Trust in Argentine law

The trust (fiducia means "faith, trust", etc.) is a legal figure that allows the isolation of assets, cash flows, businesses, rights, etc. in an independent and separate estate for different purposes. It is an instrument widely used in the world. Its Anglo-Saxon counterpart is the trust and it has ancient roots in Roman law.

In our country, it is perfected through a contract and is regulated by Law No. 24,441 "Financing of housing and construction" (articles 1 to 26 inclusive). This law is clear, the figure is considered safe and applicable to a wide variety of issues due to its characteristics and comparative advantages.

trust-1

Observing its appearance in our country in 1995, and what happened in other countries and considering the prevailing economic-financial situation, it is possible to assume that in the Argentine Republic, the application of this figure would maintain the strong growth that has been manifesting.

A trust exists when in a contract a person transfers the ownership of certain goods to another, where the latter exercises it for the benefit of whoever is designated in the contract, until a term or condition is met.

The trustee, who manages the assets, must act with the prudence and diligence of the good businessman, based on the trust placed in him, in defense of the trust assets (since he behaves as the new "owner") and the objectives of the trust. If not, the trustor or the beneficiary may demand compensation for the damages and losses caused.

The trust is not the only institute that allows you to carry out a business, it simply has certain advantages for which it deserves to be evaluated.

In essence, the use of the "trust" figure allows the investor to invest his capital in a business that will be managed by an expert who acts with the prudence and diligence of the good businessman. It is proposed as a legal instrument, since it is consistent with the principles of trust with which many businesses have been carried out for decades.

The trust figure can be used for multiple purposes. It has the advantages of allowing the creation of legal structures that are very precisely adjusted to the desired objective.

The trust does not ensure returns, but rather ensures experience, diligence and honesty in running the business. Attempts to push the trust figure as a business panacea are dangerous mistreatments that can condition the use of a useful tool.

Taking into account the absence of a financial system and the impossibility of companies to obtain formal and informal financing, it is appropriate to evaluate the trust as a mechanism that allows formalizing existing businesses and expanding it to investors who previously did not participate.

Development

Concept

In accordance with article 1 of Law No. 24,441: «there will be a trust when a person (trustor) transfers the trust property of certain assets to another (trust), who is obliged to exercise it for the benefit of whoever is designated in the contract (beneficiary)), and to transmit it to the trustor, the beneficiary or the trustee to meet a term or condition. "

Regulatory Aspect

Legal framework:

Article No. 2662 of the Argentine Civil Code. Law No. 24,441 "Financing of housing and construction". Resolutions of the National Securities Commission No. 271/95 and following. PEN Decree No. 780/95

Tax framework:

In general, various taxes (profits, VAT, gross income, etc.) are applicable to trusts. In particular, financial trusts have tax exemptions insofar as they are framed in Decree No. 780/95.

Administrative framework:

Common trusts are private contracts that do not require the intervention of specific institutions. In the case of fiduciary assignment of real estate, a public deed is required. In Argentina, there are no restrictions to act as a fiduciary in general. In particular, to be a fiduciary in financial trusts, one must be an authorized financial institution or company registered for this purpose before the National Securities Commission. Report No. 28 (August 1997) of the CPCECF (Accounting Studies Commission) referring to the accounting treatment of the trust, explains the ways of accounting for fiduciary property.

Characters

The trust agreement is:

Consensual, since it produces effects since the parties reciprocally express their consent, the delivery of the property in property resulting in an act of execution of the agreement, whose lack authorizes to demand the delivery and the granting of the formalities imposed by the nature of the goods.Bilateral, since it generates reciprocal obligations for the trustor (must deliver the thing and the remuneration of the order) and fiduciary (must administer the thing in accordance with the provisions of the convention).Onerous, since the benefit that it procures to one of the parties It is only granted for a benefit that she has made or is obliged to make and the constituent of the trust owes the trustee a commission. Non-formal, although in its constitution it requires a public deed or other specific forms,Depending on the nature of the assets in trust, despite their logical economic importance, their conclusion must be made in writing, even in private documents.

Subjects

Trustor or settlor or constituent or transferor: is the person who transfers the assets in trust and stipulates the conditions of the contract.Fiduciary or trustor: is the one who receives them as fiduciary property with the obligation to give the goods the destination provided for in the contract.: is the one who receives the benefits of the trusteeship. Trustee: is the final recipient of the goods once the term or condition stipulated in the contract has been met. Generally, beneficiary and trustee are the same person.

Object

Real estate, furniture, registrable or not, money, securities, etc., will be objects of the trust, when they can be individualized.

When the individualization of the trust is not possible, the requirements and characteristics that must be met will be described.

The assets may not enter the trustee's assets, being confused with their own, they are assets that can be separated from the asset, with separate accounts and excluded from the guarantee of the trustee's creditors and those of the trustor.

Fiduciary property is constituted on the trust assets, forming a separate patrimony from the fiduciary patrimony and the trustee. When it comes to recordable assets, the corresponding records must take into account the fiduciary transfer of the property in the name of the trustee.

The object can be:

Immediate: it is the delivery of the property of a good to be administered as an owner. Medium: it can be all kinds of goods or rights.

The mediate object and the fiduciary property are increased if this is the result of the contract, when the fiduciary acquires other assets with the fruits of the trust assets or with the product of acts of disposition on them, being recorded in the acquisition act and in the records. relevant.

Among the possible mediated objects is money, the most typical examples of trusts being those of investment and administration; money appears in tangible form as an expression of the capital given in trust and as a manifestation of its income; other times, it appears as an expression of the fruit or resulting from non-monetary capital.

Money as a mediated object of trust appears directly or indirectly, constituting most of the time as a generator of bank resources.

Rights And Obligations Of The Parties

Of the trustor

Rights:

Appoint one or more fiduciaries and reserve specific rights, linked to the possibility of monitoring compliance with the provisions of the agreement, among which it is worth highlighting the power to revoke the trust, even against the generic principle that imposes irrevocability, the only way to put it end, when it is ineffective or unnecessary.

Among the causes of termination of the trust is the removal of the trustor if that power had been expressly reserved.

The settlor can judicially request the removal of the trustee for breach of his obligations. The settlor can hold the trustee accountable and, eventually, exercise liability actions.

Obligations:

remunerate the trustee, reimburse the expenses incurred by the trustee on the occasion of the commission, and clean up the eviction.

Trustee

Rights:

It has all the powers inherent to the purpose of the trust, particularly those related to the domain and administration of the thing.

You can use and dispose of the goods, you cannot appropriate the fruits, but always until the end of the contract is achieved.

Obligations:

To administer in the established way, being inherent the conservation and material and legal custody of the goods, to carry out the necessary improvements and repairs, to contract insurance and to pay the taxes that are imposed on them.

Manage by producing fruits according to the regular use of things without disposing of them, but producing the highest yield. Some laws impose the diversity of investments to avoid the risks derived from the concentration in a single economic activity.

Maintain the identity of the assets of the order separate from those of the trustee, not being able to include them in their accounting or consider them in their assets.

You can tax the trust assets when required by the purposes of the trust. It is legitimized to exercise all the corresponding actions for the defense of the trust assets both against third parties and against the beneficiary.

Be accountable for the steps it takes, notifying within a short time the conclusion of certain investment operations or the receipt of fruits derived from them. The trustees must render accounts to the beneficiaries with a periodicity of no more than one (1) year.

Present complete and reliable information on the accounting movement of the assets in their possession.

Transfer the assets as agreed at the time of the order to the beneficiary or the trustee.

Cessation of the trustee

judicial revocation, breach of its obligations, at the request of the settlor, or at the request of the beneficiary with summons to the settlor, death or incapacity declared judicially if he were a natural person, bankruptcy or liquidation; waiver

c) Of the beneficiary

He is a special creditor of the trust, being able to be it by the fruits that produce the trust assets, or in relation to these, once the time has passed or the condition foreseen to transfer the property has been fulfilled.

The beneficiary may require the trustee to fulfill the trust. You have the right to exercise liability actions for non-compliance and to demand conservatory actions.

You can challenge the acts performed by the trustee contrary to the instructions of the trustee.

The right to obtain the property once the trust has ended, can be transferred to the trustee without coinciding with the person of the beneficiary.

Effects of the Trust

The objective liability of the trustee is limited to the value of the thing whose risk or defect caused the damage, if the trustee could not reasonably have been insured.

The trust assets are exempt from the individual or collective action of the trustee's creditors and the trustors creditors of the trustor may not attack the trust assets, the fraud action being safe. The beneficiary's creditors may exercise their rights over the fruits of the trust assets.

The assets of the trustee will not be liable for the obligations contracted in the execution of the trust, which will only be satisfied with the assets in trust. The insufficiency of the trust assets to meet these obligations will not lead to the declaration of their bankruptcy. In such case, and in the absence of other resources provided by the trustor or the beneficiary according to contractual provisions, it will proceed to its liquidation, which will be in charge of the trustee, who must dispose of the assets that comprise it and deliver the product to the creditors in accordance with the order of privileges provided for bankruptcy; in the case of a financial trust, in case of insufficient trust assets, if there is no contractual provision, the trustee will summon an assembly of holders of debt securities,This will be notified through the publication of notices in the Official Gazette and a widely circulated newspaper of the trustee's domicile, which will be held within sixty (60) days from the last publication, so that the assembly resolves on the rules of administration and liquidation of the patrimony.

These rules may provide:

The transfer of the trust assets as a unit to another company of the same order; The modifications of the issuance contract, which may include the remission of part of the debts or the modification of the terms, modes or initial conditions; The continuation of the administration of the assets held in trust until the termination of the trust; The way of disposal of the assets of the trust estate; The designation of the person who will be in charge of the sale of the estate as a unit or of the assets that comprise it; Any other matter determined by the assembly, related to the administration or liquidation of the separate assets.

The assembly will be considered validly constituted, when holders of titles representing at least two thirds of the issued and outstanding capital were present; may be acted by representation with a power of attorney certified by a notary public, judicial authority or bank; no legalization is necessary.

The agreements must be adopted by the favorable vote of holders of securities that represent, at least, the absolute majority of the issued and outstanding capital, except in the case of the matters indicated in subsection b) in which the majority will be two thirds. parts (2/3) of the issued and outstanding securities.

If there is no quorum in the first summons, a new meeting must be called, which must be held within thirty (30) days following the date set for the meeting not held; This will be considered valid with the holders that are present. The agreements must be adopted with the favorable vote of titles that represent at least the absolute majority of the issued and outstanding capital.

Extinction of the Trust

The trust will be terminated by:

The fulfillment of the term or the condition to which it has been submitted or the expiration of the legal maximum term (30 years); The revocation of the trustor, if that power has been expressly reserved; Said revocation will not have retroactive effect; any other cause provided for in the contract.

