Resolution No. 1021-98: Factoring, Discounting, and Factoring Companies Regulations

Lima, October 1, 1998
Superintendent of Banking and Insurance Resolution No. 1021-98

The Superintendent of Banking and Insurance

CONSIDERING:

That, the General Law of the Financial System and the Insurance System and the Organic Law of the Superintendent of Banking and Insurance, Law No. 26702, hereinafter the General Law, in items 4 and 10 of Article 221, establishes that companies in the financial system are authorized to carry out discounting and factoring operations;

That, likewise, Article 16 of the General Law provides for the establishment of factoring companies as specialized companies of the financial system whose corporate purpose is defined in item 8 of Article 282 of the aforementioned legal provision;

That, consequently, it is necessary to establish the regulatory framework for factoring and discounting operations; as well as the rules that factoring companies must observe for purposes of their organization and functioning;

Being in accordance with the opinion of the Adjunct Superintendencies of Banking and Legal Advice; and,

In exercise of the powers conferred by items 7 and 9 of Article 349 of the General Law;

RESOLVES:

ARTICLE FIRST.- Approve the regulation on factoring, discounting, and factoring companies, which forms an integral part of this Resolution.

ARTICLE SECOND.- This Resolution enters into force the day following its publication in the Official Gazette El Peruano.

Register, communicate, and publish,

MARTÍN NARANJO LANDERER
Superintendent of Banking and Insurance

REGULATION ON FACTORING, DISCOUNTING, AND FACTORING COMPANIES

TITLE I
ON FACTORING OPERATIONS

CHAPTER 1
ON FACTORING

Article 1.- Factoring
Factoring is the operation by which the Factor acquires, for valuable consideration, from a natural or legal person, referred to as the Client, instruments of a credit nature, providing in some cases additional services in exchange for remuneration. The Factor assumes the credit risk of the debtors of the acquired instruments, hereinafter Debtors.

Article 2.- Instruments with credit content
Instruments with credit content, hereinafter the Instruments, must be freely disposable by the Client. Factoring operations cannot be carried out with instruments that have matured or originated in financing operations with companies of the financial system.

The instruments subject to factoring may be invoices, confirmed invoices, and debt-representative securities, as defined by the laws and regulations on the matter. These instruments are transferred by endorsement or by any other form that allows the transfer of ownership to the Factor, according to the laws on the matter. Such transfer comprises the transmission of all accessory rights, unless otherwise agreed.

Article 3.- Factoring Contract
Factoring is perfected through a written contract between the Factor and the Client. The contract must contain at least the following:

1. Name, trade name, or corporate name and domicile of the parties;
2. Identification of the instruments that are the subject of factoring or, if applicable, specify the criteria that allow identifying the respective instruments;
3. Price to be paid for the instruments and the method of payment;
4. Remuneration corresponding to the Factor; if applicable;
5. Responsible party for collecting from the Debtors; and,
6. Moment from which the Factor assumes the credit risk of the Debtors.

Article 4.- Knowledge of Factoring by Debtors
The factoring operation must be carried out with the knowledge of the Debtors, unless due to the nature of the acquired instruments, such knowledge is not necessary.

It will be presumed that the Debtors know of the factoring when there is evidence of receipt of the corresponding notification at their legal domiciles or at those indicated in the Instruments, or when by any other form it is unequivocally evidenced that the Debtor knows of the factoring.

Article 5.- Limits applicable to the Debtor.
Factoring operations will be considered as placements, and the limits established in Articles 201, 202, 206, 207, 208, 209, and 211 of the General Law will be applicable to each of the Debtors.

CHAPTER 2
ON THE FACTOR

Article 6.- Companies authorized to act as factors
The companies authorized to operate as Factors are the following:

1. Factoring companies that have been authorized by this Superintendency;
2. Banking companies and other multiple-operation companies authorized to carry out the operations provided for in module 1 of Article 290 of the General Law.

Article 7.- Rights of the Factor
The minimum rights of the Factor are:

1. To carry out all acts of disposition regarding the acquired Instruments; and
2. To charge a remuneration for any additional services provided.

Article 8.- Obligations of the Factor
The Factor assumes, at least, the following obligations:

1. To acquire the Instruments in accordance with the agreed conditions;
2. To provide the agreed additional services;
3. To pay the Client for the acquired instruments; and,
4. To assume the credit risk of the Debtors.

Article 9.- Additional services
The Factor may provide the Client with additional services to the acquisition of instruments, which may consist of commercial research and information, management and collection, accounting services, market studies, comprehensive advice, and others of a similar nature.

CHAPTER 3
ON THE CLIENT

Article 10.- Rights of the client
The Client has, at minimum, the following rights:

1. To demand payment for the transferred instruments within the established period and in accordance with the agreed conditions; and,
2. To demand compliance with any additional services that have been agreed upon.

Article 11.- Obligations of the client
The Client has, at least, the following obligations:

1. To guarantee the existence, enforceability, and validity of the Instruments at the time the factoring is concluded;
2. To transfer the Instruments to the Factor in the manner agreed or established by law;
3. To notify the Debtors of the factoring, when applicable;
4. To receive payments made by the Debtors and transfer them to the Factor, when so agreed with the latter;
5. To inform the Factor and cooperate with it to allow the best evaluation of its own financial and commercial situation, as well as that of its Debtors;
6. To provide all documentation related to the transfer of Instruments; and,
7. To remunerate the Factor for the additional services received.

