Colombia continued from page 40 imperative to reinforce transaction structuring and to enhance the legal, functional, and governance separation between the settlor and the Independent Trust.
This development is attributable to two principal factors. First, settlor-debtors frequently transfer all or substantially all operating cash flows to the trust, leaving themselves with insufficient liquidity to absorb adverse performance shocks. Second, evolving jurisprudential interpretations have introduced legal uncertainty that may not fully align with the statutory insolvency framework applicable to trusts or with broader macroeconomic policy objectives.
The first factor may be mitigated through refined financial and contractual structuring. The second depends to a significant extent on the technical specialization of insolvency adjudicators and their appreciation of the systemic implications of these decisions for credit markets, infrastructure development, and legal certainty.
Prospective Considerations: Structuring and Contractual Mitigation Measures
Transaction structuring
• Avoid full assignment of project cash flows to the payment source
• Limit trust-administered flows to debt service amounts
• Permit the trust to acquire receivables through discounting or factoring mechanisms
• Implement contingent payment waterfalls tied to independently verified performance metrics
• Grant perfected security interests over trust assets in favor of lenders, with preagreed valuation and dispute resolution mechanisms
• Evaluate the use of regulated securitization structures for infrastructure, public services, and structured cash-flow transactions Contractual safeguards
• Precisely delineate the trust’ s purpose to preclude characterization as a business operator
• Clearly allocate authority to initiate insolvency proceedings
• Strengthen the trustee’ s fiduciary duty to preserve bankruptcy remoteness
• Impose immediate notification obligations in favor of lenders regarding any insolvency-related instruction
• Incorporate negative covenants prohibiting the settlor from disputing trust ownership of assets Public policy considerations Given that the Superintendence of Companies operates under the Ministry of Commerce, Industry, and Tourism, the systemic and macroeconomic implications of extending insolvency proceedings to insolvency-remote trust structures should be carefully assessed, particularly in relation to access to long-term financing and infrastructure development.
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