Upon termination of the trust, the trustee shall be obligated to deliver the assets in trust to the trustee or to his successors, granting the instruments and contributing to the corresponding registry registrations.

Escrow classes

According to whether or not the trustor receives a consideration

Fiduciary transfer with consideration: the transfer of the trust assets is made as a trust, or as trust, but the trustor receives a consideration for said transfer.Fiduciary transmission without consideration: it is possible to have a fiduciary transfer without consideration, for example, donate the trust assets to a third party.

b) According to the Object

A possible non-limiting classification of the various types of trust existing, according to their purpose, may be the following:

1) Guarantee trust: it can replace the mortgage and the pledge with advantages. For this, the trustor transmits a good (a real or movable thing) in fiduciary property, guaranteeing an obligation that it maintains in favor of a third party, with instructions that, not paid the same at maturity, the trustee will proceed to dispose of the thing and with its net proceeds it disinterests the creditor and the remaining liquid remainder, it reintegrates it to the settlor. In the trust agreement, all the necessary provisions will be adopted, including the way to prove the default of the debtor trustor with his creditor, beneficiary of the guarantee. In this way, judicial execution procedures are avoided, with the speed and economy that this implies,not forgetting that the trust property is out of the action of the other creditors of the trustee and of those who are those of the trustee. It is also out of the bankruptcy of any of them, avoiding all verification procedures (except for the fraud action that has been committed with respect to the creditors of the settlor).

2) Insurance trust: the good intentions of the head of the family that contracts a life insurance so that, on the day he dies, his wife and children receive a significant sum that allows them a decent subsistence, it could be ruined if, after the incident, the beneficiaries of the compensation paid by the insurance company mismanage the received and in a short time consume the amount collected. It is a concern that whoever hires such insurance never rules out, which can be avoided through a duly constituted trust. The insured person names a bank or other financial institution that he or she trusts as a beneficiary and enters into a trust agreement with it, designating it as the trustee of the amount to be received from the insurer,setting its term and specifying all the conditions to which it must be adjusted in compliance with the stated purposes (investments to be made, beneficiaries of the income, final destination of the goods, etc.).

This is a form of trust that can be extremely useful and beneficial to fiduciary entities for the commissions or other income that their management agrees and receives.

3) Real estate trust: the trustee receives from the trustor a property in order to manage it or develop a construction project and sale of the units built.

We give as an example the construction of a building with units to be distributed among those who are awarded under the horizontal property regime. Various interests come together in the business, such as entities that grant credits, builders and architects who carry out the work, engineers and calculators, municipal entities that must grant the corresponding permits and authorizations, environmental control entities, the land owner (s) where will do construction etc. The presence of all these interested parties, can be reconciled with advantage when a specialized financial entity exercises ownership of the property as fiduciary property and offers full assurance that the business will be carried out with respect for all the interests involved and as agreed.

4) Administration trust with judicial control: it is established for civil associations with legal status, such as those dedicated to sports activity of any kind, which, in cases of decreed bankruptcies or preventive contests, constitutes an administration trust in charge of a fiduciary body for the purpose of managing said entities. This fiduciary body, which is supposed to be an expert in bankruptcy crises, is made up of an accountant, a lawyer and a sports expert, who work together and are in turn controlled by a judge. The purpose of this fiduciary body is for three experts from different areas to join their efforts, in order to solve the crisis that the entity is going through and maintain its continuity, in addition to establishing the causes that led to its bankruptcy.One of the activities entrusted to this body is the consolidation of the liability, on which, once determined, representative, nominative and endorsable certificates will be issued to creditors. The bases on which the legal regulations are based are sport as a social right, the generation of genuine income, in order to be able to settle the liability and guarantee creditors the collection of their credits, overcoming the state of insolvency, so that from this In this way, the continuity of the institution is guaranteed.in order to clear the liabilities and guarantee creditors the collection of their credits, overcoming the state of insolvency, so that in this way the continuity of the institution is guaranteed.in order to clear the liabilities and guarantee creditors the collection of their credits, overcoming the state of insolvency, so that in this way the continuity of the institution is guaranteed.

5) Testamentary trust: it can be constituted by contract or testament, and it can only be done on certain assets. In this way, the trustor can impose the indivision of the trust assets for a period from their death.

6) Administration trust: responds to the convenience of the trustor in relieving himself of the administration of his assets, for reasons of age, occupation or comfort.

7) Investment trust: it constitutes a modality of the administration trust. With it, a return on assets is sought that is optimized by the professional management of the bank.

8) Domain transfer trust: it produces the definitive transfer of the property in favor of the trustee when the condition of the contract is fulfilled.

9) Financial trust: the National Securities Commission approved the first financial trust on December 7, 1995. They allow various types of credit rights to be taken as an underlying asset in order to enable securitization (securitization) by issuing on the basis of said assets underlying, debt securities and / or certificates of participation that are acquired by investors.

The trustee is a financial entity or a company specially authorized by the National Securities Commission (CMV) to act as a financial trustee; the beneficiaries are the holders of certificates of participation in the fiduciary domain or of debt representative securities, guaranteed with the goods thus transmitted

The financial trust contract must consider:

The individualization of the goods object of the contract. If such individualization is not possible, on the date the trust is held, the description of the requirements and characteristics that the assets must meet must be stated. The determination of the way in which other assets may be incorporated into the trust. The term or condition to The fiduciary domain is subject, which can never last more than thirty (30) years from its constitution. The destination of the assets at the end of the trust. The rights and obligations of the fiduciary, and the way to replace it if it ceases. The individualization of the trustor, trustees and trustees. The identification of the trust. The procedure for the liquidation of the assets in the face of their insufficiency to face the fulfillment of the purposes of the trust.The accountability of the fiduciary to the beneficiaries. The remuneration of the fiduciary. The terms and conditions of issuance of the participation certificates and / or the debt representative securities.

