Legal Insights From Brazil to Start Your Week

Private Credit | 5 Points of Attention for Investors in the Purchase of Brazilian Receivables

Brazilian Receivables Funds (known as FIDCs), financial institutions and other investors acquire and advance more than BR$100 billion in trade receivables annually, originated by companies in their sales of products and services.

From the legal disputes that arise from sales of receivables, we identified points that acquirers should pay attention in order to mitigate risks linked to this type of transaction.

See below 5 of these key points in the acquisition of receivables by FIDCs, financial institutions, and other investors:

1. Do Due Diligence on Receivables to be Prepaid: FIDCs, financial institutions, and investors acquire receivables performed (the majority) or to be performed.

With regard to “performed”, the investor must (i) confirm that the seller is the legitimate holder of the receivables, (ii) review the documentation that supports the credit rights, such as commercial contract and invoice issued, and (iii) confirm with the debtor of the receivables that they are owed and there is no commercial dispute between the supplier (credit seller) and the debtor.

2. Specify the Underlying Receivables in the Purchase Agreement: The Receivables Purchase Agreement must provide for the main specifications of the receivables, in order to individualize them and, thus, ensure their right of assignment vis-à-vis the supplier, the debtor and third parties.

For continuous receivables assignment programs, details of the receivables to be assigned should preferably be attached to the Receivables Purchase Agreement, which may be updated or replaced as new receivables are negotiated.

3. Notify and Obtain Acknowledge from the Debtor Regarding the Assignment of Receivables: This is one of the crucial points in the acquisition and anticipation of credit rights. Observe the rules of art. 290 of the Brazilian Civil Code, which requires that the debtor of the assigned receivable be notified of the assignment and declare that he or she is aware of it, is a key precaution for investors.

According to market practice and caselaw, the format of notification and acknowledgment of the debtor may occur in various ways, but within accepted limits.

4. Ensure the Right of Recourse in Key Situations: Although the advance of receivables is commonly signed without recourse against the seller (i.e., the credit risk is assumed by the investor), the investor must ensure the right of recourse against the seller if (i) there are defects in the documentation that originated the receivables that invalidate them or make them unenforceable, (ii) there is a dispute with third parties over their ownership, (iii) if there is a commercial dispute over the receivables between the seller and the debtor, or the commercial contract has been annulled or amended, without the investor's consent, among other events.

5. Protect Your Assignment of Receivables: In addition to notifying and informing the debtor of a specific assignment of receivables, consider registering the Receivables Purchase Agreement with the Brazilian Registry of Titles and Deeds of the seller's jurisdiction.

Although it is not a condition for the validity and enforceability of the assignment, registration will publicize the assignment and guarantee seniority rights in the face of third-party disputes.

The above points of attention are important to be considered by FIDCs, financial institutions and other investors in credit rights, aiming to mitigate some of the main risks involved in a market with great opportunities.

Dispute Resolution | Sports Betting Advertising in Brazil: The Rules of the Game to Avoid Liability

Sports betting platforms and websites operating in Brazil must be aware of advertising and marketing rules.

It is to avoid the imposition of sanctions (ranging from fines to the suspension of the company's operations) and which could constitute a crime against consumer relations, subject to personal responsibility of managers.

See below the main rules applicable to such advertising in Brazil:

1. Advertising must be aimed at an adult audience. Such insertions must not be made on social networks, profiles, channels, programs or media content aimed at people under 18, and must not contain visual, verbal or written elements that are aimed at children or young people.

2. It must not suggest an illusion of control over the results of betting, or that repeated betting will increase chances of winning. It is prohibited to mention that betting constitutes a form of investment or income.

3. It is not permitted to offer credit to consumers (for example, advance funds that later must be returned to the operator or third party), which could lead to debt.

From a Brazilian consumer rights perspective, it is important that advertising is correct and conveyed clearly. Any error in advertising will probably bind the company. This is because it will be difficult to sustain that the consumer should identify that it was an error (due to a lack of parameters and experience in the Brazilian market with such a service) and that, therefore, the company would be exempted from honoring such an offer conveyed by mistake.?

Companies licensed by the Brazilian Ministry of Finance can advertise bets in Brazil, but it is important that the companies’ marketing and legal teams are aligned so that such advertising is carried out within legal limits and without exposing the company and its managers to civil and criminal liability.

Labor |?Salary Transparency Reports Will Be Published by the Brazilian Ministry of Labor and Employment on March 21st

The Brazilian Ministry of Labor and Employment (MTE) informed that the Transparency Reports of companies with more than 100 employees will be made available via the Emprega Brasil Portal on March 21st.

The MTE also highlighted that after these reports are published, the deadline for companies to publish their reports on their websites, for access not only by their employees, but by the general public, remains until 03/31/2024.

In view of this, and with the intention of mitigating the potential risk of damage from the information that will be disclosed in these reports, and negative publicity, several companies and associations have already moved to avoid this obligation, presenting the following actions to the Brazilians Courts:?

1. ADIs in the Brazilian Federal Supreme Court: The National Confederation of Industry and the National Confederation of Commerce, Goods, Services and Tourism proposed Direct Actions of Unconstitutionality (ADIs – Brazilian Acronym) with a request for precautionary measure, to evaluate the constitutionality of points of the Law of Equality (“Law 14,611/23”), the entities claim, among other things, that the requirement to publish reports, which do not reflect the factual reality of companies, causes unfair reputational damage.

The ADIs have already been distributed, but remain pending judgment, thus, for now, companies assisted by these Confederations are still subject to the publication obligation.

2. Writs of Mandamus in the Brazilian Labor Courts: Some Associations and Companies even filed Writs of Mandamus in the Brazilian Labor Court with requests for early protection to exclude the obligation to publicize the Transparency Reports, alleging an offense against the LGPD and CADE, without success until this moment; and

3. Early Protection Action against the Union in the States Federal Courts: Two drugstore chains obtained the first injunctions exempting them from providing labor and salary information to the federal government through the salary transparency report and to publicize the Transparency Reports. These injunctions were granted in the Federal Courts in the States of S?o Paulo and Rio de Janeiro. To date, this is the most effective measure found to prevent the duty to publicize the Transparency Reports.

We recommend that companies that choose to file lawsuits do so as soon as possible, as the deadline for publishing the Salary Transparency Report remains March 31, 2024 (next week).

The Labor Area of Feijó Lopes Advogados are available to assist companies in these actions and in the next steps to avoid the obligation to publicize their Transparency Reports.