Publications

Category: Litigation

The current understanding of the Superior Court of Appeals (STJ) regarding the best interpretation of the concept of payment contained in Art. 523 of the Code of Civil Procedure (CPC) and regarding the effectiveness of the judicial deposit of the amount executed as a way to eliminate the fine, the fees of Art. 523, § 1, of the CPC, and the other late charges may increase the efficiency of the execution phase of the proceeding. By creating economic incentives for debtors to spontaneously comply with their obligation, the understanding in case law that has been crystallizing in the Supreme Court seeks to induce debtors to evaluate the cost/benefit of challenging the execution of judgment. The objective is to try to limit discussions at this stage to cases where debtors believe they have a good enough claim to justify taking the financial risks associated with his resistance to complying with the judgment.

Art. 523, head paragraph and § 1, of the CPC sets the period of 15 days for voluntary payment by debtors of the amount established by a creditor in the petition initiating the execution of judgment, under penalty of a fine of 10% and attorneys' fees for loss of suit to the same percentage of 10% over the value of the principal obligation. After this period, with or without attachment and regardless of new summons, a new time period of 15 days begins for the presentation of a challenge to execution of judgment, pursuant to Art. 525 of the CPC.

Thus, the timeline established by the legal text provides that debtors, before challenging the execution of judgment, must effectively make payment of the debt within the time limits stipulated by the creditor or risk seeing their debt automatically increased by 20%, due to the application of a fine and attorneys' fees. This is because, according to the current case law of the Supreme Court, the judicial deposit for the purpose of guaranteeing the judgment does not avoid the application of the fine of Art. 523, § 1, of the CPC, while the existence or the value of the debt for definitive execution of judgment is under discussion.

Justice Nancy Andrighi found, when deciding Special Appeal No. 1.834.337/SP, that there "are two criteria to be said of the application of the fine provided for in Article 523, § 1, of the CPC: the summons for payment or resistance manifested in the suit for execution of judgment. These two criteria are linked to the technical requirements of the procedural rule, since they deny or the period of 15 business days set out in head paragraph or voluntary action of payment". In other parts, it attests that "the fine referred to in Art. 523 of the CPC shall be excluded only if the judgment debtor voluntarily deposits the amount due in court, without conditioning its withdrawal on any discussion" and that "there needs to be effective resistance by the debtor through the filing of an objection to then authorize the application of the fine of § 1 of Art. 523".

Analogous reasoning is applied by the understanding established by the STJ, which, in Precedent 517, established that "attorneys' fees are due in the execution of judgment, whether or not there is an objection, after the deadline for voluntary payment, which begins after the summons of the lawyer of the judgment debtor".

That is, unless the debtor voluntarily pays the debt – without contesting it – the legal fine of 10% will be levied, in addition to fees for loss of suit, also stipulated at 10% over the amount of the debt. The resistance of the debtor who does not spontaneously comply with the judgment may generate more work for the creditor's lawyer, either to litigate the issues brought in the objection or to locate assets that can be executed to pay off the debt.

Added to this is the fact that, recently, the Supreme Court has also been reviewing the case law until then predominant in relation to the effect of the judicial deposit of the amount executed, to suppress the legal burden of the arrears.

In 2014, the STJ had set, in judgment of the special appeal representing controversy No. 1.348.640/RS,^[1] topic 677, to the effect that "in the execution phase, judicial deposit of the amount (in whole or in part) of the judgment extinguishes the debtor's obligation, within the limits of the amount deposited." At the time, the plea adopted by the Supreme Court and crystallized in Topic 677 was that, after the deposit of the amounts, the responsibility for the remuneration of the amount would be transferred from the debtor to the depository financial institution. Thus, the creditor who potentially wanted to compensate himself for the difference between the amount of the judicial deposit – adjusted for inflation by the saving account rate – and what would be paid to him, under the enforcement order, should make an application against the bank that maintained the judicial deposit, in the case in which the amounts were deposited.^[2]

However, recently, a question of order was received under Special Appeal No. 1.820.963/SP,^[3] in the Third Panel of the STJ, to establish a review procedure for Topic 677, aiming to define: "if, in the execution, the judicial deposit of the amount of the obligation, with the consequent application of interest and adjustment for inflation borne by the depository financial institution, exempts the debtor from the payment of the charges arising from the default, provided for in the judicial or extrajudicial enforcement order, regardless of the release of the amount to the creditor."

Despite the controversy surrounding the previous understanding of the STJ – which assigned to the depository institution the burden arising from a legal relationship to which it was never a party – it is a fact that the proposal to review the jurisprudential topic  677 – which may be assigned to the debtor who deposited the amount executed the responsibility for payment of the difference between the adjustment rates of the judicial deposit and those contained in the enforcement instrument^[4] – it may encourage the debtor to make voluntary payment of the debt or, at the very least, not delay the discussion indefinitely in  the enforcement of judgment, just because it has secured the enforcement instrument.

