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Dominican Republic

Last Verified on Friday 3rd March 2017

    • Dominican Republic

      Term loans and revolving credit facilities are the most common forms of medium term bank financing in the Dominican Republic. Commercial mortgage financing is also available as long term financing. In addition, syndicated and bilateral credit facilities allowing financing in multiple currencies of substantial amount of funding have become very common. It is noted that under our banking legal system security packages are taken into consideration for purposes of risk allocation provisions.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      No, there are not governmental or central bank approvals required for a foreign lender to provide financing to local companies or borrowers in the Dominican Republic.  Like wise the granting of security or guarantees to foreign lenders is not restricted or impeded in any way.

      Notwithstanding, loan agreement are subject to registration at the Central Bank for statistical purposes only.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      There are no foreign exchange restrictions in force either to remit funds to Dominican Republic or to remit those funds abroad. The Monetary and Financial law has fully liberalised the foreign exchange market by establishing the principle of free convertibility of the Dominican pesos.

      Nevertheless, money-laundering regulations subjects to certain formalities the conversion of local currency into US$10,000 or in excess thereof.

      Conversion transactions must be carried out through a banking or money exchange licensed institution.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      No regulation applies with respect to prepayment of cross-border loans. Prepayments of the loan is freely agreed among the parties.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      Our banking regulation provides for mandatory risk allocation provisions to be made by local banks before the Superintendency of Banks to cover contingencies. In addition, local banks must create regulatory reserve account at the Central Bank known as encaje legal. This reserve equals to a percentage of the total of funds deposited or raised under any type of instrument in national and foreign currency. Current percentages of encaje legal are: 14.3 for multiple banks and 10.1 for savings and loans associations as of January 2015.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      To the best of our knowledge there are no moratorium laws en effect in Dominican Republic. Thus, the declaration of the moratorium on loan obligations of private companies shall require the approval by the National Congress.  

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      Any environmental liability remains with the borrower as beneficiary of the environmental licence. The Ministry of Environment has authority to cease or close the project operations of the borrower/beneficiary and to revoke the environmental licence. The same principle applies to any other areas of liability as a result of the activities of the borrower.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      As a general rule all payments considered to be income of Dominican source are subject to local taxes. Payment of principal made to lenders is not considered income; therefore, they are not subject to taxes. However, interest paid or credited abroad are subject to a 10 per cent withholding tax.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      As mentioned above foreign loans are subject to 10 per cent withholding tax upon interests.

      As it regards to domestic loans if the lender is a corporation it is not subject to any withholding upon interest but must present and pay tax upon income. Notwithstanding if the local lender is an individual it must make the 10 per cent withholding tax upon interest.

      Payment made through electronic wire transfer from local bank to local and international bank and the issuance of checks are subject to a 0.0015 per cent charged levied on the value of the transferred amount or check. 

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      Currently the Dominican Republic has a tax treaty with Canada. This treaty avoids double taxation by agreeing on the mutual elimination of taxes on specified items of income. These items include special provisions for industrial and commercial profits, investment income, dividends, interests, royalty income, real property income, personal service income, etc.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      There are special laws under which favourable tax treatment, fiscal credits and other incentives are granted for certain markets and industries attracting financing structures. Among these laws, the Tourism Promotion Law 158-01, the Law on Promotion of Exports No. 84-99, the Law on Promotion of Free Trade Zone No. 8-90, Special Development Frontier Zone No. 28-01, Textile Market Law 56-07, Renewal Energy Law 57-7, Cinematography law No. 108-10, Retirement, Law 189-11 on Trust and Law 171-07 of Special Incentives to Retired individuals and Rent beneficiaries of foreign source.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      There is no current regulation limiting the interest to be charged by lenders when providing financing: thus, there is no usury rate or maximum allowable rate of interest in our jurisdiction. Our banking law and regulations provide that financial operations shall de done under free market conditions. The interest rate of transactions completed in local or foreign currency will be freely determined among market agents. The interest rate does not include closing fees, prepayment premiums, etc.

      However, pursuant to the Regulation for the Protection of the User of Financial Services, once agreed, the interest may not be unilaterally increased by the bank without written notice to the borrower. Such increase will not apply immediately and in case of certain financial products, such as credit cards and deposit accounts, the interest rate is to be clearly explained.    

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      Dominican individuals and Dominican entities may freely agree to submit their agreements to a foreign law and a foreign forum. Said submission has been duly recognised and enforce in Dominican Republic.

      Courts in the Dominican Republic will recognise a foreign governing law and enforce a contract subject to a foreign governing law, in general: however, the security interest over assets or interests deemed to be located in the Dominican Republic can only be created and enforced under the country's law. 

