The Group of Practice of Banca, Finanzas & Capital Markets of Gómez-Pinzón Abogados is recognized by the market and by specialized international publications as a leader in Colombia and one of the most important in Financial Law in the region.
The Firm’s clients are usually international banks with interests in Colombia, Colombian financial institutions, Colombian and foreign issuers that have advanced public offerings in the Colombian market, in international markets and local and foreign investment banking and multilateral institutions. of credit. The experience of this Group is unmatched in Colombia.
New law prohibits penalties for advance credit payments
On July 27, Law 2033 of 2020 was issued, which allows the advance payment of credits denominated in Colombian pesos and prohibits the imposition of penalties for such payment. On the one hand, in the case of credits granted by entities of the cooperative sector, the law establishes that these entities must inform their clients about the possibility of paying their obligation in advance. In turn, customers can decide whether their advance payment paid to capital will decrease the term of the obligation or the number of installments, or if the value of the installment of the obligation will decrease.
On the other hand, for other credit operations or contracts for the acquisition of goods or provision of services in which the seller or supplier directly grants financing to the consumer, the consumer may make partial or total advance payments to the balance of his debt, without the possibility of establish penalties or demand the payment of interest for the remaining term. In any case, the benefits of the law will only apply to credits whose value does not exceed 880 monthly minimum wages in force.
The escrow trust is a security interest
Responding to a general query, the Superintendency of Companies reiterated that the rules contained in Law 1676 of 2013 are applicable to the trust contract in guarantee. As it is a contract whose purpose is to guarantee the fulfillment of obligations contracted with third parties, the Trust in guarantee is considered a security interest in accordance with Law 1676. Likewise, the Superintendency confirmed that the parties to the trust in guarantee contract can freely agree on the mechanism of execution of the guarantee object of the contract.
ABC of passive external debt
What requirements must the Passive External Indebtedness meet when it is granted in legal currency?
- The NRC must be a legal person, including foreign financial institutions. NRC natural persons cannot grant loans in legal or foreign currency, except for some events authorized by Banrep.
- A local financial institution authorized to act as an intermediary in foreign exchange transactions (Exchange Market Intermediary “IMC”) must act as an intermediary between the NRC and the RC to disburse the loan in legal currency and to make reports to Banrep. Despite this intermediation, the NR will continue to be considered as the Creditor of the operation.
- The loan in legal currency must be disbursed by the NRC in a local account of the RC with an IMC, used exclusively for Liability External Debt. The funds in legal currency must come from an Exclusive Use Account owned by the NRC, opened with an IMC. Any payment of principal, interest, commissions or any other charge related to the loan in legal currency must also be channeled through this Exclusive Use Account.
- Exclusive Use Accounts can be funded by the NRC with (i) foreign currency transfers channeled through the IMC (ii) disbursements of loans in legal currency granted by local banks to the NRC (iii) resources in legal currency obtained by the NRC of the issuance of securities in the Colombian market (iv) liquidation of foreign portfolio investments of the NR (v) other income from transactions of External Debt Liabilities paid to the NR in legal currency (vi) returns received in the Use Accounts Exclusive and, (vii) sales of foreign currency to obtain legal currency. The remaining funds in the Exclusive Use Account can be used to make portfolio investments.
- The Colombian financial regulation considers foreign financial institutions, regulated entities that under their own local regime are authorized to act as banks, stock brokers and / or managers or fund advisers, among other financial activities, subject to Colombian law when they wish to offer Colombian residents, financial products and services or the stock market.
- According to article 7 of External Resolution 1 of 2018 issued by the Board of Directors of Banco de la República, the following entities can act as IMC: (i) Banking Establishments, (ii) Financial Corporations, (iii) Financing Companies, (iv) Financiera de Desarrollo Nacional SA, (v) Banco de Comercio Exterior de Colombia SA – BANCOLDEX, (vi) Financial Cooperatives, (vii) the Stock Brokerage Companies; (viii) Foreign Exchange Intermediation and Special Financial Services Companies – SICSFE; and (ix) the Specialized Companies in Electronic Deposits and Payments – SEDPE, (x) the Territorial Development Finance Company – FINDETER, (xi) the Fund for the Financing of the Agricultural Sector – FINAGRO, (xii) the Colombian Institute of Educational Credit and Technical Studies Abroad – ICETEX, (xiii) the National Promoter of Territorial Development – ENTerritorio, (xiv) and the National Savings Fund – FNA.
- The IMC intervenes in several phases during the development of the loan and it is important to maintain contact with the assigned IMC throughout the process: a) The IMCs facilitate administrative procedures that must be made before Banrep, b) They verify the documents required in the registration forms required by Banrep, c) They receive the mandatory deposit when it is necessary.
- For Liability External Indebtedness in legal currency it is not necessary to make any deposit with Banrep, before or after the disbursement of the loan and the channeling procedures. However, foreign currency transfers made by the NRC to feed the Exclusive Use Account are subject to such deposit. Currently the deposit amount is zero percent (0%) of the transfer amount.
What requirements must be met by the Liability External Indebtedness granted in foreign currency?
The conditions in general are the same as for credits in legal currency, except for the points indicated here:
- The loan can be disbursed in a local account in legal currency or a foreign account in the name of the RC, even outside the exchange market, although the channeling procedure would vary in each case. The RC can open a Compensation Account to manage the disbursements and payments associated with the Liability External Indebtedness, which partially facilitates the channeling procedures described below, since the intervention of the IMC is significantly reduced.