By making spontaneous payment of the debt before the expiry of the period of Article 523, § 1, of the CPC, without an objection, the debtor avoids increase of the debt by 20%. If it  chooses to file an objection – at the risk of having to pay a fine and fees on the debt – it must do so knowing that it may be held liable for interest and adjustment for inflation, under the terms of the instrument executed, up to the date of the actual payment, even if it has made the deposit in full of the amount stipulated by the creditor.

This configuration does not go outside the objectives of the legislator, since there are other financial incentives in the Code of Civil Procedure for debtors to meet their obligations in a timely manner, to accelerate the recovery of the debt executed. Examples are the mechanisms for discount on attorney's fees - art. 827, § 1, of the CPC^[5] – and installment of the debt - art. 916 of the CPC - applicable to the execution of extrajudicial security for a sum certain.^[6]

Nor is it possible to say that the imposition of penalties that increase the value of the debt excessively harms the debtor. The logic of abbreviating the definitive execution of judgment by this route also involves the fact that the debtor's broad defense, more often than not, was ensured in the trial phase – before the formation of the instrument that is now sought to be fulfilled. In addressing the provisional fulfillment of judgment, the legislator took care to establish that judicial deposit of the full amount of the debt removes the application of the fine of Art. 523, § 1, of the CPC (art. 520, § 3, cpc). To access this amount or perform any other act of expropriation, the creditor must provide a suitable security deposit and will be liable for any damages (art. 520, I and IV of the CPC), if the instrument on which the provisional execution of judgment is based is amended in favor of the debtor.

^[1] REsp 1348640/RS, opinion drafted by Justice PAULO DE TARSO SANSEVERINO, SPECIAL COURT, decided on July 5, 2014, published in the electronic gazette of the Judiciary on May 21, 2014

^[2] "This Superior Court of Appeals has a settled understanding that the responsibility for adjustment for inflation and interest, after the judicial deposit is made, is assigned to the financial institution where the cash was deposited (Precedent 179 and 271 of the STJ). This position applies even if it is an attachment of money for the guarantee of execution. Thus, the judicial deposit in the amount of the execution ceases, the debtor's liability for such charges ceases" (STJ, AgRg no EDcl no Ag 1298725/SP, opinion drafted by Justice Nancy Andrighi, Third Panel, decided on May 10, 2010). In the same direction: STJ, AgRg no Ag 1228560/RJ, opinion drafted by Justice Aldir Passarinho Junior, Fourth Panel, decided on October 19, 2010; STJ, REsp 1665819/DF, opinion drafted by Justice Herman Benjamin, Second Panel, decided on August 8, 2017.

^[3] Question of Order raised in REsp 1820963/SP, opinion drafted by Justice NANCY ANDRIGHI, SPECIAL COURT, decided on October 7, 2020, published in the electronic gazette of the Judiciary on October 28, 2020, going on to be processed under the procedure set forth in arts. 256-S and 256-T ristj (Special Repetitive Appeal).

^[4] It should be noted that the proposal for a revision of Topic 677 stems from the fact that the case law of the Supreme Court on the subject had already been changing in recent years, culminating in the Question of Order that effectively proposed revision of the topic. To this effect are the following judgements: STJ, REsp 1475859/RJ, opinion drafted by Justice João Otávio de Noronha, Third Panel, decided on August 16, 2016; STJ, AgInt no  AgInt no REsp 1404012/PR, opinion drafted by Justice Luis Felipe Salomão, Fourth Panel, decided on February 7, 2019; STJ, AgInt no AgInt no AREsp 1687672/SP, opinion drafted by Justice Marco Aurélio Bellizze, Third Panel, decided on December 7, 2020.

^[5] Art. 827. Upon dismissing the complaint, the judge shall then set the attorney's fees of 10%, to be paid by the judgment debtor.

• 1 - In the event of full payment within three days, the amount of the attorneys' fees shall be halved.

^[6] Art. 916. Within the period for a motion for clarification, recognizing the credit of the judgment creditor and proving the deposit of 30% of the amount in execution, plus costs and attorneys' fees, the judgment debtor may request that he be allowed to pay the remainder within up to six monthly installments, plus adjustment for inflation and interest of 1% per month.

Category: Succession planning

Widely used abroad as a vehicle for estate and succession planning , the trust is not provided for in Brazilian law. It is a typical instrument of British law and countries that adopt the common law (as opposed to the Roman-Germanic system/civil law adopted in Brazil and in countries such as Italy, Germany, Portugal and France). It allows an individual (Settlor) transmits assets to a third party (trustee) for the company to administer them in favour of certain beneficiaries  according to rules defined in a contract (trust agreement/trust deed).

