Argentine Central Bank Regulates Factoring Micro, Small and Medium-Sized Enterprises Platforms

On January 19, 2023, the Argentine Central Bank (BCRA) issued Communique “A” 7673 announcing the creation of the registry of factoring platforms that finance Micro, Small and Medium-sized Enterprises (MSMEs or MiPyME in Spanish) and regulated said companies.

 

MSMEs financing platforms (PFM) are “legal entities that facilitate –as a main or accessory activity of their corporate purpose-, through computer tools and/or systems, the arrangement of commercial operations made with “MiPyME electronic credit invoices” (FCEM), in the terms of section 13 of the Productive Financing Law No. 27440, as well as other instruments the regulation deems admissible.”

 

FCEMs are billing instruments created in 2018 by the Productive Financing Law No. 27440 (LFP). The LFP defined them as enforceable instruments and non-physical securities that must meet the following requirements:

 

(i) be issued within the framework of a sale for production or commercialization purposes;

(ii) both parties have domicile in national territory; and

(iii) have a payment term longer than 15 days.

 

Before the creation of the FCEMs, there were two other regulation attempts, which were not adopted by the market: the repealed Billing Act No. 24064 of 1991 and the Act No. 24760, which amended the Bankruptcy Act and Code of 1996. The issue with the Act No. 24760 and its “credit invoice” regime was that said invoices did not constitute enforceable instruments, and so MiPyMEs could not transfer or negotiate them as such. Besides, the application of the regime was optional.

 

In order to remedy those deficiencies, the LFP established the enforceability of the FCEMs and the obligatory nature of the regime for all the commercial transactions in which a MSME must issue electronic credit invoices to a large company, being only optional for commercial transactions between MSMEs.

 

The LFP also created the “MiPyME Electronic Credit Invoices Registry”, operated by the Argentine Tax Authority (AFIP) and regulated by General Resolution No. 4367 of December 2018. Through said registry, MiPyMEs can:

 

1. consult all the issued, accepted, paid, and rejected FCEMs;
2. consult the parties compelled to accept FCEMs; and
3. opt for either of the two trading and circulation systems: a stock exchange system within the Argentine capital market or an over-the-counter system.

 

Regarding the regulation, the Communique “A” 7673 established that only financial entities and non-financial credit suppliers may buy FCEMs.

 

Among the PFMs’ responsibilities are:

 

• The prohibition of assuming any credit risk or guaranteeing, directly or indirectly, the operations arranged through them;

 

• The prohibition of acting as sellers or buyers of instruments negotiated through them, nor operating for themselves or on behalf of third parties, nor managing funds of their users, nor intervening in the settlement of operations of its own platform or other technological platforms or systems;

 

• To provide the parties involved with clear and simple information;

 

• To adopt mechanisms guaranteeing the delivery of the FCEM –to the buying entity– against the payment of the agreed amount –to the selling party–. When, to that effect, they use a “payment against delivery modality” (delivery vs. payment or DvP), they must use the services provided by financial market infrastructures (IMF) and/or payment service providers, in both cases authorized by the BCRA;

 

• To inform separately their service commissions without adding it to the discount rate offered by the buyer.

 

 

Also, PFMs must register before the new registry through the AFIP application, similar to Payment Service Providers’ registration process. The novelty introduced by the BCRA is that, additionally, PFMs must present a procedural manual to clearly understand the processes and methods used for the platform to function, and the offer of operations with FCEMs to the investor, detailing every control applied.

 

Furthermore, and within the scope of the surveillance powers the Superintendence of Financial and Exchange Institutions will exercise over PFMs, they must send a copy of their financial or accounting statements, allowing periodic on-site or remote audits, and comply with the established informative regime. Said regime has not been determined yet.

 

Moreover, PFMs must include in every advertisement or documentation used to provide services a text that clearly states that they do not assume liabilities or risks for the operations whose arrangements they facilitate, nor guarantee the collection of the instruments object of these operations, and that they are not authorized by the BCRA to act as financial entities.

 

The BCRA established that the companies currently providing these services must register before the new registry before June 1, 2023.