Publications
- Category: Institutional
In its rhythm of continuous expansion, these promotions strengthen the firm’s Litigation, Corporate, Real Estate, Infrastructure, and Tax practices
Machado Meyer Advogados announces the appointment of nine new partners. The promotions, which are effective as of January of 2022, include Fernanda Cury Messias, Guilherme Azevedo, Mariana Meditsch, Paulo Henrique Carvalho Pinto, Marcos Costa, Bruno Eduardo Pereira Costa, Paulo T. C. Machado, Fernando Munhoz, and Virgínia Pillekamp.
"Machado Meyer is committed to creating internal opportunities for the professionals already on our team. These appointments reflect the continued importance of valuing our professionals, coupled with the firm's good performance throughout the year. Our intention continues to be to offer intelligent legal solutions, with a qualified team of excellence, acting assertively to meet the needs of our clients," says Tito Andrade, managing partner of Machado Meyer Advogados.
From now on, the Corporate area has new partners on its staff. Fernanda Cury Messias specializes in banking and debt capital market transactions, project finance, syndicated transactions, and debt restructuring. Guilherme Azevedo specializes in structuring public offerings of debt and equity securities and structured finance. Mariana Meditsch performs advisory work in structuring M&A transactions, negotiating and drafting purchase and sale agreements, investment agreements, shareholders' agreements, conducting due diligence, corporate restructurings, and advising foreign clients intending to begin activities in Brazil. Paulo Henrique Carvalho Pinto, a lawyer specialized in structuring corporate and M&A transactions, including the purchase and sale of equity stakes and assets, spin-offs, takeovers, transformations, mergers, and conducting due diligence. He also works with corporate law, succession planning, and advising foreign clients on investment and registration in Brazil.
The Litigation area now has Marcos Costa as a partner. An expert in civil procedure, consumer law, aviation, civil, arbitration, and corporate litigation, he practices in lawsuits, actions of great economic or business repercussion, arbitration, diagnosis of legal issues, preventive control of lawsuits, due diligence, contingency analysis, and legal opinions.
Bruno Eduardo Pereira Costa is specialist in real estate law and real estate business. He practices in agribusiness and agrarian contracts, in addition to having experience with transactions with real estate in general, structuring of real estate developments and subdivisions. He participates in the processes of real estate due diligence and risk evaluation in operations involving the acquisition and encumbrance of real estate in urban and rural areas. He is also active in crisis management projects and will be a partner in this area.
In the infrastructure practice, Paulo T. C. Machado has been appointed, whose specialty is project structuring, financing operations, and regulation of the electric power sector. His work involves all stages of the development, implementation, and operation of infrastructure projects, in particular the negotiation of construction contracts (EPC), the supply and operation of power sector assets, and the structuring of financing operations.
Finally, Fernando Munhoz is becoming a Partner in the Tax practice. He is an expert in administrative and judicial tax litigation, with extensive experience in conducting and managing strategic cases for domestic and foreign companies, with expertise in the food and beverage, pharmaceutical, telecommunications, mining, and retail sectors; and Virginia Pillekamp, a lawyer specialized in indirect taxes, customs regulations, and who practices in various tax matters, such as implementation of enterprises in Brazil, corporate or business model restructuring, obtaining special regimes, administrative litigation, and preparation of formal consultations with the tax authorities, advising industries, commercial companies, and Brazilian and foreign service providers.
About Machado Meyer Advogados
Founded in 1972, Machado Meyer Advogados is one of the most respected law firms in Brazil. It offers legal assistance to Brazilian and international clients, including large corporations from the most varied sectors of activity, financial institutions, and government entities. The firm is present in São Paulo, Rio de Janeiro, Brasília, Belo Horizonte and New York. www.machadomeyer.com
Access the Legal Intelligence Center, Machado Meyer’s vision of matters that impact on your business. Perceptions, analysis, and information from our lawyers on current legal issues.
Press service:
- Edvaldo Chequetti
- Andrea Natali
- Claudio Monteiro
RPMA Comunicação
Tel.: 55 11 5501-4655
- Category: Banking, insurance and finance
In line with the process of easing foreign exchange regulations implemented by the Central Bank of Brazil and with the principles of broad freedom to carry out foreign exchange operations, Resolution 4948 of the National Monetary Council (CMN), which will enter into force on January 3, 2022, brings good changes to derivative operations contracted abroad.