TITLE II
ON DISCOUNTING OPERATIONS

Article 12.- Discounting
Discounting is the operation by which the Discounter delivers a sum of money to a natural or legal person referred to as the Client, for the transfer of certain instruments of a credit nature. The Discounter assumes the credit risk of the Client, and the Client in turn assumes the credit risk of the debtor of the transferred instruments.

The provisions contained in Articles 2 and 4 of this Regulation shall be applicable to discounting.

Article 13.- Limits applicable to the client
The limits provided for in Articles 201, 202, 206, 207, 208, 209, and 211 of the General Law will apply only to the Client and not to the debtor of the acquired instruments.

TITLE III
ON FACTORING COMPANIES

Article 14.- Corporate purpose
Factoring companies are joint-stock companies whose corporate purpose consists primarily in the acquisition of invoices, confirmed invoices, and debt-representative securities, through factoring and discounting.

Article 15.- Constitution
The process for the constitution of factoring companies is regulated by the pertinent provisions contained in SBS Resolution No. 600-98 of June 26, 1998, and all those that this Superintendency issues for this purpose.

Factoring companies will be constituted observing the minimum capital established in Article 16 of the General Law, which they must keep updated in accordance with what is stated in Article 18 of the General Law.

Article 16.- Operations
Factoring companies may carry out all operations that are necessary for the fulfillment of their corporate purpose.

Article 17.- Portfolio concentration and operational limits
The provisions on operational limits established in Articles 198 and 199 of the General Law will be applicable to factoring companies. Likewise, the rules issued by this Superintendency on the identification and administration of credit risk, as well as those referring to the regime of provisions for credit risk and adjudicated assets, will apply.

Article 18.- Accounting registration
Factoring companies must register their operations in accordance with the current accounting rules applicable to companies in the financial system.

Article 19.- Dissolution and liquidation
The dissolution and liquidation of factoring companies will be governed by the provisions contained in Title VII of Section One of the General Law and the complementary rules issued by this Superintendency.

Article 20.- Submission of information to the Superintendency
Factoring companies must send the following information to this Superintendency:

1. Accounting Information
   a) Trial Balance b) General Balance Sheet (Form "A") c) Statement of Income and Loss (Form "B") d) Statement of Cash Flows (Form "C") e) Statement of Changes in Equity (Form "D")
2. Complementary Information
   a) Annual External Audit Report b) Management Report to the Board of Directors c) Report on the Evaluation of the Annual Work Program of the Internal Control Office. d) Confidential Credit Report e) Investments (Annex No. 1) f) Summary of placements and contingent credits by type of guarantee (Annex No. 2) g) Report on the classification of debtors in the credit portfolio, contingent, and financial leases (Annex No. 5) h) Fixed Assets (Annex No. 7) i) Adjudicated and recovered assets (Annex No. 7-A) j) List of Shareholders and Transfer of Shares (Report No. 1) k) Risk-weighted assets (Report No. 7) l) Effective Equity adjusted for inflation (Report No. 8) m) Commercial reports (Report No. 14) n) Credit lines granted from abroad (Report No. 15)

In the case of factoring operations, the commercial reports referred to in item m) of the preceding item must contain information on both the Client and the Debtors; the minimum information and documentation will be those required for credit operations. In the case of discounting operations, said commercial reports must contain the information and documentation regarding the Client.

The Confidential Credit Report must contain the information corresponding to the accounting items established in Article 25 of this Regulation, as well as those corresponding to discounting operations established in the Chart of Accounts for Financial Institutions.

The information considered in the first paragraph of this article will be sent in accordance with the normative references, provisions, and deadlines established by this Superintendency, insofar as applicable, and in all those provisions that modify or expand them.

Article 21.- Annual External Audit Report
For the submission of the annual external audit report referred to in item a), item 2 of Article 20 above, factoring companies must observe the provisions established by this Superintendency regarding the same.

TITLE IV
GENERAL AND FINAL PROVISIONS

Article 22.- Global Limit for Factoring Operations
The global limit established in item 1 of Article 200 of the General Law, applicable to multiple-operation companies, will be considered on invoices, confirmed invoices, and debt-representative securities acquired through factoring.

Article 23.- Provisions for Credit Risk
Factoring companies and multiple-operation companies will determine provisions for credit risk in relation to the classification of the Debtor when carrying out factoring operations, and in relation to the classification of the Client when carrying out discounting operations.

Article 24.- Adaptation Period
Factoring companies constituted prior to the entry into force of the General Law must adapt their capital, operations, and statutes to the provisions contained in said Law, in SBS Resolution No. 600-98, and in this Regulation, within a period expiring on June 30, 1999.

Multiple-operation companies that carry out factoring and discounting must adapt to the provisions contained in this regulation, within the period indicated in the preceding paragraph. Likewise, those multiple-operation companies that, by virtue of the provisions of this Regulation, exceed the limit established in item 1 of Article 200 of the General Law, may not during said period increase their existing levels of concentration at the time of entry into force of this provision.

Article 25.- Accounting of Factoring Operations
The Chart of Accounts for Financial Institutions is modified as follows: (*)

(*) Chart of Accounts repealed by Accounting Manual