The development and investment in infrastructure projects require forms that provide legal certainty and it is in this area where the escrowone of the legal vehicles that presents greater benefits in Uruguay. Both in infrastructure for agriculture and for sports, housing, roads or wind energy, the trust plays a key role.
Almost 20 years after its regulation, it has proven to be very useful as a investment management instrument, channeling of public and private investments, constitution of guarantees and as a vehicle for securitization. It has undoubtedly been key piece to boost the Uruguayan capital market.
Broadly speaking, the trust consists of one or more persons (trustors) transferring the ownership of certain assets or rights (trust property) to a trustee, who is obliged to dispose of them for the realization of certain pre-established objectives, in benefit of one or more people (beneficiary) so that at compliance with the term or condition, the trust property is restored to the settlor or, failing that, it is transferred to the beneficiary.
In short, it is an instrument through which the participants, both individually and jointly, They assign some of the assets of their patrimony to a trustee for their administration and management, investment, execution of a work, among other activities.
There are several types of trusts, but the most used are administration, guarantee and financial. The administration trust can be used for a wide range of businesses, either to manage certain assets, carry out the execution of a work and/or invest in assets and receive the benefits. In the guarantee trust, the fiduciary property is transferred so that the trustee can keep it as collateral of a guaranteed obligation, making it possible for the latter to dispose of the trust property in the event of a breach of the principal obligation.
In the case of financial trusts, they grant their beneficiaries certificates of participation in trust assets, debt securities that are guaranteed with the assets of the trust, or mixed titles (part of debt securities and other certificates of participation). Likewise, for the purposes of listing the securities through a public offering, the financial trust must be previously registered as issuer in the Securities Market Registry of the Central Bank of Uruguay. However, you can also choose to make a private offer and in this case you must not have said registration.
The trust is a legal structure in accordance with current investment requirements in a wide variety of projects and industries. the signature Bragard Lawyersfounded by Jean Jacques Bragard in 2011, has specialized in advising, creating and structuring trusts, with the experience transmitted by its founder for more than 28 years.
“One of the best examples to illustrate the advantages of the trust is the real estate. In the structuring of real estate ventures, it was common to use the corporation as a legal vehicle. The public limited company evidently fails to satisfy all the concerns or attend to the diversity of interests, let alone overcome the limitations that the regulations impose on it. Sometimes we see corporate agreements that regulate unorthodox, unreliable solutions that are difficult or questionable from a legal point of view. However, it has been shown that the trust achieves better results. When the interest of the business participants is to collectively channel their investments and contributions with people who in turn pursue different interests, objectives and risks, the trust constitutes a more appropriate instrument,” he said. Bragard.
In this sense, the firm highlights some benefits of the trust, such as the transparency in the administration of the resources received by having the participation of a third party outside the business. It is a “tailor-made suit”, unlike the public limited company, which has its own rigidity from its regulatory framework. It allows valuing the type of contribution or regulating the form of investor exit with greater flexibility. On the other hand, it provides legal certainty, since the risks are exclusively associated with the success of the investment made.
On the other hand, its flexibility and versatility also stand out, since it offers the possibility of putting together a structure tailored to the development, incorporating the different agents involved and the different contracts that make up the business, allowing contingencies to be foreseen.
In addition, it limits the conflict of interest, creating an autonomous and independent patrimony to that of the intervening subjects. This ensures that the trust assets cannot be persecuted by creditors outside the trust business, and guarantees that the contributions made are only used for the established purposes.
“The structure of the trust requires the trustee to carry out his duties and comply with the obligations imposed by law and business, with prudence and diligence, acting on the basis of the trust placed in him,” said the founding partner of Bragard Lawyers.
Success stories
As discussed, the vehicle is attractive to a wide variety of industries and sectors. For example, in the case of the agricultural venture called “Irrigated Lands Financial Trust”, the signature Bragard Lawyers acted as co-organizer and legal advisor to the two financial trusts that went public in 2016 and 2018 respectively. In total, these trusts were authorized to issue securities for up to USD 200,000,000 and their purpose is to acquire productive rural properties in which investment is made in irrigation infrastructure for agricultural production, generating income through sharecropping contracts.
Likewise, the financial trust is a vehicle widely used for real estate development projects, either for construction or for the administration in sale & lease back regimes, both of properties destined for residential residences and for industrial and/or logistical properties. . As a success story, the Platinum financial trust (2021) can be named for mixed titles for up to USD 165,000,000, in which the firm Bragard Lawyers advised its largest investor, an institutional fund.
In another order, the figure of the trust has also been satisfactorily used by the State for its function of housing development. As an example of this, we can cite the recent program “Entre Todos, Sueños en Obra”, launched by the Ministry of Housing and Territorial Planning, which proposes as an investment arm of said portfolio, the investment trust for construction, renovation, recycling , expansion and completion of more than 4,500 homes. This instrument, which had the legal advice of lawyer Jean Jacques Bragard, will allow the State to co-invest with private developers in housing construction.
Completing this brief review, the trust has also been used for the execution of infrastructure works in the sports industry. In this sense, we can cite the success story of the Social Club Administration Trust, a vehicle used for the remodeling of the Club Nacional de Football facilities under the legal advice of Bragard.
The trust has gradually replaced the legal structures used previously for the administration of assets and the channeling of collective public and private investments, as well as in the constitution of guarantees, and is even used to solve business crises.