Accounting Treatment

There are different accounting treatment alternatives for trust contracts on the trustor's books, which depend on the different types of trust existing and on the particular clauses of each contract, especially those relating to the final destination of the trust assets and the consideration related to the fiduciary transfer, in the event that it exists.

It corresponds to establish if it is necessary for the trust to keep a separate accounting and issue Financial Statements and, in this case, what are the characteristics that these must contain.

Participants of the trust contract are required to report in their Financial Statements about the rights and obligations arising from said contract.

Fiduciary transfer with consideration

The trust transfer, for which the trustor receives a consideration, will be recorded as a sale transaction on the trustor's books, when the latter, when transferring the trust property, effectively transfers control of the trust assets.

In the absence of this circumstance, the aforementioned assets will remain in the assets of the trustor with an adequate explanation of the contractual situation that affects them or may affect them.

Treatment when the fiduciary transfer is assimilable to a sale transaction

For the fiduciary transfer to be accounted for as a sale transaction in the trustor's accounting, all of the following requirements must be met:

The trustor transfers to the trust the future economic benefits that the trust assets will produce. This requirement is not met if the trustor retains the option to repurchase the trust assets. Such option is not considered to exist when the contract provides for the possibility of matching the offer of a third party to repurchase the trust assets.In the event that the fiduciary transfer is carried out with the obligation on the part of the trustor to bear losses related to the Trust assets, paying the amount of the loss or replacing the trust assets, the trustor must make a reasonable estimate of future losses and related expenses related to said assets. It is considered that there is no sale when the trustor cannot make such an estimate.The trust agreement cannot compel the repurchase of the trust assets or it could only do so in a minor proportion. A typical example of this alternative is the “securitization” or securitization of mortgages, pledges or credit card coupons. The fiduciary transfer of the asset in trust is not carried out in guarantee of obligations of the trustor or third parties (guarantee trust).

The accounting treatment of these alternatives in the accounts of the trustor and the trust.

In the accounting of the trustor

The trustor, in the event that he keeps an accounting record of his operations, must record in his accounting the fiduciary transfer of the assets involved in the trust agreement, derecognizing them and recording as counterpart the asset or assets received as consideration. When the transaction is carried out for a value different from the book value of the assets involved, such difference should be recorded as a result, together with the future losses and estimated related expenses.

In the accounting of the trust

The trust assets will be included in the trust's accounting at the values provided in the corresponding contract or, failing that, according to the criteria established in the professional accounting standards in force for each type of asset.

In all the registrable entries or balances related to trust assets, the condition of fiduciary property must be stated with the indication “in trust”.

The counterpart of said registration will be the one that most adequately reflects the rights of creditors, beneficiaries and trustees.

The financing of the trust assets will be carried out through debt securities and / or participation certificates. Debt securities must be registered as a "fiduciary liability".

The certificates of participation constitute or integrate the so-called "Net Trust Property" and as such will be registered integrating said item.

Subsequent transactions made during the life cycle of the trust, as a result of the trustee's management, must be recorded in the trust's accounting.

Treatment when the fiduciary transfer is not assimilated to a sale transaction

For the treatment of the fiduciary transfer as a sale operation, the accounting treatment will be as follows:

In the accounting of the trustor

The assets in trust must be reclassified in the accounts of the trustor in an account that reflects their affectation to the trust, also reflecting as assets and liabilities the benefits and considerations related or related to the operation in question.

Subsequent transactions made during the life cycle of the trust will be recorded in the trustor's books based on the information received from the trustee.

In the accounting of the trust

Given that in this alternative both the trust assets and the consideration received are accounted for in the trustor's books, the trust must not make any registration in this regard at that time.

Fiduciary transfer without consideration

When the trustor does not receive any consideration for the trust transfer and there is also a remote probability that the trustor will buy back the trust assets, said assets must be derecognized from the trustor's assets and the corresponding loss must be recognized.

The accounting in the books of the trust of this alternative is similar to that described in treatment as sale in the books of the trust.

Trustee accounting treatment

The trustee shall record in its books the results accrued by its management, such as commissions, fees, etc., being able to reflect in memorandum accounts or in notes to its financial statements its responsibility as trustee on the trust assets.

Accounting treatment of participation certificates

The holder of the participation certificates, according to their activity, will integrate or expose them in the relevant item and will also classify them (current or non-current) according to the period in which they estimate their conversion into cash or their application in the cancellation of liabilities.

Its valuation must result from applying the proportion of the respective holding of participation certificates to the fiduciary net worth. In no case shall such valuation exceed its recoverable value.

Financial Statements of the trust

When the economic and legal significance of the trust assets, as well as the management or administration involved in the creation contract (which may present a degree of complexity assimilable to that of a commercial or industrial entity) justify it, the trust submits periodic information in the form of financial statements.

