At the beginning of April, Law 13,986 was published, the result of the conversion of Provisional Measure 897/2019, known as the “Agro PM”.
The text approved by the Congress was sanctioned and suffered some presidential vetoes, especially regarding the deadlines for renegotiation of debts and changes in tax rates, which, according to the reasons for the vetoes, would result in a taxable revenue waiver.
The Agro Law was a demand from the sector, which demanded an increase in the availability of agricultural credit with easier forms of guarantee. Besides this, the legislation that regulates some modalities of bills and financing were foreseen in several sparse legislations, which needed updating, even to adapt them to reality, with a view to fomenting the business developed by the entire agribusiness productive chain by means of new alternatives for the private financing of this sector.
Below, we present the main changes and novelties of Law 13,986/2020 by topics:
Solidarity Guarantee Fund “FGS-AGRO
– Arts. Law 13.986/20, 1st to 6th – This deals with the modality of complementary guarantee in favor of financial institutions (guarantee reinforcement) to enable the rural producer to obtain financing to settle or renegotiate his short term debts and gain strength to restructure his business, including debts related to the financing of infrastructure and rural connectivity.
The FGS-AGRO will be composed in the form of an association by at least (2) two debtors, the creditor and the guarantor, if any. Being certain that the law has foreseen minimum percentages of payment, resources will be converted into quotas for the FGS-AGRO, based on the debit balances of the guaranteed financial operations, which are:
- primary share, of the debtors’ responsibility, corresponding to 4% (four percent) of the outstanding balance;
- secondary share, the responsibility of the creditor, or in the hypothesis of consolidation, of the original creditors, corresponding to 4% (four percent) of the outstanding balance; and
- tertiary share, of the guarantor’s responsibility, if any, corresponds to 2% (two percent) of the debit balance, and such payment may also be made by reducing the debit balance of the creditor guaranteed by the FGS-AGRO.
Once the guaranteed obligations are due and unpaid, the creditor can sue the FGS-AGRO, constituting it in default and demand the payment of the debit balance, which will be settled by using the quota balance, observing the following preference order benefit: (i) primary share; (ii) secondary share; and (iii) tertiary share, if any. After the discharge of the debts and/or operations guaranteed by it, or even after the exhaustion of its resources, the FGS-AGRO will be extinguished, and it is certain that in the existence of a remaining balance, it will be returned to its quota holders in the exact proportion of the payment of their quotas, observing the following order: (i) tertiary quota, (ii) secondary share, and (iii) primary share.
Rural Assets in Affectation
– Arts. 7th to 16th of Law 13.986/20 – The agro sector(lato sensu) pleaded for the possibility of the debtor’s constituting a guarantee on a specialized part of the property. With the new legislation, as long as the rural module is respected, divisible parts of the same property can be used to guarantee different credit operations, including those represented by a Rural Product Note (CPR), in the case of credit operations with cooperatives, cereal producers and other creditors, or by a Rural Real Estate Note (CIR), in the case of financial operations. In addition, this guarantee covers the affected property, its improvements and accessions, with the exception of movable goods, crops and livestock.
Under the law, the affected rural property: (i) it will be unseizable against the generality of third-party creditors, with the exception of labor, social security and tax credits of the debtor; (ii) may not be transferred to any translational act of the owner and, likewise, may be recorded or further secured; and (iii) the credit guaranteed by the segregate estate has an extra-business nature, and is not subject to the effects of judicial reorganization, bankruptcy or civil insolvency.
Cédula Imobiliária Rural CIR
– Art. 17 to 29 of Law 13.986/20 – New modality of credit title, which represents: (i) the promise to pay in cash, resulting from a credit operation of any modality; and (ii) characterization of default, the obligation to deliver in favor of the creditor, affected property or fraction thereof.
The CIR can be issued in book-entry form or in paper-entry form by means of an entry in a bookkeeping system authorized by the Central Bank of Brazil. In both cases, it must be registered within five working days of its issue, with an institution authorized by the Central Bank to register or deposit financial assets, and is an extrajudicial enforcement instrument, representing a liquid, certain, and enforceable debt in cash, corresponding to the amount stated on it or to the debit balance it represents.
In order to be constituted, the area that constitutes the rural estate in affectation must be georeferenced to the Brazilian Geodesic System, and the minimum area corresponding to the minimum parceling fraction and/or the rural module of the region must be respected, whichever is smaller, in the hypothesis of affecting part or fraction of the property. In the event of default on the CIR, the creditor will have the prerogative of promoting the execution of the guarantee by means of the extrajudicial procedure of fiduciary alienation of real estate under the terms of articles 26 and 27 of Law No. 9.514/1997, with the proviso that, differently from Law No. 9.514/1997, if the value obtained in a second auction is not equal or higher than the debt value (including expenses and charges), the creditor will have the prerogative of executing the balance against the debtor. Note that the new law is silent and does not establish what the criteria will be for evaluating the property for the purpose of determining the balance, and that the parties (creditor and debtor) must establish such premises expressly when the CIR is issued.
