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ICLG
The International Comparative Legal Guide to:
Lending & Secured Finance 2015
3rd Edition
A practical cross-border insight into lending and secured finance
Published by Global Legal Group, with contributions from:
Advokatfirma Ræder DA
Akin Gump Strauss Hauer & Feld
in association with Gregory D. Puff & Co.
Ali Budiardjo, Nugroho, Reksodiputro
Allen & Overy LLP
Anderson Mōri & Tomotsune
Archer Legal LLS
Asia Pacific Loan Market Association
CMS Reich-Rohrwig Hainz
Cordero & Cordero Abogados
Cornejo Méndez González y Duarte S.C.
Criales, Urcullo & Antezana – Abogados
Cuatrecasas, Gonçalves Pereira
Davis Polk & Wardwell LLP
Debarliev, Dameski, Kelesoska
Attorneys at law
DLA Piper
Drew & Napier LLC
Ferraiuoli LLC
Freshfields Bruckhaus Deringer LLP
Hajji & Associés
J.D. Sellier + Co.
JŠK, advokátní kancelář, s.r.o.
Keane Vgenopoulou & Associates LLC
Khan Corporate Law
King & Spalding LLP
KPP Law Offices
Lee and Li, Attorneys-at-Law
Leges Advokat
Loan Market Association
Loan Syndications and Trading Association
Maples and Calder
Marval, O’Farrell & Mairal
Mayer Brown LLP
McMillan LLP
Milbank, Tweed, Hadley & McCloy LLP
Miranda & Amado Abogados
MJM Limited
MOLITOR, Avocats à la Cour
Montel&Manciet Advocats
Morgan, Lewis & Bockius LLP
Morrison & Foerster LLP
Nchito and Nchito
Norton Rose Fulbright
Pestalozzi Attorneys at Law Ltd
QUIROZ SANTRONI Abogados Consultores
Reed Smith LLP
Rodner, Martínez & Asociados
Shearman & Sterling LLP
Sirota & Mosgo
Skadden, Arps, Slate, Meagher & Flom LLP
Spasic & Partners
Tonucci & Partners
TozziniFreire Advogados
White & Case LLP
The International Comparative Legal Guide to: Lending & Secured Finance 2015
Editorial Chapters:
Loan Syndications and Trading: An Overview of the Syndicated Loan Market – Bridget Marsh &
Ted Basta, Loan Syndications and Trading Association
1
2
Loan Market Association – An Overview – Nigel Houghton, Loan Market Association
7
3
Asia Pacific Loan Market Association – An Overview of the APLMA – Janet Field & Katy Chan,
Asia Pacific Loan Market Association
1
Contributing Editor
Thomas Mellor, Morgan,
Lewis & Bockius LLP
Head of Business
Development
Dror Levy
Sales Director
Florjan Osmani
11
General Chapters:
4
An Introduction to Legal Risk and Structuring Cross-Border Lending Transactions – Thomas Mellor &
Thomas Hou, Morgan, Lewis & Bockius LLP
15
5
Global Trends in Leveraged Lending – Joshua W. Thompson & Caroline Leeds Ruby, Shearman &
Sterling LLP
20
Developments in Intercreditor Dynamics – Meyer C. Dworkin & Monica Holland, Davis Polk &
Wardwell LLP
28
33
Commercial Director
Antony Dine
6
Account Directors
Oliver Smith, Rory Smith
7
Senior Account Manager
Maria Lopez
“Yankee Loans” – Structuring Considerations; “Lost in Translation” – Comparative Review and Recent Trends – Alan Rockwell, White & Case LLP
8
Commercial Lending in the Post-Crisis Regulatory Environment: 2015 and Beyond – Bill Satchell &
Elizabeth Leckie, Allen & Overy LLP
40
Sales Support Manager
Toni Hayward
Sub Editor
Sam Friend
Senior Editor
Suzie Levy
9 Acquisition Financing in the United States: Boomtime is Back – Geoffrey Peck & Mark Wojciechowski,
Morrison & Foerster LLP
44
10 A Comparative Overview of Transatlantic Intercreditor Agreements – Lauren Hanrahan &
Suhrud Mehta, Milbank, Tweed, Hadley & McCloy LLP
49
Group Consulting Editor
Alan Falach
11 A Comparison of Key Provisions in U.S. and European Leveraged Loan Agreements – Sarah Ward &
Mark Darley, Skadden, Arps, Slate, Meagher & Flom LLP
55
Group Publisher
Richard Firth
12 The Global Subscription Credit Facility and Fund Finance Markets – Key Trends and Emerging
Developments – Michael C. Mascia & Wesley Misson, Mayer Brown LLP
63
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13 Recent Trends and Developments in U.S. Term Loan B – James Douglas & Denise Ryan,
Freshfields Bruckhaus Deringer LLP
67
14 Real Estate Finance: Trends Around the Globe and the Outlook for 2015 and Beyond –
Matthew Heaton, Reed Smith LLP
72
GLG Cover Design
F&F Studio Design
Country Question and Answer Chapters:
15 Albania
Tonucci & Partners: Neritan Kallfa & Blerina Nikolla
77
16 Andorra
Montel&Manciet Advocats: Audrey Montel Rossell &
Liliana Ranaldi González
83
17 Argentina
Marval, O’Farrell & Mairal: Juan M. Diehl Moreno & Diego A. Chighizola
89
18 Australia
Norton Rose Fulbright: Tessa Hoser & Livia Li
19 Belarus
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20 Bermuda
MJM Limited: Jeremy Leese & Timothy Frith
115
ISBN 978-1-910083-40-6
ISSN 2050-9847
21 Bolivia
Criales, Urcullo & Antezana – Abogados: Carlos Raúl Molina Antezana &
Andrea Mariah Urcullo Pereira
125
Strategic Partners
22 Botswana
Khan Corporate Law: Shakila Khan
133
23 Brazil
TozziniFreire Abogados: Antonio Felix de Araujo Cintra & Paulo Leme
140
24 British Virgin Islands
Maples and Calder: Michael Gagie & Matthew Gilbert
146
25 Canada
McMillan LLP: Jeff Rogers & Don Waters
153
26 Cayman Islands
Maples and Calder: Alasdair Robertson & Tina Meigh
161
27 China
DLA Piper: Carolyn Dong & Chi Yao
168
28 Costa Rica
Cordero & Cordero Abogados: Hernán Cordero Maduro &
Ricardo Cordero Baltodano
176
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Continued Overleaf
Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720
Disclaimer
This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice.
Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication.
This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified
professional when dealing with specific situations.
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The International Comparative Legal Guide to: Lending & Secured Finance 2015
Country Question and Answer Chapters:
29 Cyprus
Keane Vgenopoulou & Associates LLC: Thomas Keane &
Christina Vgenopoulou
183
30 Czech Republic
JŠK, advokátní kancelář, s.r.o.: Roman Šťastný & Patrik Müller
191
31 Dominican Republic
QUIROZ SANTRONI Abogados Consultores: Hipólito García C.
197
32 England
Allen & Overy LLP: Philip Bowden & Darren Hanwell
204
33 France
Freshfields Bruckhaus Deringer LLP: Emmanuel Ringeval & Cristina Radu 212
34 Germany
King & Spalding LLP: Dr. Werner Meier & Dr. Axel J. Schilder
221
35 Greece
KPP Law Offices: George N. Kerameus & Panagiotis Moschonas
232
36 Hong Kong
Akin Gump Strauss Hauer & Feld in association with Gregory D. Puff & Co: Naomi Moore & Daniel Cohen 239
37 Indonesia
Ali Budiardjo, Nugroho, Reksodiputro: Theodoor Bakker &
Ayik Candrawulan Gunadi
250
38 Italy
Shearman & Sterling LLP: Valerio Fontanesi & Vieri Parigi
258
39 Japan
Anderson Mōri & Tomotsune: Taro Awataguchi & Toshikazu Sakai
268
40 Luxembourg
MOLITOR, Avocats à la Cour: Martina Huppertz & Chan Park
276
41 Macedonia
Debarliev, Dameski & Kelesoska Attorneys at law: Dragan Dameski &
Jasmina Ilieva Jovanovikj
283
42 Mexico
Cornejo Méndez González y Duarte, S.C.: José Luis Duarte Cabeza &
Ana Laura Méndez Burkart
289
43 Morocco
Hajji & Associés: Amin Hajji
296
44 Norway
Advokatfirma Ræder DA: Marit E. Kirkhusmo & Kyrre W. Kielland
302
45 Peru
Miranda & Amado Abogados: Juan Luis Avendaño C. & José Miguel Puiggros 311
46 Puerto Rico
Ferraiuoli LLC: José Fernando Rovira Rullán & Carlos M. Lamoutte Navas 320
47 Russia
Sirota & Mosgo: Oleg Mosgo & Anton Shamatonov
327
48 Serbia
Spasic & Partners: Darko Spasić & Ana Godjevac
334
49 Singapore
Drew & Napier LLC: Valerie Kwok & Blossom Hing
341
50 Spain
Cuatrecasas, Gonçalves Pereira: Manuel Follía & María Lérida
350
51 Sweden
White & Case LLP: Carl Hugo Parment & Tobias Johansson
359
52 Switzerland
Pestalozzi Attorneys at Law Ltd: Oliver Widmer & Urs Klöti
366
53 Taiwan
Lee and Li, Attorneys-at-Law: Abe Sung & Hsin-Lan Hsu
375
54 Trinidad & Tobago
J.D. Sellier + Co.: William David Clarke & Donna-Marie Johnson
383
55 Ukraine
CMS Reich-Rohrwig Hainz: Anna Pogrebna
392
56 USA
Morgan, Lewis & Bockius LLP: Thomas Mellor & Rick Eisenbiegler
399
57 Uzbekistan
Leges Advokat: Azamat Fayzullaev & Azizbek Akhmadjonov
410
58 Venezuela
Rodner, Martínez & Asociados: Jaime Martínez Estévez
417
59 Zambia
Nchito and Nchito: Nchima Nchito SC & Ngosa Mulenga Simachela
422
Chapter 23
Brazil
Antonio Felix de Araujo Cintra
TozziniFreire Advogados
1Overview
1.1
What are the main trends/significant developments in