The reasons behind this conclusion are the following:

In those cases in which the trust's contractual operation transcends by its importance, magnitude or significance the interests of the parties directly involved in said commitment, and extends to potential applicants for this information (Treasury, capital markets, Stock Exchanges, control agencies, investors, etc.), the issuance of financial statements is necessary for the purpose of informing said users. The recital set forth in Part One - item e) - of RT No. 8 of the FACPCE, regarding: “… that the financial statements constitute one of the most important elements for the transmission of economic and financial information on the situation and management of public and private entities. ”Article 6 of Law 24,441 establishes the responsibility for administration and information that corresponds to the trustee,who must act "… with the prudence and diligence of the good businessman who acts on the basis of the trust placed in him."

The duty to inform arises from article 7 of Law 24,441, which textually states: "The contract may not release the fiduciary from the obligation to render accounts…". "In all cases, the trustees shall render accounts to the beneficiaries with a periodicity of no more than one (1) year."

With respect to the information requirements, it is interpreted that articles 68 to 74 of the Commercial Code are applicable by extension.

The provisions of Decree 780/95, regulation of Law 24,441, which although its article 1 does not impose the obligation to issue financial statements, it does indirectly establish the need to present them by indicating that "… in the balance sheets related to Trust assets must include the condition of fiduciary property… »General Resolution 274/95 of the National Securities Commission, which regulates financial trusts, established a quarterly information system that must be presented by the trustee for each trust that it administers through independent financial statements according to the deadlines set for the public offering regime. The financial statements must be presented for annual periods and quarterly subperiods, the presentation deadlines being applicable,Formalities and advertising requirements established for issuers of negotiable securities included in the public offering regime and listed in the special section of a self-regulated entity. The annual financial statements and for intermediate periods, must be signed by the representative of the trustee and approved by the Trustee's Management Bodies and will have an audit and limited review report, respectively, signed by an independent public accountant, whose signature will be legalized by the respective Professional Council.They must be signed by the trustee's representative and approved by the trustee's Management Bodies and will have an audit and limited review report, respectively, signed by an independent public accountant, whose signature will be legalized by the respective Professional Council. presentThey must be signed by the trustee's representative and approved by the trustee's Management Bodies and will have an audit and limited review report, respectively, signed by an independent public accountant, whose signature will be legalized by the respective Professional Council. present

The basic financial statements that the trusts must present are:

Statement of Trust Financial Situation. Statement of Evolution of Net Trust Assets. Statement of Trust Results. State of Origin and Application of Trust Funds.

They must follow the guidelines set forth in the professional accounting standards (Technical Resolution No. 8 and other current resolutions), regarding the content and presentation of the information covered by these financial statements.

Given the characteristics of the trusts, it is considered advisable that the State of Origin and Application of Trust Funds be presented under the alternative of exposing the causes of variation of the funds, considering as funds the availabilities and temporary liquid investments, adopting the direct criterion exposure of funds generated or applied to operations.

In the denomination of the items of the financial statements, the aforementioned must be taken into account with respect to the identification of items such as Assets Received in Trust, Trust Liabilities, Participation Certificates and Trust Assets.

The presentation of any of the basic statements will not be mandatory when, due to the characteristics of the trust agreement, such presentation is not justified. An example of this situation may arise with respect to the State of Evolution of the Trust Assets when the trust is fully financed with debt securities.

Additional information

To the information that is usually presented in complementary notes and annexes, provided for in the current accounting standards, must be added that which explains the relevant aspects and the characteristics of the trust contract, as an example, the identification of the trustor and the trustee, the object of the trust, the objective of the trustee's management and the term of the contract and / or its termination condition.

When the fiduciary liability is made up of debt, denominated «junior», whose payment is subordinated to the payment of another debt, denominated «senior», the subordination conditions must be explained in a note.

Given the special or particular characteristics of trust contracts, the reason why one of the basic financial statements is not issued must be explained.

Complementary information in the financial statements of the trustor and the trustee

Both the trustor and the trustee must present the relevant aspects and characteristics of the trust agreement and the rights and obligations of the parties in the complementary information to their financial statements.

In the case of the trustor, the reasons why one of the two alternatives provided for was selected must be explained, when it is a trust transfer with consideration, and in those cases in which the trust assets have been derecognized from the trustor's assets, but there is the possibility of repurchasing them. For example, when a resolution condition of the trust agreement is not fulfilled, said possibility and the conditions in which it would be presented should be disclosed in notes to the financial statements of the trustor.

The trustee, in turn, in the complementary information to its basic financial statements, must provide the income and expenses derived from its management as trustee, and summary information on the trust contracts that are in its charge, including for each of them the class of the trust assets, the total assets, liabilities, fiduciary net worth and the result for the period or year.

Auditing Standards

Usually

The lack of professional standards on auditing of the different types of trust make it necessary to comply with the provisions of Technical Resolution No. 7 of the FACPCE, respecting the accounting treatment of the trust that dictates Report No. 28 (AUGUST 1997) of the Commission. of Studies on Accounting of the Professional Council of Economic Sciences of the Federal Capital.

In particular

The National Securities Commission in its different General and amending Resolutions, establishes a specific treatment for the audit of financial trusts, which are detailed below:

Audit Committee of the Financial Trust

Appointment of an audit committee of the financial trust:

Unless otherwise provided in the statute, the Audit Committee will be appointed by the board of directors of the issuer, by a simple majority of its members, from among the members of the body that are versed in business, financial or accounting matters.

The designation of the members of this Committee, as well as any modification in its membership (whether due to resignation, license, incorporation or replacement of its members, or any other cause), must be communicated by the station to the Commission and to the Self-regulated entities where the issuer's shares are traded, within three (3) days of the occurrence or when the event is brought to their attention.

