30 August 2001

Purchase Option Under Financial Leases And Insolvency Proceedings (Law 550 Of 1999)

Colombia Insolvency/Bankruptcy/Re-Structuring
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Article by Juan Carlos Gómez and Pablo Barraquer

Pursuant to a recent opinion from the Superintendency of Companies, the term and the conditions provided for the exercise of a purchase option under a financial lease is independent from the term established in a restructuring agreement reached in accordance with Law 550 of 1999, which result from the proceedings aimed at solving a company's financial difficulties failing which mandatory liquidation will proceed. (Opinion 2596 dated February 1, 2001).

Pursuant to the above-mentioned opinion, a company subject to restructuring proceedings:

(i) must pay its outstanding obligations under the lease which became due before commencement of the proceedings in the terms set forth in the restructuring agreement reached by the company's creditors within said proceedings;

(ii) must continue making payments under the lease which become due after the date in which the proceedings are started as set forth in the relevant lease;

(iii) is entitled to exercise the purchase option under the lease within the term established under the relevant financial lease agreement for doing so (a) regardless of having to continue making the payments mentioned in item (i) above, and (b) provided it has complied with the obligation to which reference is made in item (ii) above.

This report was prepared and is copyrighted in 2001 by PARRA, RODRÍGUEZ & CAVELIER, a law firm with offices in Bogotá, Colombia. The general information herein contained does not constitute legal advice. Transcriptions and quotes are permitted citing the source.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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