A security interest is the legal right granted by the debtor to the creditor of the debtor's property (commonly referred to as collateral ) allowing the creditor to request assistance to the property if the debtor fails to make a payment or perform a secure obligation. One of the most common examples of security interests is a mortgage: When a person, with a transport action is disclosed, promises with a promise to pay a certain amount of money, under certain conditions, on a date or date to say period, that action on a page with wet ink applied on the part that hopes the exchange creates original funds and Instruments are negotiated. The promised action conveyed a promise binding on the mortgagee who created a nominal value on the instrument of the amount of currency demanded instead. That's where good faith is offered to the Bank in return for local currency from the Bank to buy a house. Certain state bank laws typically require the Bank to transfer such funds with negotiable instruments to the Main State Bank as well as in Canada. This creates a security interest in the land where the house is located at the Bank and they file a warning against the ownership of the land at home as evidence of the security interest. If a mortgage fails to pay a failed in its promise to repay the exchange, the bank then appeals to the court to cover up your property to eventually sell the house and apply the proceeds to extraordinary exchange.
Although most security interests are created by agreement between the parties, it may also be for security interests to arise by legal operations. For example, in many jurisdictions, a mechanic fixing a car benefits from a car's lien for repair costs. This Lien arises from legal operations without any agreement between the parties.
Most security interests are given by people who own property to secure their own debt. But it is also possible for someone to guarantee their property as collateral for someone else's debt (often called third-party security ). Thus, parents may provide security assurances over their homes to support business loans granted to their child. Similarly, most security interests operate to secure debt or other direct financial obligations. But sometimes security is provided to secure non-financial obligations. For example in construction, performance ties can secure satisfactory performance from non-financial liabilities.
The different types of security interests that can arise and the rights they provide will vary from country to country.
Video Security interest
Rationale
Secured creditors take security interests to enforce their rights to collateral in the event that the debtor fails to fulfill its obligations. If the debtor goes bankrupt, the creditor is guaranteed to take precedence over the unsecured lender in the distribution.
There are other reasons why people sometimes take over an asset. In shareholder agreements involving two parties (such as joint ventures), sometimes shareholders each will charge their shares to support others as collateral for the performance of their obligations under the agreement to prevent other shareholders from selling their shares to third party . It is sometimes suggested that banks can take the floating costs over the company by means of security - not so much for security for their own debt repayment, but because this ensures that there will be no other banks, usually, lend to the company; thereby virtually providing a monopoly in favor of a bank that holds a floating charge on the loan to the company.
Some economists question the usefulness of security interests and secured loans in general. Advocates argue that interest is guaranteed to lower the risk for the lender, and in turn allows the lender to impose a lower interest, thereby lowering the cost of capital for the borrower. For example, interest rates for mortgage loans (which are mortgages secured by real property) are much lower than credit card debt (where there may be no collateral at all, or such assurances are easily hidden or depreciated quickly).
Detractors argue that creditors with security interests can destroy companies that are in financial trouble, but who may still recover and benefit. The secured lender may be nervous and uphold initial security, take back the main asset and force the company into bankruptcy. Furthermore, the general principle of most of the insolvency regimes is that the creditor must be treated equally (or pari passu ), and allowing the secured creditors to select a particular asset disrupts the conceptual bases of bankruptcy.
More sophisticated criticisms about security show that even if the unsecured creditors will receive less on bankruptcy, they should be able to compensate by wearing a higher interest rate. However, since many unsecured creditors are unable to adjust their "interest rate" to the top (claimant, employee), the company benefits from a cheaper rate of credit, thus harming the non-adjusting creditors. Thus there is a transfer of value from these parties to the guaranteed borrower.
Most bankruptcy laws allow mutual debt to be set-off, allowing certain creditors (those who also owe money to a bankrupt debtor) pre-preferential position. In some countries, "voluntary" creditors (such as tort victims) also have a privileged status, and on the other, environmental claims have preferred privileges for cleaning costs.
The most commonly used criticism of secured loans is that, if a secured creditor is allowed to seize and sell a major asset, the liquidator or insolvency of the trustee loses the ability to sell the business as survival, and may be forced to sell the business on a break-up basis. This may mean getting a much smaller return for unsecured creditors, and will always mean that all employees will be made redundant.
