Legal Insights From Brazil to Start Your Week

What you will be reading in this issue:

1. Private Credit; Ag?| Restructuring Brazilian Agribusiness Debt: 5 Points that Banks and Fund Managers Should Include Into Debt Instruments

2. Capital Market?| Brazilian SEC Facilitates Access to Beginner Investors in Capital Market in 2025

3. Tax?| Brazilian Tax Reform: 4 Key Impacts on Companies' Logistics Network in Brazil

4. Credit Recovery?| Enforcement Actions To Recover Credit in Brazil: Strategies That Creditors Need to Know

5. Labor?| 5 Essential Practices for Companies Doing Business in Brazil to Prevent Labor Liabilities in 2025

Private Credit; Ag | Restructuring Brazilian Agribusiness Debt: 5 Points that Banks and Fund Managers Should Include Into Debt Instruments

The Brazilian scenario of high funding costs has led foreign and Brazilian financial institutions and fund managers to have to restructure loans in Brazilian reais and US dollars with Brazilian borrowers from all sectors, including agribusiness.

From local transactions, such as issuing banking notes, loans, capital markets certificates (CRAs), to international loans, such as PPEs, direct loans, among others, several of them are currently being restructured to reschedule repayments, add collateral and/or change certain covenants.

See below 5 points of attention to be considered by lenders when renegotiating loan facilities in Brazil with local borrowers:

1. Which Type of Restructuring Instrument to Enter Into in Restructuring of Debt in Brazil: Debt renegotiations are generally formalized through an amendment to the original contract or a debt confession instrument.

The key is that, regardless of the type, the contract must (i) be straightforward and contain provisions that provide certainty and apcceleration rights to the confessed debt and (ii) be qualified as an enforceable debt instrument to be enforced in Brazilian court through fast track procedure (execuc?o judicial).

2. Confessed Debt Amount: The clause providing for the amount of the debt must be indicate its exact value (or means of reaching it, if applicable), avoiding subjectivities. It must contain a declaration that the debtor confesses the amount due as liquid, certain and due.

3. Default Charges to be Applied to the Restructured Debt: It is important to determine whether the repayment schedule will be subject to the interest, default interest and penalty provided for under the new debt instrument or those eventually included in the original contract. It is not unusual to see debt renegotiations being challenged in Brazilian courts due to confusion and overlapping contractual provisions.

4. Inclusion of Clause to Allow Credit Assignment: Given that the “distressed” credit market is very active in Brazil, creditors should always consider the inclusion of contractual provision that allows the assignment and transfer of credit, rights and obligations to third parties, without the prior debtor’s consent (a later communication should be enough). There are countless cases of sale of credits that are prevented from taking place due to the lack of such type of provision.

5. Collateral Package to Back the Debt Restructuring: Creditors should always seek to negotiate the inclusion of collateral in renegotiations. Although collateral over fixed, movable or real estate property are always preferred, personal guarantees (aval/fian?a) also help as they generally create the commitment of individual guarantors (directors/partners/spouses) to make the debt be effectively paid off.

The above points take into account a background of recent restructurings and applicable Brazilian caselaw.

Capital Market | Brazilian SEC Facilitates Access to Beginner Investors in Capital Market in 2025

To expand access to the capital market in Brazil, the Brazilian Securities and Exchange Comission (CVM) started to allow investors with assets of up to BRL 30,000.00 to have differentiated and facilitated access to the capital market.

The so-called "Cadastro de Acesso" (or Access Registration) was instituted by Resolution 225, which will enter into force on March 3, 2025. The Resolution enables the simplified registration of these investors, considered "retail investors", with little information for intermediaries to meet the requirements of CVM Resolution n. 50/2021 and be able to start carrying out operations in the Brazilian capital market with funds from these investors. Every investor linked to the Cadastro de Acesso will be framed in a conservative profile, having access to limited investments.

Brazilian Intermediaries interested in using the Cadastro de Acesso must qualify before the market entity to which they are linked and must prove to have the appropriate systems and controls to meet the requirements of CVM Resolution n. 50/2021 on mandatory control of illicit practices, such as the prevention of money laundering, for example.

This register is experimental and will undergo a 5-year analysis period before being confirmed by the CVM. Even so, the Resolution is an advance by CVM, in the sense of democratizing the market, but maintaining the necessary legal certainty for the market and investors.

Tax |?Brazilian Tax Reform: 4 Key Impacts on Companies' Logistics Network in Brazil

Currently, defining the logistics network in Brazil involves not only locating suppliers and customers with their respective logistics costs, but also analyzing the tax benefits offered by different states, such as incentives from the State Tax on Circulation of Goods ("ICMS").

Proper logistics and tax planning plays a fundamental role in ensuring competitiveness, reducing costs and maximizing operational efficiency. With the imminent changes expected in the tax reform, companies of all sizes will need to reevaluate their strategies to adapt to the new tax and logistics scenario.

We highlight 4 points that require attention below by companies doing business in Brazil:

1. End of the Tax War and Unification of ICMS: Currently, one of the biggest difficulties faced by companies is the complexity of ICMS, with rates and rules that vary between states in Brazil. The tax reform foresees the unification of ICMS into a single national law, through its replacement by the Tax on Goods and Services (IBS), eliminating interstate tax disputes and simplifying tax calculation. As a result, the need to plan logistics routes and establish new distribution centers based on state tax incentives can be significantly reduced, bringing greater predictability to the tax costs of logistics operations.

2. Changes in Tax Benefits for the Logistics Sector: Regional tax benefits, such as incentives for setting up distribution centers in certain locations, will be reviewed. With the standardization of tax rates, states will lose part of their ability to offer these incentives.

