factoring

Factoring activities will be supervised by the Superintendency of Corporations

A new standard conditions a minimum solvency for performing activities of factoring and holding command contracts.

July 24, 2014

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Article 89 of Law 1676 of 2013 provides that companies whose sole activity is the factoring or discount portfolio may only make contracts of "specific mandate" with a third party to acquire invoices for an amount of 10% of assets recorded society. Thus, the rule establishes a solvency requirement for these companies to operate.

This Factoring activity involves the transfer of a bill (credit document), from a businessman or trader-to the facturing company, in exchange for this give you a financial advance, in order to obtain liquidity when debtors are expected to be delayed in your payments. Generally Factor (financial institution) is the person who assumes the credit risk associated with accounts receivable purchase.

Currently in Colombia, is forbidden to the factors to use specific resources used for investment mandates factoring operations.

The Ministry of Commerce issued Decree 1219 of 2014, in order to regulate this rule that affects the operation of the companies that perform factoring. This control resides in the stipulation of the management of public resources, mentioned in Article 335 of the Colombian Constitution; whose activities can only be carried out prior approval of the State.

According to this decree, the reason for that should be mandatory solvency regulation is to prevent factoring companies incur the crime of mass and normal uptake of public monies.

This Decree provides that the factoring companies that have made these transactions with a value equal to or greater than 30,000 monthly minimum wages and who have made contracts specific mandate with third parties for the purchase of invoices shall be subject to the supervision of the Superintendency Companies.

This entity will have the obligation to create the Single National Registry of factors, who must submit their financial statements at year end. This Register will be publicly available to guide decisions of stakeholders.

As the limit of solvency standard dictates that this will be calculated "considering the value of the current mandate specific contracts with third parties for the purchase of bills related to the value of the heritage that has registered the company in the interim period financial statement the last calendar day of the month immediately preceding". Failure to comply will force them to take steps to restore, or improve the operation by removing their financial position in the term established by the Superintendence.

Finally it is worth mentioning that under this Decree, shall be considered as factoring companies which are subject to the provisions of Article 1 of Decree 1981 of 1988, when its liability is comprised of bonds with more than 20 people or more 50 obligations; or when it has held for three consecutive months, over 20 term contracts in order to manage money.

The opinions expressed in this article are those of the authors and do not necessarily reflect the viewpoints of Activo Legal Ltda.

Factoring activities will be supervised by the Superintendency of Corporations