BRAZIL Law and Practice Contributed by: Caio Ferreira Silva, Thiago Braga Junqueira, Vinícius Pimenta Seixas and Rodrigo Vieira, Pinheiro Neto Advogados
raising funds or as a guarantee for the payment of an underlying financing agreement. Despite the reforms creating certain safe har- bours for waiving the need for the registration of securities offerings, prevailing Brazilian laws and regulations still lack clear criteria to distinguish between a public and a private offering of secu- rities. Therefore, certain precautions must be taken so that the offering to be privately negoti- ated is not deemed a public offering of securities and does not thereby become subject to filing and other requirements under the prevailing laws and regulations. 3.6 Asset-Based Financing Asset-based financing is typically structured as secured loans or capital markets debt instru- ments, such as debentures. The preferred and most suitable security interest for an asset-based transaction is generally the fiduciary sale or assignment, whereby the guarantor assigns the fiduciary title/ownership of assets to the creditor. Full ownership is restored by the borrower upon payment of the obligations or consolidation with the creditor in the event of default. Alternatives involving the true sale of assets are also available but are more commonly used for the transfer of receivables owed by third parties upon payment of a purchase price to the original creditor. Such transactions may be structured via receivables funds (FIDCs), regulated by the Central Bank of Brazil and the CVM. In October 2023, Law No 14,711 – the “New Guarantee Framework” was enacted to provide for greater flexibility on the out-of-court enforce- ment of security interests by creditors. This law further allowed the better use of real estate as collateral for loans, with the flexibility of being encumbered under second degree mortgages
or fiduciary sales, for instance, and the possibil- ity of recharging the outstanding debt (similar to the “Home Equity Line of Credit” model in the US). These features should promote the growth of structures akin to asset-based financings in Brazil, thereby stimulating the development of the sector. The law also introduced the possibility to cre- ate more than one fiduciary sale over the same real estate property (akin to a second lien mort- gage), and the alternative, when the same debt is secured by more than one property, for the creditor to choose to foreclose on the proper- ties collectively or successively until the debt is satisfied. In the case of successive enforcement, the consolidation of the real estate ownership (and the payment of the transfer tax) only occurs as each property is auctioned. Based on the new law, whenever more than one debt is secured by the same property, the Real Estate Registry Officer shall notify all creditors to submit the updated amount of their credits and establish a creditors’ list so that the proceeds from the fore- closure are distributed among creditors accord- ing to their priority in time, and ultimately to the guarantor. The recently enacted law also created a new out-of-court enforcement procedure for mort- gages, which is very similar to the extrajudicial foreclosure of the fiduciary sale (the process tak- ing place before the Real Estate Registry Office, and the auction sale being documented by a notarial record, which will serve as the title for the registration of the acquisition by the winning bidder). Moreover, with the enactment of Law No 14,430, of 3 August 2022, the Brazilian government has introduced the legal framework for securitisa- tions in Brazil, and has brought about improve-
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