Lending & Secured Finance 2015
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 Published by Global Legal Group Ltd. 59 Tanner Street London SE1 3PL, UK Tel: +44 20 7367 0720 Fax: +44 20 7407 5255 Email: [email protected] URL: www.glgroup.co.uk 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 Archer Legal LLS: Ivan Martynov & Alexander Filipishin 107 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 GLG Cover Image Source iStockphoto Printed by Information Press Ltd April 2015 Copyright © 2015 Global Legal Group Ltd. All rights reserved No photocopying 98 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. WWW.ICLG.CO.UK 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 140 WWW.ICLG.CO.UK 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 WWW.ICLG.CO.UK 141 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. WWW.ICLG.CO.UK 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. WWW.ICLG.CO.UK 143 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. 144 WWW.ICLG.CO.UK 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:[email protected] URL:www.tozzinifreire.com.br Tel: +55 11 5086 5559 Fax: +55 11 5086 5555 Email: [email protected] 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. ICLG TO: LENDING & SECURED FINANCE 2015 WWW.ICLG.CO.UK 145 Other titles in the ICLG series include: ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Alternative Investment Funds Aviation Law Business Crime Cartels & Leniency Class & Group Actions Competition Litigation Construction & Engineering Law Copyright Corporate Governance Corporate Immigration Corporate Recovery & Insolvency Corporate Tax Data Protection Employment & Labour Law Environment Franchise Gambling Insurance & Reinsurance ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ International Arbitration Litigation & Dispute Resolution Merger Control Mergers & Acquisitions Mining Law Oil & Gas Regulation Patents Pharmaceutical Advertising Private Client Private Equity Product Liability Project Finance Public Procurement Real Estate Securitisation Shipping Law Telecoms, Media & Internet Trade Marks This article appeared in the 2015 edition of The International Comparative Legal Guide to: Lending & Secured Finance; published by Global Legal Group Ltd, London. 59 Tanner Street, London SE1 3PL, United Kingdom Tel: +44 20 7367 0720 / Fax: +44 20 7407 5255 Email: [email protected] www.iclg.co.uk
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