Technical Standards on the Transfer of Shares of Insurance Companies

CNBCR-03/2024 NRP-54 TECHNICAL STANDARDS ON THE TRANSFER OF SHARES OF INSURANCE COMPANIES

Approval: 02/29/2024 Effective Date: 03/15/2024

THE STANDARDS COMMITTEE OF THE CENTRAL BANK OF RESERVE OF EL SALVADOR,

CONSIDERING: I. That Article 6 of the Insurance Companies Law establishes the classes of persons who may be owners of the shares of insurance companies constituted in El Salvador. Likewise, it establishes that no natural or legal person, directly or through an intermediary, may be the holder of shares of an insurance company representing more than one percent (1%) of the capital of the company, without having previously been authorized by the Superintendence of the Financial System, for which it will consider the aspects indicated in Article 12 of said Law, excepting what is provided in letters a) and b) of the same article. II. That Article 7, first paragraph, of the Insurance Companies Law, establishes that insurance companies must inform the Superintendence of the Financial System about the transfers of shares registered in the shareholders' register in the previous month, within the first five business days of the following month. Likewise, they must send a list of shareholders at the close of each fiscal year, within a period not exceeding thirty days of the following fiscal year, being able to use electronic means or printed reports, as required by the Superintendence of the Financial System. III. That Article 7, second paragraph, of the Insurance Companies Law, establishes that when the transfer of shares results in a shareholder owning more than one percent (1%) of the capital of the insurance company, as established in Article 6 of said Law, the respective company must obtain prior to registration, certification of the corresponding authorization granted by the Superintendence of the Financial System. IV. That Article 78 of the Insurance Companies Law, establishes that shares acquired in violation of what is provided in Article 7 of said Law, will not allow exercising the right to vote in the general shareholders' meeting, under penalty of nullity of said votes. When the shareholder does not meet the requirements to obtain the certification referred to in the same article, they must dispose of the shares, within a period not exceeding sixty days from their acquisition. V. That Article 78 letter a) of the Supervision and Regulation of the Financial System Law, establishes that the Superintendence will keep updated the records regarding the members of the financial system and their shareholders.

THEREFORE, by virtue of the normative powers conferred by Article 99 of the Supervision and Regulation of the Financial System Law,

CNBCR-03/2024 NRP-54 TECHNICAL STANDARDS ON THE TRANSFER OF SHARES OF INSURANCE COMPANIES

Approval: 02/29/2024 Effective Date: 03/15/2024

AGREES to issue the following:

TECHNICAL STANDARDS ON THE TRANSFER OF SHARES OF INSURANCE COMPANIES

CHAPTER I OBJECT, SUBJECTS AND TERMS

Object Art. 1.- These Standards aim to establish the requirements and procedures that interested parties must fulfill to receive authorization to acquire shares of insurance companies, in a percentage greater than one percent (1%) of the social capital of the issuing entity, as well as the procedures that insurance companies must comply with, derived from the transfer of shares.

Subjects Art. 2.- The subjects obliged to comply with the provisions established in these Standards are natural and legal persons who intend to acquire shares of Insurance Companies in a percentage greater than one percent (1%).

Terms Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning: a) Central Bank: Central Bank of Reserve of El Salvador; b) Law: Insurance Companies Law; and c) Superintendence: Superintendence of the Financial System.

CHAPTER II INFORMATION REQUIREMENT TO ACQUIRE SHARES IN EXCESS OF 1% OF SOCIAL CAPITAL

Authorization Request to Acquire Shares Art. 4.- Natural and legal persons must request authorization from the Superintendence for the acquisition of shares of an insurance company, when the new acquisition results in the shareholder being the holder of more than one percent (1%) of the share capital of the respective entity.

For the determination of the percentage mentioned in the first paragraph of this article, the proportion corresponding to the applicant will be added to their own participation when they participate in the equity of legal persons that are shareholders of the insurance company.