For this reason, many jurisdictions limit the ability of secured creditors to enforce their rights in bankruptcy. In the US, the protection of creditors of Chapter 11, which completely prevents the enforcement of security interests, aims to keep the company running at the expense of creditor rights, and is often criticized for that very reason. In Britain, administrative rules have the same effect, but are less widespread in scope and restrictions in terms of creditor rights. The European system is often cited as pro-creditors, but many European jurisdictions also impose restrictions on deadlines to be obeyed before secured creditors can enforce their rights. The most violent jurisdictions that support creditor rights tend to be in offshore financial centers, who hope that, by having a highly biased legal system against secured creditors, they will encourage banks to lend cheaper prices to offshore structures, and thus in turn encourage businesses to use it to get cheaper funds.
Maps Security interest
Security interest type
Under English law and in most jurisdictions of common law derived from English law (the United States is an exception as defined below), there are nine main types of security interests of ownership:
The United States also developed the sale of conditional private property as another form of security interest, which is now obsolete.
The security interest in common law is ownership or non-post , depending on whether the guaranteed party really needs to take over the collateral. Or, they appear by agreement between the parties (usually by executing a security agreement), or by legal operation .
The legal evolution of unattractive security interests in private property has become very complicated and cluttered. Under the Twyne Case rule (1601) transferring interest in private property without also immediately transferring ownership is consistently deemed to be a fraudulent means of transport. More than two hundred years will pass before such security interests are recognized as valid.
The following discussion of the types of security interests especially concerns English law. The British law on security interests has been followed in most countries of common law, and most common law countries have similar property laws that govern the rule of law.
Type
Security interests can be taken on all types of property. The law divides the property into two classes: private property and real property. Real estate is the land, the buildings attached to it and the accompanying rights. A private property is defined as any property other than the actual property.
Valid KPR "Correct"
A legal mortgage arises when the asset is delivered to a party that is guaranteed as a guarantee of liability, but is subject to the right to own the reconstructed assets when the obligations are made. This right is called the "redemption equity". The law has historically taken a dim view of the provisions that could impede this right to own reconstructed assets (referred to as "blockages" on the redemptive equity); although the position has become more relaxed in recent years in relation to sophisticated financial transactions.
References to "correct" mortgage laws mean mortgages by traditional common law transfer methods are subject to proviso in this way, and references are usually made in contradiction to either a fair mortgage or a legal mortgage. The actual legal mortgage is relatively rare in modern trade, beyond sometimes in respect of shares in the company. In the UK, true land mortgage law has been removed for the sake of the law mortgage.
In order to resolve a legitimate mortgage, it is usually necessary that the property rights on the asset be submitted to the name of the guaranteed party in such a way that the guaranteed party (or the candidate) becomes the legal rights holder of the asset. If a mortgage law is not settled in this way it will usually act as a fair mortgage. Due to the requirement to transfer the title, it is not possible to take a legal mortgage on a future property, or take more than one legal mortgage on the same asset. However, a mortgage (legal and fair) is an unfortunate security interest. Usually the party that gives the mortgage ( mortgagor ) will still have the mortgaged assets.
The holders of mortgage law have three main solutions in the event of default on guaranteed liabilities:
- they can cover up the asset,
- they can sell assets, or
- they can appoint a recipient of an asset.
Mortgage holders can also usually sue on the agreement to pay that appears on most mortgage instruments. There are various other solutions available to mortgage holders, but they are mostly related to land, and therefore have been supplanted by law, and they are rarely done in practice in relation to other assets. Mortgage recipients (mortgagee ) are entitled to pursue all solutions simultaneously or in sequence.
Foreclosures are rarely done as a remedy. To foreclose, the secured party needs to petition to court, and orders are made in two stages ( nisi and absolute ), making the process slow and impractical. Courts have historically been reluctant to provide foreclosure orders, and will often order judicial sales. If an asset is worth more than a guaranteed obligation, the guaranteed party should normally take into account a surplus. Even if the court makes an absolute decision and foreclosure orders, the court retains the absolute discretion to reopen foreclosure after the creation of the order, although this will not affect the title of the third party buyer.
Legal mortgage holders also have sales force over assets. Each mortgage contains an implied sales force. This implied power exists even if the mortgage is not under the seal. All mortgages made in the manner also usually contain the sales force implied by the law, but the exercise of legal power is limited by the provisions of the law. Both implied sales forces require court orders, although courts are usually also able to order the sale of the judiciary. The guaranteed party has an obligation to get the best possible price, however, this does not require that the sale be done in a certain way (ie with a sealed auction or offer). How much the best price can be earned will depend on the available market for assets and related considerations. Sales must be real sales - a mortgagee can not sell to himself, either alone or with others, even for fair value; such sales may be limited or sidestepped or ignored. However, if the court orders the sale under the law, mortgagee can be expressly authorized to purchase.
