Daniel Araya and Rodrigo Maffioli of Arias & Muñoz in San José look at the country’s new transactions law

New opportunities for Costa Rican small and mid-size entrepreneurs to gain access to credit and obtain the financial resources required to start up their businesses have been created under the Law on Security Interests on Moveable Assets (the “Law”).

This relevant and innovative piece of legislation is based on a model law drafted by the Organization of American States, inspired by common law principles.

Purpose of the Law

The Law defines a “security interest over moveable assets” as a “preferential right granted over the moveable assets given in guarantee to the creditor”. Its main goals consist of: (i) promoting and increasing access to credit in Costa Rica by developing the appropriate legal and institutional framework to facilitate the use of a wider range of moveable assets as guarantee by potential borrowers while applying for loans; and, (ii) creating a new digital Secured Transaction Registration System, in order to publish the rights over the recorded security and consequently protect the potential lenders’ interests from third party claims. The new System operates as an electronic database of files containing securities granted by debtors, and allows the secured creditors to perform an online registration process without the intervention of third parties.

The need to conceive and approve the Law arose from the restrictions posed by local regulations in connection with goods traditionally admitted as guarantee (e.g. specific, existing, identifiable and tangible assets such as motor vehicles, machinery, aircrafts and ships), which will remain subject to the traditional pledge registration regime. Recordable security interests now include specific or generic groups of moveable assets, present or future tangible or intangible assets, inventories, capital shares, equipment, intellectual property and contractual and extra-contractual rights, as well as accounts receivables, among others.

Additionally, the concept of “security interest over moveable assets” has been extended to future and existing contracts, agreements and clauses used as guarantee in obligations over moveable assets, including, but not limited to, sale-leasebacks, guarantee trusts over moveable goods, floating pledges, factoring, financial leasing and agricultural, commercial or industrial pledges.

Since the Law came in force on May 20 2015, security interests must be established by a security agreement between creditor and debtor, or by law.

Urgent actions following the introduction of the Law

The most immediate effect of the new Law is the urgent need to migrate certain pledges already registered under the old regime (e.g., agriculture equipment, civil works equipment, and trailers) to the new Secured Transactions Registration System. The Costa Rican Public Registry granted all creditors a three-month period, which expired on August 20, 2015, to complete the necessary process without additional costs and, most importantly, to avoid losing priority rights in pledges granted over specific assets.

Also, all existing securities resulting from transactions closed prior to the introduction of the Law must also be recorded in order to preserve priority over third parties eventually claiming preferential rights over the registered pledges.

Execution in case of default

In the event of default, the Law sets out several options for the execution of the security interests such as repossession of the assets granted as collateral, common judicial auction and extrajudicial auction agreed by the parties in the secured transaction. The possibility of the latter being performed by a Notary Public or a Trustee represents a particular innovation introduced by the Law regarding the enforcement of the secured obligations in case the debtor fails to comply with the terms and conditions negotiated by the parties to the transaction. Execution of a recorded security should be performed by filing a digital notice of execution with the Secured Transactions Registration System and the delivery of the notice to the debtor. Once the notice has been filed, the debtor has the right to terminate the process of execution of the security by paying the full amount owed to the secured creditor, as well as the reasonable enforcement costs incurred by the creditor in initiating the execution.

Expectations and current challenges

The reform to the legal and financial system should have a positive effect on the growth of the Costa Rican economy by creating more flexible conditions in which to obtain fresh capital resources. This will be a catalyst to the development of small to mid-size businesses and a boost for industries such as agriculture, which have been struggling to recover from their recent downturns.

Issues such as the viability of receiving intangible assets as a guarantee for a transaction have still not been resolved at the regulatory and institutional level. Consequently, borrowers and lenders looking to enter into transactions affected by the new regime will require close guidance in order to protect their best interests.

Daniel Araya


Arias & Muñoz

San José

Rodrigo Maffioli


Arias & Muñoz

San José