Monday, March 4

The trust as an instrument to honor obligations with creditors in an orderly manner

The global quarantines that resulted as a way to stop the advance of the coronavirus (COVID-19), caused enormous collateral damage to all the economies of the world; millions of companies disappeared when they went bankrupt and this led to the loss of millions of formal jobs.

All the governments of the world came out with multiple and different programs in defense of their industries and companies; after all the greatest creator of wealth in a country is the private sector.

In our countries, the Central Banks injected large amounts of liquidity into the economies, the Governments used fiscal programs, and the Regulatory Entities worked with the banking industry to provide payment facilities and moratoriums to debtors affected by the crisis generated by COVID-19. 19.

As an expert in banking and specifically in solving problems that many companies face in paying their obligations, be they to banks and general creditors, I have learned that all debt can be paid.

This happens as long as the one who owes wants to pay and the one who is owed is willing to collaborate in an orderly payment plan.

Throughout my forty years as a banker and expert in “turnarounds”, I have seen how numerous companies have been able to honor their obligations.

Sometimes, yes, there are certain creditors who choose to block all efforts of an orderly payment plan via lawsuits, where creditors can benefit, filing lawsuits against assets that seek to reorganize their finances.

On numerous occasions I have seen how these creditors have derailed companies’ efforts to organize their finances.

This makes it necessary to create a separate patrimony in the trust and the protective effect in the reactivation of the commercial, business or industrial line of the trustor, due to the effects generated by COVID-19.

I was struck by the fact that recently a large company achieved the objective of being able to honor its obligations, by having developed and implemented, having a clear and effective reorganization and payment plan, which gave confidence to all creditors; but that included legal protection that defended the company’s assets against legal actions by a minority of creditors who only looked out for their interests.

We interviewed the lawyer Fernando Sucre about this Trust instrument that allowed this great company to reorganize itself and to be able to honor all its obligations.

Lawyer Sucre, executive president of Central Fiduciaria, explains to us that the assets of the trust constitute a separate estate subject to the purpose stipulated in the Trust Agreement.

This avoids being kidnapped or seized, except for: obligations incurred or for damages caused by the execution of the trust; or by virtue of encumbrances constituted on said assets; or by third parties when the goods have been transferred or retained with fraud and to the detriment of their rights. This patrimony is independent of the patrimony of the settlor, the fiduciary and the beneficiary.

Consequently, the trust assets must be kept separate from the rest of the assets of the trustee and from those corresponding to other trust business.

In this way, the trust would allow creditors who have privileged or real guarantees to be included as beneficiaries, but making a protection shield against other creditors, with whom they must negotiate their obligations, but with the peace of mind that their assets are protected under this structure, so that they continue to serve as support in the development of your business movement, when we overcome this situation and return to normality.

It is important to clarify that, within the assets managed by the trustee in this type of trust, there are: Liquid assets, real estate, personal property, licenses and concessions, shares and rights, and other assets.

In this sense, in the face of the economic recession generated by this COVID-19 pandemic in most sectors, the event of which may affect the stability of any productive actor, the structuring of a trust would lead to the creation of an independent patrimony of the Assets of the your company, which implies its exclusion as a general guarantee from its creditors, who could only seize the profits, but not the assets.

CEO Advisors

Roberto Jose Arguello
CEO Advisors