The third drug is to designate the receiver. Technically the right to appoint a recipient may arise two different ways - under the terms of a mortgage instrument, and (where the mortgage instrument is run as a deed) by law.
If mortgageers take possession then under general law they owe a strict duty to the mortgagor to keep the value of the property (although the provisions of a mortgage instrument will usually limit this obligation). Nevertheless, the rules of common law are mainly related to physical property, and there is a lack of authority on how they might apply to take "ownership" rights, such as shares. Nevertheless, a mortgagee is advised to continue to honor their obligation to retain the value of the mortgaged property both for their own benefit and under their potential responsibility to the mortgagor.
Fair Mortgage
A fair mortgage can appear in two different ways - either as a legal mortgage that is never perfected by conveying the underlying asset, or by specifically creating a mortgage as a fair mortgage. A mortgage on a just right (such as the interests of a recipient under trust) will always exist in equity only in any case.
Under the laws of some jurisdictions, only the deposit of title documents may result in a fair mortgage. In connection with this land has now been removed in the UK, although in many jurisdictions the company's shares can still be pawned with stock certificate deposits in this way.
In general, a fair mortgage has the same effect as an enhanced law mortgage except in two respects. First, being a fair right, it will be extinguished by a bona fide buyer for a value that has no notification about the mortgage. Secondly, since the legal right to the mortgaged property is not actually granted to the guaranteed party, it means that the necessary additional steps are imposed in connection with the implementation of the recovery such as foreclosure.
Mandatory Mortgage
Many jurisdictions allow certain assets to be pawned without transferring ownership of assets to the borrower. In principle, legal mortgages relate to land, registered aircraft and registered vessels. In general, mortgageers will have the same rights as they have under a real traditional law mortgage, but the way enforcement is usually regulated by law.
Equitable filling
Fixed fixed costs confer a right on a party guaranteed to view (or apply) certain assets in the event of a debtor's failure, which may be exercised either by a sales representative or the appointment of the recipient. This is probably the most common form of security for assets taken over. Technically, the cost (or "mere" cost) can not include the power to enforce without legal intervention, because it does not include the transfer of ownership of the property to the assets charged. If the fee includes this right (such as a personal sale by the recipient), it's a really fair mortgage (sometimes called a fee by way of mortgage). Because of little change in these differences, the term "payload" is often used to include a fair mortgage.
Equal charges are also an unfortunate form of security, and the coste recipient ( chargee ) does not need to retain ownership of the billable property.
If the security equivalent of a charge awarded by an individual (as opposed to a corporate entity) is usually expressed as a sales charge, and is subject to applicable sales laws. Difficulties with the Bills of Sale Act in Ireland, England and Wales have made it almost impossible for individuals to make a floating charge.
Floating payload
Similar floating costs apply to charge the same cost after they crystallize (usually at the commencement of the liquidation process of the successor), but before that they are "floating" and are not attached to any of the chargor's assets, and free fixed costs to handle or dispose of. The US equivalent is a floating lien, which unlike the floating costs, can be provided by all types of debtors, not just corporate entities.
Pledge
A promise (also sometimes called a pawn) is a form of proprietary security, and therefore, the asset being promised needs to be physically delivered to the recipient of the promise (promise ) . Promises are in the commercial context used in trading companies (mainly, physically, commodity trading), and still used by pawnshops, which, contrary to their old world image, remain a regulated credit industry.
Pawn has a general legal force of sale in the event of default on a guaranteed obligation arising if the obligation is guaranteed not satisfied with the agreed time (or, in the failure of the agreement, within a reasonable period of time). If the sales force is exercised, the pledgeholder must be accountable to the fund maker for any surplus after payment of the guaranteed obligations.
Promises do not confer the right to designate a recipient or seizure. If the holder of an appointment sells or disposes of a secured asset when it is not entitled to do so, they may be liable in conversion to the governor.
The main flaw with the pledge is that it requires physical possession by its promise, which traps the business pioneer in a paradox. Unless the pledge actually occupies the same place as the pledger, the transferred collateral is not available to the pawnbroker to operate the business and generate revenue to pay for the mortgage. Lawyers in many jurisdictions try to address this issue with creative tools such as conditional sales and receipt of trust (see below) with varying results.
