Financial Trust in Uruguay

Financial Trusts in Uruguay: A Tool for Project Structuring and Fund Raising in Uruguay Fund Raising

The financial trust is a specialized type of trust that is widely used in
Uruguay for the structuring of financial projects and fund raising. In this article,
we will explore in detail what a financial trust is, how it works and its benefits.
for both settlors and investors.

What is a Financial Trust?

A financial trust is a contract in which one person (settlor) transfers certain assets to another person (trustor).
financial services, such as loans, mortgages, leasing contracts or securities, to another person or to a third party.
entity (trustee), who administers and manages them for the benefit of the investors (beneficiaries).
through the issuance of trust securities backed by such assets. In Uruguay, the trusts
regulated by Law No. 17,703 and are a fundamental tool in the financial market.
capitals of the country.

Operation of the Financial Trust:

The process of setting up and operating a financial trust involves the following steps:

1. Incorporation of the Trust: The settlor (which can be a financial institution, a
   company, or a natural person) transfers the financial assets to the trustee by means of a
   financial trust contract.
2. Structuring of the Trust: The structure of the trust is established, including the
   assets to be entrusted, the rights and obligations of the parties, the purpose of the trust and the
   trust and the terms and conditions of issuance of trust securities.
3. Issuance of Trust Securities: The trustee issues trust securities backed by the
   assets of the trust, which are offered to investors in the capital market.
   These securities represent rights to the cash flows generated by the assets
   underlying.
4. Administration by the Trustee: The trustee administers and manages the assets of the
   trust in accordance with the provisions of the contract and for the benefit of the investors. This
   may include payment collection, revenue sharing, risk management, and risk management.
   execution of legal actions if necessary.
5. Distribution of Cash Flows: The cash flows generated by the assets of the
   trust, such as loan payments, rents or interest, are distributed to the investors.
   based on the terms and conditions of the trust securities.
6. Control and Supervision: The financial trust is subject to strict control and supervision.
   by the Securities and Exchange Commission (CVR) and the Central Bank of Uruguay (BCU), which regulates and
   oversee the operations of financial trusts to ensure transparency and accountability.
   investor protection.

Benefits of the Financial Trust:

1. Investment Diversification: Investors can access a wide range of assets.
   financially diversified through the trust securities issued by the trust, which will provide them with
   allows you to diversify your portfolio and manage risk more effectively.
2. Access to Financing: Settlors can use the financial trust as a
   an alternative source of financing to traditional bank credit, allowing them to obtain
   funds through the securitization of its assets and the issuance of trust securities in the market.
   of capital.
3. Flexibility and Adaptability: Financial trusts offer a flexible structure that can be
   adapt to a wide variety of assets and projects, including loans, mortgages,
   leasing, factoring, among others, as well as to different financial objectives and the needs of the
   trustors and investors.
4. Tax Efficiency: Depending on the structure and specific characteristics of the trust,
   can offer tax advantages for both settlors and investors, such as tax advantages for the
   possibility of deferring the payment of taxes on income generated by the assets
   underlying.
5. Transparency and Security: Financial trusts are subject to strict regulation and supervision by the competent authorities, which provides transparency and security to investors and contributes to confidence in the capital market.

In conclusion, the financial trust is a powerful and versatile tool that offers a number of advantages.
benefits for both settlors and investors in Uruguay. By providing access to
financing, investment diversification, flexibility and tax efficiency, the trusts, the
The financial markets play an important role in the development and growth of the country’s capital markets.