the lending markets in Brazil?
The Brazilian financial market is quite sophisticated, with large
Brazilian and international retail banks and a number of smaller
specialised financial institutions.
In recent years, securitisation transactions involving the real
estate and agribusiness sectors became more popular with a very
substantial increase in the volume of transactions.
Corporate lending also increased not only in the form of direct loans
and financings but also in the form of debentures (long term debt
securities) issued in the local market and purchased by investment
funds and other institutional investors.
1.2
What are some significant lending transactions that
have taken place in Brazil in recent years?
There have been some significant lending transactions related to
infrastructure projects in Brazil, some transactions entered for the
financing of the airports, the operation of which has recently been
transferred by concession to the private sector, and some large
transactions involving sanitation and energy sectors. It should be
noted, however, that in recent years the major lender in Brazil was
BNDES (the Brazilian Federal Development Bank) and the success
of the bank’s lending policies have taken some space from the
private sector banks in long term financing in Brazil. Due to a more
restrictive fiscal policy that is currently being adopted by the Brazilian
Federal Government, it is expected that the transfer of funds from the
Treasure to BNDES will be substantially reduced in the coming years,
thereby reducing the lending capacity of the bank. This may lead to
an increase of the proportion of project loans by private local and
international banks, as well as multilateral agencies.
2Guarantees
2.1
Can a company guarantee borrowings of one or more
other members of its corporate group (see below for
questions relating to fraudulent transfer/financial
assistance)?
As a general rule, a Brazilian company is free to guarantee borrowings
of one or more other members of its corporate group. There are
restrictions, however, in the case of publicly held corporations, since
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Paulo Leme
such type of guarantees may be seen as giving an undue benefit to
the controlling shareholders of the relevant guarantor.
2.2
Are there enforceability or other concerns (such as
director liability) if only a disproportionately small (or
no) benefit to the guaranteeing/securing company can
be shown?
Provided that all corporate authorisations are duly obtained by the
relevant guarantor in the form provided in its by-laws or articles of
association, there should be no enforceability concerns with respect
to guarantees granted in relation to borrowings of other members of
a company’s corporate group.
If the guarantor is a publicly held corporation, however, a guarantor
or controlling shareholder may be held responsible if it is proven
that the guarantee may cause a loss to the minority shareholders and
benefit the controlling shareholders of the company.
2.3
Is lack of corporate power an issue?
Any transactions entered into by a Brazilian company must be
entered in compliance with the provisions of their by-laws or
articles of incorporation. Therefore, any guarantee signed by
persons not duly empowered pursuant to the by-laws or articles
of incorporation (and any relevant powers of attorney) may be
declared invalid by a court decision.
2.4
Are any governmental or other consents or filings,
or other formalities (such as shareholder approval),
required?
Companies controlled by the public sector (either at the Federal,
State or Municipal levels) are not free to sign guarantees without
proper authorisations.
Private sector companies are free to execute guarantees, provided
that they comply, as the case may be, with their by-laws or articles
of incorporation. In addition, companies may also be subject to
contractual restrictions resulting, for instance, from financing and
similar agreements signed with banks or concession or similar
agreements signed with the government aimed at operating some
public services as concessionaires.