Therefore, companies will have to reevaluate the location of their distribution centers and warehouses, considering factors such as transportation costs, proximity to markets and operational efficiency as a priority, rather than regional tax advantages. It is worth noting that ICMS tax incentives will remain in force until 2032. The reduction of these benefits will be progressive during the transition period, with a reduction of 1/10 per year from 2029, until their complete extinction in 2033.

3. New IBS incidence on added value: With the creation of the IBS, which will replace the ICMS and ISS, the tax burden will be calculated based on the added value at each stage of the production chain. This new format will make logistics an even more relevant stage, since each movement and addition of value will directly impact taxation. Therefore, companies will need to review their supply chains to optimize taxation, ensuring cost reduction and greater operational efficiency.

4. Transition Rules and Operational Adaptation: The transition to the new tax system will be gradual, with the current system and the new regime expected to coexist for a certain period. During this phase, companies will need to deal with two tax regimes simultaneously, which requires integrated and updated systems for correct calculation of taxes. This transition scenario will temporarily bring greater complexity to logistics operations, requiring rapid and efficient adaptation.

The tax reform will bring profound changes to companies' logistics management. While unifying taxes could simplify the system in the long term, the transition period will require a major adaptation effort. To remain competitive, it will be essential to reassess the supply chain, optimize routes and invest in technology.

Credit Recovery |?Enforcement Actions To Recover Credit in Brazil: Strategies That Creditors Need to Know

Recovering overdue credits can be a challenging process for creditors in Brazil, but Brazilian law provides a range of tools to assist it, which includes typical and atypical enforcement measures stand out.

Typical enforcement measures are aimed directly at fulfilling the obligation, whether by transferring possession of an asset or through the judicial sale of the debtor's property.

To implement these typical measures, creditors have access to the following main tools:

1. Sisbajud: Locates and freezes funds in bank accounts, including through the "persistent search" feature, which continuously tracks financial assets.

2. Renajud: Identifies vehicles registered under the debtor's name.

3. Infojud: Provides access to tax information and income tax returns.

4. CNIR: A national registry that consolidates information on rural properties.

5. SNIPER: A patrimonial investigation system that cross-references data from various sources to locate assets.

6. CNIB: Allows for the registration of asset unavailability, preventing the debtor from selling or transferring properties.

Atypical enforcement measures, on the other hand, are not aimed directly at debt payment but rather at compelling the debtor to fulfill their obligation. Examples include the suspension of a driver’s license (CNH), passport seizure, and blocking credit cards.

The Superior Court of Justice (STJ) is currently analyzing the legality of atypical enforcement measures, such as passport seizure, under Topic 1,137. Although it ordered the suspension of cases involving such requests in 2022, the STJ began issuing favorable decisions for creditors in 2023, based on a Supreme Federal Court (STF) ruling that deemed the seizure of a debtor's passport constitutional (ADI No. 5,941).

In addition to the measures mentioned above, it is also possible to initiate a piercing the corporate veil proceeding to reach the assets of shareholders, companies within the same economic group, or the company itself, if the debtor is an individual. To support the initiation of such a proceeding, a detailed investigation of the debtor's civil life is recommended to identify any irregularities committed, using search tools like CENSEC to locate powers of attorney or donations with usufruct in notaries' offices, which evidence fraud through the use of "straw men."

Credit recovery, when conducted strategically and with personalization, can become a competitive advantage for companies. A well-defined strategy that considers each debtor's profile and the specificities of each debt significantly increases the chances of success in negotiations and in recovering the amounts owed. Developing an effective strategy requires deep market knowledge, familiarity with the available tools, and an understanding of best practices in credit management.

Labor | 5 Essential Practices for Companies Doing Business in Brazil to Prevent Labor Liabilities in 2025

Labor management in 2025 remains one of the biggest challenges for companies in Brazil.

Labor liabilities, often underestimated, can arise from routine situations such as payroll configuration errors or maintaining inadequate contracts. These oversights lead to lawsuits, inspections by the Public Prosecutor's Office, fines, and damages that affect not only the company’s cash flow but also its market credibility.

Yes, the impacts of labor liabilities go beyond financial compensation. They can compromise the company’s reputation, hinder talent attraction and retention, and trigger institutional crises that damage the organization’s public image. In a connected world where information spreads rapidly, crises involving labor issues can undermine years of effort in building a solid reputation. On the other hand, well-implemented preventive measures significantly reduce these risks, fostering a transparent and secure relationship with employees.

Protecting your company is more than complying with the law — it is a strategic investment in sustainable growth.

The main sources of labor liabilities include: (i) irregular hiring practices (e.g., hiring independent contractors or freelancers when conditions for employment relationships are met); (ii) failures in managing working hours, including in remote work arrangements; (iii) noncompliance in granting mandatory benefits and paying overtime; (iv) lack of equity in employee treatment; Workplace harassment.

To minimize these risks, consider adopting effective practices such as:

1. Conducting periodic audits of contracts and payroll records;

2. Reviewing internal policies;

3. Training managers;

4. Revising workflows, infrastructure, and workplace conditions;

5. Staying updated on legislative changes and collective agreements.

Preventing labor liabilities is not just a precaution but an indispensable strategy for business success. In an increasingly dynamic and interconnected business landscape, ensuring compliance with labor regulations strengthens employee relationships, promotes a healthy work environment, and safeguards the organization’s reputation.

By adopting preventive practices and investing in efficient management, your company will be well-prepared to face the challenges of 2025 with confidence and competitiveness, solidifying its market position.