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      In any action or proceeding arising out of or relating to an outstanding loan, the courts of the Dominican Republic would recognise as valid judgment, a final and conclusive judgment rendered by the foreign court for the payment of fixed or readily calculable sum money against the borrower and would give a judgment based thereon without re-examining or re-litigating the merits of the original action, provided that such judgment rendered by the foreign court is declared enforceable through the issuance of a writ of execution exequatur by the corresponding Dominican court. Dominican courts will issue without need on a retrial if the following conditions are met:

      • there exists a treaty with the country where the judgment was rendered. Dominican Republic is party to the New York Convention; or
      • the judgment complies with: all formalities require for the enforceability thereof under the laws of the country of issuance; has been translated to Spanish together with related documents and satisfies the authentication requirements of Dominican Republic law; was issued by a competent court after valid service of process upon the parties to the action; was issued after an opportunity was given to the defendant to present its defence; is not subject to further appeal and is not against any public policy in the Dominican Republic.
      • In any event, the judgment shall not be contrary to the public policy of Dominican Republic.

      Assuming such a final judgment rendered by the competent court complied with the standards set forth above and in the absence of any condition referred to above, which would render such foreign judgment unenforceable, such judgment would be enforceable in Dominican Republic by means proceeding for the enforcement of a foreign final judgment under the laws of Dominican Republic.

      With respect to the principles of Dominican public policy referred to above, assuming that payments of commission, compensations or indemnity and reimbursement of costs and expenses represent usual conditions prevailing in the relevant financial markets, a Dominican court would not find any provision of lending agreement, with respect to such payments and reimbursements to be a violation of principles of Dominican public policy unless the applications in any particular case of a provision of the lending agreement, to make a unilateral determination as to amounts owed on account of indemnities or reimbursements would, in the judgment of the court, result in a recovery by the plaintiff so arbitrary and unreasonable as to be considered contrary to basic and fundamental principles of the Dominican legal system.

      Upon compliance with the above, the courts in Dominican will enforce a final conclusive for the payment of fixed or readily calculable sum of money rendered by the court having jurisdiction, under its laws, over the borrower, in an action arising from the lending agreement, including any other transaction entered into pursuant thereto in accordance with the procedure contemplated by the Code of Civil Procedure for the enforcement of foreign judgments.  

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      Stamp duties, registration taxes or other similar taxes would not be required with respect to the loan agreement and any note documents. However, costs vary depending on the type of security. Chattel Mortgage is subject to minimum payment at the Court of Peace. Registration of liens upon real estate implies a tax of 2 per cent tax upon amount secured. Finally, in case of pledges over intangibles assets, registration before the Civil Registry could be very steep as the amount of the transaction  

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      No registration is required locally. However, if a Dominican court is empowered for the execution of any of the parties’ obligations under the loan agreement it is mandatory to provide the court with Spanish translation by Dominican judicial translator of the credit documents.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      The enforcement of the lender’s rights does not depend upon the availability of a promissory note nor any form of execution document. However, the availability of a promissory or other form of execution document contributes to the speediness to obtain such enforcement.

      Therefore, the lender may seek the enforcement of its rights under an executive proceeding if loan is evidenced in a note or any other execution document, such as:  final and conclusive judgment, a notarised copy of a public deed; a notarial promissory note; or any title to which the law grants force of execution. On the other hand, if a lender does not have an execution document, the lender shall seek the enforcement of its rights in an ordinary proceeding and once a final judgment is obtained, it shall seek its enforcement.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      Yes. It would be necessary that the guarantee be evidenced by a guarantee agreement. Although our Civil Code provides that the parties may contract obligations verbally, it would be impossible to enforce and oppose the guarantee against third parties. 

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      Yes. A party may grant a secured or unsecured guarantee in respect of a loan to an unaffiliated third party provided that the pertinent authorisation is obtained from the pertinent corporate authority or body of the corporation pursuant to the quorum and majority provided by the corporation by-laws.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      Security can be granted over all kinds of assets depending on the creditor's request to cover the outstanding debt. Among others, security is granted as follows: mortgages over real property, liens and charges over moveable assets (tangible and/or intangible), charge over shares and securities, and its dividends and interests, liens over financial interests (bank accounts, investments, certificates of deposit), pledge over merchandise and goods stored in bonded warehouses; pledge over imported goods (in transit), corporate guarantees, endorsement of promissory notes, insurance policies, letters of credit and account receivables.

