delayed by X days Support loans secured with static collateral Require regular amendments No advance filing Notice-filing Record simplified notices (financing statements) Automated registration procedures Registration is almost instantaneous Support revolving loans secured with fluctuating collateral Advance filing

8. Honduran Draft Law Art. 44 � The Registry of security interests is notice-filing Art. 45 � Functional and unitary registration system for all security devices Art. 45 � Minimum registry verification (automated) Art. 47 � Registration of standardized financing statements (electronic) Art. 51 � Remote access for registrations and searches Art. 52 � No restrictions on access (fees, authorizations may be required)

9. Effects of Registration No registration - In personam effects � security agreement Registration - In rem effects � publication (perfection) Registration does not validate the security interest Single financing statement perfects a security interest over the following assets (line of credit): Original collateral (existing inventory, accounts) Proceeds (cash, bank deposits) Property acquired in the future (new inventory, new accounts) Multiple security interests between the same parties Continuation of a security interest perfected by other method � possession or control

10. Registration Procedures Registration is effective when searchable Electronic registration � immediate Paper registration � delay (hours, days) Data from paper forms must be keyed into the system �exactly� as it was received Corrections, abbreviations, additions not permitted, risk of mistakes and fraud Creditors search before advance funds Registrations may be notified to all interested parties � amendments, PMSI

11. Who May File What Initial registration form any authorized user - creditor Amendment and correction the creditor (debtor may force the creditor to correct) Continuation and enforcement only the creditor Assignment and subordination one of the creditors Termination the creditor and the debtor upon request Other notices � tax and judgment liens, bankruptcy

12. What Information is Registered Required: Identification of the debtor(s) Identification of the creditor(s) Generic description of the collateral Other: General terms and conditions of the loan (amount) Signatures (authorized users)

13. Reasons for Rejection Allowed Non-payment of fee Insufficient information Missing debtor�s name Missing creditor�s name Missing the description of collateral (If) Paper form is ineligible (If) Submitted on a non-official form Not-allowed No security or loan agreement submitted (may be permissible) Registration allegedly does not comply with other laws Missing information other than the required data Information is invalid, inaccurate

14. Features of Future Central-American Registries Debtor�s registry, central database Unrestricted access, no requirement to justify search Fees to cover its operations, no excessive profit-making Registrar may issue certified copy of its records that will have evidentiary value Regional harmonization