The Settlor defines the scope of the trust at the time of the contraction, i.e. the rules for the management of the assets, their beneficiaries (who may be third parties or the Settlor) and events where there will be transfer (partial or total) of assets to beneficiaries.

There are many situations allowed in this contractual modality, from the management of assets in favor of minor children or legally incapacitated persons, professional administration of assets, management of assets in case of incapacity/interdiction of the Settlor, until the delivery of the assets in the event of death. The trust thus functions as a legitimate legal instrument of succession and estate planning.

Given the lack of regulation on the subject in Brazil, there is a wide use of the trust in other jurisdictions by Brazilians who hold assets abroad. As a result, so that the estate planning can be structured in Brazil, is in the process in the House of Representatives The Bill No. 4.758/20, authored by Deputy Enrico Misasi. The objective is to include in our legal system the "General Fidúcia Regime" to regulate fiduciary property in the national territory.

In justifying the project, Mr Misasi expressly refers to the trust as an inspiring source of the project, in addition to defining as its main objective the segregation of the assets of the parties to the contract through the creation of the assets of allocation, fundamental for the legal certainty of the fidúcia contract by differentiating the assets of the instituter from the assets of the administrator.

The draft law defines the trust, in Article 2, as the "juridical transaction by which one of the parties, called trustor, transmits, under fiduciary regime, present or future assets or rights, to the other, called fiduciary, so that the fiduciary administers them for the benefit of a third party, called beneficiary, or the trustor himself, and transmits them to them or to third parties, in accordance with the provisions of the respective constitutive act" , a structure similar to that of the trust.

The great innovation is the creation of the assets of allocation, pursuant to Article 3 of the project: "The assets and rights transmitted in trust, as well as their fruits and income, constitute fiduciary property, subordinate the powers inherent to them to the restrictions and limits established in the law or in the respective act of constitution". In accordance with Paragraph 1 of the same article, fiduciary property shall last until the implementation of a resolutive condition or advent of a term, both defined in the contract, at which time the assets shall be transmitted to the beneficiaries, as provided for in § 2.

The assets transmitted in trust constitute autonomous assets, not responsible for debts of the trustee, but only for debts linked to fiduciary property, the content of § 3 of Article 3, being legally established the segregation of assets between the parties of the contract and the subject matter of the agreement, except in cases of fraud.

In addition, the fiduciary may not use the assets received in trust to his advantage, and must comply with the rules of the contract and the rules established by the trustor, as in the relationship between trustee and Settlor in the contracts of trust.

Another important characteristic of the fiduciary relationship is the possibility of institute it by unilateral act, with a revocable character or not. It is possible to create it, therefore, through a will, which makes it an important succession planning tool.

Although fiduciary property is already provided for in specific legislation, such as those regulating real estate development, securitization of credits and fiduciary guarantee, the bill would bring significant legal progress through the creation of the Trust contract, which could be used in various ways and with different objectives. This applies both to the management of assets in various situations and to the succession of assets, including extending to the management of the heir's assets in situations where such action is recommended, as currently occurs with the trust.

The bill was received on March 10 in the Finance and Taxation Committee and, after analysis, will proceed to the Constitution and Justice and Citizenship Committee.

Category: Environmental

Over the last few years, the state of São Paulo has adopted several measures to restrain the practice of field burning – traditional agropastoral techniques in which a vegetation is set on fire to clean off the site – in areas of sugarcane cultivation. In 2017, for example, the Greener Ethanol Protocol (Protocolo Etanol Mais Verde) was executed between the Environmental Agency of the State of São Paulo (Cetesb) and the sugar-energy sector. One of its technical directives is the elimination of the use of fire as a pre-harvest agricultural method for the processing of sugarcane in certified areas. The aim is to reduce greenhouse gas emissions, protect riparian vegetation and headwaters, and stimulate the adoption of good practices for soil conservation.

Recently, on February 11, 2021, the 2^nd Chamber Reserved for the Environment of the Court of Justice of the State of São Paulo (TJSP) approved the extrajudicial agreement executed between Cetesb and the sugar-alcohol sector, represented by the Sugarcane Agroindustry Union of the State of São Paulo (Unica) and the Organization of Associations of Sugarcane Producers of Brazil (Orplana).

The agreement, which represents a pioneering initiative of Cetesb, aims to address the environmental debts arising from the issuance of Infraction Notices with the imposition of fine (INs), related to infractions arising from fires in sugarcane cultivation areas of the state of São Paulo: "The object of this Extrajudicial Agreement is to formally continue the settlement of pending debts that have not been registered in Active Debt arising from Infraction Notice with the Imposition of Fine Penalty issued due to fires in areas of sugarcane cultivation which have been issued until 31.12.2019." According to environmental legislation, forest fire is considered as every fire that uncontrollably advances on vegetation.