Presentation of Documents Art. 5.- Interested parties must present the authorization request according to Annexes No. 1 and 2 of these Standards, considering the following: a) When it concerns natural persons, they must incorporate the following information: i. Copy of the Unique Identity Document (DUI); ii. Copy of the Tax Identification Number (NIT), which will be required in cases defined by the Tax Administration; iii. Valid criminal record certificate issued by the General Directorate of Penal Centers. In the case of Central American shareholders, they must present the document accrediting that they have no criminal record issued by the competent authority in their country of origin; iv. Certified copy of the passport, in the case of foreigners; v. General Balance sheet practiced at the close of the year prior to the date of the request, if the applicant is not obliged to keep formal accounting; vi. Audited financial statements at the close of the year prior to the date of the request, with their corresponding opinion; when by legal provision the applicant is obliged to present them; vii. Sworn declaration, in which they state that they are not in any of the causes indicated in Article 11 of these Standards, expressly mentioning each of them; and viii. Certificate issued by the Attorney General's Office, certifying that no judicially proven participation in activities related to drug trafficking and connected crimes, and with money laundering and asset laundering, terrorism financing and financing of the proliferation of weapons of mass destruction has been established; or sworn declaration of the applicant, granted before a Notary.

b) When it concerns legal persons, they must incorporate the following information: i. Copy of the Tax Identification Number (NIT); ii. Audited financial statements at the close of the year prior to the date of the request, with their corresponding opinion; iii. Certification mentioning the names of the main shareholders or partners of the requesting legal person, with their corresponding equity participation; iv. Updated credential of the Board of Directors registered in the Commerce Register; v. Testimony of the deed of constitution and statutes, or creation law, as applicable, in both cases with their reforms; vi. For partners or shareholders who are holders of twenty-five percent (25%) or more of the shares or rights of the society, they must present the following:

1. Sworn declaration that they are not in any of the circumstances indicated in Article 11 of these Standards; and
2. Certificate issued by the Attorney General's Office, certifying that no judicially proven participation in activities related to drug trafficking and connected crimes, and with money laundering and asset laundering, terrorism financing and financing of the proliferation of weapons of mass destruction has been established; or sworn declaration, granted before a Notary. vii. List of the current owners of the shares projected to be purchased; viii. Brief study of the investment project in shares, which must contain the source of resources for the acquisition of the shares; ix. Share transfer agreement signed between the parties, in case the share acquisition is more than fifty percent (50%) of participation; and x. Resolution issued by the Competition Superintendence referred to economic concentration, in cases where such authorization corresponds in accordance with the Competition Law.

c) When it concerns Central American Insurance or Reinsurance Companies or other foreign ones, they must additionally present the following requirements: i. International classification of the requesting entity, issued by an internationally recognized rating institution; ii. Certification issued by the competent authority stating that the requesting entity operates in accordance with the prudential regulation and supervision of its country of origin and that it is complying with the provisions applicable to it; and iii. Express request addressed to the Superintendent of the Financial System, signed by the president or legal representative of the insurance company in which the investment will be made, requesting the registration of the shareholder company in the list of first-line typified foreign entities, in accordance with the regulations issued for such purposes by the Central Bank through its Standards Committee.

The request and documentation may be presented through the means made available by the Superintendence, which may be electronic. In any case, the period referred to in Article 7 of these Standards, will begin to count from the next business day after the request has been presented.

Certification Art. 6.- When the transfer of shares is one of those requiring authorization according to these Standards, the respective entity must obtain prior to registration in the shareholders' book, certification of the corresponding authorization granted by the Superintendence.

CHAPTER III AUTHORIZATION FOR THE TRANSFER OF SHARES

Procedure for the Authorization of the Transfer of Shares Art. 7.- Upon receipt of the authorization request to acquire shares in excess of one percent (1%) of the social capital, the Superintendence will proceed to verify compliance with the requirements defined in the Law and in these Standards, having up to twenty (20) business days for the authorization or denial of the request.

