With two new pieces of legislation coming into effect at the same time. It is important to examine how they affect each other and which law would perhaps supersede the other.
Is the Law 11/2018 affected by Law 115 of the Movable Securities Law?
The rights granted by to creditors by virtue of Security Agreements entered into with Debtors is a crucial elements and factor to be considered in business practices as financial loans, whether separately, or as part of a Funds Du Commerce is the key to success with regards to most business ventures.
As per the provisions of Law 115 governing movable securities; it is apparent that any creditor who duly registers his/her interest in the Securities Register created by virtue said laws, enjoys optimum protection with regards to his ability to actively enforce and acquire his right to collateral subject to a Security Agreement.
However, with Law 11 of 2018 coming into effect in 2017; the question remains: Do Secured Creditors protected by Law 115 forfeit such protection? Has the new Bankruptcy Law affected their rights vested in collateral? The answer to this question varies and the factor that shall determine priority of a Secured Creditor will depend on two aspects:
1- The Registration Date of the Security Interest in Collateral.
2- The actions of the Secured Party with regards to the Bankruptcy Proceedings.
Provided that the collateral is duly registered in the Register prior to the insolvency of the Debtor; the collateral subject to the interest is removed from the assets pool that may be used by the liquidator for settlement. However and as per Article 20 of Law 115 of 2015 ” In cases were the Debtor becomes insolvent, declares bankruptcy or initiates insolvency proceedings, secured movable registered on the Securities Register are not included in the bankruptcy assets provided that the registration was made prior to the date of insolvency or the date of initiation pertaining to the insolvency proceedings. In these cases, Secured Creditors in accordance to the provisions of this Law must take the necessary measures and action for the sale of the collateral subject to their respective interests in accordance to the Security Agreement and to satisfy their respective rights in the collateral within one year of the date of insolvency or the date of initiating insolvency proceedings.”
When a creditor secures his interest as per Law no. 115/2015; said creditor who duly registers their security interest in accordance with Law no. 115/2015 and the procedures set forth in the Executive Regulation is deemed to have a privilege (priority) right. In connection to insolvency or restructuring of the Debtor, Bankruptcy Law no. 11 of 2018 stipulates the manner by which a Secured Creditor may avoid having the collateral deemed part of the bankruptcy assets pool. Article 136 of Law 11/2018 stipulates that secured creditors are not included in the insolvency claims and their respective information shall only be listed as a reference not as a party.
Article 128 of Law. 11/2018. Secured Creditors having a privileged interest may file a separate claim to the liquidator in connection to their interest; they may further execute their right pertaining to collateral provided that they send the required notification to (1) the liquidator and (2) the judge overseeing the insolvency/restructuring.
Regarding Inventory; Article 150 of Law no. 11/2018 stipulates the following “Without prejudice to the provisions of Law. 115/2015. If a buyer becomes insolvent prior to the payment of the price and after the movable enter his inventory for sale, the seller is prohibited from cancelling the sale contract and from re-acquiring the assets; the seller further forfeits his priority; and any agreements to the effect of re-acquiring the movables may not be raised against other creditors” As such, if the seller has secured his interest in accordance to Law 115/2015; his privilege remains valid and thus the aforementioned does not apply