On October 3, 2023, the Chamber of Deputies approved the text of the so-called Legal Framework for Guarantees (Bill No. 4188/2021) which, among other points, establishes new procedures and rules for guarantees, as well as extrajudicial enforcement measures for credit recovery through notaries. In addition, the legal proposal gives new normative contours to the figures of fiduciary alienation and mortgage.
With the approval by the federal deputies of amendments from the Federal Senate, Bill No. 4188/2021 will now be sent for presidential sanction. The legislative change aims to promote a reduction in interest rates and, consequently, a reduction in defaults in the Brazilian credit market.
As far as the changes that most directly affect Brazilian agribusiness are concerned, it is worth highlighting the fact that the new wording has ruled out the creation of Guarantee Management Institutions (IGG), which in the initial proposal would have been responsible for intermediating the valuation of debtors’ assets. The non-creation of intermediary companies can be seen as salutary, since rural finance credit comes largely from non-financial institutions.
Another sensitive point for the agro-credit market is the changes made to the mortgage and fiduciary alienation institutes. If sanctioned, in the guarantee of fiduciary alienation: i) the possibility of assigning the rights of the fiduciary (debtor) without the consent of the fiduciary creditor will be opened up; as well as ii) there will be the possibility of subsequent fiduciary alienation.
In relation to mortgages, there will be i) the possibility of an extrajudicial procedure to foreclose on the property given as a mortgage guarantee and the possibility of direct sale by the creditor after a second unsuccessful auction or adjudication of the property by the creditor upon payment of the Real Estate Transfer Tax (ITBI).
The text also maintained the unseizability of the single family home even in the case of a fiduciary alienation guarantee.
The team at Passos e Sticca Sociedade de Advogados is closely following the discussions on the new legislation and its potential implications for the Brazilian agribusiness credit market, and is now available to answer questions about the Legal Framework for Guarantees.
Atenciosamente,
Passos e Sticca Advogados Associados – PSAA