Legal suit
Legal liens, in many common legal systems, include the right to retain the physical ownership of tangible assets as collateral for the underlying obligations. In some jurisdictions it is a form of proprietary security, and ownership of an asset must be transferred to (and maintained by) a guaranteed party. In the case of mortgage ownership, the right is purely passive. In the case of a mortgage, the guaranteed party (lienor ) has no right to sell the asset - only the right to refuse to return it until it is paid. In the United States, lien can be an unfortunate security interest.
Many legal lien appear as a matter of law (by common law or by law). However, it is possible to create legal lien under contract. The Court has affirmed that it is also possible to provide sales force to the party guaranteed in such a contract, but the law of such matter of authority is limited and it is difficult to know what limitations and obligations will be imposed on such an exercise. a force.
Lien equivalent
Fair lien is the slightly amorphous forms of security interest that arise only with legal operations under certain circumstances. It has been academically noted that there seems to be no real unifying principle behind the circumstances that gave rise to it.
Fair lien applies basically as a fair cost, and only arises in certain situations, (eg unpaid vendor lien in relation to property is the same rights; maritime lien is sometimes regarded as a fair lien). It is sometimes argued that where a company's constitutional document states that the company has rights to its own shares, this provision applies as a fair liability, and if the analysis is true, then that may be the only exception to the rule. that fair liens arise by legal operations rather than by covenant.
Hypothecation
Hypothecation, or "trust receipt" is a relatively rare form of security interest in which the underlying assets are promised, not by the delivery of assets as in conventional agreements, but by the delivery of documents or other proof of ownership. Hypothecation is usually seen in relation to bottomry (bills of lading), where bill of lading is supported by a guaranteed party, which, except redeemed security, can claim property by billing delivery.
Conditional sales
Another form of growing security interest in the United States at the end of the 19th century and the first half of the 20th century was conditional sales, the ancestors of today's US lawyers calling money security interest purchases (PMSI). It was popular in that era among the creditors for two reasons. First, most US states have imposed severe restrictions on chattel mortgages to protect debtors (when debtor prisons are removed but still in the memory of most people alive), and secondly, all US states of that era also have anti- strictly. Conditional sales, at least initially, look free from both problems.
Under pressure from their creditors and lawyers, the US courts gradually developed a very technical distinction between absolute, unconditional sales, where sellers merely become unsecured creditors of other buyers, and conditional sales, where the sale of goods is made dependent on several conditions such as payment of the price in installments). Thus, a buyer's breach of a material condition, in turn, allows the seller to declare the contract has expired, that the status quo ante must be recovered, and to retrieve the appropriate items. Because the buyer has infringed, he has lost his right to substitute part of the price already paid, or in alternatives the payment may be considered a raw form of lease for the use of the Goods.
Because conditional sales became popular to finance industrial equipment and consumer goods, the US state legislature began to organize it as well during the early 20th century, with the result that they soon became almost as complicated as the old forms of security interests they had used. to avoid.
Flower vs. security general liability
Some liabilities are only supported by the security interests of certain property, and the obligation of debt repayment is limited to the property itself, without further claim to the obligor. This is referred to as "nonrecourse liability".
Other liabilities (ie liability responsibilities) are supported by the full credit of the borrower. If the borrower fails, then the creditor can force the obligor into bankruptcy and the creditor will divide all the assets of the obligor.
Depending on the relative obligor credit, asset quality, and structure availability to separate the asset liabilities from the obligor obligations, the interest rate charged to one may be higher or lower than the other.
Perfection
Perfection of security interests means different things to lawyers in different jurisdictions.
- in English law, perfection has no legal or judicial meaning prescribed, but academics have emphasized the view that it refers to the attachment of security interests to the underlying asset. Others argue unequivocally that the attachment is a separate legal concept, and that perfection refers to whatever steps are necessary to ensure that security interests can be upheld against third parties.
- In American law, perfection is generally taken to refer to any measures necessary to ensure that security interests remain applicable to other creditors or other parties, including the insolvency trustee in the case of a bankruptcy of the debtor.
The second definition becomes more commonly used commercially, and is arguably preferred, since the use of traditional English law has little purpose except in relation to a truly rare law mortgage (very few other security interests require additional steps to stick to assets Security interests often requires some form of registration to be enforced in connection with bankruptcy of the requesting party).
"Quasi-security"
There are a number of other arrangements that can be applied by parties that have the effect of conferring security in a commercial sense, but not actually creating a security interest in assets. For example, it is possible to provide the power of attorney or conditional election to support guaranteed parties related to the subject matter, or to use title retention settings, or execute undated transfer instruments. While these techniques can provide protection for guaranteed parties, they do not confer ownership of property in assets related to regulation, and their effectiveness may be limited if the debtor goes bankrupt.