Independence:

The majority of the members of the Audit Committee of the stations that make a public offer of their shares must invest the status of independent.

The companies must arbitrate the means, in case of replacement of the principal directors, to guarantee the existence of independent substitute directors to integrate said Committee.

Functioning:

The Committee will have powers to issue its own internal regulations.

It must meet with a frequency not less than that required by law, regulations and statute, to the station's administrative body.

The rules applicable to the administrative body will be applied to the Committee's deliberations and to its minutes books.

The remaining members of the administrative bodies and the members of the inspection body may attend the Committee's deliberations, with voice, but without vote. The Committee, by reasoned resolution, may exclude them from its meetings.

Powers and Obligations of the Committee:

The Committee shall review the plans of the external and internal auditors and evaluate their performance, and issue an opinion on the occasion of the presentation and publication of the annual financial statements.

To this end, as part of the evaluation of the external audit function, it must:

Analyze the different services provided by external auditors and their relationship with their independence, in accordance with the standards established in Technical Resolution No. 7 of the ARGENTINE FEDERATION OF PROFESSIONAL COUNCILS OF ECONOMIC SCIENCES and in all other regulations that, in this regard, dictate the authorities that carry the professional registration controller. Report the invoiced fees, stating separately:
- Those corresponding to external auditing and other related services, intended to provide reliability to third parties (for example, special analyzes on the verification and evaluation of internal controls, taxes, participation in prospectuses, certifications and special reports required by control bodies, etc. Those corresponding to special services other than those mentioned above (for example, those related to the design and implementation of information systems, legal, financial aspects, etc.).

Said evaluation must be carried out by the Audit Committee, and will include verification of the policies that they have regarding independence in their respective structures, to ensure compliance with them.

In cases where there is no Audit Committee, the fees of the external auditors must be reported by the Board of Directors.

Issue for publication with the frequency that it determines, but at least on the occasion of the presentation and publication of the annual financial statements, a report in which it accounts for the treatment given during the year to the matters of its competence provided for in article 15 of the Transparency Regime of Public Offering of Decree No. 677/01. Give publicity, within the terms provided in these Rules, or immediately after produced in their absence, the relevant opinions Within the SIXTY (60) calendar days of commencement In the financial year, present to the Board of Directors and the issuing body of auditing, the Action Plan provided for in article 15 of the Transparency Regime for Public Offering of Decree No. 677/01. In the case of operations carried out by related parties regularly,An opinion may be issued with a generic nature, but limited to a validity in the time that may not exceed one (1) year or the beginning of a new financial year or to predetermined economic conditions. Comply with all those obligations that are imposed by the Statute, as well as the laws and regulations applicable to the station due to its status as such or the activity it carries out.

Corporations that are classified as small and medium-sized companies are exempt from constituting an Audit Committee.

At the first meeting of the Board of Directors of each year of the companies that are classified as small and medium-sized companies, the body must declare, with the scope of an affidavit, that they meet the requirements for such classification.

Within the FIVE (5) days, a copy of said minutes must be sent to the Commission and to the self-regulated entities in which its shares are listed.

Failure to comply with said charge will automatically expire the exception here provided for that year.

External auditors

· Independence Criteria of External Auditors

Registered public accountants acting as external auditors:

They must meet the independence conditions established by Technical Resolution No. 7 of the ARGENTINE FEDERATION OF PROFESSIONAL COUNCILS OF ECONOMIC SCIENCES and in all other regulations that, in this regard, are dictated by the authorities that control the professional enrollment. the provision of professional services other than those of the external audit, the external auditor does not meet the independent condition if said services include the performance of the following tasks:
- Assume management activities such as authorizing, carrying out, or consummating an operation, or in some way exercising any type of action on behalf of the entity or having the power to do so.Make decisions related to managerial or management tasks for which it responds to the entity's governing body. Have custody of the entity's assets. Prepare source documents or originate electronic or other data that supports the execution of an operation.
In particular, the external auditor will not be independent when:

The assistance services to the administrative body, in their responsibility to keep accounting records in accordance with current legal provisions and prepare the financial statements in accordance with the accounting standards adopted by the Commission, involve making administration decisions or occupying a role equivalent to that of management. Valuation services consist of assigning value to significant items in the financial statements and the valuation includes a significant degree of subjectivity on the part of the auditor. Tax services imply that the external auditor makes decisions about the policies to be implemented in the entity's fiscal area or when the preparation and presentation of declarations and adoption of fiscal positions are not arranged by the entity but depend on the external auditor.Technology services, which include the design and implementation of technological accounting information systems for an entity, are used to generate information that is part of the financial statements, unless the following conditions are ensured: The entity acknowledges that it has the responsibility to establish, maintain and monitor the internal control system.The entity designates a competent employee, preferably who is part of the front-line management, to be responsible for making all management decisions regarding the design and implementation of a system of computer hardware and software. The entity is responsible for making all management decisions regarding the design and implementation process.The entity evaluates the sufficiency and results of the design and implementation of the system. The entity is responsible for the operation of the system (equipment and programs) and for the data used or generated by the system. The staff of the external auditor that provides these services does not have management functions or a role equivalent to that of first-line management. The provision of assistance services for the development of internal audit activities, or the outsourcing of some of its activities, does not ensure that there is a clear separation between the management and control of internal audit, which should be the sole responsibility of the entity's administrative body, and the performance of internal audit activities themselves.Activities that constitute an extension of the procedures necessary for the development of external auditing are not included in this incompatibility. The provision of legal services, by virtue of the existence of a professional association with lawyers, involves acting on behalf of the entity in the resolution of a dispute or litigation. Financial services consist of the promotion, sale or initial subscription and placement of the shares of an entity, even if the operation is carried out on its behalf and order.involves acting on behalf of the entity in the resolution of a dispute or litigation. Financial services consist of the promotion, sale or initial subscription and placement of the shares of an entity, even if the operation is carried out on its behalf and orders.involves acting on behalf of the entity in the resolution of a dispute or litigation. Financial services consist of the promotion, sale or initial subscription and placement of the shares of an entity, even if the operation is carried out on its behalf and order.