The settlement negotiations were carried out due to the various ongoing lawsuits questioning the validity of INs related to fires in the cultivation areas. The most recent rulings from TJSP indicate a trend of alteration in the understanding relating to the INs issued by Cetesb, and the Court has repeatedly passed decisions stressing the absence of a chain of causation between the conduct of the defendants (owners and possessors of the areas and even sugarcane mills) and the occurrence of fires in cultivation areas.

Therefore, in order to solve the assorted ongoing judicial demands and the controversy over the INs related to fires in the sugarcane cultivation areas, Cetesb proposed the execution of the agreement, aiming to give the opportunity to those who had been fined to settle the debts arising from the INs issued until December 31, 2019, provided that they are not yet enrolled in active debt.

Amongst the most relevant obligations of the agreement there are:

• the obligation to pay the amount of the fine in a single quota or in up to 18 monthly installments;

• the waiver of filing any appeals in the administrative proceedings before Cetesb; and

• the discontinuance of the lawsuit in which the validity of the INs issued by Cetesb is discussed.

At the same time, Cetesb is committed to express its agreement with the withdrawal of lawsuits filed by the entrepreneurs.

If the interested party decides to pay the debt in a single quota, the discount applied on the corrected amount of the debt is 75%. If the party decides to pay the amount in installments, a 50% discount is applied on the corrected amount of the debit.

In a video presentation of the context and provisions of the agreement made available by Cetesb on March 17, 2021, additional details were disclosed on the developments of the agreement, amongst them, we highlight that the execution of the agreement: (i) will not be considered for the purpose of ascertaining recurrence in an administrative infraction, since new parameters have been adopted for the year of 2020; and (ii) does not constitute a confession to committing the alleged offence.

The agreement and the discount granted by the environmental agency do not imply the waiver of any obligation to recover environmentally degraded areas. Cetesb also reported that, as of 2020, the applicable procedure for identifying the chain of causation related to fires will be based on different parameters, based on Cetesb's Board Decision No. 29/20, in consonance with the modification of the understanding expressed by the TJSP in recent trials.

Cetesb's change of stance ensures greater legal certainty and demonstrates a commitment to the sugar-alcohol sector, which plays an important role in the climate change agenda. In the future, the agreement could even be used as a case of success to guide and support the drafting of new agreements between environmental agencies and other economic sectors that also present a significant number of ongoing legal disputes to discuss penalties applied in the administrative sphere.

Category: M&A and private equity

 Clarissa Freitas, Rafael Costa Silva and Tathiana Litter Bussab

Provisional Measure No. 1,040, published on March 30 of this year, promotes legislative changes with the aim of fostering the business environment and improving Brazil's position in the ranking Doing Business, developed by the World Bank.

Among the changes, Provisional Measure 1,040 included provisions in the Brazilian Corporate Law with new rules on the protection of minority shareholders, applicable primarily to publicly-held companies. It is expected that, with such measures, the business environment will become more attractive to investors.

We sumup the following the main changes in Law No. 6404/76 made by Provisional Measure 1.040:

1. Expansion of matters of competence of the general meeting of publicly held companies

With the inclusion of item X in Article 122, it becomes the obligation of publicly-held companies to deliberate at the general meetings on:

• the disposal or contribution to another asset company, if the value of the transaction corresponds to more than 50% of the value of the total assets of the company contained in the last approved balance sheet; and

• the conclusion of transactions with related parties that meet the criteria of relevance to be defined by the Brazilian Securities and Exchange Commission (CVM).

2. Change of the rule of convening the general meeting of publicly held companies

The new wording of article 124, §, item II, indicates that, for publicly held companies, the minimum period in advance for the first call has become 30 days. Furthermore, pursuant to the amendment to paragraph I, § 5, art. 124, the CVM may "declare which documents and information relevant to the resolution of the general meeting were not timely made available to shareholders and determine the postponement of the meeting for up to 30 days, from the date of availability of such documents and information to shareholders".

Because of Article 9 of CVM Instruction No. 481, several companies already convened the ordinary general meetings in advance. This article recommends that, in cases of ordinary general meetings , publicly held companies provide shareholders with the relevant documentation for the resolution of the meeting at least 30 days in advance. Thus, Provisional Measure 1,040 extends this rule to any and all meetings, whether ordinary or extraordinary.

Despite recognizing the benefits of such a change for the capital market, CVM issued CVM Resolution No. 25 on March 30 of this year, with the intention of improving the transition process and adaptation to the provisions of Provisional Measure 1,040. Thus, publicly held companies may continue to follow the minimum period of 15 days in advance for the first call for general meetings, provided that they have already been or are convened by April 30 of this year.

