Technical Standards for Constituting and Operating Reciprocal Guarantee Societies and Re-guarantors of Reciprocal Guarantee Societies

CNBCR-11/2023 NRP-48
TECHNICAL STANDARDS FOR CONSTITUTING AND OPERATING RECIPROCAL GUARANTEE SOCIETIES AND RE-GUARANTORS OF RECIPROCAL GUARANTEE SOCIETIES Approval: 12/14/2023 Validity: 01/02/2024

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

CONSIDERING:
I. That Article 32, first paragraph, of the Law of the Reciprocal Guarantee System for Micro, Small and Medium Rural and Urban Enterprises, establishes the information that interested parties must present to the Superintendence of the Financial System to constitute a Reciprocal Guarantee Society.
II. That Article 34, first paragraph, of the Law of the Reciprocal Guarantee System for Micro, Small and Medium Rural and Urban Enterprises, establishes that the certified copy of the deed of constitution must be presented to the Superintendence of the Financial System so that it may qualify whether the terms stipulated in the bylaws conform to the previously authorized projects and whether the social capital has been effectively integrated in accordance with the authorization.
III. That Article 35, first paragraph, of the Law of the Reciprocal Guarantee System for Micro, Small and Medium Rural and Urban Enterprises, establishes that the Superintendence of the Financial System will certify that the Reciprocal Guarantee Society is authorized to begin operations.
IV. That Article 3, second paragraph, literal b), of the Law of Supervision and Regulation of the Financial System, establishes that the Superintendence of the Financial System is responsible for authorizing the constitution, functioning, start of operations, suspension of operations, modification, revocation of authorization, closure, and other acts of the members of the financial system, in accordance with legal, regulatory, or technical normative provisions established regarding the matter.
V. That Article 7, literal h), of the Law of Supervision and Regulation of the Financial System, establishes that the Superintendence of the Financial System is responsible for the supervision of Reciprocal Guarantee Societies and their local re-guarantors.
VI. That Article 99, third paragraph, literal a), of the Law of Supervision and Regulation of the Financial System, establishes that it is the responsibility of the Standards Committee of the Central Reserve Bank of El Salvador to approve technical norms on any other aspect inherent to risk management by the supervised entities.
VII. That in accordance with Article 101, fourth paragraph, of the Law of Supervision and Regulation of the Financial System, the powers to approve, modify, and repeal technical norms that must be complied with by the members of the financial system and other supervised entities are transferred to the Central Reserve Bank of El Salvador.

CNBCR-11/2023 NRP-48
TECHNICAL STANDARDS FOR CONSTITUTING AND OPERATING RECIPROCAL GUARANTEE SOCIETIES AND RE-GUARANTORS OF RECIPROCAL GUARANTEE SOCIETIES Approval: 12/14/2023 Validity: 01/02/2024

THEREFORE,

by virtue of the normative powers conferred upon it by Article 99 of the Law of Supervision and Regulation of the Financial System, AGREES to issue the following:
TECHNICAL STANDARDS FOR CONSTITUTING AND OPERATING RECIPROCAL GUARANTEE SOCIETIES AND RE-GUARANTORS OF RECIPROCAL GUARANTEE SOCIETIES

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to develop the requirements and legal and administrative processes to constitute and operate Reciprocal Guarantee Societies and Re-guarantors of Reciprocal Guarantee Societies subject to the Law of the Reciprocal Guarantee System for Micro, Small and Medium Rural and Urban Enterprises.

Subjects
Art. 2.- The subjects obliged to comply with the provisions established in these Standards are the persons interested in constituting Reciprocal Guarantee Societies and Re-guarantors of Reciprocal Guarantee Societies that are covered by the Law of the Reciprocal Guarantee System for Micro, Small and Medium Rural and Urban Enterprises.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Central Bank: Central Reserve Bank of El Salvador; b) Law: Law of the Reciprocal Guarantee System for Micro, Small and Medium Rural and Urban Enterprises; c) Participations: Social participations; d) Re-guarantor(s): Re-guarantor(s) of Reciprocal Guarantee Societies; e) Society or Societies of Guarantee: Reciprocal Guarantee Society or Societies; and f) Superintendence: Superintendence of the Financial System.

CNBCR-11/2023 NRP-48
TECHNICAL STANDARDS FOR CONSTITUTING AND OPERATING RECIPROCAL GUARANTEE SOCIETIES AND RE-GUARANTORS OF RECIPROCAL GUARANTEE SOCIETIES Approval: 12/14/2023 Validity: 01/02/2024

CHAPTER II
REQUIREMENTS AND APPLICATION PROCEDURE

Application and Documentation
Art. 4.- Persons interested in constituting a Guarantee Society or a Re-guarantor, regulated by the Law, must submit an authorization request to the Superintendence and additionally, the following documentation:
a) Draft deed of constitution incorporating the social bylaws. This draft must contain the requirements set forth in the Law, Article 22 of the Commercial Code, and the Notary Law; b) Organizational and administrative scheme of the society; c) Financial bases of the operations it plans to develop, commercial plans, and financial projections for at least three years; d) Activity program and specific operations projected to be carried out; e) Requirements of the partners who will constitute the society, indicating their participations in the social capital; and f) List of Protective Partners and Founding Participating Partners of the Guarantee Society. In the case of Re-guarantors, the list of partners must be presented. The lists must indicate the amount of the respective subscriptions and their general details. Likewise, the subscriptions must be duly certified by an External Audit Firm registered in the Register of Auditors of the Superintendence. In the event that the partners are natural persons, they must present the following information:
i) Copy of the Unique Identity Document (DUI); ii) Copy of the Tax Identification Number (NIT), which must be in accordance with what is established by the Tax Administration; iii) Notarially certified photocopy of the passport, in the case of foreigners; iv) Sworn declaration of not being in a situation of bankruptcy or insolvency; and v) Description of the origin of the funds, accompanied by documentation evidencing the source of funds, for the acquisition of social participations. If the future partners are legal entities, they must present the following information:
i) Copy of the Tax Identification Number (NIT), which must be in accordance with what is established by the Tax Administration; ii) Audited financial statements of the last fiscal year; iii) Copy of the certified copy of the deed of constitution and bylaws with their reforms and legal representation; iv) Sworn Declaration of not being in a situation of bankruptcy or insolvency, issued by the legal representative of the company to be constituted as a protective or participating partner of the Guarantee Society or as a partner of the Re-guarantor; v) Certification of the minute point, where the acquisition of the social contributions of the Guarantee Society or the Re-guarantor for its constitution is authorized; and vi) Description of the origin of the funds, accompanied by documentation evidencing the source of the funds, for the acquisition of social participations. In the case that the documentation presented comes from abroad, both the photocopies and the signatures appearing in them must be authenticated or certified by a notary or foreign official, as appropriate, and follow the apostille procedure in the case of countries signatories to the "Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents"; otherwise, 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 failing that, by officials of the Ministry of Foreign Relations from which such documents originate. g) List and general details of the future directors with their spouses, with the following information:
i) Sworn declaration of not having the disqualifications indicated in Article 47 of the Law, according to the model in Annex No. 1; ii) Valid certificate issued by the General Directorate of Penal Centers, stating no criminal record, as well as the current solvency certificate from the National Civil Police; and iii) Curriculum Vitae and documentation accrediting the experience and knowledge established as requirements to be a director, indicated in Article 46 of the Law. h) Name or corporate name of the audit firm that will presumably conduct the external audit. This firm must be registered in the register of external auditors maintained by the Superintendence; and i) List of managers and their spouses, as well as persons authorized to decide on the granting of bonds or other types of guarantees. In the case of Re-guarantors, this refers to persons authorized to re-guarantee or re-guarantee the portfolios of guarantees and bonds granted by Guarantee Societies. In both cases, they must comply with the same requirements of literal f).

The application and documentation may be submitted through the means made available by the Superintendence, which may be electronic. In any case, the deadline referred to in the first paragraph of Article 5 of these Standards will begin to run from the next business day after the application has been submitted.