The computation period for incompatibilities will run from the year in which the work is performed to the third year prior to the year to which the audited financial statements refer.

· Presentation of Sworn Statements by External Auditors

The sworn declarations provided for in article 12 of the Transparency Regime of the Public Offering of Decree No. 677/01, must be submitted by the interested parties before the Commission prior to the assembly that will appoint the external auditors or auditors, with a anticipation not less than that required for the documentation corresponding to the assembly in question.

In the event that the accountant to be appointed has not presented the documentation with such anticipation, the assembly must go to an intermediate room to allow said presentation and the period in question to elapse, before voting on the respective item on the agenda.

In the event that the designation proposal has been made by the Issuer's Management Body, it must also, prior to the meeting, present the opinion of the Issuer's Audit Committee to the Commission.

The affidavits of the auditor (owner or substitute) and the opinions of the Issuer's Audit Committee, if applicable, must also be submitted by the interested parties for publication in the bulletins of the self-regulated entities in whose area the negotiable securities are traded. of the station in question and may also be consulted by the public on the Commission's INTERNET page.

· Content of the Affidavits

The affidavit of the designated as regular or substitute auditor, must contain:

First and last names, type and number of identity document. Professional address. University that granted the title and graduation date. Other university degrees obtained. Experience in auditing the financial statements of other companies or entities. Details of the Professional Councils in which is registered.A professional society or association that integrates or to which it belongs, where appropriate, indicating its address and details of the respective registration or registration before the competent Professional Council.Detail of the sanctions of which it would have been liable. the individual professional or the professional society or association that he integrates or to which he belongs, with the exception of those that have been classified as private by the acting Professional Council.Details of your professional relationships or those of the company or association to which you belong with the issuer or its shareholders who have "significant participation" in it or with companies in which they also have "significant participation" related to audit functions external or others.

In the event that, during the period of their performance, there are changes to the information presented, the interested parties must update their sworn statement within ten (10) days of the change or when it becomes known to them.

Opinion of the Audit Committee on the appointment of the External Auditor

The opinion of the Audit Committee on the proposal for the appointment of external auditors made by the management body of the issuer, as well as, where appropriate, the proposal for revocation that it will present, as a minimum must contain:

Evaluation of the considered background, The reasons that support the continuation of a public accountant in office or those that support the change for another, and In the event of revocation, or appointment of a new external auditor, you must also give a detailed account of the possible discrepancies that may have existed on the financial statements of the company.

Appointment of External Auditor proposed by Minority Shareholders

Requests for the appointment of external auditors made at the proposal of minority shareholders of a company, must meet the following conditions:

Accredit the representation of the proportion of five percent (5%) of the share capital by the presenters, through:
- In the case of scriptural shares, the respective vouchers for account balances issued by the company or by the person in charge of the respective registry, and financial institution in which they are in custody, or certified photocopy of the corresponding titles with proof of registration of ownership in the Company's Register of Shareholders.

The certification of the documents presented for this purpose must not be older than fifteen (15) days from the date of submission.

The presenters must prove that they have exhausted the internal instances with the competent corporate bodies. Describe in detail the damage that may affect the rights of the presenters and the absence of other alternatives to avoid it. Describe in detail the scope of the audit they request to be carried out, their duration, and how it will avoid prejudice to their rights, Propose up to three (3) studies of external auditors, which must meet the character of "independent" with respect to the petitioners and society, assuming Likewise, the commitment to bear the petitioners of the cost of the fees and expenses of these auditors.

Once the fulfillment of the established requirements has been accredited, the Commission shall give a hearing, for the peremptory period of five (5) days, or the shorter period that in case of urgency it determines, to the inspection body and, where appropriate, to the Audit Committee. of the society.

Once the opinion of the inspection body and the Audit Committee of the company in question has been presented, the Commission may instruct said company to proceed to designate one of the studies of external auditors proposed by the petitioners to carry out the task or tasks proposed by the minorities at your request.

The Commission resolution must contain:

The maximum term granted for the formalization of the designation, and The scope of the tasks for which it is designated and its maximum duration.

In all cases, before beginning the respective task, the study of auditors thus designated must ratify before the company that it is not obliged to bear its expenses and fees.

Advantages of the Escrow

From a financial point of view, it is worth mentioning that when companies have certain types of assets with the capacity to generate cash flow and this is perceived by the financial and capital markets as an important source of funds for the repayment of obligations, gives rise to a new source of financing for companies, generally guaranteeing this operation with idle or low-return assets.