The new regulation will revoke CMN Resolution 3.312/05 – an exchange regulation that deals with derivatives – and will be applied to financial institutions as well as to legal entities and natural persons that contract or want to contract derivative transactions with a foreign counterparty. It provides in a simple, broad and objective way that financial institutions and other institutions authorized to operate by the Central Bank of Brazil may carry out derivative transactions abroad, of any modality regularly practiced in the international market.
Currently, the regulation does not support the contracting of cross-border derivatives for protection (hedge) of the variation of any foreign currency against the Brazilian Real. If a Brazilian company wants to contract a derivative operation to protect itself from the variation of the Brazilian Real against another currency, it has to hire it in Brazil with a Brazilian counterparty (local operation). In order to contract the operation abroad, that company needs to use meansoutside the country (an investment fund or other group company located abroad, for example).
This is because the wording of CMN Resolution 3.312 brings a subtlety. The regulation allows the contracting of international financial transfers linked to derivatives operations intended to hedge commercial or financial rights and obligations subject to parity risks "between foreign currencies". By inserting the expression "between foreign currencies" in its wording, the resolution excluded from its scope the hiring of foreign exchange operations related to derivative transactions contracted between a Brazilian party and another party abroad that had parity with the Brazilian Real as one of its parameters.
CMN Resolution 3.312 establishes derivative transactions contracted between a Brazilian party and a foreign party that can exchange transactions to make payments from one party to the other. In addition to those involving parity between foreign currencies, this includes only transactions intended to hedge commercial or financial rights or obligations, subject to the risk of variation in interest rates or commodity prices on the international market. By the current regulation, therefore, only a few types of international derivatives operations can be contracted. In addition, such operations should always have the purpose of hedging.
With the enforcement of CMN Resolution 4948, all of this will be revoked. The restrictions on types of operations and the obligation to contract the operation exclusively for protection purposes will end.
The new regulation also amends Article 8 of CMN Resolution No. 3,568, which is one of the pillars of the Brazilian exchange rate system. This article provides that natural persons and legal entities may contract foreign exchange operations of any nature together with an agent authorized to operate in the foreign exchange market, in view of the legality of the transaction, based on the economic rationale and the responsibilities defined in the respective documentation.
CMN Resolution 4,948 inserted a paragraph in such Article 8, establishing that transfers relating to the trading of derivative financial instruments abroad, of any modality regularly practiced on the international market, must be made in authorized banks on the foreign exchange market. With this modification, the regulator makes it clear that the general rule applicable to foreign exchange operations provided for in Article 8 of CMN Resolution No. 4,948 becomes the one that will regulate foreign exchange transactions related to derivative transactions contracted abroad, without the ties of CMN Resolution No. 3,312.
The repeal of CMN Resolution 3,312 ends the requirement to register the derivative operation for the contracting of the exchange operations provided for therein – except for the registration of derivatives linked to loans between residents or domiciled in Brazil and residents or domiciled abroad carried out on the basis of Resolution 2,770. The registration of the derivative transaction, however, will continue to be a condition of the validity of derivative contracts, according to Article 2, §4 of Law 6.385/76.
All these changes brought by CMN Resolution 4,948 open new perspectives for the derivatives market contracted abroad. They can contribute to increasing competition and expanding the supply of sophisticated products to local customers.
- Category: Litigation
Given the current economic scenario, the issue of contractual guarantees is increasingly in vogue in legal transactions conducted in recent years. To ensure faithful and full compliance with the signed contracts, parties have sought mechanisms to ensure the security of these instruments.
To enter into and perform a business deal, it is not enough just to believe that the debtor will honor its contractual obligations. It is necessary to guarantee that, in the event of breach of contract, the creditor will be able to enforce, quickly and efficiently, the guarantees that will be presented to it to compensate it for the losses that default will surely cause it. It can be said, therefore, that the existence of a guarantee is often what defines the completion (or not) of a deal. Hence its importance is obvious.
Sureties and guarantees are the most common contractual guarantees. Both are chosen in many situations in commercial practice, even though they do not tie the debt to a certain asset, precisely because they are personal guarantees, inasmuch as they originate from contractual relationships.
While surety is valid for contracts in general, a guarantee is a concept linked to the exchange law and can only be attached to negotiable instruments.
Although there is a difference between the concepts, contracting parties are rarely able to distinguish them easily. These types of guarantees are even confused with the situation in which, specifically, extension of joint and several liability is established (article 264, Civil Code). For this reason, it is common to find a mistake in the nomenclature of the type of guarantee indicated in the contract, a fact that may give rise to litigation regarding interpretation of the clause that stipulates it will be provided.
