Law No. 14,430, sanctioned on August 3, 2022, originated from Provisional Measure No. 1.103/22, instituted the Legal Framework of Securitization and consolidated the sparse legislation that disciplined the Certificates of Real Estate Receivables (CRI) and Certificates of Agribusiness Receivables (CRA).

It is an important legal rule that will have a significant impact on the expansion and consolidation of the securitization market in Brazil, by contributing to financial disintermediation and the expansion of the capital market.

The law standardizes the general rules applicable to the securitization of credit rights and issuance of certificates of receivables, establishes important definitions for the market, brings a uniform and comprehensive concept of certificate of receivables, in addition to pacifying issues that generated legal controversy or burdened the structuring of operations.

The legal framework of securitization represents a paradigm shift in the receivables credit market in the country, since it will allow the expansion of securitization with the intermediation of securitization companies to the most diverse sectors of the economy.

Prior to the enactment  of Provisional Measure No. 1.103/22, securitization with the intermediation of securitization companies were restricted to the real estate, agribusiness and financial sectors.

In the education and sanitation sectors, for example, there is a demand for private investment instruments through capital market, which was already manifested in bills that were processed in the National Congress, aiming at the creation of Certificates of Educational Receivables and Certificates of Sanitation Receivables. These regulatory initiatives ended up not evolving, but with the edition of the Legal Framework of Securitization, this demand can be met due to the creation of the broad concept of "Certificate of Receivables".

The reform implemented by Law No. 14,430 is part of the broad context of modernization of the rules applicable to securitization companies and the securitization market. In the regulatory sphere, we highlight the edition of CVM Resolution No. 60/21, which came into force on May 2, 2022. This resolution of the Brazilian Securities Commission complements the law recently sanctioned by establishing a regulatory framework for securitization companies and the securitization market.

The regulatory standard shares the same view of the legal diploma. It was conceived to encompass a comprehensive concept of Certificate of Receivables, which will allow the use of this instrument in various economic sectors. This alignment was possible thanks to the discussions for the drafting of the law, which took place between public administration and private sector entities within the scope of the Capital Markets Initiative (IMK), a strategic action led by the Ministry of Economy, in which Brazilian Securities Commission participates.

The coordination, supervision and supervision of the securitization market and its participants is the responsibility of the Securitization Superintendence created in 2021, which is part of the Brazilian Securities Commission.

Regarding the the main changes brought by the Legal Framework of Securitization, the following stand out:

  • The creation of important legal definitions for the securitization market, such as "securitization companies" and "securitization";
  • The use of a uniform and comprehensive concept of "Certificate of Receivables";
  • The possibility for securitization companies – including securitization companies of financial credits – to use the fiduciary regime with the constitution of separate estate in the issuance of any Certificate of Receivables and other securities representing securitization;
  • The protection of the investor in relation to risks related to tax, social security or labor issues of the securitization company, with removal from the application of article 76 of Provisional Measure 2.158-35[1];
  • The possibility of capital calls through the execution of a subscription promise and payment of certificate of receivables;
  • The extension of the revolving mechanism – previously restricted to agribusiness credits – for securitization involving receivables of any kind, with implementation subject to adjustment in CVM Resolution No. 60/21, which currently prohibits revolving on real estate securitization;
  • The possibility of recomposing the backing of the structure with other credit rights in view of the insufficient of the separate estate;
  • The provision of payment of investors with credit rights in situations of settlement of issues arising from the insolvency of the securitization company or insufficiency of the separate estate assets, in situations in which there was no agreement between investors or quorum at the general meeting; and
  • The extension of the correction clause by the exchange variation for Certificates of Receivables of any nature, which was previously restricted to Certificates of Agribusiness Receivables (CRA), provided that the requirements set forth in law and by the National Monetary Council are observed.

The income tax exemption on income paid to individuals holding Certificates of Real Estate Receivables (CRI) and Certificates of Agribusiness Receivables (CRA), however, does not extend to other Certificates of Receivables.

Provisional Measure No. 1.103/22 has been in force, with force of law,  since its edition, on March 15 of this year. During its process in the National Congress, 55 parliamentary amendments were presented.

Among the proposed amendments, we highlight the revocation of items I, II and III of paragraph 8 of Article 3 of Law 9,718/98 to allow the fundraising expenses incurred by legal entities whose purpose is the securitization of credits to be deducted from the calculation basis of the contribution to PIS/PASEP and COFINS taxes.

The revoked items limited this possibility to the securitization of real estate, agribusiness and financial credits. This tax treatment is necessary to facilitate the payment flow in the acquisition of credit rights in securitization.

The edition of the Legal Framework of Securitization is an important advance for the receivables credit market and inaugurates a new paradigm in this sector, with enormous economic potential and guarantee of legal certainty for the performance of securitization companies. The reform will therefore allow the consolidation and expansion of the securitization market in Brazil and has the potential to positively affect the most varied sectors of the economy, in addition to strengthening the national capital market.

 

[1] Provisional Measure 2.158-35. "Art. 76. The rules establishing the allocation or separation, in any capacity, of assets of an individual or legal entity have no effect in relation to debts of a tax, social security or labor nature, in particular with regard to the guarantees and privileges attributed to them.

Single paragraph. For the purposes of the provisions of the caput, all the assets and income of the taxable person, his estate or his bankrupt estate, including those that have been subject to separation or affectation, remain liable for the debts referred to therein."