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Nicaragua’s Regulatory Requirements for Financial Institutions: A Step Towards Economic Growth
After years of efforts to regulate investment companies, Nicaragua has finally implemented a comprehensive legal framework that ensures their proper operation. The Investment Companies Act, published in the Gazette No. 76 on April 27, 2015, aims to promote the creation and expansion of companies by channeling medium and long-term internal and external resources.
Key Requirements for Investment Companies
To operate in Nicaragua, investment companies must meet specific requirements:
- Be incorporated as a limited company
- Have a minimum subscribed and paid-in capital of C$800,000,000.00 (approximately US$29 million)
- Publish the names of shareholders and founding directors on the Superintendence’s website
- Obtain approval from the Superintendence prior to constitution
- Comply with corporate governance policies and regulations for internal and external audit
Operations Permitted by Investment Companies
Investment companies are authorized to perform various operations, including:
- Granting medium and long-term financing for investment projects in energy, real estate, road infrastructure, tourism, technological development, innovation, and municipal development
- Obtaining loans and credits from financial institutions, non-banking financial intermediaries, and foreign financial institutions
- Making investments in companies linked to the law’s object
- Investing in the purchase and sale of securities, such as bonds, stocks, certificates of deposit
Prohibited Transactions for Investment Companies
The law also prohibits certain transactions, including:
- Pooling resources from the public through savings deposits
- Granting loans for an amount under Two Million Dollars or its equivalent in Cordobas
- Acquiring property, except for offices or agencies use or assets received as credit recovery
- Providing guarantee or assurance regarding obligations of a third party
Taxation and Supervision
Investment funds created or managed by investment companies are taxable under Article 280 of the Tax Concertation Law. Additionally, these companies must make cash contributions to the annual budget of the Superintendence up to 1.0 (one) per thousand active or equivalent parameter as determined by the Board of the Superintendent.
Conclusion
The Investment Companies Act represents a significant step towards promoting economic growth in Nicaragua. By regulating investment companies, the government aims to channel medium and long-term resources into various productive activities, creating jobs and stimulating economic development.