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New regulations on Mutual Guarantee Companies

On August 5. 2010, the Official Gazette published Resolution No. 16/2010 (the “Resolution”), issued by the Subdepartment of Small and Medium Sized Businesses and Regional Development, for the purposes of organizing the Mutual Guarantee Companies regime, so as to prevent possible obstacles to its enforcement, as well as different constructions.

The Resolution determines the documents to be provided to the National Administration of Financial Aid for Micro, Small and Medium Sized Businesses, in order to obtain authorization to operate as Mutual Guarantee Companies:

  • Note stating name, surname, address and identity document;
  • Note of request for authorization to operate and identifying data of the company to be organized;
  • If the contingency fund is pretended to be organized under a trust, a copy of the trust agreement that will regulate it;
  • Identifying data of protecting partners;
  • Identifying data of participating partners;
  • Affidavit signed by the President of the Mutual Guarantee Company, identifying the Participating Partners, their commercial relationship with Protecting Partners, if any, and stating that the status of Micro, Small or Medium-Sized Business has been proved at the time of their entrance in the Company, and stating the total sales amount during the last three (3) years, calculated on the basis of the analysis of each Participating Partner and the source of the information used for such purpose;
  • Form containing the identifying data and professional background of all members of the Managing Board, the Supervisory Committee, Chairman, legal representative and agents with general powers of administration and disposition;
  • Business plan for the first three (3) years of management;
  • Any other information as the Controlling Authority may require, related with the accomplishment of technical suitability levels for business management, quality of organization for fulfillment of their corporate purpose while complying with operative limits and applicable law in force, commercial systems and any other information showing the economic and financial viability of the project;
  • Draft of by-laws.

Likewise, the Resolution sets out some restrictions to act as a partner:

  • Micro, Small and Medium-Sized Businesses may not act as Participating Partners if their main activity relates to financial intermediation or other financial services or leisure activities involving gambling and games of chance (as per the code of activities organized by the Federal Administration of Public Revenue).
  • Micro, Small and Medium-Sized Businesses that on their own or through their owners, members, shareholders and/or members of the management bodies have any kind of participation as owner, member, shareholder and/or member of the management bodies, in companies engaged in the above-mentioned activities, may not act as Participating Partners either.
  • The number of Participating Partners with commercial relations with a Protecting Partner may not exceed fifty percent (50%) of the total number of Participating Partners of the Mutual Guarantee Company in question.
  • No Protecting Partner and its related or controlled companies may have a participation greater than forty percent (40%) in the Contingency Fund of each Mutual Guarantee Company.

Besides, the Resolution imposes a control obligation on the part of Mutual Guarantee Companies, which shall evaluate and supervise the continuance of the status of Micro, Small and Medium-Sized Businesses of Participating Partners having guarantees in effect. Whenever a Participating Partner ceases to comply with the conditions necessary to be considered a Micro, Small and Medium-Sized Business, the Mutual Guarantee Company may not provide such Participating Partner with new guarantees and shall inform that event to the National Administration of Financial Aid for Micro, Small and Medium-Sized Businesses.

The Resolution further determines that contributions to the corporate capital and the members’ Contingency Fund shall remain in the Company during at least two (2) calendar months, as from the date they are effected. Likewise, the level of usability of the Contingency Fund shall be at least eighty percent a month on average, during the period of permanence of said contributions.

Apart from that, the Resolution sets forth that the Controlling Authority may impose on the Mutual Guarantee Companies, their members, members of the Managing Board and/or members of its Auditing Commission, the following sanctions:

  • Warning;
  • Penalty;
  • Prohibition to make increases to the Contingency fund during one (1) calendar year as from the moment of the sanction;
  • Withdrawal of the authorization to operate as a Mutual Guarantee Company.

The Resolution came into effect on August 6, 2010.

 

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