The permission given by CVM Resolution 25, which entered into force on the date of its publication, aims to avoid a possible disagreement between the new minimum period in advance for the convening of general meetings and that established in Article 132 of Law No. 6,404/76. It was then approved that:

• the 30-day period provided for in item II of § 1 of Article 124 of Law No. 6,404/76 shall be applied to the general meetings convened from May 1, 2021; and

• the general meetings already convened or those that may be convened by April 30, 2021 may observe the period of 15 days in advance of the first call".

3. Prohibition of the accumulation of positions

Pursuant to Article 138, §3, publicly held companies may not allow the accumulation of the positions of chairman of the board of directors and chief executive officer of the company. The standard is already provided for in the B3 regulation of companies listed on the Novo Mercado and, from the publication of Provisional Measure 1,040, reaches all publicly held companies, regardless of B3's listing segments. Paragraph 4 of the same article indicates that CVM may exceptional the seal in lower billing companies.

4. Independent directors

The participation of independent directors in the composition of the board of directors of publicly held companies became mandatory with the inclusion of §2 in Article 140. This standard is already provided for in the B3 regulation of companies listed in the Novo Mercado and, from the publication of Provisional Measure 1.040, reaches all publicly held companies, regardless of B3's listing segments.

Because it is a Provisional Measure, the rule has a maximum term of 60 days, extendable for the same period, and will lose its effectiveness if it is not transformed into law by the National Congress.

Category: Capital markets

The agribusiness sector has just gained a new financing instrument for its production chain. This is the Investment Fund in Agroindustrial Production Chains, or FIAGRO, created by Law No. 14,130, of March 29, 2021.^[1]

In 2020, Brazil remained one of the main suppliers of commodities agriculture in the world, according to IPEA (Institute of Applied Economic Research). Soybeans in grains and bran, beef, pork and chicken, sugar, coffee and cotton were highlighted. Factors such as the devaluation of the real against the dollar, the increase in global demand and local production (there was a record soybean harvest in the 2019/2020 biennium), the trade war between the U.S. and China and the crop failure of competing countries boosted the good performance of the sector,^[2] which is the most relevant in terms of positive contribution to the Brazilian trade balance.

As explained in the explanatory memorandum to the bill that created FIAGRO,^[3] agribusiness has been seeking a transition from a financing model based on government subsidies to one that relies on private credit, since the federal government's fiscal restrictions impose increasing reduction of available resources. This is already happening with large producers that have easier access to the financial and capital markets. As an example, in 2020, the primary market for Agribusiness Receivables Certificates (CRAs) reached an all-time high of R$ 15.81 billion.^[4] Although strongly concentrated on corporate debt of a single debtor, this alternative also shows growth potential for pulverizes risk credits and financing from small and medium-sized producers.^[5] Another example of the industry's progress in this direction was the editing of the Law No. 13,986/20 (as a result of the conversion of a Provisional Measure focused on Agribusiness sector into law), which should still show its full potential for the expansion and consolidation of agribusiness financing by the private sector in the coming years.

Thus, FIAGRO emerges as an alternative to expand the financing of Brazilian agribusiness, after a quick process in the National Congress and partial presidential sanction, with a veto. Its main characteristics are explained below.

1. Regulation by CVM: FIAGRO's shares are securities, thus attracting the regime of Law No. 6,385/76,^[6] and the competence of the Brazilian Securities Commission (CVM) to authorize, discipline and supervise the constitution, operation and administration of the fund. It is expected that, soon, the CVM will issue a regulation to discipline FIAGRO, subject to the law’s guideline.

2. Target assets: FIAGRO may invest in the assets listed below:^[7]

• rural properties, which may be leased or disposed of by the fund;

• shares of companies that explore activities that are part of the agro-industrial production chain;

• financial assets, credit securities or securities issued by individuals and legal entities that are part of the agro-industrial production chain (including, thereby, the Rural Product Card (CPR), the Agribusiness Credit Rights Certificate (CDCA), the Agribusiness Letter of Credit (LCA), the Agricultural Deposit Certificate (CDA), the Agricultural Warrant (WA), the Rural Real Estate Note (CIR);

• agribusiness credit rights and securitization bonds issued backed by agribusiness credit rights, including CRAs and Credit Rights Investment Fund quotas (FIDCs) - standardized and non-standardized - that invest more than 50% of their equity in credit rights agribusiness;

• real estate credit rights relating to rural properties and securitization securities issued backed by these credit rights, including CRAs and Credit Rights Investment Fund quotas - standardized and non-standardized - that invest more than 50% of their equity in said real estate credit rights; and

• investment fund shares that apply more than 50% of their equity to the assets listed in the assets listed above.