2.5
Are net worth, solvency or similar limitations imposed
on the amount of a guarantee?
No. The law does not provide any net worth, solvency or similar
tests on the amount of a guarantee. Companies that are giving fixed
ICLG TO: LENDING & SECURED FINANCE 2015
TozziniFreire Advogados
2.6
Are there any exchange control or similar obstacles to
enforcement of a guarantee?
As a general rule, any company or person may remit money
abroad to comply with any obligation incurred by it. The laws and
regulations, however, impose a duty on the relevant Brazilian bank
through which the remittance will be made to verify the validity of
the underlying transaction. In other words, although there are no
legal obstacles, it is normally advisable for a guarantor to speak to
its bank to make sure that it will be able to make the remittance in
the future without further discussions.
3.4
Yes. Collateral security may be taken over receivables.
3.5
What types of collateral are available to secure
lending obligations?
The basic types of collateral that are available to secure lending
obligations in Brazil are the following: (i) mortgage of real estate
properties; (ii) pledge over movable assets and rights; and (iii)
fiduciary transfer of title over real estate, movable assets and rights.
3.2
Is it possible to give asset security by means of
a general security agreement or is an agreement
required in relation to each type of asset? Briefly,
what is the procedure?
It is not possible in Brazil for a company to create a collateral over
all of its existing or future assets to secure a debt. Any security
agreement has to include a description of the relevant assets that are
being given as collateral.
Mortgages have to be implemented by means of a public deed and
must describe in detail the property being given as collateral. The
agreement must also be registered in the competent Real Estate
Registry with jurisdiction over the location of the property.
Pledge Agreements must identify all assets given as collateral
thereunder and must be registered with the Registry of Deeds and
Documents in the place of the headquarters of the grantor of the
collateral. In case the assets are to be kept in the possession of the
debtor, then the pledge agreement has to be registered with the Real
Estate Registry with jurisdiction of the place where the assets are
located.
Fiduciary transfer of title agreements follows the same procedures
as above. It is important to note that foreign creditors and Brazilian
non-financial institutions may not be secured creditors under
fiduciary property agreements over credit and other rights or over
fungible goods.
3.3
Can collateral security be taken over real property
(land), plant, machinery and equipment? Briefly, what
is the procedure?
Can collateral security be taken over cash deposited
in bank accounts? Briefly, what is the procedure?
Yes. In that case the bank has to be notified and normally the
agreement provides that the bank will transfer the amounts
deposited in the relevant account pursuant to instructions of the
secured creditor or a collateral agent appointed for such purpose.
3.6
3 Collateral Security
3.1
Can collateral security be taken over receivables?
Briefly, what is the procedure? Are debtors required
to be notified of the security?
Brazil
assets as collateral must present a certificate of no indebtedness
issued by the Brazilian Social Security Authorities to the relevant
Registry (Real Estate or Deeds and Documents) where the agreement
will be registered.
Brazil
Can collateral security be taken over shares in
companies incorporated in Brazil? Are the shares
in certificated form? Can such security validly be
granted under a New York or English law governed
document? Briefly, what is the procedure?
Shares in companies incorporated in Brazil may be given as
collateral by the relevant shareholders. In this case the lien has to
be registered in the Share Registry Book of the company or with the
relevant custodian/registrar. Although the law allows the issuance
of certificates of shares, virtually all shares exist only as book
entry records in the Share Registry Books of private companies or
registrars of publicly held companies.
Quotas of limited liability companies may also be pledged to secure
debts. In this case the procedure involves the execution of a quota
pledge agreement, which must be registered with the Registry
of Deeds and Documents. It is normal practice to include an
amendment to the company’s Articles of Incorporation to include
a provision reflecting the existence of the pledge over the quotas.
3.7
Can security be taken over inventory? Briefly, what is
the procedure?
Yes. Inventory may be subject to a pledge agreement, which
must be signed by the parties and registered with the Real Estate
Registry with jurisdiction over the place where the goods are kept.
The agreement must describe the relevant goods given as collateral
and include the number of goods that are subject to the pledge
agreement. In this case the pledge extends automatically to any new
goods that replace the goods that have been sold, up to the number
of goods initially pledged.
3.8
Can a company grant a security interest in order to
secure its obligations (i) as a borrower under a credit
facility, and (ii) as a guarantor of the obligations of
other borrowers and/or guarantors of obligations
under a credit facility (see below for questions
relating to the giving of guarantees and financial
assistance)?
