BRAZIL Law and Practice Contributed by: Roberto Panucci, Tiago Severo, Diogo Nebias and Guilherme Teles, Panucci, Severo e Nebias Advogados
In addition, in a restructuring or distressed situation, borrowers or sponsors might indeed want to buy back debt at a discount. Brazilian law allows it but, from a structuring perspective, parties ensure that it does not undermine the remaining lenders. By way of example, if a sponsor-related entity buys the debt, it may agree to subordinate its rights or waive rights in order to align interest with the borrower. Under out-of-court debt restructurings, controlling shareholders can pur- chase bank claims and then either convert them into equity or simply cancel them, as part of a deleverag- ing strategy. 3.8 Public Acquisition Finance In Brazilian public acquisition financing (public acqui- sition offer ( oferta pública de aquisiçã o, or OPA)), the concept of “certain funds” is not as codified as in jurisdictions such as the UK, but market practice and regulation achieve a similar effect. However, the CVM – CVM Resolution No 215/2024 – requires the intermediary institution to secure a payment guaran- tee for 100% of the consideration, typically by using escrow deposits, standby letters of credit, or bank guarantees. This mechanism effectively functions as a “certain funds” requirement, ensuring public shareholders receive cash at closing. At the same time, commit- ment letters and financing structures allow bidders flexibility. The use of such provisions in private M&A is com- mon in complex transactions. Documentation tends to be long-form and detailed. In a public acquisition finance transaction, their existence and key terms are Recent legal and commercial developments in Brazil have prompted changes to financing documentation and deal structures. The following key changes stand out. • Modernisation of secured transactions – Brazil has implemented reforms to improve the secured lending environment. One change is the legal infrastructure for collateral registries and electronic disclosed in mandatory public filings. 3.9 Recent Legal and Commercial Developments
liens. Also, Law 14,195/2021 made some tweaks such as allowing creditors to more easily enforce guarantees out of court. Loan contracts increas- ingly incorporate explicit consent of the borrower to out-of-court enforcement and appointment of the creditor (or an agent) as an attorney-in-fact for such enforcement steps, to utilize these stream- lined procedures. • Insolvency law reforms – Brazil’s Bankruptcy Law was significantly amended by Law 14,112/2020. Some changes better protect creditors, such as giving DIP financing priority in certain cases and clarifying that unsecured creditors (such as those with fiduciary collateral) can enforce even during reorganisation (after a waiting period). Loan docu- mentation has evolved to take advantage of these changes or protect against new risks. • ESG and sustainability terms – with the rise of sustainability-linked finance, loan agreements may include Key Performance Indicator pricing adjustments or covenants to maintain certain ESG ratings. • Digital contracts and electronic signatures – the COVID-19 pandemic accelerated acceptance of electronic signatures and digital contracts. Financ- ing documents now routinely allow electronic execution and even provide that counterpar- ties agree not to contest validity solely based on electronic form. Also, notices and communications clauses now often permit email notice as a means of official communication (with appropriate condi- tions), reflecting an evolution from the traditional registered mail approach. 3.10 Usury Laws Brazil technically has an old usury law (Decree 22,626 of 1933) (the “Usury Law”), which caps interest at 12% per year. However, this ceiling is not applicable to lending provided by financial institutions and – since September 2024, when Law No 14,905 was enacted – such ceiling is not applicable for any loans to compa- nies (not individuals) and debt related to certain credit instruments named as títulos de crédito (credit bonds) under Brazilian Law and debt securities. 3.11 Disclosure Requirements Private loan agreements are not generally filed pub- licly. There are no specific rules requiring disclosure
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