CNBCR-11/2023 NRP-48
TECHNICAL STANDARDS FOR CONSTITUTING AND OPERATING RECIPROCAL GUARANTEE SOCIETIES AND RE-GUARANTORS OF RECIPROCAL GUARANTEE SOCIETIES Approval: 12/14/2023 Validity: 01/02/2024

Procedure for Authorization to Constitute a Guarantee Society or a Re-guarantor Art. 5.- Upon receipt of the authorization request to constitute a Guarantee Society or a Re-guarantor, in accordance with what is established in Article 4 of these Standards, the Superintendence will proceed to verify compliance with the requirements defined in the Law and these Standards, within a maximum period of thirty days counted from the receipt of the application, for the review of the documentation. If the application is not accompanied by the complete and duly formatted information detailed in Article 4 of these Standards, the Superintendence, due to the lack of necessary requirements, may require the applicants to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the interested parties when there are reasons justifying such extension. 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 application, leaving them free to submit a new application. If after analyzing the documentation presented in accordance with Article 4 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 may notify the applicants to remedy the deficiencies communicated to them or present additional documentation or information required. The applicants will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the additional information required by the Superintendence. The Superintendence may, through a reasoned resolution, extend by up to another ten business days, the period indicated in the previous paragraph, when the nature of the observations or notified deficiencies so requires.

Extension Period
Art. 6.- Interested applicants wishing to constitute a Guarantee Society or a Re-guarantor may submit a request for extension of the period indicated in the fifth paragraph of Article 5 of these Standards to the Superintendence, before the expiration of said period, stating the grounds for the request and proposing, if applicable, the relevant proof. The extension period may not exceed ten business days and will begin from the next business day following the expiration date of the original period.

Suspension of the Period
Art. 7.- The thirty-day period indicated in the first paragraph of Article 5 of these Standards will be suspended for the days that elapse between the notification of the request to complete 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. 8.- Once the complete and duly formatted documentation has been presented, the Superintendence will resolve within a period of sixty days on the request to constitute a Guarantee Society or a Re-guarantor and will notify within a maximum period of three business days, from the date the resolution is issued. Authorization may only be denied, through a reasoned resolution, when the projected Guarantee Society or Re-guarantor does not comply with the provisions of the Law or does not offer sufficient guarantees for the fulfillment of the corporate purpose for which it must be created. Art. 9.- If the resolution mentioned in the previous article is favorable, the applicants will have one hundred and eighty days, counted from the date of respective authorization, to constitute the Guarantee Society or Re-guarantor. If not constituted within the aforementioned period, the resolution will become void.

CNBCR-11/2023 NRP-48
TECHNICAL STANDARDS FOR CONSTITUTING AND OPERATING RECIPROCAL GUARANTEE SOCIETIES AND RE-GUARANTORS OF RECIPROCAL GUARANTEE SOCIETIES Approval: 12/14/2023 Validity: 01/02/2024

CHAPTER III
CONSTITUTION OF THE GUARANTEE SOCIETY OR RE-GUARANTOR

Art. 10.- Prior to the presentation of the certified copy of the deed of constitution of the Guarantee Society or the Re-guarantor in the Commercial Registry, it must be presented to the Superintendence, so that it may qualify whether the terms stipulated in the social bylaws conform to the previously authorized projects and whether the social capital has been effectively integrated in accordance with the authorization. The Superintendence will have a period of ten business days to carry out this verification. If there are differences between the public deed of constitution and the draft thereof authorized by the Superintendence, the latter must communicate this to the applicant within the period indicated in the previous paragraph, so that the authorizing notary proceeds to make the respective adjustments, and the certified copy of the public deed must be presented again to the Superintendence within a period of twenty business days from the date of communication of the inconsistencies or differences for verification. Likewise, no Guarantee Society or Re-guarantor may be constituted that does not have the minimum capital fully subscribed and paid. For these purposes, it may not be less than that established in Article 55 of the Law.

Art. 11.- In the case of the capital contribution for the constitution of the Guarantee Society or the Re-guarantor, capital contributions must be accredited by cash deposit in the Central Bank or another means of verification authorized by the Superintendence.