If the request is not accompanied by complete and proper information according to what is established in Article 5 of these Standards, the Superintendence, due to the lack of necessary requirements, may require the entity, within a period of ten (10) business days counted from the day following the notification, to present the missing documents, a period that may be extended at the request of the interested parties when there are reasons justifying it.

The Superintendence in the same notice will indicate to the applicants that if they do not complete the information within the aforementioned period, it will proceed without further procedure to archive the request, leaving them free to present a new request.

If after the analysis of the documentation presented according to what is established in Article 5 of these Standards, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited, the Superintendence will notify the applicants to remedy the deficiencies communicated to them or present additional documentation or information requested by them.

The applicants will have a maximum period of ten (10) business days, counted from the day following the notification, to resolve the observations or present the information requested by the Superintendence.

The Superintendence may, through a reasoned resolution, extend by another ten (10) business days the period indicated in the previous paragraph, when the nature of the observations or deficiencies notified so requires.

Extension Period Art. 8.- Applicants may present to the Superintendence a request for extension of the period indicated in the fifth paragraph of Article 7 of these Standards, before the expiration of said period, must express the grounds on which it is based and propose, if applicable, the pertinent proof.

The extension period cannot exceed ten (10) business days and will start from the next business day following the expiration date of the original period.

Suspension of the Period Art. 9.- The period of twenty (20) business days indicated in the first paragraph of Article 7 of these Standards, will be suspended for the days that elapse between the notification of the request for information or documentation referred to in the second and fifth paragraphs of said article, until the observations required by the Superintendence are remedied.

Resolution Art. 10.- Once the complete and proper documentation has been presented, the Superintendence will resolve on what was requested; resolution that will be communicated to the interested party and the corresponding insurance company, within a maximum period of three (3) business days, from the date the resolution was issued.

When the resolution is favorable, it must indicate the number of shares that the applicant is authorized to acquire.

Denial of the Request Art. 11.- The Superintendence will deny the request to persons who are in any of the following cases: a) Insolvent or declared bankrupt, until they have been rehabilitated and those who have been judicially qualified as responsible for a fraudulent or negligent bankruptcy; b) Those convicted of crimes against property or against the public treasury, when the sentence has become final; c) Directors, officials or administrators of an insurance company or another institution of the Financial System, who have incurred patrimonial deficiencies of twenty percent (20%) or more of the minimum required by the Law or who have required State contributions for their stabilization or who have been intervened by the respective auditing entity. In any case, responsibility must be demonstrated for the situation to have occurred; d) Debtors of the Salvadoran Financial System for credits to which a stabilization reserve of fifty percent (50%) or more of the balance has been constituted, while the irregularity of the credit persists; and e) Those who have participated directly or indirectly in a serious infringement of the laws and other norms governing the Financial System.

What is established in the letters of the first paragraph of this article, will also apply with respect to the spouse and relatives of the first degree of consanguinity of the applicant.

When the applicant is a legal person, what is established in this article will apply to each of the partners or shareholders who have a participation equal to or greater than twenty-five percent (25%) in the equity of the society in question.

Art. 12.- Likewise, the Superintendence will deny the request when, as a result of this, the requirement regarding that the ownership of the shares of insurance companies constituted in El Salvador, must be maintained at minimum seventy-five percent (75%) individually or jointly in the classes of persons established in Article 6 of the Law, is not met.

CHAPTER IV OTHER PROVISIONS AND EFFECTIVE DATE

Presentation of Information Art. 13.- The copies presented before the Superintendence, in compliance with what is established in these Standards, must be legible and certified by a Salvadoran Notary. In cases where the copies correspond to the Unique Identity Document (DUI) and the Tax Identification Number (NIT), notarial certification will not be required.

Likewise, signatures that match any type of documentation issued in El Salvador must be legalized by a Salvadoran Notary.

