CNV Promotes Real Estate Developments

On September 11, 2020 the Argentine Securities Commission (the “CNV” after its acronym in Spanish) issued Resolution No. 855 (the “Resolution”), by means of which it created a new legal regime applicable for Collective Investment Products for real estate development.

The Resolution was preceded by Resolution No. 844, by means of which the preliminary Resolution was submitted for public consultation.

With the purpose of boosting real estate development in every way, providing the tools and assets to allow financing through the capital markets, CNV issued the Resolution and created a new legal regime applicable to closed mutual funds (the “Mutual Funds”) and financial trusts (the “Trusts”) for real estate development, which falls within the characteristics of the real estate industry.

The Resolution mainly sets forth the following regulations applicable both to the Mutual Funds and the Trusts:

• the abrogation of the existing regulations about Mutual Funds and Trusts for real estate development;

• that the underlying asset must be constituted with the development, acquisition, investment and/or the income from the real estate assets;
• the acknowledgment of two essential figures for the right operation of these structures: the developer and the technical auditor; and
• the possibility of reducing to one business day the diffusion phase in the negotiable securities public offering when the offer is directed to qualified investors.

Among the main regulations implemented by the Resolution regarding Mutual Funds, are the following:

• the procedures of expendability of the quota holders meeting when the Fund Manager has obtained the consent of the relevant majority by a demonstrable means that ensures it;
• the possibility to establish the issuance of joint ownership and income quotas;
• the possibility for those Mutual Funds that have the purpose to develop real estate projects, to issue quotas that give the right to acquire a unit or equal; and
• the incorporation of a simplified procedure for the issuance or placement of quotas in one or more tranches, within the authorized maximum amount.

Finally, among the main regulations found in the Resolution regarding the Trusts for real estate development, are the following:

• the possibility of issuing debt securities and certificates of participation that give the right to acquire a unit or equivalent;
• that the placement phase of the debt securities and certificates of participation can be reopened within a term that must not exceed five (5) years as from its constitution or until reaching the amount authorized under the Trust;
• that the developer duties could be executed by the Trustee;
• that when a technical auditor has been hired, the appointment of a Control and Review Agent could be waived; and
• the possibility of increasing the issuance amount authorized under the Trust and/or issuing additional debt securities and/or certificates of participation, provided that this is included in the original trust agreement or the trustee has the unanimous consent of the holders of the debt securities and certificates of participation.