Project Finance - Assets Security

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Security

Is it possible to give asset security by means of a general security agreement or is an agreement required in relation to each type of asset?

The Code of Commerce allows a Panamanian company to grant a pledge agreement over movable property. Some of the general characteristics of a pledge agreement governed by the laws of Panama are as follows:

• it extends to payment of principal, interests, and conservation and collection expenses;

• the pledge agreement may contain a clause authorising the pledgee to appropriate or take over the property given in pledge in the event of a default, namely private sale, but subject to appraisal by two brokers selected by each of the parties, or by a third broker designated by these two in case of disagreement, or by the corresponding judicial authority in the absence of designation thereof; and

• the parties to a pledge agreement must agree the method that will be used to determine the value of goods given in pledge for purposes of a private sale or appropriation thereof, to ensure a fair valuation, upon application, of the amount owed. If no such valuation is agreed upon in the corresponding contract, the parties must appoint appraisers and ultimately it will be decided by a court in the event of disagreement.

Panamanian law also contemplates the possibility of execution of a general pledge of assets located outside of Panama. This general pledge of assets may be granted via a public instrument issued in Panama or by a private document authenticated by a Notary Public in the jurisdiction where it is executed and thereafter legalised by a Panamanian consul or by apostille. The general pledge of assets may be governed by a foreign law and must be registered at the Public Registry Office in Panama to be valid against third parties. This type of pledge would only affect assets situated outside Panama and will not enjoy preference over charges made against specific assets.

Project Finance in Panama – María de Lourdes Marengo (mmarengo@pmalawyers.com) | Nadya Price (nprice@pmalawyers.com)

PATTON MORENO & ASVAT, the experienced legal guidance you can trust.