BRAZIL Law and Practice Contributed by: Caio Ferreira Silva, Thiago Braga Junqueira, Vinícius Pimenta Seixas and Rodrigo Vieira, Pinheiro Neto Advogados
Bank Guarantee (Fiança Bancária) Since these types of guarantees are granted as a service provided by financial institutions con- tracted by obligors or creditors, banks usually charge a fee, which is commonly paid by the debtor. 7. Lender Liability 7.1 Equitable Subordination Rules The prevailing laws and regulations set forth that only banks and other financial institutions regulated by the Central Bank of Brazil may grant credit facilities as their main and regular activities. Therefore, any local company not duly accredited by the Central Bank of Brazil that originates and provides credit on a regular basis may face the risk of being deemed a financial institution without proper authorisation, which may lead to sanctions being imposed, including in the criminal sphere. In addition, loans granted by non-regulated enti- ties are generally subject to interest rate limita- tions under the Brazilian Usury Law. However, under a new law enacted in 2024, such limita- tions no longer apply (beyond banks, regulated financial institutions, and investment funds or clubs) to obligations: • contracted between legal entities; • represented by credit instruments or securi- ties; • entered into with civil society organisations of public interest, as defined under a special law, that are engaged in granting credit; or • carried out in the financial, capital or securi- ties markets. As a general rule, under Brazilian law, entities considered as related parties – such as those
( fiança bancária ), which must be complied with by any financial institution backing debt obliga- tions with this type of guarantee. 6.2 Restrictions As outlined in 6.1 Types of Guarantees , with respect to the granting of in rem guarantees for fiduciary sale or assignment, there are gener- ally no restrictions on granting a guarantee in transactions involving related parties, even though they are often restricted by the corporate governance rules of the companies, in certain regulated entities or publicly held corporations. In addition, any acts of the company should be subject to the fiduciary duties of senior manage- ment and controlling shareholders to further the company’s purpose (and not enter into transac- tions benefitting related or third parties to the detriment of the company) and, therefore, in essence, agreements should be entered into on an arm’s length basis. 6.3 Requirement for Guarantee Fees Endorsement Made by Guarantor (Aval) There are no legal requirements under Brazilian law for guarantee fees to be charged, but gran- tors may seek compensation from the debtor to do so. In most cases, since the guarantors (granting the aval ) are related parties to the obligor, such guarantees are typically without charge. Surety (Fiança) As a rule, the grantor of a fiança (ie, the fiador ) cannot charge the beneficiary a fee, but it can receive compensation from the debtor for agree- ing to grant such guarantee. If the fiador settles the debt, it takes over the creditor’s position on the credit rights and thus may claim the relevant payment from the debtor, as established in Arti- cle 831 of the Brazilian Civil Code.
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