Yes. This possibility will be subject to the provisions of the relevant
by-laws or articles of incorporation of the relevant company. There
may also be limitations due to negative covenants that may exist in
financial and other agreements entered into by the company.
Please see the answer to question 3.2 above.
ICLG TO: LENDING & SECURED FINANCE 2015
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TozziniFreire Advogados
Brazil
3.9
What are the notarisation, registration, stamp duty
and other fees (whether related to property value or
otherwise) in relation to security over different types
of assets?
The fees related to the notarisation and registration of security
agreements are not relevant. There are no stamp duties in Brazil.
3.10 Do the filing, notification or registration requirements
in relation to security over different types of assets
involve a significant amount of time or expense?
Generally speaking, the taking of security does not involve a
significant amount of time or expense. If a property that is being
given as collateral under a mortgage is located out of the Brazilian
major urban centres then the process may take longer due to less
efficient Registries.
If the security agreements are signed in a foreign language they will
have to be translated into Portuguese by a sworn translator and this
may add some additional timing and costs to a transaction.
3.11 Are any regulatory or similar consents required with
respect to the creation of security?
Not as a general rule. Companies that operate under concessions
granted by the government to operate public services (for instance
in the energy, telecom, toll roads and similar sectors) may need
authorisation from the relevant granting authority to create a
security interest over the assets and credit rights.
3.12 If the borrowings to be secured are under a revolving
credit facility, are there any special priority or other
concerns?
No, there are not.
Brazil
(b)
Shares of any company which directly or indirectly owns
shares in the company
No, there are not.
(c)
Shares in a sister subsidiary
No, there are not.
It should be noted, however, that publicly held companies may not
offer collateral to secure the obligations of a third party, especially if
such third party is in any way related to the controlling shareholders
of the publicly held company.
5 Syndicated Lending/Agency/Trustee/
Transfers
5.1
As a general rule, Brazil will recognise the role of an agent or
trustee, provided that such agent or trustee acts as an attorney in fact
duly appointed by each of the relevant creditors under the relevant
syndicate of creditors.
5.2
As a general rule the creditor will want to make sure that the
agreement is entered in accordance with the provisions of the
bylaws or articles of incorporation of the relevant companies. These
provisions will usually require approval from the shareholders or the
board of directors of the company and the document to be executed
by at least two duly appointed officers or attorneys in fact.
4 Financial Assistance
5.3
142
Are there prohibitions or restrictions on the ability
of a company to guarantee and/or give security to
support borrowings incurred to finance or refinance
the direct or indirect acquisition of: (a) shares of the
company; (b) shares of any company which directly or
indirectly owns shares in the company; or (c) shares
in a sister subsidiary?
(a)
Shares of the company
No, there are not.
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Assume a loan is made to a company organised under
the laws of Brazil and guaranteed by a guarantor
organised under the laws of Brazil. If such loan is
transferred by Lender A to Lender B, are there any
special requirements necessary to make the loan and
guarantee enforceable by Lender B?
Assignments of credits are valid in Brazil and are enforceable
against the debtor provided that the debtor is duly notified of the
assignment. As a general rule, the collateral securing the loan, as an
ancillary obligation, follows the assignment of the credit.
Notwithstanding such fact, in order to simplify enforcement of
collateral it is recommended that the registration of the security
interest be amended to reflect the amendment of the credit.
6 Withholding, Stamp and other Taxes;
Notarial and other Costs
6.1
4.1
If an agent or trustee is not recognised in Brazil, is
an alternative mechanism available to achieve the
effect referred to above which would allow one party
to enforce claims on behalf of all the lenders so
that individual lenders do not need to enforce their
security separately?
Please see the answer to question 5.1 above.
3.13 Are there particular documentary or execution
requirements (notarisation, execution under power of
attorney, counterparts, deeds)?
There are no particular documentary or execution requirements,
except for agreements related to real estate properties, which have
to be entered by means of public deeds.
Will Brazil recognise the role of an agent or trustee
and allow the agent or trustee (rather than each lender
acting separately) to enforce the loan documentation
and collateral security and to apply the proceeds from
the collateral to the claims of all the lenders?
Are there any requirements to deduct or withhold tax
from (a) interest payable on loans made to domestic
or foreign lenders, or (b) the proceeds of a claim
under a guarantee or the proceeds of enforcing
security?
Yes. Interest paid to foreign lenders is subject to withholding tax in
Brazil at the rate of 15% (or 25% for lenders domiciled in tax haven
jurisdictions). The same rate applies to fees charged by the lender to
the borrower (such as commitment or structuring fees).