      The Dominican system provides a registration procedure to perfect a security interest. Under Dominican laws mortgages on mining concessions and real estate must be registered before the corresponding real estate registrar to be perfected, giving the secured lender the corresponding priority. Likewise, mortgage over chattel is perfected with the registration of the chattel mortgage contract at the Court of the Peace of the pertinent jurisdiction. On the other hand, commercial pledged on securities granted in favour of banks are perfected by the physical delivery of the pledged asset to the perfected lender given the corresponding priority.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      The most common form is the assignment of receivables and accounts. Assigment requires execution of an assignment agreement and notification of the assignment to the assigned debtor by bailiff act.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      Security interest in collateral registered under the name of a collateral agent for the benefit or one or more lenders are valid and recognised in Dominican Republic. The recently enacted Law for the Development of the Mortgage Market and the Creation of Trusts No. 189-11 provides for the security trust.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      Yes. As stated above, in accordance with the recently enacted Law for the Development of the Mortgage Market and the Creation of Trusts, a collateral agent may act as the sole secured party for the benefit of a group of lenders and may grant a security interest over the assets held in trust for the purposes of undertaking obligations assumed by the trustee for the benefit of the trust. Upon an event of default the fiduciary may transfer the assets held in trust to the creditor. 

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      According to Dominican law, the sale of any collateral must always be made through public auction. The auction is normally made by the corresponding court.

      However, please note that enforcement of collateral is made through court proceeding that are normally regulated by the laws governing the creation and perfection of the relevant security.

      The step to foreclose on a collateral vary depending on the type of asset but all of them entail sending a notice to the debtor with respect to the occurrence of an event of default, filing a lawsuit for the attachment of the security/asset and going through a public sale process.

      Last verified on Friday 3rd March 2017

    • Dominican Republic

      On 7 August 2015, a new legal statute on Restructuring and Liquidation of Companies and Business Persons (Law No. 141-15) was signed into law in the Dominican Republic. The law establishes mechanisms and proceedings to protect creditors in cases of financial difficulty of their debtors by allowing the latter to remain in operation and overcome the economic difficulties that prevent them from complying with previously undertaken obligations, thus achieving business continuity of companies and business individuals. This law will enter into effect on 7 February  2017, a date that is 18 months following its enactment.

      Law No. 141-15 applies to national or foreign debtors with domicile or continuous presence in the country. However, the following debtors are excluded from this law: commercial entities controlled by the state; financial intermediation entities regulated by the Monetary and Financial Law No. 183-02, dated November 2002, and its modifications; securities intermediaries, investment fund management companies, centralised security deposits, stock exchanges, securitisation companies and any other entity considered to be a stock market participant, with the exception of publicly traded companies and companies governed by Law No. 19-00 on Securities Market, dated May 2000.

      The Law sets forth the legal framework applicable to insolvency proceedings with international or cross-border effects, and has been drafted following the United Nations Commission on International Trade Law (UNCITRAL).

      For the first time in our legislation a restructuring process has been contemplated. Under this law in the event of temporal lack of liquidity or cessation of payments of the debtor, the debtor is granted the opportunity to restructure its operations and continue operating, allowing the company’s employment to continue, as well as protecting and facilitating the preservation of assets in favor of the creditors recognised by the debtor.

      The process involves a request of restructuring of the debtor the before the court through a petition. Following the restructuring request, the court has the obligation to appoint a person as the verifier, who will have the duty to verify the debtor’s financial situation and inform the court thereof. During the restructuring process, the creditors have the right to appoint a physical or legal person (as the creditor adviser) to assume their collective representation during the procedures and actions. Likewise, the employees of the debtor may also appoint a person who will act in the capacity of adviser for the employees. These advisers represent the collective interests of the respective interested groups with priority over other interested parties during the restructuring process.

      If the restructuring request is accepted the court’s decision must be duly notified to the debtor and the creditors. The court will then appoint a conciliator, whose principal role is to mediate between the debtor and its creditors in order to reach a restructuring agreement or restructuring plan.

      Upon appointment of the conciliator, the conciliation and negotiation process is initiated. During this process, the management of the debtor’s assets continues to be handled by the debtor, but remains subject to the supervision of the conciliator. Likewise, all judicial, administrative or arbitral decisions that affect the assets of the debtor, any enforcement or eviction procedures regarding the debtor’s moveable and immoveable property, calculation of interest under loans and other credit documents, among others, are suspended.

      During the conciliation process, the creditors must declare and supply to the conciliator the documents evidencing their assets (liabilities vis-à-vis the debtor). After the conciliator verifies and confirms such liabilities, this portion of the conciliation process concludes with the publication of a final list of liabilities.

      Once the liabilities have been verified, the debtor and conciliator must present the restructuring plan in case an agreement with the majority of the participants of the process is reached. However, in the event that such agreement is not reached, liquidation will be recommended to the court.

      Currently the legal community in working in a law draft for the perfection of guarantee over moveable property. Under the provisions of this draft it is contemplated the creation of a central registry to facilitate the perfection of security interest to secure the payment of credit obligations.    

      Last verified on Friday 3rd March 2017

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