In other words, the intervening joint and several guarantor is not to be confused with the surety provider or guarantor. Nevertheless, the joint and several debtor and the guarantor are liable for the obligation under the same conditions, in the same way, and at the same time as the debtor who assumed the obligation (articles 275 and 899, Civil Code), not providing for, therefore, the benefit of discussion which the guarantor is given by operation of law.
Regarding the benefit of discussion, the creditor must first sue the principal debtor. Thus, the execution of the guarantor's assets (for the entire debt) starts only in the event that no assets of the original debtor have been found or due to insufficient funds. At any rate, if the contract indicates a waiver of the benefit of discussion, a possibility that is legally provided for and does not give rise to an abusive clause (Special Appeal No. 851.507), the guarantor, who previously was secondarily liable for the debt, now competes with the original debtor, as occurs in cases of joint and several liability and surety.
While surety is an ancillary and solemn contract (which must observe written form, article 819, Civil Code, and be executed by public or private instrument, or, further, in the body of the contract itself), the validity requirement of joint and several liability and sureties is unique: the signature of the joint debtor and the guarantor in the contractual instrument suffices.
On the other hand, although the joint and several liability and guarantees, unlike surety, have a substantially autonomous and independent nature (since they are not subordinated to the main obligation), they are not to be confused with each other either, since guarantees are a specific concept for negotiable instruments.
It is also important to pay attention to the legal formalism related to the spousal consent, which prevents one of the spouses from assuming specific obligations without the prior authorization of the other spouse in order to avoid deterioration of the couple's assets. If, on the one hand, there is no legal provision providing for the need for spousal consent for the validity of the joint and several liability, on the other hand, there is a settled understanding that the “surety provided without the authorization of one of the spouses entails total ineffectiveness of the guarantee" (Precedent 332 of the STJ).
Although there is a provision in the law requiring spousal consent in order for a guarantee to have full effectiveness (article 1,647, III, Civil Code), a provision that is confirmed by the majority of the judgments that have decided on the matter, recent case law has taken the position that the interpretation of this article must be suited to the characteristics of the guarantee.
Considering that a guarantee gives more efficiency and agility to banking transactions, reducing, moreover, the costs of financial transactions, the law could not impose the need for a consent, at risk of condemning the very concept to failure.
And that is why recent judgments have taken the position that the need for spousal consent should be limited to cases in which the guarantee is provided on securities governed by the Civil Code (in consonance with article 1,647, III, Civil Code). It does not reach the nominated (typical) negotiable instruments, which are ruled by special laws, in which there would be no such requirement.
Having outlined the main differences between the concepts of joint and several liability, sureties, and guarantees, the importance of the distinction of nomenclatures and the correct use of such concepts by the contracting parties is noted. It is evident that, although there are similarities, the intervening joint and several guarantor, the surety provider, and the guarantor are distinct legal concepts and, therefore, they must be clearly defined in the contractual provisions in order to avoid application of a regime different from the will of the contracting parties.
- Category: Real estate
In a recent ruling on an appeal against a decision that denied attachment of real property classified as family property (interlocutory appeal 2075933-13.2021.8.26.0000), the 16th Chamber of Private Law (CDP) of the São Paulo Court of Appeals (TJSP) decided, by majority vote, in favor of the exceptional possibility of setting aside the unattachability of family property (with a declared value of R$ 24 million), even if intended for housing of the debtor.
Applying the principles of proportionality and reasonableness, the judges ruled that the setting aside of the unattachability provided for in Law 8,009/90 is possible, provided that the objective of the law and the minimum equity for the debtor to maintain a decent life (in this case, set at 10% of the value of the original property) are maintained, for him to purchase another property for his residence.
The concept of family property aims at legal protection and preservation of a single property intended for the residence of the family entity that allows the concomitant exercise of the fundamental rights to housing, human dignity, and the existential minimum. In the event the family entity owns more than one property intended for its residence, the law determines that the protection indicated is restricted to the property of lesser value or to the one in whose enrollment the concept was registered, but without establishing a maximum value for the family property concept.
The protection of the right to housing provided for in the law constitutes a social right included in article 6 of the Federal Constitution and, further, is classified as protection of a fundamental right, and is not absolute, but may be weighed against other constitutional rights and principles. By loosening the legal rule, the understanding evidenced in the decision rekindled the discussion on the maintenance of the unattachability of one's own residential property or that of a family entity, regardless of its value.