ICLG TO: LENDING & SECURED FINANCE 2015
TozziniFreire Advogados
What tax incentives or other incentives are provided
preferentially to foreign lenders? What taxes apply to
foreign lenders with respect to their loans, mortgages
or other security documents, either for the purposes
of effectiveness or registration?
There are no tax incentives granted specifically to foreign lenders.
Loans related to export financing for Brazilian exporters are exempt
from withholding tax.
Certain investments made by foreign companies in securities issued
in Brazil related to infrastructure projects may also benefit from a
withholding tax exemption.
6.3
Will any income of a foreign lender become taxable in
Brazil solely because of a loan to or guarantee and/or
grant of security from a company in Brazil?
7 Judicial Enforcement
7.1
Although there are a few conflicting decisions, we are of the opinion
that the courts of Brazil should recognise a foreign law chosen by the
parties to govern their agreement. The law provides expressly that
the law that governs an agreement is the law of the place where the
agreement is executed. In our opinion, this provision should apply
only in case of the absence of an express choice of law provision in
the agreement.
7.2
No, it will not.
6.4
Will there be any other significant costs which would
be incurred by foreign lenders in the grant of such
loan/guarantee/security, such as notarial fees, etc.?
No, there will not.
6.5
Are there any adverse consequences to a company
that is a borrower (such as under thin capitalisation
principles) if some or all of the lenders are organised
under the laws of a jurisdiction other than your
own? Please disregard withholding tax concerns for
purposes of this question.
Brazilian thin capitalisation and transfer pricing rules apply to
cross-border transactions performed between a Brazilian company
with: (i) a related party; or (ii) a company resident in a tax haven
jurisdiction or subject to a beneficial tax regime. As a rule, the
tax residency of the foreign company for Brazilian tax purposes
is determined based on its place of incorporation. If the lender is
incorporated in a tax haven jurisdiction or subject to a beneficial
tax regime, interest expenses would be tax deductible for corporate
income taxes purposes if: (i) the expenses are considered as
necessary for the maintenance of the company’s activities; (ii) all
company debts with residents in a tax haven jurisdiction or a foreign
country subject to a special tax regime do not exceed 30% of the
Brazilian company’s net equity; and (iii) interest expenses does not
exceed a rate determined by the tax legislation based on the currency
in which the loan was granted, plus a spread of 3.5%.
For the sake of clarity, a country or jurisdiction is deemed to be a
tax haven jurisdiction when it: (a) does not impose income tax; (b)
imposes income tax at a rate lower than 17%; (c) imposes restrictions
on the disclosure of shareholding composition or on the ownership
of investments; or (d) does not disclose beneficial ownership. The
concept of beneficial tax regime is applicable for jurisdictions that,
normally, are not considered as “tax havens”, but in which certain
companies are entitled to tax advantages.
ICLG TO: LENDING & SECURED FINANCE 2015
Will the courts in Brazil recognise a governing law
in a contract that is the law of another jurisdiction
(a “foreign governing law”)? Will courts in Brazil
enforce a contract that has a foreign governing law?
Brazil
6.2
Brazil
Will the courts in Brazil recognise and enforce a
judgment given against a company in New York
courts or English courts (a “foreign judgment”)
without re-examination of the merits of the case?
Yes. A foreign judgment or a foreign arbitral decision will be
enforced in Brazil after being ratified by the Brazilian Superior
Court of Justice, without a re-examination of the merits of the case.
In order to be ratified, the decision must be final and not subject to
further appeal, the parties thereto must have been properly served
of process and the decision must be translated into Portuguese by a
sworn translation.
7.3
Assuming a company is in payment default under a
loan agreement or a guarantee agreement and has
no legal defence to payment, approximately how long
would it take for a foreign lender to (a) assuming
the answer to question 7.1 is yes, file a suit against
the company in a court in Brazil, obtain a judgment,
and enforce the judgment against the assets of the
company, and (b) assuming the answer to question
7.2 is yes, enforce a foreign judgment in a court in
Brazil against the assets of the company?
Since the court system in Brazil is federative, the court efficiency
may vary substantially throughout the country. As a general rule
one may say that in case (a) above, the time may be between 2 and 3
years and in the case of (b), the time may be between 1 and 2 years.
7.4
With respect to enforcing collateral security, are
there any significant restrictions which may impact
the timing and value of enforcement, such as (a) a
requirement for a public auction or (b) regulatory
consents?