3. Administration: as occurs with Real Estate Investment Funds (FIIs), FIAGRO must be managed by an administrator institution authorized by CVM that is necessarily a multiple bank with an investment portfolio or with a real estate credit portfolio, investment bank, real estate credit company, brokerage company or a company distributing bonds and securities, or other legally equivalent entities.^[8] The institution will have the competence to represent FIAGRO actively and passively, judicially and extrajudicially and also to respond personally for the eviction of rights, in the event of the sale of property by the fund^[9], in addition to being responsible for mismanagement, reckless management, conflict of interests, non-compliance with the regulation of the fund or determination of the general meeting of shareholders.^[10]

FIAGRO's assets will be acquired by the administrator, on a fiduciary basis, and the real estate, and fruits and income arising therefrom, will be held under the administrator's fiduciary property. FIAGRO's assets and rights do not communicate with the assets of the administrator and, therefore, (i) are not part of its assets, (ii) are not directly or indirectly liable for any of its obligations, (iii) are not part of its assets and rights, for the purpose of judicial or extrajudicial liquidation, (iv) cannot be pledged as a guarantee for the debit of its operations, (v) are not subject to execution by any of its creditors, however privileged they may be, and (vi) cannot any real liens on the properties may be incurred. ^[11] Consequently, the administrator is required to include in the purchase title the restrictions indicated in the items above and that the property acquired is FIAGRO's property, noting that this must also be included in the registration of the rural property at the Real Estate Registry Office^[12]. Since the property is FIAGRO's property, the administrator does not need to present the Certificate of Debts Relating to Federal Tax Credits and the Active Debt of the Union on the occasion of the sale of the property in question.^[13]

In addition, considering that the administrator is responsible for good management, according to a standard of conduct guided by objective good faith, the same limits were adopted to ensure an adequate management of the resources of the quota holders who will invest in FIAGRO, being prohibited, in this sense, that the administrator:

• grant loans, future income to shareholders or open credits under any modality;

• provide surety, surety, acceptance or co-obligation in any form;

• invest abroad funds raised in the country;

• invest the funds in the acquisition of quotas of the fund itself;

• sell the installment of the fund's quotas, allowing the division of the issuance into series;

• promises predetermined income to shareholders;

• carry out operations of the fund when there is a conflict of interest between the fund and the managing institution, or between the fund and the entrepreneur.^[14]

4. Payment of quotas: FIAGRO's quotas can be paid in assets and rights, and payment in rural properties is permitted provided that they have been previously evaluated by a professional or by a specialized company^[15]. Initially, it was considered a deferral of the taxable event of the capital gain on the quotas paid in with rural property for the date of sale of these quotas, instead of the moment of payment. But, as we will see below, the provision was vetoed by the President of the Republic based on the Fiscal Responsibility Law (although the veto may still be overturned by the National Congress). In principle, if the veto is not lifted, the payment of FIAGRO's quotas with a rural property assessed by a professional or by a specialized company is a taxable event of the capital gain, as is currently the case with Investment Funds in Participations.

In FIAGRO, as in Real Estate Investment Funds, the investor is protected from liabilities arising from the rights in rem that are part of the fund's portfolio, since he will not personally answer for any legal or contractual obligation in relation to the rural properties belonging to FIAGRO or its administrator, nor may he exercise real rights over the properties in question. The obligation of the investor is, therefore, limited to the payment of the quotas subscribed by him, serving the subscription bulletin as an extrajudicial enforcement order capable of supporting an execution action for collection by the administrator, or the sale of unpaid quotas to third parties.^[16]

5. Form: FIAGRO may be constituted in the form of an open or closed condominium.^[17]

6. Categories: the standard made room for the regulation of FIAGRO categories according to the target audience and the nature of the fund's investments.^[18]

7. Fund regulation: as with other fund modalities, FIAGRO will be structured through a bylaws, the minimum content of which is disciplined by law:

• qualification of the managing institution;

• investment policy that establishes, with precision and clarity, the definitions of the assets that will make up the fund's assets to meet its objectives;

• entrance fee or criteria for fixing it;

• remuneration of the administrator;

• disclosure of information to shareholders, observing the deadlines set by the CVM;

• expenses and charges of the fund;

• competence and quorum for deliberation of the investors' general meeting;

• criteria for subscription of shares by the same investor;

• the term of the fund and the conditions for redemption for the purpose of settlement;

• other specifications, aiming at market surveillance and clarity of information, in the form of regulations to be edited by the CVM; and

• criteria related to the distribution of income and capital gains.

All of these requirements are also applicable to Real Estate Investment Funds^[19].However, it is important to highlight that, unlike Real Estate Investment Funds, FIAGRO has an advantage because it is not obliged to distribute to its investors the minimum of 95% of the profits earned, calculated according to the cash regime, based on balance sheet or half-yearly balance sheet. Thus, the taxation of gains and income can be postponed until the moment of amortization, redemption or sale of shares, differently from what happens with Real Estate Investment Funds.