According to the decision, a literal interpretation of Law 8,009/90 could lead to the understanding of maintaining the unattachability of the family property, regardless of value. However, according to most judges, the law should have an interpretation in line with the provisions of article 5 of the Law of Introduction to the Norms of Brazilian Law and article 8 of the Code of Civil Procedure, taking into account the social purposes for which the law is intended and the requirements of the common good, observing the principles of proportionality, reasonableness, legality, and efficiency.
The decision of the 16th CDP of the TJSP sought to give effectiveness to the aforementioned provisions, giving the magistrate the possibility of going beyond the application of the letter of the law and seeking the ultimate meaning of the legislation. To justify the decision, the judge responsible for the majority opinion posed rhetorical questions regarding the protection of the family property concept to extend to property whose fraction of value exceeds the total assets of most Brazilians, having understood that there is no need for property worth R$ 24 million to preserve the dignity and existential minimum of the debtor.
The understanding that prevailed, therefore, was that the protection of family property, when of a high value, should be mitigated to ensure the effectiveness of the creditor's right to receive the amount due. The debtor's right to housing and dignity must be safeguarded, however, by segregating a percentage of the proceeds from the future auction in order for him to purchase a new property, which cannot be attached pursuant to Law 8,009/90.
The interpretation favorable to the creditor still represents an isolated understanding, but in the long run may be part of a change in the case law of Brazilian courts, establishing a maximum limit on the value of the property to be protected by the family property concept. For greater legal certainty, however, the ideal situation is to settle the discussions involving family property by means of more precise regulations in law, whether to impose new limits, or to ensure that the protection of the concept does not encounter barriers beyond those provided for in the legal text.
- Category: Labor and employment
Everyone knows that Brazil has an enormous number of labor claims. What perhaps a large part of the population is unaware of is that, as large as the number of labor claims in progress in Brazil are, the total amounts paid by companies to ex-employees are as large.
According to the research conducted by the Superior Labor Court (TST) itself, in 2020, about R$28 billion was paid to workers, an amount higher than the Labor Courts' own budget for the same year, of R$18.8 billion.
Leaving aside the reasons that lead Brazilian workers to sue their employers, the fact is that the Labor Courts move a lot of money, not only for the workers, but to the public coffers, since this is an important source of revenue.
With so much money floating around Brazil's Labor Courts, not a few saw labor claims as a form of investment. Thus, assignments of claims of their holders, claimants, to third parties began.
The TST was concerned about this indiscriminate assignment of claims, since it was increasingly common for claimants to assign claims to their own attorneys, which, in the view of the TST at the time, harmed the worker and the Judiciary itself.
In this context, Justice Emmanoel Pereira forwarded to the Federal Board of the Brazilian Bar Association (OAB) a consultation requesting that the entity pronounce an understanding on the assignment of claims from claimants to lawyers and, if it was allowed by the Statute and Code of Ethics of the OAB, whether it should be communicated to the Court in which the case where the assigned claim originated. The answer was simple and categorical: the acquisition of labor claims by the lawyer represented in the case violates the Code of Ethics of the Brazilian Bar Association, due to the privileged relationship that the lawyer has with his client, since, in general, he knows his client's financial condition, his expectations, and the peculiarities of the case he is representing.
The matter was then dormant for a while until it recently came back into the spotlight because of a decision handed down by the TST. In a judgment on a motion for clarification in a lawsuit that discussed the assignment of claims, Justice Douglas Alencar rendered the understanding that the assignment of labor claims is perfectly acceptable, provided that it is done in strict observance of the general requirements of validity of the legal transaction. That is, in the Justice's view, it can be done.
The decision was sufficient for big players in the financial market, previously wary of the practice, to feel more comfortable exploring the market and seeking some answers from their legal advisors. Investors' concerns are the most varied: how to map the lawsuits? How is the assignment effected? Must the judge of the case be informed of the assignment? Can the Labor Courts bar the assignment and annul the contract entered into between the parties concerned?
It is too early to have all the answers. However, we venture to opine that the greatest concern of labor judges regarding the good order of the process is, to a large extent, allayed by the professionalization of the assignment market.
Investment funds interested in Brazilian workers' claims have high levels of corporate governance, are supervised by regulatory agencies, and are subject to risk assessments and reputational damage for their practices. In other words, they have a lot to lose from dubious transactions.