The financial trust and securitization become an instrument to obtain working capital without further indebtedness. They are an important source of financing for investment projects and refinancing of liabilities. The decrease in the cost of indebtedness is mainly explained by the decrease in the risk of non-payment and operational guarantees. The separation of business and management risks should also influence the reduction of cost of capital rates. Since participation certificates and debt securities are negotiable, it is possible to obtain a certain level of liquidity by buying and selling these financial assets in the secondary market.

From a commercial point of view, the transparency of the business is improved by greater fiduciary control and corporate agreements are strengthened.

Securitization modifies the traditional financing mechanism by a more complex one that involves the disintermediation of the process, since it puts investors in direct contact with the money-takers (the bank mediates but does not assume credit risk, since the contingency remains in the lead of the final holder of the title), and the mobilization of low-turnover assets.

This allows new resources to be injected into the system, restarting the investment process that, with greater liquidity and guarantees, benefits the general economy, transforming loans or illiquid assets accounts receivable into securities (liquid assets).

The purpose pursued by the originator:

Reduces the financial cost by isolating certain assets from your assets and granting additional guarantees. Reduces credit risk, allowing you to get resources at a better financing rate. Increases lending capacity. Avoids liquidity risk caused by asynchronies between assets and liabilities. Securitization marks this drawback due to the increased turnover of portfolio loans. Entities with a high degree of immobilization of their portfolios or long amortization periods acquire greater lending capacity. It tends to the development of capital markets by supplying new securities to the public offer with a homogeneous quality and in a competitive framework. It concentrates the company on a specific activity. Stimulates long-term credit.Improves return on investment and equity. The foreign investor may be more willing to invest in an investment project guaranteed by an asset isolated from country risk.

For the investor:

Obtains a higher return that compensates for the risk assumed. The risk is limited and qualified by professionals. It allows direct participation in large investments that could otherwise mean the disbursement of significant sums of money or perhaps they would be possible alternatives. in the secondary market, being able to transmit it in payment or give it as a guarantee. In many cases, the income obtained is exempt from taxes.

Desirable Characteristics of the Assets to be Securitized

Clear configuration of credits. Defined payment patterns and predictable cash flow. Low probability of defaults. Diversity of debtors. High profitability.

3. Conclusions

The trust in the real economy guarantees the investment and the emerging results that are expected from it from a transparent process, predictable operations and clear guidelines, considering both private and general interests, and relating trade and technology in a truly integrative way., labor and finances. In economic and financial matters, it is necessary for professionals to control the fulfillment of processes and the degree of satisfaction obtained (time, quality, prices, etc.).Entrepreneurships must be categorized. The most important parameters are: the investment, the terms, the returns and the risks associated with the activities. The evaluation may be individual for each undertaking and also for a set of businesses (each with its own individuality),that will make up an investment portfolio The creation of a specific institute for the registration of trust funds and the contracts of the commitments assumed, together with a professionalized practice, present in the stages of evaluation and control of investment projects and their financing, would promote the development of specific and regional activities in the country. The intensive application of financial instruments, such as trusts, would facilitate the production of operations in the productive economy. The decisions to be taken are facilitated, considering both particular and general issues. Entrepreneurs will consider technological, commercial, economic, financial, and internal, regional and external markets; the State will take into account the growth of the product, the levels of occupation,job quality and tax collection, investors will focus on the return and risk of investment.Financial institutions can take an active part in the formation of trust funds, but also other entities, with the approval of the respective authorities of application, may assume the role of trustors. In this way, capital generation mechanisms and a closer link of productive activity with finances would be fostered. With the financing of private projects and the formation of a purchasing club, consortia and the presence of international tenders, they can export products and import supplies and equipment.The use of the trust must start from a situation diagnosis and a careful analysis of the mechanisms to be included in the contract. The designs conceal a balanced and precise incentive structure for all participants. They must be consistent with the background and situation of each of the participants. A good design does not imply success. Problems that it presents: lack of jurisprudence. The professional in Economic Sciences must play an integrating role against this instrument, identifying its possibilities of application, both in relation to the strategic conception and regarding the operation of schemes that may be required by corporations, SMEs, civil associations, families or individuals.They must be consistent with the background and situation of each of the participants. A good design does not imply success. Problems that it presents: lack of jurisprudence. The professional in Economic Sciences must play an integrating role against this instrument, identifying its possibilities of application, both in relation to the strategic conception and regarding the operation of schemes that may be required by corporations, SMEs, civil associations, families or individuals.They must be consistent with the background and situation of each of the participants. A good design does not imply success. Problems that it presents: lack of jurisprudence. The professional in Economic Sciences must play an integrating role against this instrument, identifying its possibilities of application, both in relation to the strategic conception and regarding the operation of schemes that may be required by corporations, SMEs, civil associations, families or individuals.both in relation to the strategic conception and regarding the operation of schemes that may be required by corporations, SMEs, civil associations, families or individuals.both in relation to the strategic conception and regarding the operation of schemes that may be required by corporations, SMEs, civil associations, families or individuals.

Bibliography

Argentine Civil Code Law 24.441: Law on Financing of Housing and Construction ». Professional Notebook No. 1 of the CPCECF" Recomposition of the Working Capital of Viable Companies ". Professional Notebook No. 6 of the CPCECF" Trust ". Report No. 28 of the Commission of CPCECF Accounting Studies General Resolutions of the National Securities Commission. PEN Decree 780/95. Modern Contracts, Ghersi, Carlos Alberto. Commercial Contracts, Villegas, Carlos. Web Pages: Professional Council of Economic Sciences of the Federal Capital: cpcecf.org.arNational Securities Commission:

www.cnv.gov.ar