Comments on the Mexican Non-Possessory Pledge
The Mexican General Law of Negotiable Instruments and Credit Transactions (Ley General de Títulos y Operaciones de Crédito) contemplates the non-possessory pledge as an additional form of security available in Mexico, which constitutes a right over movable assets with the purpose of guaranteeing the performance of an obligation. Under this legal structure, the guarantor preserves at all time the possession of the pledged asset, and may use it and benefit from the products derived from such asset as long as the pledge remains in effect, if so agreed by the parties, while at the same time being obligated to allow the creditor to inspect the asset.
The non-possessory pledge has significantly enhanced the range of security interests offered by our legislation to structure secured transactions involving movable assets. Since its introduction in the year 2000, this type of pledge quickly became an attractive alternative to the traditional forms of Mexican guarantees, such as the bonds, third-party guarantors (avales), mortgages and traditional pledges.
This type of pledge has increased the business opportunities for global financial firms to participate in the Mexican financing market, particularly in the small and mid-size companies’ sector. The structure, generally well-known and adopted as an ordinary form of guarantee in many countries, has eased the structuring efforts for transactions and reduced the costs of preparing tailor-made security agreements enforceable in Mexico, the cost and burden of which made this source of funding out of reach for small companies.
The proper structuring of the non-possessory pledge may provide a bank or creditor with a first priority pledge over all or part of the movable assets of a business, whether inventory, raw material, accounts receivable, office equipment, cash, rights, intellectual property, or any others. Due to the fact that the possession of the pledged assets is maintained by the guarantor, the non-possessory pledge does not jeopardize the business operations of the guarantor, allowing the business to continue to be run in its ordinary course, turning it into an ideal instrument so that those seeking secured financing may continue operating their businesses and generating income that will eventually enable them to repay their debt.
The General Law of Negotiable Instruments and Credit Transactions, which governs this legal figure, establishes the types of assets that may be granted as collateral under this type of pledge, including: (i) assets and rights existing at the time of, or after, the creation of the pledge, including intellectual property rights; (ii) assets derived as proceeds or future products; (iii) assets resulting from transformation processes of the assets; and (iv) assets or rights that the debtor receives or is entitled to receive.
When formalizing a non-possessory pledge, it is advisable that other covenants and agreements become part of the guarantee structure. These ancillary obligations will enable to creditor to have access to first-hand and timely information on the composition of the pledged assets, its location, and other material information. Such information will be very valuable to the creditor if at any time the pledge needs to be executed and the pledges assets disposed of for the purposes of satisfying the guaranteed obligation.
The agreement by means of which the non-possessory pledge is granted must be in writing and, if the amount of the secured credit is equal to or greater than the equivalent in national currency of two hundred fifty thousand investment units (UDIs), that is, approximately U.S.$119,000.00 (One Hundred Nineteen Thousand 00/100 Dollars of the United States of America) as of the date hereof, the parties must ratify their signatures before a notary public. Additionally, the registration of the pledge agreement in the Sole Registry of Guaranteed Personal Property (Registro Único de Garantías Mobiliarias), is required in order for the non-possessory pledge to have effects against other creditors and third parties. It is as a result of the registration process that the creditor gains a priority right over the pledged assets and against any other claims or encumbrances of third parties.
The non-possessory pledge constitutes a valuable instrument, particularly suitable for certain commercial-type security interests where the collateral assets are variable, undefined, or flexible. However, despite its benefits, it is not a perfect instrument; in fact, many transactions may be better structured through one of the “traditional” forms of security, making it important to analyze the particular circumstances of each case and to remain open to the full range of available options.
It is important to have an experienced and professional team of attorneys to advise the parties in the structuring of any security interest, such as the non-possessory pledge, as this may result to be cost-effective and beneficial for the secured party, particularly during any future enforcement or non-enforcement proceedings.
Our firm has extensive experience in the negotiation and implementation of non-possessory pledge agreements, both with domestic and foreign creditors, and we are prepared to advise those who wish to make use of this instrument in the operation of their business in Mexico.
February 2026.
This article was originally written in 2001 by Jaime Treviño and updated and complemented in February 2026 by Tracy Delgadillo and Emilia Cardona. Please send any questions or comments to info@jata.mx. The original author is the Managing Partner of JATA – J.A. Treviño Abogados and the Resident Partner of the firm’s Houston office, and may be contacted at jtrevino@jata.mx. The co-authors who updated and complemented this article are a Partner and a Senior Associate at JATA and may be contacted respectively at tdelgadillo@jata.mx and ecardona@jata.mx. JATA is a Mexican law firm with offices in Monterrey, N.L., Mexico, and Houston, Texas.
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