8. Taxation of FIAGRO's portfolio:

• Withholding Income Tax (IRRF) in financial investments: the net income and gains earned by FIAGRO on financial investments of fixed or variable income are subject to the incidence of Withholding Income Tax, observing the same rules applicable to legal entities submitted to this form of taxation.^[20]

• Capital gains earned by FIAGRO: as in the Real Estate Investment Funds, capital gains earned by FIAGRO are exempt from Financial Transaction Tax (IOF) and Income Tax (IR).^[21]

9. Taxation of income of quota holders:

• Withholding Income Tax in the amortization or redemption of quotas: income and capital gains earned, when distributed by FIAGRO, are subject to the Withholding Income Tax at the rate of 20%.^[22]

• Capital gain in the sale and redemption of quotas: capital gains on the sale or redemption of FIAGRO quotas are subject to the incidence of income tax at the rate of 20% at source, in the case of redemption, or, in other cases, to the same rules applicable to capital gains or net gains earned in variable income operations.^[23]

• Due to the extension of Article 16-A of Law No. 8,668/93 to FIAGRO, it seems that the legislator's idea was to provide that the tax withheld at source may be offset against that withheld by FIAGRO, on the occasion of the distribution of income and capital gains. Thus, as it is better explained below, due to the veto in § 5 of 16-A of Law 8,668, the income tax withheld from the quota holders will be considered (i) anticipation of the due in the declaration, in the case of a legal entity beneficiary taxed based on the actual, presumed or arbitrated profit; or (ii) exclusive taxation, in other cases.

The President of the Republic sanctioned Law No. 14,130 in part, with veto of certain provisions^[24], discussed below. Such vetoes will still be submitted to the National Congress, which has the power to overthrow them.

The exemption from Withholding Income Tax was vetoed for income earned by FIAGRO whose quotas are traded on a stock market or over-the-counter market and which are distributed to individuals. Similar to what happens with Real Estate Investment Funds, the initial proposal demanded that, in order to be entitled to this benefit, FIAGRO should have at least 50 investors, and the individual benefiting from the exemption could not have quotas that represent 10% or more than the totality of the quotas issued by FIAGRO, or whose quotas give you the right to receive income greater than 10% of the total income earned by FIAGRO. The reason for the veto was Art. 113 of the Transitional Constitutional Provisions Act, which requires that the legislative proposal that creates or changes mandatory expenditure or waiver of revenue be accompanied by an estimate of its budgetary and financial impact. It was also pointed out as the basis for the veto the Art. 137 of the Budget Guidelines Law of 2021, according to which the term of validity of tax benefit must be limited to five years^[25].

Also, as mentioned above, a provision that provided for the deferral of the taxable event for payment of income tax arising from the capital gain on the quotas paid in with rural property by a natural or legal person for the date of sale of these quotas, or at the time of their redemption, in the case of liquidation of the fund, observing the payment of the deferred tax proportionally to the amount of quotas sold, was vetoed. This forecast would be a major driver for the sector, since it would allow the structuring of FIAGRO by rural owners in a less costly way, also considering the illiquidity of the assets.

Finally, the veto in § 5 of Art. 16-A of Law No. 8,668/93 makes the investment, through the FIAGRO structure, in Agricultural Deposit Certificate (CDA), Agricultural Warrant (WA), Agribusiness Credit Rights Certificate (CDCA), Agribusiness Letter of Credit (LCA), Agribusiness Receivable Certificate (CRA) and Financial Rural Product Note (CPR-F), unattractive, since it will not be up to the applicable Withholding Income Tax exemption applicable when the investment in these assets are carried out by individuals. Thus, it would be more advantageous for investors who are individuals to invest directly, in accordance with Art. 3, IV and V, of Law No. 11,033/2004, and not through a FIAGRO. Therefore, by virtue of the veto, the securities above that make up the FIAGRO portfolio will be subject to Withholding Income Tax at the rate of 20%. The Withholding Income Tax incentive is very similar to what was granted to the Real Estate Investment Funds to invest in these bonds, which was a great incentive for the wide adoption of the Real Estate Investment Fund.

^[1] This law amended Law No. 8,668/93 to include this new form of fund within the norm that currently regulates the constitution and tax regime of Real Estate Investment Funds - FII.

^[2] KRETER, Ana Cecilia; PASTRE, Rafael; BASTOS FILHO, Guilherme Soria. Carta de Conjuntura - Número 50 – Nota de conjuntura 29 – 1º trimestre de 2021. Instituto de Pesquisa Econômica Aplicada (Ipea). Published on March 31, 2021. p. 1, 4, 5, 6, 7, 9 e 10.

^[3] Justification of Bill Project No. 5,191/20, presented on 11.18.2020. Author: Mr Arnaldo Jardim, Cidadania/SP. Available on: https://www.camara.leg.br/proposicoesWeb/fichadetramitacao?idProposicao=2265295>. Access: 31.03.2021.

