The Superintendence of Companies reiterated its position: mortgages are not subject to registration in the Registry of Securities

Last February, the Superintendence of Companies (“SC”) issued Concept 220-006186 of 2021, in which it re-stated that mortgages are not subject to registration in the Registry of Securities (Registro de Garantías Mobiliarias “RGM”), managed by Confecamaras, as it has been reiterated by this entity since 2016.

This document also addresses an important issue related to the treatment of mortgages in insolvency proceedings, according to Law 1116 of 2006 and articles 50, 51 and 52 of Law 1676 of 2019 (“Securities Over Movable Assets Law”).

Hereunder, we provide a brief summary of the most relevant elements exposed in the aforementioned concept.

Registry of mortgages

Mortgages are subject to registry in the Office for the Registry of Public Instruments, according to what is provided by articles 740, 756 and 796 of the Civil Code and by article 4 of Law 1579 of 2019.

Therefore, the SC insists that mortgages cannot be registered in the RGM, an especial registry created by the Securities Over Moveable Assets Law to make security interests over moveable assets enforceable to third parties.

Mortgages in insolvency proceedings

Ever since the Securities Over Moveable Assets Law was enacted, and due to the advantages that this regime provides to secured creditors, the SC has received several requests to answer queries regarding the possibility to “extend” this regime to mortgages.

In response to this, the SC has explained in various memorandums that the aforementioned possibility is only valid in relation to insolvency proceedings. According to articles 50, 51 and 52 of the Securities Over Moveable Assets Law, some privileges given to securities by their regime are applicable to mortgages, since they can be classified as a collateral (garantía real). For instance, the real estate property object of mortgage can be excluded of the bankruptcy’s assets, in favor of the mortgage creditor. Hence, the mortgage creditor has an advantage in relation to the classification of its credit, which defines the order in which credits must be paid in the insolvency proceeding.

Thus, the SC reiterated the position adopted since the issuance of Auto 000359 of the 19^th of February 2016 by the Insolvency Proceedings Office and explained, once again, the consequences of the analysis and application of articles 50, 51 and 52 of the Securities Over Moveable Assets Law in relation to mortgages in said proceedings:

1. Mortgages constituted before the enactment of the Securities Over Moveable Assets Law (21^st of February 2014), are subject to the conditions and classification in the insolvency proceeding established by the regulation in force at said moment. Hence, the advantages for mortgages contained in articles 50, 51 and 52 of the Securities Over Moveable Assets Law are not applicable in such case. The SC explains this by saying that “new laws cannot disavow legal matters or relationships that were validly constituted under the previous regulation, nor can they deny the consequences that they generated when they were in force”;
2. On the contrary, mortgages constituted after the enactment of the Securities Over Moveable Assets Law do have the privileges mentioned in articles 50, 51 and 52 of said law, but only in relation to insolvency proceedings;
3. The notion of mortgage creditor is not compatible with that of secured creditor, established in article 8 of the Securities Over Moveable Assets Law. This issue was widely debated after the enactment of the aforementioned law. Initially, some stated that it would be required to register a mortgage in the RGM so that its creditor would become, then, a secured creditor. This concept reiterated the incompatibility of these two kinds of creditors and the impossibility to register mortgages in the RGM;
4. It is up to the Insolvency Proceedings Office from the SC, in its judicial precedent, to determine the rules that will be applicable in relation to the rights for mortgage creditors in relation to the insolvency proceeding.

In conclusion, it is only possible to “extend” the Securities Over Moveable Assets Law regime, and some of its benefits, to mortgages in relation to insolvency proceedings. However, under no circumstance it is possible to register mortgages in the RGM. The register of mortgages must be made in the in the Office for the Registry of Public Instruments, according to what is established in the civil law. This register is enough to enforce mortgages under any scenario and to receive the benefits given by the Securities Over Moveable Assets Law in an insolvency proceeding.