Cancellatory Check

By means of the Communication A 5130 effective as from November 23, 2010 the Argentine Central Bank (“the “Central Bank”) approved the use of cancellatory checks. The cancellatory check differs from the regular check because it is not a payment order: upon delivery to the payee, the financial obligations are considered satisfied. 

All persons will be able to obtain these checks in the bank where they have an account and, accordingly, a registered signature. Individuals will have the possibility of buying them in pesos or in dollars, which will be debited from their account. Checks in dollars may only be used to buy real estate. In the case of individuals willing to buy a check in dollars, they will be able to choose between having the money debited from their account or making a cash payment in dollar bills. Legal entities will only be able to obtain cancellatory checks in dollars, and they will only be able to pay by debit -they do not have the possibility of buying cancellatory checks in cash with dollar bills.

Banks will need to have cancellatory checks available in all their branches.  The check books will be issued and distributed by the Central Bank. 

The financial entity will draw the check for the amount the client requests. However, there is a legal limit established: if the check is in pesos, the amount can go from AR$ 5,000 to AR$ 400,000, and if it is in dollars, it can go from USD 2,500 to USD 100,000. The amount will be written on the check along with the buyer’s and the payee’s names, their tax identification numbers, and the issue date.

Before handing the check to the buyer, the intervening bank will transfer the money to the Central Bank. The Central Bank will be in charge of transferring the money to the bank where the check is cashed.

The payee has a ninety day period to be counted as of the issue date to cash the cancellatory check.  To such effect, the payee will have to present the check to the bank in which they have an account and prove they are the final payee of the check.

Natural persons will have the option to deposit the check in their savings account or to exchange the check for cash, which would avoid them the 1.2% debit and credit tax. Legal entities will not have this possibility and will be required to deposit the check in their current account.

Legal entities may not endorse these checks.  Individuals may endorse them twice. The endorser’s signature will have to be certified by a public notary, a judicial authority or a bank worker.

A website will be set up so that intervening banks, verified holders, and the endorser’s certifiers will be able to confirm the accuracy of the information written on the check and if there is a stop-payment order. 

In the event that the check is stolen, lost or destroyed, the verified holder will have to give written notice of this situation to the bank. In the following twenty-four hours, this person will have to prove that they have reported the event to the relevant authority. Once this is done, and if the person is the final payee of the check, they are allowed to cash the check at the Central Bank.

If a person tries to cash a check that has a stop-payment order, the document will be withheld under the responsibility of the person who has placed the stop-payment. The person who presented the check will be given a photocopy of its front and back, along with a copy of the information given by the Central Bank’s web page.

It seems that this instrument will allow individuals to receive and make payments safely, quickly, and with no apparent cost.  Time will tell if cancellatory checks are used and if they actually are as convenient as they appear to be.