Notwithstanding the above, if the documentation presented comes from abroad, both the copies and the signatures contained therein must be authenticated or certified by a foreign notary or official, as the case may be, and follow the procedure of legalization. They must be legalized by the Head of the Diplomatic Mission, Consul, Vice-Consul or Officer in Charge of Consular Affairs of El Salvador, or in their absence, by officials of the Ministry of Foreign Relations from which such documents originate.

Documentation originating from a foreign country, written in a language other than Spanish, to have legal effect in El Salvador, must be translated in accordance with what is established in the Law on the Practice of Notarial Jurisdiction of Voluntary Jurisdiction and Other Proceedings.

Share Transfer Report Art. 14.- Share transfers carried out in accordance with what is established in these Standards, must be communicated to the Superintendence according to the Technical Standards for the Information Collection Procedure for the Register of Share Transfers (CNBCR-03/2024), approved by the Central Bank through its Standards Committee.

Acquisition of Shares without Authorization Art. 15.- When shares have been acquired without the corresponding authorization of the Superintendence, they will not have voting rights, a circumstance that will be recorded in the shareholders' meeting minutes. This provision will not be applicable in the case where the shares have been registered in the corresponding book in favor of the shareholder before the entry into force of the Law, notwithstanding, if this person ceases to hold the status of shareholder at any moment and subsequently wishes to acquire shares again in said company, they must request authorization from the Superintendence.

Art. 16.- The shareholder who does not meet the requirements to obtain the authorization, must transfer the ownership of the shares within a period not exceeding sixty (60) days, counted from the acquisition thereof.

New Companies or Capital Increase Art. 17.- Cases of subscription and payment of shares for the constitution of new companies or for an increase in social capital, will be authorized in each case.

Sanctions Art. 18.- Non-compliance with the provisions contained in these Standards, will be sanctioned in accordance with what is established in the Supervision and Regulation of the Financial System Law.

Repeal Art. 19.- These Standards repeal the Instruction on the Transfer of Shares (IN-03), approved by the Board of Directors of the Superintendence of the Financial System in Session No. CD-28/1998 of May 13, 1998, whose Organic Law was repealed by Legislative Decree No. 592 containing the Supervision and Regulation of the Financial System Law, published in the Official Diary No. 23, Volume No. 390, dated February 2, 2011.

Transitory Art. 20.- Requests presented in accordance with what is established in the Instruction on the Transfer of Shares (IN-03), and which were in process at the time these Standards enter into force, will be continued and concluded in accordance with the regulations under which they began.

Unforeseen Aspects Art. 21.- Aspects not provided for in the regulatory matter in these Standards, will be resolved by the Central Bank through its Standards Committee.

Effective Date Art. 22.- These Standards will enter into force as of March 15, two thousand twenty-four.

Annex No. 1 CNBCR-03/2024 NRP-54 TECHNICAL STANDARDS ON THE TRANSFER OF SHARES OF INSURANCE COMPANIES

Approval: 02/29/2024 Effective Date: 03/15/2024

REQUEST FOR AUTHORIZATION TO ACQUIRE AND BE OWNER OF SHARES IN EXCESS OF 1% IN ___________________(NATURAL PERSONS)

Gentlemen Superintendence of the Financial System Present

I, ________________________, of __________ years of age, profession or occupation ____________________, nationality __________________, domiciled at ____________________, with Unique Identity Document or Passport No. _______________, Tax Identification Number (NIT) _____________ (which will be required in cases defined by the Tax Administration), request authorization to acquire and be owner of _____________ shares in ________________ in excess of 1% of its social capital. For the purposes of the regulations established in Article 6 of the Insurance Companies Law, I declare the following personal information:

I. THAT I AM THE OWNER OF THE FOLLOWING INVESTMENTS IN COMPANIES THAT WILL BE SHAREHOLDERS OF THE INSURANCE COMPANY (OPERATING OR IN FORMATION)