Art. 12.- If it is determined that there are no inconsistencies between the public deed of constitution and the reviewed draft of the deed, or in the case that the inconsistencies communicated in accordance with Article 10 have been overcome; the Superintendence will proceed within a period of five business days to issue a certificate signed by the Superintendence of the Financial System, containing the favorable qualification of said deed, for the purpose that it may be presented in the Commercial Registry for the corresponding registration.

Procedure if the Commercial Registry makes observations on the Certified Copy of the Public Deed of Constitution, or denies its registration Art. 13.- When the Commercial Registry notifies the authorizing notary or any other interested party of the denial or the making of observations on the certified copy of the public deed of constitution of the Guarantee Society or the Re-guarantor, that person must in turn notify such circumstance to the Superintendence in writing and no later than the next business day after receiving the respective notification. In said writing, the interested party or the authorizing notary must relate at least, the presentation number of the respective instrument in the Commercial Registry and state whether they will file any type of appeal aimed at achieving the registration of the certified copy or, in its case, the manner in which they intend to remedy the respective observations, as well as the result of such actions, which must be notified to the Superintendence in the manner provided in the previous paragraph. If for the registration of the instrument in question it is necessary to modify the conditions under which the Superintendence ordered its favorable qualification, it may, at the written request of the future partners, proceed to modify the certificate related in Article 12 of these Standards. Once the certified copy is registered and the bylaws are deposited in the Commercial Registry, the society will send a copy of said instruments to the Superintendence.

Art. 14.- The Legal Personality of the Guarantee Society or the Re-guarantor is perfected through the registration of the deed in the Commercial Registry; however, the corresponding certified copy may not be presented for registration in such Registry if it does not carry a reason signed by the Superintendence stating the favorable qualification of said deed.

CNBCR-11/2023 NRP-48
TECHNICAL STANDARDS FOR CONSTITUTING AND OPERATING RECIPROCAL GUARANTEE SOCIETIES AND RE-GUARANTORS OF RECIPROCAL GUARANTEE SOCIETIES Approval: 12/14/2023 Validity: 01/02/2024

CHAPTER IV
START OF OPERATIONS

Art. 15.- Within a period of one hundred and eighty days, counted from the constitution of the society, the executives of the Guarantee Society or the Re-guarantor must submit the request for start of operations with the manuals of functions and operational procedures with the requirements contained in Annexes No. 2 to No. 3 of these Standards, description of the furniture and equipment to be used, of the surveillance systems and of the insurance to be contracted. Guarantee Societies or Re-guarantors to whom the Superintendence has authorized the start of their operations and do not do so within a period of one year from the authorization, will have said permission revoked. The application and documentation may be submitted through the means made available by the Superintendence, which may be electronic. In any case, the deadline referred to in the first paragraph of Article 16 of these Standards will begin to run from the next business day after the application has been submitted.

Procedure for Authorization of Start of Operations Art. 16.- Upon receipt of the request for authorization of the start of operations of the Reciprocal Guarantee Society or the Re-guarantor, in accordance with what is established in Article 15 of these Standards, the Superintendence will proceed to verify compliance with the requirements defined in the Law and these Standards, having a period not greater than fifteen business days. If the application is not accompanied by the complete and duly formatted information detailed in Article 15 of these Standards, the Superintendence, due to the lack of necessary requirements, may require the applicants to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the interested parties, when there are reasons justifying such extension. 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 application, leaving them free to submit a new application. If after analyzing the documentation presented in accordance with Article 15 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 may notify the applicants to remedy the deficiencies communicated to them or present additional documentation or information required.

CNBCR-11/2023 NRP-48
TECHNICAL STANDARDS FOR CONSTITUTING AND OPERATING RECIPROCAL GUARANTEE SOCIETIES AND RE-GUARANTORS OF RECIPROCAL GUARANTEE SOCIETIES Approval: 12/14/2023 Validity: 01/02/2024

The applicants will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the information required by the Superintendence.
The Superintendence may, through a reasoned resolution, extend...