It is also possible to replicate security effects by transferring assets directly, provided that the assets are transferred back once the guaranteed obligations are settled. In some jurisdictions, this arrangement can be categorized as a grant from the mortgage, but most jurisdictions tend to allow free parties to characterize their transactions as they see fit. A common example of this is financing using a stock loan or repo agreement to guarantee cash advance, and the transfer of title arrangements (for example, under "Transfer" establishing a credit support UK Legal attachment to the ISDA Master Treaty (which is differentiated from other forms of CSA, which provide security)).
Laws in various jurisdictions
European Union
Laws pertaining to the taking and enforcing of security vary by country, and depending on whether it is from general law or civil law.
In the European Union, Setting the Financial Warranty Settings provides deprivation as a drug to secure financial security. In the UK, this has been introduced under the Financial Collateral Arrangement (No.2) of Regulation 2003 in which the mortgage asset is "financial security" and the mortgage instrument stipulates that the rules apply. Appropriations are the means by which the mortgagee can take ownership of the asset, but must be accountable to the mortgagor for fair market value (which must be determined in the mortgage instrument), but without the need for a court order. In 2009, the Justice Committee of the Advisory Panel ruled that as a matter of English law:
- A designation closer to sales than foreclosure. This applies the sale by the assurance maker to himself, at a price determined by the agreed appraisal process.
- No need, for a valid allocation, for the assurance taker to become a registered shareholder.
- Commercial practicability requires that there should be concrete actions that obscure the intention to use the power of appropriation, communicated to the collateral provider.
The principles under which equitable assistance can be sought, in which appropriations have been carried out under English law, are disclosed in 2013 at Cukurova Finance International Ltd. v Alfa Telecom Turkey Ltd. .
United States (Uniform Commercial Code)
In the late 1940s, the United States (US) legal community arrived at a consensus that traditional customary law differences were outdated and did not serve a useful purpose. They tend to generate too much unnecessary litigation about whether the creditor has chosen the right type of security. There is a growing recognition that different types of security interests are flourishing just because on the one hand, many judges think there is something inherently wrong with letting someone, either out of desperation or stupidity, to immediately weigh on all his personal properties. as collateral for the loan, but on the other hand, the debtor and the creditor will endeavor to achieve the desired outcome in any way necessary, even if it means creating some security interests to cover different types of personal property. There is also the issue of the early English cases mentioned above which consider these security interests to be fraudulent carriers and fail to recognize that they have legitimacy in the modern industrial economy. Therefore, since the history of security interests shows that the judicial resistance to upholding the vast security interests will not stop borrowers from trying to give them as persuasion to creditors to expand financing, and that they are socially useful under the circumstances The better, the better option is to make the law of security interest as clear and simple as possible.
The result is Article 9 of the Uniform Commercial Code (UCC), which regulates the security interests in personal property (as opposed to real estate) and establishes an integrated concept of security interest as a right in property of the debtor securing the payment or performance of an obligation.
Article 9 is subsequently enforced, though not entirely without variation, by 50 states, the District of Columbia, and most of the region.
Under Article 9, security interests are created by security agreements, in which the debtor provides security interests in the debtor's property as collateral for a loan or other obligation.
The security interests give the holder the right to take remedial action in respect of the property, after the occurrence of certain events, such as not repaying the loan. The creditor can own such property to meet the underlying obligations. The holder will sell the property at a public auction or through a private sale, and apply the proceeds to meet the underlying obligations. If the proceeds exceed the amount of the underlying liability, the debtor is entitled to the excess. If the result fails, the security interest holders are entitled to a deficit assessment in which the holder may institute additional legal proceedings to recover the full amount unless it is a non-recourse debt like many mortgage loans in the United States.
In the US the term "security interest" is often used interchangeably with "lien". However, the term "lien" is more often associated with real property collateral than with private property.
Security interests are usually provided by "security agreements". Security interests are established in respect of the property, if the debtor has ownership interest in the property and the security interest holders provide value to the debtor, such as providing the loan.
The holder may "fine-tune" the security interest to place third parties with notices thereof. Perfection is usually accomplished by filing a financing statement with the government, often a state secretary located in a jurisdiction where a corporate debtor is established. Perfection can also be obtained by ownership of collateral, if the collateral is a real property.
