Fiduciary arrangements act as a spur to business growth in Colombia
The recent subject of a blog, fiduciary arrangements in Colombia are a concept frequently used as a means to structure and develop complex, large-scale business deals. The article made mention of various common scenarios in which the arrangement is used, such as the development of real estate projects, infrastructure, corporate acquisitions, manufacturing project management, cash management at companies and transactions on the securities market.
There follows a more in-depth look at some of these:
- Real estate fiduciary arrangements are a much demanded vehicle whereby the fiduciary company takes on the funds of investors looking to acquire property and only use such funds once the project has reached break-even point and has reasonable prospects in terms of its financial, commercial and technical viability.
Throughout the development of the real estate project, the fiduciary company is tasked with making payment to third parties, thereby ensuring that the funds are properly used. To this end, the real estate developers oversee the various projects and the investors hand over the financial backing safe in the knowledge that, if the initiative fails to break even, the fiduciary company will reimburse them for their investment, along with any revenues generated. This also reduces the risk of any opportunist developers seeking to make off with or misuse the funds handed over by investors. Taking only the real estate market into account, fiduciary companies accounted for the management of upwards of €7,600 million by midway through 2013.
- As far as the securities market is concerned, fiduciary arrangements are used for collective investment purposes. Channeled through collective investment vehicles, investors provide funds to fiduciary companies to be invested jointly in line with the criteria set in the fund regulations. The figures on the funds administered by such companies under these arrangements were somewhere in the region of €14,200 million midway through 2013.
- When it comes to infrastructure projects, fiduciary arrangements are mandatory in nature. In a bid to prevent the improper use of funds on the part of certain concession-holders, Colombian law requires that any advance payments made by public bodies be handled under fiduciary agreements. It is therefore used as a mechanism to ensure the transparent use of public funds.
Among other projects, funds have been managed under fiduciary arrangements in Colombia for over 35 state concessions, 3 hydroelectric plants have been built, 15 airport construction and refurbishment projects have been carried out, 125 hospitals have been built, 110 sewerage plans have been developed and funds have been managed to support victims of natural disasters such as floods and earthquakes.
Garrigues Latin American practice