As to the interference of the Labor Courts in the assignments of claims, we believe it makes total sense if performed in the form of ratification decisions with respect to the assignments. With this, not only the parties to the lawsuit win, but also those involved in the assignment of the claim and the Judiciary itself, since there will be a judicial declaration attesting to the good order of the assignment, the free and unimpeded will of the assignee, and the absence of harm to the litigating parties. The ratification procedure would be very similar to the one adopted in the evaluation of traditional agreements, with an evaluation of the terms of the agreement and ratification of the will of the parties.
It is clear that the issue will demand action by investors in the courts. A tête-à-tête with the judges will be fundamental to demonstrate the good faith in the acquisition of the claim, the benefits to the claimant party, and the importance, for the transaction, of the endorsement of the Judiciary on the assignment.
To the great litigants of the Labor Courts we send a message to tighten their belts, invest in prevention of labor violations, and take heart to endure some good battles with the funds, which will become the holders of their claims.
- Category: M&A and private equity
Contracts for the purchase or sale of companies, whether drawn up by sellers or buyers, usually follow a market pattern. The difference relates only to certain requirements or to the intensity or manner of determining certain conditions, depending on which side drafts the first draft.
In general, the industry also sets certain conditions, because some issues usually affect all companies in the same operating segment to a greater or lesser extent. A frequent example is activities that have rules and legislation specific to the activity and are supervised by regulatory agencies, as is the case of concessionaires or permitholders of energy and telecommunications public services. In these cases, there are not only typical industry issues from the commercial point of view of customer and supplier relations, but also requirements of specific legislation.
Throughout the negotiation and, mainly, after the investigation of the situation of the company that is the target of the acquisition, other specific situations usually arise that must be addressed in the acquisition agreements and that, in fact, are situations of that particular company.
Although all these common conditions exist and various contractual clauses are considered "standard", in all acquisitions the contracts are obviously different, due to issues specific to the industry or to the legal, financial, and commercial situation of the company being acquired, as to the person of the sellers (whether a family that directly holds an interest in the company, a large conglomerate, or even the market, when it is a publicly traded company, with or without defined control). The topics addressed are the following:
- price and adjustment;
- conditions precedent or closing conditions;
- indemnity (what is indemnifiable by each party, what the limits are, if any, to the indemnity obligation, whether in time or in amount);
- closing acts; and
- general provisions and form of dispute settlement between the parties (arbitral or judicial proceeding, mediation, etc.).
In acquisition transactions in general, therefore, there is an entire legal framework to seek protection, on the buyer's side, in relation to possible contingencies, materialized or not, in relation to the company that are of concern because they may fall upon the buyer. After all, obtaining compensation for losses arising from acts or facts that occurred before the purchase was made can be complex. This is the biggest concern of those who acquire a business in Brazil. So much so that in many acquisitions, collateral is also provided or requested for the seller's obligation to indemnify the buyer after completion of the transaction.
The conditions precedent are certainly of concern, in addition to other possible situations or conditions of the deal, but it is undeniable that the indemnification clause is almost always the clause that usually causes the biggest discussions between the parties. It is usually the most stressful point for the buyer in acquisition transactions. These are consequences subsequent to the closing, to the actual acquisition, which in fact require a lot of dedication during the negotiation. The time between signing and closing is as short as possible, except in transactions that require prior authorization from the antitrust authority, regulatory agency, or shareholders in order to be concluded.
In judicial reorganizations, the concern changes
In one type of acquisition, especially, the focus of concern changes a lot: these are acquisitions of companies (or assets of companies) under judicial reorganization. In such cases, companies in financial difficulties can be more effective in paying their creditors and restoring their activities. It is a strict and supervised procedure whereby the indebted company is granted a term to continue operating while negotiating with its creditors, in compliance with the Reorganization and Bankruptcy Law (LRF or Law No. 11,101/05), as amended.
The process allows companies to renegotiate accumulated debts, with the objective of effectively enabling recovery of activities and avoiding closure, layoffs, and lack of payments. To this end, the company must present its reorganization plan showing that, even in the face of difficulties, it can get back on its feet, if it can renegotiate its debts to continue to be active with production.
By requesting judicial reorganization, the company obtains a moratorium, that is, payment to creditors is postponed or suspended, for it to be able to focus on paying employees, raw materials, and products essential to the operation of the business.
Article 60 of the LRF deals specifically with the sale of branches or Isolated Production Units (UPIs) of the company under reorganization. The sole paragraph of this provision assures the acquirer of the absence of succession:
Article 60. If the judicial reorganization plan approved involves the judicial sale of branches or isolated production units of the debtor, the judge shall order that it be carried out, with due regard for the provisions of article 142 of this Law.