As a general rule, provided that the agreement contains such
provision, the creditor may enforce collateral by means of a private
sale. Mortgages over real estate properties, however, must be
enforced by court-led auctions.
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TozziniFreire Advogados
Brazil
7.5
Do restrictions apply to foreign lenders in the event
of (a) filing suit against a company in Brazil or (b)
foreclosure on collateral security?
A foreign resident who owns no real estate property in Brazil that
files a lawsuit in Brazil must post a bond to secure the court and
legal fees. The value of the bond is determined by the judge and
normally varies from 15 to 20% of the value of the claim.
Such bond is not required in case of enforcement proceedings in
connection with extrajudicial collection instruments (“títulos
executivos extrajudiciais”), which comprise, among other
instruments, promissory notes, bills of exchange and agreements
signed by two witnesses.
7.6
Do the bankruptcy, reorganisation or similar laws
in Brazil provide for any kind of moratorium on
enforcement of lender claims? If so, does the
moratorium apply to the enforcement of collateral
security?
Yes. In case of the bankruptcy of a Brazilian company all collection
and enforcement lawsuits against the bankrupt company are
suspended. In the case of a judicial recovery the suspension may
not exceed 180 days as of the approval of the judicial recovery by
the court.
7.7
Will the courts in Brazil recognise and enforce an
arbitral award given against the company without reexamination of the merits?
Yes. Please see the answer to question 7.2 above.
8 Bankruptcy Proceedings
8.1
How does a bankruptcy proceeding in respect of a
company affect the ability of a lender to enforce its
rights as a secured party over the collateral security?
There are two main bankruptcy proceedings in Brazil: (i) judicial
recovery; and (ii) bankruptcy.
In the case of judicial recovery, all creditors have the right to vote to
approve a recovery plan submitted by the company. After the filing
of the recovery, there is a stay of enforcement of 180 days during
which the creditors are not able to enforce their collateral. This rule
is applicable to creditors under pledge and mortgage arrangements.
Creditors under fiduciary transfer of title arrangements are not
subject to the judicial recovery and therefore may enforce their
rights when the relevant credits become due and payable.
In the case of bankruptcy, all lawsuits are suspended and the
company goes into a court-led liquidation, after which the creditors
are paid in accordance with the ranking of their respective credits.
8.2
Are there any preference periods, clawback rights
or other preferential creditors’ rights (e.g., tax debts,
employees’ claims) with respect to the security?
The Brazilian bankruptcy code provides that certain acts, if
performed by the debtor within the so-called “suspect period” are
not effective vis-à-vis the bankruptcy estate, irrespective of the
absence of intention of the parties thereto to defraud third parties.
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Brazil
The most relevant of such acts are: (i) the payment of an obligation
before its due date; (ii) the payment of a debt in a manner not specified
in the relevant agreement; and (iii) the granting of a security interest
in relation to indebtedness that existed prior to the suspect period.
In any of these situations the trustee of the bankruptcy may set aside
the relevant actions and claw the payments back.
The suspect period is fixed by the judge at the time of the declaration
of the bankruptcy and may not retroact more than 90 days prior to the
bankruptcy date or the date the judicial recovery is accepted by the court.
In addition, any actions taken with the purpose to defraud creditors
may be set aside by the bankruptcy court.
8.3
Are there any entities that are excluded from
bankruptcy proceedings and, if so, what is the
applicable legislation?
Financial institutions are subject to special rules governing
intervention and extra judicial liquidation; such actions are carried
out by the Central Bank of Brazil. Depending on the circumstances,
the extra-judicial liquidation may be converted into bankruptcy,
governed by the general law.
8.4
Are there any processes other than court proceedings
that are available to a creditor to seize the assets of a
company in an enforcement?
No, but as mentioned above, the agreement may provide that the
creditor has the right to sell the collateral in a private sale in case of
default of the borrower.
9 Jurisdiction and Waiver of Immunity
9.1
Is a party’s submission to a foreign jurisdiction legally
binding and enforceable under the laws of Brazil?
Yes, but any such submission will be no exclusive. Pursuant to
the Brazilian Code of Civil Procedure, Brazilian courts will have
jurisdiction whenever (i) the defendant is domiciled in Brazil, (ii)
the obligation has to be performed in Brazil, or (iii) the lawsuit
originates from an event which occurred and/or an act which was
performed in Brazil.
9.2
Is a party’s waiver of sovereign immunity legally
binding and enforceable under the laws of Brazil?
Yes. Entities of the public sector controlled by the Federal, States or
Municipalities Governments may waive sovereignty when entering
into transactions which are not essentially related to a public duty.