Incomplete, security interest holders may have difficulty in enforcing their rights in warranties with respect to third parties, including bankers in bankruptcy and other creditors who claim security interests in the same collateral.
If the debtor fails (and does not file for bankruptcy), UCC offers creditors the option of suing the debtor in court or disposition with public or private sales. UCC dispositions are designed to be held by private parties without legal involvement, although other secured debtors and creditors of the debtor have the right to sue the creditor who disposes if not done in a "commercially reasonable" way to maximize the proceeds from the sale of collateral.
Article 9 is limited in scope to personal property and equipment (ie, personal property attached to real property). The security interests in real property continue to be governed by non-uniform laws (in the form of law or law of the case or both) that vary dramatically from one state to another. In a small portion of the state, a trust deed is the primary instrument for taking security interests in real property, while mortgages are used in the rest.
Commonwealth
As mentioned above, the core insight of UCC Article 9 is that the traditional distinction is very obsolete, which was very influential elsewhere and inspired the enactment of the Private Security Act in Canada during the 1990s. Although Ontario was the first province to enforce the law in 1990, all other Canadian provinces and territories followed the example established by the PPSA Saskatchewan passed in 1993. PPSA is generally similar to the UCC Article 9. However, they differ substantially in some issues such as rental property maintenance, and effectiveness of financing statements after the debtor changed its name. Quebec has not enacted PPSA but part of the Quebec Civil Act 1994 which governs the hypothesis is clearly influenced by PPSA and Article 9, and the province has made further amendments to the Civil Code to allow for more types of transactions already available in Article 9 jurisdictions.
In turn, international development experts admitted in the mid-1990s that security law reforms were a major reason for the prosperity of Canada and the United States, having allowed their businesses to finance growth through secured loans that did not exist elsewhere. The International Monetary Fund, World Bank, and other international lenders are beginning to encourage other countries to follow the example of Canada as part of the structural adjustment process (consultation processes are often required as a condition of their loans). The Canadian PPSA was followed by the New Zealand Personal Property Securities Act 1999, the Vanuatu Personal Property Act 2008, the 2009 Private Property Rights Act, the Papua New Guinea Property Rights Act of 2012, the Jersey Security Act 2012 (includes intangible private property only), Samoa Personal Property Securities Act 2013, and Jamaican Security Interest in the Personal Property Act 2013.
The actions of Canada, New Zealand and Australia all follow the UCC's "functional approach" approach and borrow a large portion of the terms and framework of Article 9. However, New Zealand, as a unitary state, only needs to enact one action for the whole country and be able to create one national "list" for security purposes. While the US enacted Article 9 at the state level and Canada enacted PPSA at the provincial level, Australia, other common law federations, deliberately imposed a new federal security law to replace more than 70 state laws and created a similar list with New Zealand.
Civil Code
The first major effort to bring the benefits of UCC Article 9 into the jurisdiction of civil law was launched by the European Bank for Reconstruction and Development in 1992, which resulted in the EBRD Model Law for Guaranteed Transactions in 1994. However, the Law of EBRD Model approach for all subjects differed radically of UCC Article 9, and it is also very limited. For example, it has no provision for the security interest of purchase money. Nearly all Central and Eastern European countries reformed their guaranteed transaction laws in the 1990s and 2000s, although most of them obtained ad hoc native solutions or followed the Law of the EBRD Model to some extent. Only Albania, Kosovo, and Montenegro are trying to follow the UCC approach of Article 9.
In 2002, the Organization of American States announced the Inter-American Law Model of Guaranteed Transactions, in response to rapidly growing empirical evidence that the chronic failure of the Latin American legal system to support modern asset-based financing is the main reason for economic instability in the region. The OAS Model Act seeks to import many of the best parts of UCC Article 9 into the sphere of Latin American civil law, but with broad revisions to the region's unique issue. The OAS Model Act has been enforced to some extent in several countries, including Mexico (2000, 2003, and 2010), Peru (2006), Guatemala (2007), and Honduras (2009).
To date, only Honduras can fully enforce and actually apply the OAS Model Law in a manner that is faithful to the spirit of UCC Article 9, in the sense of uniting security interests and making it easily visible in the public registry. At the launch of the American Prosperity Preparedness program in San Jose, Costa Rica on March 4, 2010, then-US. Secretary of State Hillary Clinton stressed that "the United States is committed to working with our Pathways partners to modernize legislation governing loans so that small and medium businesses can use assets other than real estate as collateral for loans," and generously praises Honduras for its efforts his aggressive reforms.
Source of the article : Wikipedia
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