Company NIT Name of Partners NIT Nominal Value /u Total Shares Total Nominal Value % Participation Insurance Company

II. THAT I AM A DEBTOR IN THE FOLLOWING FINANCIAL SYSTEM INSTITUTIONS

Financial Institution Amount Maturity Destination Guarantee

III. THAT I HAVE BEEN AN OFFICIAL, DIRECTOR OR MANAGER (FACTOR) IN THE FOLLOWING FINANCIAL SYSTEM INSTITUTIONS:

Institution Position Performed

IV. POSSIBLE TRANSFERORS OR SOURCES OF ACQUISITION OF THE SHARES

The names of the persons who will transfer their share participation to me are:

---

---

or I intend to carry out the acquisition of shares through a public offer of shares.

V. AMOUNT OF THE TRANSACTION

The transaction or transactions will amount to a sum of (Amount in United States dollars in numbers and letters).

VI. THAT I KNOW THE PENAL RESPONSIBILITIES RELATING TO THE FORGERY OF DOCUMENTS CONTAINED IN THE PENAL CODE

Likewise, I declare that I am aware of the causes for which the Superintendence can deny the acquisition of shares by more than 1%; that I am not in any of them; and that I meet the requirements for the requested authorization.

And for the purposes of the prior authorization required by the Insurance Companies Law, I sign this in ________________, on the _____________ day of the month of ______________ of two thousand ______________________.

Signature of the Applicant

Annex No. 2 CNBCR-03/2024 NRP-54 TECHNICAL STANDARDS ON THE TRANSFER OF SHARES OF INSURANCE COMPANIES

Approval: 02/29/2024 Effective Date: 03/15/2024

REQUEST FOR AUTHORIZATION TO ACQUIRE AND BE OWNER OF SHARES IN EXCESS OF 1% IN ___________________(LEGAL PERSONS)

Gentlemen Superintendence of the Financial System Present

I, ________________________, in my capacity as President/Legal Representative of the company ________________________, with Tax Identification Number (NIT) _____________, domiciled at ____________________, request authorization to acquire and be owner of _____________ shares in ________________ in excess of 1% of its social capital. For the purposes of the regulations established in Article 6 of the Insurance Companies Law, I declare the following corporate information:

I. THAT THE COMPANY IS THE OWNER OF THE FOLLOWING INVESTMENTS IN COMPANIES THAT WILL BE SHAREHOLDERS OF THE INSURANCE COMPANY (OPERATING OR IN FORMATION)

Company NIT Name of Partners NIT Nominal Value /u Total Shares Total Nominal Value % Participation Insurance Company

II. THAT THE COMPANY IS A DEBTOR IN THE FOLLOWING FINANCIAL SYSTEM INSTITUTIONS

Financial Institution Amount Maturity Destination Guarantee

III. THAT THE COMPANY HAS BEEN AN OFFICIAL, DIRECTOR OR MANAGER (FACTOR) IN THE FOLLOWING FINANCIAL SYSTEM INSTITUTIONS:

Institution Position Performed

IV. POSSIBLE TRANSFERORS OR SOURCES OF ACQUISITION OF THE SHARES

The names of the persons who will transfer their share participation to the company are:

---

---

or the acquisition of shares is intended to be carried out through a public offer of shares.

V. AMOUNT OF THE TRANSACTION

The transaction or transactions will amount to a sum of (Amount in United States dollars in numbers and letters).

VI. THAT I KNOW THE PENAL RESPONSIBILITIES RELATING TO THE FORGERY OF DOCUMENTS CONTAINED IN THE PENAL CODE

Likewise, I declare that I am aware of the causes for which the Superintendence can deny the acquisition of shares by more than 1%; that I am not in any of them; and that I meet the requirements for the requested authorization.

And for the purposes of the prior authorization required by the Insurance Companies Law, I sign this in ________________, on the _____________ day of the month of ______________ of two thousand ______________________.

Signature of the Legal Representative