So, as a general rule, such entities may waive sovereign immunity
when entering into loan and financing agreements.
10
Other Matters
10.1 Are there any eligibility requirements in Brazil for
lenders to a company, e.g. that the lender must
be a bank, or for the agent or security agent? Do
lenders to a company in Brazil need to be licensed
or authorised in Brazil or in their jurisdiction of
incorporation?
Any individual or legal entity may be a lender in Brazil. The
performance of banking transactions (including raising funds from
ICLG TO: LENDING & SECURED FINANCE 2015
TozziniFreire Advogados
In addition, any foreign loans to Brazilian companies must be
registered in the ROF System of the Central Bank of Brazil. Such
registration is necessary for the borrower to be able to purchase
the foreign currency necessary to make any payments of principal,
interest or fees under the relevant loan agreement.
Prior to registration the foreign lender will have to obtain a
Tax Number (known as CNPJ) from the Brazilian Federal Tax
Authorities and a Cademp Number from the Central Bank of Brazil.
Obtaining such numbers is a simple procedure that should not take
more than two or three days.
10.2 Are there any other material considerations which
should be taken into account by lenders when
participating in financings in Brazil?
Brazil
the market to fund loans to third parties, on a regular basis) are
restricted to Brazilian financial institutions duly authorised by the
Central Bank of Brazil.
Brazil
No, there are not.
Antonio Felix de Araujo Cintra
Paulo Leme
TozziniFreire Advogados
Rua Borges Lagoa, 1328
São Paulo, SP, CEP 04088-904
Brazil
TozziniFreire Advogados
Rua Borges Lagoa, 1328
São Paulo, SP, CEP 04088-904
Brazil
Tel: +55 11 5086 5226
Fax: +55 11 5086 5555
Email:afcintra@tozzinifreire.com.br
URL:www.tozzinifreire.com.br
Tel: +55 11 5086 5559
Fax: +55 11 5086 5555
Email: pleme@tozzinifreire.com.br
URL:www.tozzinifreire.com.br
Antonio Felix de Araujo Cintra has extensive experience in
capital market operations, national and international financings,
securitisations, project finance, and foreign investment. He previously
served as a foreign associate in the New York office of Cleary, Gottlieb,
Steen & Hamilton. He is also a member of the Emerging Markets
Private Equity Association, Banking & Finance Committee of the World
Law Group, Banking Law Committee and Capital Markets Committee
at International Bar Association and member of the Brazilian Institute
of Finance He earned an LL.M. degree from the London Law Centre
of the University of Notre Dame, and graduated from the Law School
of Universidade de São Paulo. He is consistently recognised as
a leading practitioner in international legal publications such as
Chambers Global, Chambers Latin America, Legal 500, Latin Lawyer
250, PLC Which Lawyer?, IFLR 1000, Who’s Who Legal, Expert
Guides and Analise Advocacia 500.
Working with TozziniFreire Advogados since 2007, Paulo Leme is
a member of the Capital Markets practice group, and focuses his
practice on transactions involving the banking/financing sectors, and
infrastructure projects. He has experience in the implementation
of debt and equity transactions involving private and development
financial institutions. In addition, he regularly represents clients in
private equity investments, secured and unsecured loans, export
financing, project finance and securitisation transactions. Paulo Leme
was born in São Paulo in 1981 and studied law at the Law School
of Pontificia Universidade Catolica de São Paulo. He graduated in
2005 and in 2010 he was awarded an LL.M. in International Banking &
Finance at the University College London. He is admitted to practise
in Brazil.
Since 1976, TozziniFreire has distinguished itself as a premier, full-service law firm by consistently providing legal services to
domestic and international companies in a wide variety of business sectors. Over the years, we have played a major role in
many of the most significant transactions in the Brazilian market, becoming one of the largest and most prestigious firms in Latin
America.
TozziniFreire’s long history of representing local and international financial institutions in the negotiation and execution of
loan agreements provides its banking practice with extensive knowledge in structuring all types of complex corporate finance
transactions. In addition, its highly qualified professionals regularly advise clients on commercial transactions designed to finance
imports and exports, such as pre-export financing and securitisation of receivables. As a leading advisor to those participating in
the reorganisation of the Brazilian banking industry, we assist international banks in setting up their Brazilian operations, as well
as local banks in their relationships with foreign partners.
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This article appeared in the 2015 edition of
The International Comparative Legal Guide to:
Lending & Secured Finance; published by Global Legal Group Ltd, London.
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