BRAZIL Law and Practice Contributed by: Caio Ferreira Silva, Thiago Braga Junqueira, Vinícius Pimenta Seixas and Rodrigo Vieira, Pinheiro Neto Advogados
• real estate properties depend on the execu- tion of public deeds and registration with the competent real estate registry; and • intellectual property is subject to registra- tion with the National Institute of Industrial Property ( Instituto Nacional da Propriedade Industrial , or INPI). Considering the requirement that the security agreements must individualise and identify the collateral subject to the lien, if the assets sub- ject to a security interest are sold, transferred or replaced, an amendment to the security agree- ment may be required to perfect the lien on after- acquired or replaced assets, depending on the structure of the guarantee and the type of col- lateral. 5.4 Restrictions on Upstream Security Pursuant to Brazilian laws and regulations, as a general rule there are no limitations on a com- pany guaranteeing borrowings of one or more members of its corporate group, as long as its by-laws (or an equivalent document) do not con- tain an express prohibition in this regard. There are a few exceptions to this general rule, such as: • Brazilian financial institutions are not usu- ally allowed to extend credit nor provide a guarantee or financial assistance to their controlled or controlling individuals or entities; and • financial assistance (including guarantees) provided by publicly held companies to the exclusive benefit of controlling shareholders could be considered an abuse of the power of control under the CVM regulations. 5.5 Financial Assistance As a general rule, there are no restrictions on providing financial assistance in the form of
granting security to guarantee obligations of related parties. However, it is not uncommon to find provisions in companies’ by-laws that pre- vent corporations from rendering guarantees or security for the benefit of third parties in such circumstances. Moreover, financial institutions, insurance com- panies and pension plan corporations are gener- ally not allowed to extend loans nor render guar- antees/security for the benefit of certain persons (eg, controlling shareholders and managers). In addition, fiduciary duties may restrict the abil- ity of publicly held companies to offer collateral to secure the obligations of a third party, espe- cially if such third party is in any way related to the controlling shareholder of said publicly held company. 5.6 Other Restrictions As a rule, subject to certain recently created exemptions, Brazilian financial institutions can- not grant loans to related parties, such as: • their controlling shareholders, executive offic- ers and members of other corporate boards, and their respective spouses, partners and relatives to the second degree; • individuals or companies that hold a qualified equity interest (ie, at least 15% of the total) in their capital stock; • companies in which they hold a direct or indi- rect qualified equity interest; • companies in which they hold effective man- agement control or the power to determine the outcome of corporate resolutions, irre- spective of holding any equity interest; and • companies with which they share an execu- tive officer or director.
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