^[4] Anuário UQBAR CRA 2021. Disponível em: https://www.uqbar.com.br/anuarios2021/cra.php. Access on March 31,2021.

^[5] Anuário UQBAR CRA 2021, ..., op cit.

^[6] See Art. 3 and 20-F of Law No. 8,668, as amended by Law No. 14,130. Depending on the assets in which they invest, they may fit the definition of item V or IX of Art. 2 of Law 6,385 / 76, and, if they fit in item IX, they will need to have their first issuance of quotas offered publicly, just as the CVM understands that must occur with the Real Estate Investment Fund.

^[7] See Art. 20-A, caput and items, and § 3 of the Law No. 8,668, as amended by Law No. 14,130.

^[8] See Art. 5 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

^[9] See Art. 14 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

^[10] See Art. 8 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

^[11] See Art. 6, 7 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

^[12] See Art. 9 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

^[13] See Art. 7, §3 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

^[14] See Art. 12 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

^[15] See Art. 20-E, caput, e § 3º of Law No. 8,668, as amended by Law No. 14,130.

^[16] See Art. 13 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

^[17] See Art. 20-B of Law No. 8,668, as amended by Law No. 14,130.

^[18] See sole paragraph of Art. 20-B of the Law No. 8,668, as amended by Law No. 14,130.

^[19] See Art. 10, caput, and 20-F of Law No. 8,668, as amended by Law No. 14,130.

^[20] See Art. 16-A, and 20-F of Law No. 8,668, as amended by Law No. 14,130.

^[21] See Art. 16 and 20-F of Law No. 8,668, as amended by Law No. 14,130.

^[22] See Art. 20-C of Law No. 8,668, as amended by Law No. 14,130.

^[23] See Art. 20-D's Law No. 8,668, as amended by Law No. 14,130.

^[24] Law No. 14,130(veto). Message No. 111 of March 29, 2021. Published in Official Gazette - Section 1 - 30/3/2021, Page 15 (Veto). Available in: https://www2.camara.leg.br/legin/fed/lei/2021/lei-14130-29-marco-2021-791204-veto-162570-pl.html. Access on March 31, 2021.

^[25] Law No. 14,130 (veto). Message No. 111 of 29 March 2021, ..., cit op.

Category: Labor and employment

After a meeting between the heads of the state and municipal executive powers over the weekend, acts of the mayor and governor of Rio de Janeiro were published on March 22 and 24, restricting the movement of people and the operation of various companies from different sectors of the economy.

State Law No. 9,224/21 instituted as new holidays the days 26 and 31 march and April 1 and anticipated for the days 29 and 30 March the holidays of Tiradentes and São Jorge, celebrated on April 21 and 23, respectively.

As a way of maintaining the activities of companies that provide essential services and those that act remotely, the law excludes the application of holidays to these categories, so that the employee must provide his services on a regular basis, nothing being owed to him. In these cases, the original dates of the holidays that were anticipated and the full enjoyment of the day off by the employees are maintained.

Furthermore, the sole paragraph of Article 4 of the law determines that it is up to the State and Municipal Executive Authorities, within their respective competences, to establish the rules and prohibitions of operation during the holiday period. If there is a conflict between state and municipal rules, the one that imposes more restrictive measures should prevail.

In addition to state law, State Decree No. 47,540 provides for measures to combat the spread of Covid-19. The decree allows the operation of companies operating in key sectors, such as the oil industry, engineering activities, among others. It also allows the operation of shopping malls and shopping centers, between 12 h and 20 h, with capacity limit of 40%, being mandatory the use of masks and the supply of alcohol gel.

The fine for non-compliance with the restrictions is R$ 3,705.30 for citizens in Rio de Janeiro and R$ 37,053 for companies.

Prior to the state government's rules, the City Hall of Rio de Janeiro had published Municipal Decree No. 48,644/21, which also institutes measures to combat health attacks, with restriction orders stronger than those instituted by the state government.

As a way to ensure the population's access to essential services, the municipality of Rio allowed the operation of supermarkets and food trade (with on-site consumption fence), essential health services, industries, banking establishments, construction activities, hotels, wholesale trade, supply chain and logistics, vehicle rental services, among others.

Although the state decree allowed the operation of shopping malls and shopping centers with limited hours and capacity, the municipal decree limited the opening to those who perform economic activities considered essential, such as pharmacies, pet shops and veterinarians. Bars and restaurants may also work, but are limited to home delivery systems (delivery) and withdrawal.

The decree of the City of Rio recommends that establishments that carry out activities indoors, in particular supermarkets, should expand the opening hours and consider the alert level 3 (very high risk) for the entire territory of the city, with the application of restrictive measures and corresponding health protocols.

The two decrees prohibit recreational activities that may cause the agglomeration of people.