Brazil: The Same Trustee May Now Participate In Different Issues Of The Same Company In Brazil

The Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários) issued CVM Instruction No. 519, of January 26, 2012 (CVM Instr. 519/2012), which amends CVM Instruction No. 28, of November 23, 1983 (CVM Instr. 28/1983), dealing with the fiduciary activity performed by the debenture holders´ trustee (agente fiduciário dos debenturistas) in the Brazilian capital market. The changes introduced by CVM Instr. 519/2012 are described herein.

Before commenting these changes, however, it is important to mention that, at the beginning of the current year, CVM Instruction No. 490, of January 24, 2011 (CVM Instr. 490/2011), was enacted in order to modify CVM Instr. 28/1983 and allow the same trustee to participate of issues of debentures made by any affiliate, controlling, controlled or company which is a member of the same group of the issuer1.

At that time, the Brazilian regulator decided to maintain the prohibition that the same trustee acted in different issues of the same company, in accordance with the applicable law in force on that occasion. In this regard, article 66, paragraph 3, subparagraph (a) of Law No. 6404, of December 15, 1976 (the Brazilian Corporation Law - BCL) determined that it shall not be appointed as trustee any person already performing such a task for another issue of the same company.

Subsequently, Law No. 12341, of June 24, 2011 (Law 12341/2011), modified this provision and added an exception to the general rule contained in the BCL and expressly permitted the designation of the same trustee for different issues of the same company in the cases authorized pursuant to the rules enacted by CVM. This innovation is part of several other legal provisions inserted in Law 12341/2011 that seek to encourage the issuance of debentures by the Brazilian publicly-held corporations2.

The last reform of CVM Instruction 28/1983, made by means of CVM Instruction 490/2011, has already discussed the lack of trustees vis-à-vis the increasing number of debentures operations, and now it is expected an even larger number of operations as a result of the various changes introduced in the BCL by Law 12431/2011. In this context, the permission for the same person to exercise a trustee function in various issues of the same company becomes even more relevant.

Law 12431/2011 simply did not allow that a trustee could act in different emissions of the same company. Instead, the legislator preferred to keep the prohibition, delegating to CVM the power to authorize such occurrence by means of a specific rule. This option adopted by the legislator implies that the CVM authorization should be granted only upon compliance with certain procedures to ensure that the trustee treats equitably all debenture holders of different issues and prominently discloses the trustee function exercised in other issues of the same company. This specific rule is contained in CVM Instr. 519/2012.

Regarding to the duty of disclosure, CVM concluded that, whenever the same trustee is acting in several issues, the prospective investors must be duly informed of this fact, to enable such prospective investors to take their investment decision with solid grounds. To this end it is not enough to include the information in the annual report provided for in article 68, paragraph 1, subparagraph (b) of the BCL3. CVM also requires that such information be disclosed in the summary of the prospectus of the debentures issue, of any advertising materials, if available, as well as in the respective indenture (deed of issue).

CVM also understands that the duties of transparency and equal treatment apply not only to situations in which the trustee acts in another issue of the same company, but must also extend to those issues of any affiliate, controlling, controlled or company which is a member of the same group of the issuer, as already contemplated in CVM Instruction 490/2011.

In view of the above, the new CVM Instr. 519/2012 introduced the following changes to the text of CVM Instruction 28/1983:

  1. revocation of article 10, item I, letter (a) in order to delete the prohibition that a trustee can act in other issues of the same company;
  2. inclusion of paragraph 1 to article 10, providing the obligation of equal treatment to the debenture holders of different issues of the company or of any affiliate, controlling, controlled or company which is a member of the same group of the issuer;
  3. inclusion of paragraph 1 to article 10, establishing the duty of transparency by the company (the issuer), disclosing that the trustee already act in the same capacity in other issue of the company or of any affiliate, controlling, controlled or company which is a member of the same group of the issuer; and
  4. new wording for article 12, item XVII, letter (k), contemplating the obligation of the trustee to also inform, in the annual report addressed to the debenture holders, the exercise of trustee function in other issues of the same company or of any affiliate, controlling, controlled or company which is a member of the same group of the issuer.


1 CVM Instr. 490/2011 introduced new obligations of information disclosure regarding the different issues of debentures, either public or private, involving the same trustee and any affiliate, controlling, controlled or company which is a member of the same group of the issuer. With regard to the requirement of transparency, CVM demanded that the annual report provided for in article 68, paragraph 1, subparagraph (b) of the BCL must contain the following information about these issues: (i) name of the company offering the debentures; (ii) value of the issuance; (iii) amount of the issued debentures; (iv) kind of debenture; (v) maturity, (vi) type and value of assets pledged as collateral and name of the guarantor(s); and (vi) events of redemption, amortization, conversion, renegotiation and default in the period.

2 Law 12431/2011 also established tax benefits, simplified the procedures for approving transactions involving debentures and removed some restrictions on the issuance of debentures. Such measures converge with the initiatives for expanding private bond issues and creating an active secondary market for fixed income in Brazil.

3 According to this provision of the BCL, one of the duties of the trustee is to prepare an annual report and make it available to the debenture holders within four months from the end of the company's fiscal year, drawing attention to all relevant facts occurred during the year relating to the corporation's liabilities, the security of the debentures and the constitution and application of the amortization fund, if any; the report shall also contain a statement by the trustee regarding his/her ability to continue performing his task.

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.

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Walter Stuber
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