Sole paragraph. The object of the sale must be free of any encumbrance and there shall be no succession in the debtor's obligations, including tax obligations, subject to the provisions of paragraph 1 of article 141 of this Law.
The UPI is not defined in the LRF, but it is understood as something close to the establishment, an organized set of assets through which a business activity is carried out (whether the UPI is a company and all its assets or only part of the corporate assets).
Although there is no legal definition, a UPI is formed when the judicial reorganization plan is approved by the judge and the creditors. It can be sold during the reorganization period. This possibility allows, in addition to renegotiation with creditors, the entry of financial or strategic investors and reestablishment of the business. For the world of mergers and acquisitions, it is therefore an excellent opportunity, although the operation here has its complexities.
And, amazingly, the complexity in these acquisitions does not lie in the risk of the buyer succeeding the seller with respect to the contingencies and liabilities of the company (or set of assets) that is the subject of the transaction. This is because the LRF provided that there is no succession in the debtor's obligations in sales made under reorganization and bankruptcy proceedings. The purpose was to allow the sale to generate funds that enable satisfaction of the creditors' interests, either by direct and immediate payment of their claims, or by using the proceeds of the transaction to boost the company's activities, in compliance with the judicial reorganization plan.
In other words, in contracts for the acquisition of UPIs, the potential problems and complex clause are not usually indemnification or guarantee of liability for existing liabilities or those that may arise later, but which arise from issues prior to the completion of the transaction, because in these cases there is no question of succession of the purchaser in relation to the liabilities of the debtor in possession. In these UPI acquisition situations, the major concern is in the acquisition procedure: formation of the UPI and its scope (validity and legitimacy of the formation of the UPIs); the formal process and compliance with the requirements of Law No. 11,101/05 and the respective judicial reorganization plan for consummation of the transaction; maintenance of the condition of the business and activities; and the least possible deterioration in the UPI's economic and financial situation.
In other words, in UPI acquisition processes, the concern is not with the phase after the closing and execution of the acquisition, but with the period before. Not only because the economic and financial situation of the businesses developed by a UPI is more delicate, or its deterioration more likely, but for all the other issues, which are detailed below.
To minimize the risks of the acquisition, even after the ratification of the judicial reorganization plan that contemplates the transaction and its main terms and conditions, it is important that the legal term for the filing of any appeal have elapsed. In the event an appeal is filed, no court decision shall be in force granting a stay of such appeal against the decision that authorized the sale of a UPI (in addition, of course, to the decision by CADE and regulatory agencies, as applicable).
The risk of occurrence of what in the jargon of acquisitions is called "material (or relevant) adverse effect" in relation to the business and the economic and financial situation of a UPI is greater due to the delicate situation of a UPI even before the acquisition, inasmuch as time is a determining factor for the success or failure of the operations. With this, the very conduct of the activities in their normal course and the necessary maintenance of the company's investments in its activities and in the preservation and updating of assets and client portfolio, as well as all the concerns of not deteriorating the activities, are much greater than in a company in a "normal" situation or one that is not under judicial reorganization.
It is also important to negotiate reasonable monitoring of financial information, to the extent permitted by law, so that the buyer can know and monitor the situation of the UPI up to the effective date of acquisition.
Another feature that gains importance when it comes to a transaction involving a UPI, although it is not very common in sale and purchase transactions of companies, is the so-called breakup fee or fine for termination of the purchase and sale agreement before the closing. In the case of a UPI, this is almost a mandatory rule to minimize the loss of investment opportunity, which, in cases of judicial reorganization, may be decisive for non-recovery of the UPI or the seller, as the case may be. A fine to be paid in favor of the seller becomes of utmost importance in this case.
Often, in UPI sale and purchase agreements, there is not even an obligation to indemnify sellers, or, even if there is, it cannot be relied upon. The risk in this case is only in relation to the costs of any legal defense, as the law itself protects the buyer from liability for prior liabilities of the UPI.
It is concluded that the absence of the greatest fear (mainly of foreign acquirers/investors, who sometimes have greater difficulty in understanding the risks of Brazilian businesses) in relation to the succession of known and/or hidden liabilities of the business after its effectiveness may not exist in the acquisition of a UPI. In this type of acquisition, the concern comes in the run-up to the actual acquisition.
So whether it is an acquisition of a company in a normal situation or a business in judicial reorganization, the legal, financial, and business challenge should never be overlooked. The question is only the "moment" at which there is the greatest risk: after or before the acquisition is done.