CPR – Rural Product Note (Cédula de Produto Rural)
– Art. 42 of Law 13.986/20 – Law 8.929/94, which provides for the CPR was significantly changed, in order to provide more security, agility and modernity to its issue.
Among the main changes we highlight:
- The increase in the number of hypotheses for issuing CPRs, including those backed by planted forests, fishing and aquaculture, as well as products submitted to processing and/or first industrialization, with the executive branch having the power to regulate the products that may be subject to CPRs;
- The increase in the number of entities entitled to issue CPRs with the inclusion of agribusiness and entities that exploit native or planted forests in the list of CPR issuers;
- institution, in our legal system, of the legal provision for the book-entry issue of CPRs, as well as the option of signing them in electronic form, it being certain that the book-entry form will be the object of an electronic bookkeeping entry managed by an entity authorized by the Central Bank of Brazil to perform this task;
- The possibility of issuing the CPR with a single installment or in installments, being allowed the agreement of fixed or floating interest, and monetary correction and exchange variation for the redemption of this title; in the same way, it is possible to issue CPRs with financial settlement, which may contain a clause with exchange variation correction, being the National Monetary Council’s prerogative to regulate such matter;
- with respect to CPR guarantees, in substitution for the exhaustive list existing in Law 8,929/94, it was expressly determined that any guarantees foreseen in the legislation may be constituted; it was also made possible the fiduciary alienation of fungible and non-fungible assets, authorizing the procedure of search and seizure of the assets, under the terms of Decree-Law 911/69; and
- equating the fiduciary alienation of fungible goods to the agricultural pledge, with the provision for transfer of the real link to the products resulting from any processing.
Among the main changes we highlight:
- possibility to issue CDA and WA in book-entry or book-entry form, the latter through register in electronic media, managed by an entity authorized by the Brazilian Central Bank to perform this activity. Therefore, maintaining the obligation of electronic register of CDA and WA, within 30 (thirty) days after issue, as well as the requirement of delivering CDA and WA issued in book-entry form to the custodian entity, through endorsement and/or mandate;
- express attribution of protection against the effects of Judicial Reorganization to CDA and WA endorser, reinforcing the extra-bankable nature of these titles, as well as the rights of the final endorsee over these assets vis-à-vis the depositary;
- possibility of issuing CDA and WA to non-resident foreign investors; and
- In relation to the Certificate of Agribusiness Credit Rights “CDCA” and the Certificate of Agribusiness Receivables “CRA” it was expressly foreseen the possibility of including an exchange variation adjustment clause, being the regulation of this matter attributed to the National Monetary Council.
Concession of rural property as collateral to foreign legal entities or entities equivalent to foreign entities
– Arts. 51 and 52 of Law 13.986/20 – The legislative change resolves a long-discussed issue, due to the restrictions for “acquisition” of rural properties by foreign legal entities or legal entities equated to foreigners, according to the most recent interpretation of the legislation.
In any case, although the constitution of guarantees on rural properties has no express limitations in the legislation, such restrictions have been extended to guarantees, especially in relation to the possibility of a foreigner or person treated as a foreigner being the holder of the resoluble property or the property itself, should the guarantee be executed.
In this sense, the Agro Law expressly authorizes the constitution of guarantees on rural properties and the execution of these guarantees, including for rural properties located on the border strip, thus admitting the transfer of the rural property that is the object of the guarantee for the settlement and payment of the debt, through the realization of a guarantee in rem, as payment in kind, or in any other way.
These changes seek to provide legal security to attract foreign capital (including foreign legal entities and alike) in the promotion of agribusiness and for the concession of credit secured by rural property. Much has been discussed about the operationalization of many of the innovations brought by the Agribusiness Law, such as, for example, the constitution, formalization, and eventual “execution” of the rural segregate estate. The question is also being asked about the possible use of the mechanisms of in rem guarantee authorized by law, as a way of acquiring rural property by foreigners and their equivalents, running away from the purpose of these legal provisions.
Finally, we point out that Law no. 13,986/2020, among other innovations and guidelines, sought to modernize rural credit concession operations with mandatory resources foreseen in Decree-Law 167/1967, by providing rules applicable to bookkeeping, electronic signature, as well as to optimize the registration of these titles and linked to rural financing.
The Real Estate and Environmental Law teams of DDSA – De Luca, Derenusson, Schuttoff Advogados are at your entire disposal for further clarifications and assistance in cases involving agrarian contracts and businesses, in order to foment the agrarian activity and the credit operations in the scope of agribusiness.