Brazil: Increase Of Domestic Debenture Issues In Brazil

Last Updated: 19 March 2001
Article by Walter Stuber

There is a general consensus that the Brazilian capital market is gradually becoming more attractive as a result of the reduction of the local interest rates. In the past, it was easier and less expensive to raise funds abroad by contracting foreign currency loans. Now the economic growth is opening the doors of the country mainly for projects in the energy, telecommunications and civil construction fields.

One of the main financial instruments that is being used by the Brazilian publicly-held corporations to raise funds locally is the issue of debentures. Publicly-held corporations are those companies whose securities may be bought and sold on the stock exchange or on the over-the-counter market. For this purpose, both the company and the securities issued by it must be registered with the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários), known as "CVM". The securities of a closely-held company are not available to the general public, unless such company decides to be registered as a publicly-held corporation with the CVM before making any public placement of debentures.

The debentures are securities that represent an indebtedness assumed by the company, i.e. a loan granted to the issuer by the holders of the debentures (the debentureholders) and are used in Brazil in a similar manner to the bonds negotiated in the international capital markets.

The debenture is a very flexible security that may be adapted to any type of project finance transaction. This flexibility is given by the possibility of having issues of different series, several types of debentures (which may be issued with or without guarantee), the option of convertibility of the debentures into shares (which may exist or not), the selection of the best form of remuneration and the negotiation of all kinds of maturity terms according to the needs of each issuer.

The issue of debentures by a company gives their holders certain rights against the company, in accordance with the terms and conditions contained in the deed and the debenture certificates. A company may float more than one issue, and each issue may be divided into series, provided that all the debentures of a particular series have an equal par value and confer equal rights on their holders.

Debentures may be guaranteed by a guarantee in rem or by a floating charge and may or may not enjoy preference or be subordinated to other creditors of the company, in conformity with the provisions of the deed of issue. The guarantees may be cumulative. This means that one series of debentures may be guaranteed by a floating charge and at the same time by a guarantee in rem affecting a particular asset or assets. The rights of any particular series of debentureholders may be greater or less than those of other creditors or of debentureholders of a different series.

Therefore, under Brazilian corporation law there are four types of debentures, namely: (i) debentures guaranteed by a guarantee in rem, involving for example the pledge of a certain asset or assets (goods in the sense of movable property), the escrow of receivables or the mortgage of real estate (plots of land, buildings, etc.); (ii) debentures guaranteed by a floating charge, which will entitle the debentureholders to a general right to all the company’s assets, but shall not prevent transactions relating to the property composing such assets; (iii) unsubordinated debentures which have no specific guarantee, but will have the same rights attributed to the general creditors of the company; and (iv) subordinated debentures, which rank after the general creditors and have only priority over the shareholders of the company.

In other words, a debenture which has no guarantee may contain a clause which subordinates it to general creditors, in which case it shall only have priority over the shareholders with regard to the residual assets, if any, in the event of liquidation of the company.

Newly-issued debentures with a floating charge shall be subordinated to those of an earlier issue or issues and the priority will be established according to the date of inscription of the deed of issue. However, all the debentures of one series shall be treated equally.

A commitment not to alienate or to encumber real or other property subject to registration of ownership assumed by the company in the deed of issue may be enforced against third parties, provided it is registered with the appropriate registry.

Regardless of the guarantees outlined above, usually the debentures may also have the personal guarantee (fiança) of the controlling shareholders of the company or of third parties. Under a personal guarantee, all the assets of the guarantor without distinction represent the security. The contract of fiança is created by one person undertaking on behalf of another (in this case the company which will issue the debentures) to perform an obligation to his creditor (the debentureholders), if the the debtor (the issuer) fails to do so. The fiança is an accessory to the principal obligation (represented by the deed of issue).

Debentures may be convertible into shares and the company’s shareholders have a right of first refusal to subscribe for an issue of convertible debentures.

Debentures may have different levels of remuneration, such as a fixed interest rate or a monetary adjustment clause.

The term of maturity of the debentures may also vary depending on the specific circumstances of each transaction and pursuant to the strategic planning of the company. It is possible, for instance, to issue debentures with a short, medium or long-term maturity or even the so-called perpetual debentures.

Walter Douglas Stuber is a founding partner of Amaro, Stuber e Advogados Associados

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Walter Stuber
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions