“GUARANTEED CNV Small & Medium-sized Enterprises”: The new Negotiable Bonds regime to finance SMEs.
The Argentine Securities Commission (known in Spanish as “CNV”), through Resolution No. 696/2017, created a new regulatory framework for public offerings for SMEs, thus simplifying the existing public offering system.
The aforementioned resolution was issued in accordance with one of the strategic objectives of the Capital Markets Act No. 26.831, which is to promote access of SMEs to the capital markets, generate new investment instruments and encourage fund saving to finance productive projects and the development of Argentine regional economies.
In this sense, CNV considered it necessary the use of the capital markets ́ long-term tools, to simplify financing for SMEs.
Through this new program, SMEs may request CNV authorization to create a global note program up to AR$100,000,000, or its equivalent in other currencies, as stipulated by Decree No. 1087/93 and its amendments.
One of the advantages of this program is that mutual guarantee companies (known in Spanish as “SGR”), financial institutions or guarantee funds companies may guarantee SMEs issuances.
In turn, the economic and financial assessment of the issuer is in charge of the companies that will guarantee the issuance. This produces a simplification, in this issue, making unnecessary to present financial statements, risk assessments, and the use of the placement agent.
In addition, the CNV raised the total annual income required, allowing more SMEs to access the capital markets under this regime, in order to enable these companies, access to financing under advantageous conditions, allowing admission to a differentiated public offering regime, withbenefits. The importance of this decision is significant, since, in Argentina, SMEs represent 90% of companies and create 70% of direct employment.
Financing through this program allows structuring the payment of interest and capital attached to the business flow, and even establishing grace periods. Unlike the check and the promissory note, interest rates can be variable, which is important at this time when interest rates are high.
Regarding the “Information Regime”, the issuer must only present its annual financial statements to CNV, which means a great saving of time and resources. Likewise, the program relieves the obligation of having an Investor Protection Code or Code of Conduct and also, this program reduces the financial and corporate proceedings that must be reported.
In order to finish these brief lines about this issue, we think that this new regime can substantially expand the universe of SMEs that decide to finance themselves through this program, simplifying their entry into the capital markets to encourage, boost and develop our domestic economy.
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This article has been drafted by Yanira S. Isuani and Facundo Correa Cremaschi. For moreinformation, contact the above telephone numbers or by e-mail to fcc@correacremaschi.com
This is a courtesy of CORREA CREMASCHI ABOGADOS for its clients and friends. It is not intended to provide legal advice on any topic.