- A deposit must be made with Banrep, before the disbursement and channeling of the loan in foreign currency is made. However, currently this deposit is simply a formality, since its amount is equal to zero percent (0%) of the loan principal.
- The following foreign currency loans are exempt from the deposit requirement: a) loans granted to finance Colombian investment abroad, except when the Debtor receives capital contributions or repayments from the investment vehicle established abroad, b) loans associated with credit cards, c) government aid loans, d) loans granted to constitute guarantees in derivatives markets (futures and options), e) public debt used to grant credit to RC, f) loans that do not require disbursement, g) loans associated with operating leases (operating leases).
What happens if the Liability External Indebtedness is agreed in foreign currency, but disbursed in legal currency?
The conditions in general are the same as for credits in legal currency, except for the points indicated here:
- Since payments will be made in legal currency, they must be received in an Exclusive Use Account whose owner must be the NRC creditor of the Liability External Indebtedness.
- The same exceptions to the deposit for Foreign Debt Liabilities in foreign currency, apply for loans agreed in foreign currency, but disbursed in legal currency.
What is the procedure for channeling and reporting Liability External Indebtedness in legal currency?
The loans granted by NRC to RC must be channeled through the Colombian foreign exchange market following the steps described below:
- The disbursement and payments of the loan in legal currency must be reported to Banrep by the RC through an IMC. The loan must be reported simultaneously or before the first disbursement, by completing Form No. 6: Information on external indebtedness granted to residents (“Form F6”) before the IMC used in the transaction. Two codes are generated: one to identify the lender and one for the loan itself.
- The other expenses or expenses in legal currency associated with the Liability External Indebtedness (for example, interest payments, commissions), the RC must report them to Banrep using an IMC, within fifteen (15) business days following the day of the transfer.
- Any modification to the loan conditions in legal currency (change of debtors, creditors, amount, expiration date, interest rate, etc.) must be reported within the following 15 days. This includes any change caused by variations in the exchange rate, fractionation, merger or substitution of credits. In some cases a new Form F6 must be submitted.
- A copy of the credit agreement and any other related document must be delivered to the IMC, for reporting purposes. If the Liability External Indebtedness is syndicated, only the loan officer and / or debtor must be identified on Form F6.
- The following loans are exempt from being reported: i) credit card loans, ii) account overdrafts, iii) loans that finance export and import operations in foreign currency, including those taken by IMCs as financial intermediaries.
What is the procedure for channeling and reporting Liability External Indebtedness in foreign currency?
The same channeling procedure described in the previous paragraph is followed for credits in legal currency. However, if the resources of the loan disbursement in foreign currency are received in a Compensation Account by the RC and the payments related to it are generated from said account, the report of said transfers must be made through Form No. 10. ” Relationship of clearing account operations ”before Banrep.
What is the procedure for channeling and reporting Liability External Indebtedness agreed in foreign currency but paid in legal currency?
The same channeling procedure described for credits in legal currency is followed. However, if the proceeds of the loan disbursement in foreign currency are received in a Compensation Account by the RC, the report of said transfers should reflect this situation. The payments related to it cannot be generated from said account as they are made in legal currency.
What should be taken into account of the Liability External Indebtedness granted to Financial Entities?
When the credit is granted in legal currency for an IMC:
- There are no limitations on the type of active credit operations that an IMC can carry out, making use of the funds obtained by virtue of Liability External Debt in legal currency, provided that these operations comply with the general authorization regime of the institutions financial, to develop certain economic activities.
- The IMC must include additional details in its report of the loans that the RC does not IMC, when they report to Banrep their External Debt Liabilities in legal currency. The IMC must indicate if the foreign loan was agreed and / or disbursed in legal currency and / or in US dollars and if it was obtained through the issuance of securities abroad.
- Some IMCs are strictly prohibited from acquiring Passive External Indebtedness (including loans in legal currency) if the resources obtained are to be used in the foreign exchange market (specifically Stock Brokerage Companies).
When the credit is granted in foreign currency for an IMC:
- The IMC that receives financing from an NR in foreign currency can only carry out the following operations with the resources obtained, namely: a) credits granted in the same foreign currency received and with a maturity date equal to or less than the External Indebtedness Liabilities, b) credits granted in legal currency with a maturity date equal to or less than the External Debt Liability, accompanied by a hedging derivative on the currency subject to the Liability External Debt, which compensates the risk of variation in the exchange rate between said currency and legal currency, c) Operations as providers of liquidity in the foreign exchange market with a maturity date equal to or less than the Liability External Indebtedness.
- When the credits described in points a) and c) above are used in import or export leasing operations, or in negotiations for the supply of liquidity in the foreign exchange market, respectively, the mandatory deposit with Banrep is not required.
- The prohibition for some IMCs to acquire Liability External Indebtedness is maintained if the resources obtained are to be used in the foreign exchange market (specifically Stock Brokerage Companies).
When the credit is granted in foreign currency for an IMC but is paid in legal currency:
There are no variations in the conditions applicable to IMCs that receive Liability External Indebtedness in foreign currency, when it is disbursed in legal currency. The regime of admitted operations is the same as described in the previous paragraph.