Ivana Coelho Bomfim
CVM Resolution No. 734/2015 puts an end to the discussions about the classification of Condo-Hotels as a security
Ivana Coelho Bomfim CVM Resolution No. 734/2015, published on March
19, has put an end to the discussion of whether or not a public offer of
independent units, property fractions or quotas of special partnerships of
hotel enterprises, linked to the receipt of consideration based on the
successful management of the enterprise, would be a security. The discussions
that started in late 2013, when the Brazilian Securities Commission – CVM
warned the marked about the existence of irregular offers to the public without
the prior registration of the issuer and the offer, have been terminated. CVM
has >
CVM Resolution No. 734/2015, published on March
19, has put an end to the discussion of whether or not a public offer of
independent units, property fractions or quotas of special partnerships of
hotel enterprises, linked to the receipt of consideration based on the
successful management of the enterprise, would be a security. The discussions
that started in late 2013, when the Brazilian Securities Commission – CVM
warned the marked about the existence of irregular offers to the public without
the prior registration of the issuer and the offer, have been terminated. CVM
has >
As the discussion about the recognition of this
business model as a collective investment contract has been overcome, the
concern of real estate entrepreneurs now surrounds the possible consequences to
the developments that have been launched and marketed (in whole or in part)
without CVM’s registration. This is because collective investment contracts
were already considered securities since October 2001, with the amendment to
Law No. 6,385/1976. The obligation of prior registration of the offer existed
way before the publication of the new Resolution. However, the real estate
market did not recognize condo-hotels as securities and since 2011, as the
sector started to pick up, it had been structuring and marketing hotel
enterprises without observing the need for prior registration of the issuer and
the offer with CVM.
Public offers carried out without the due
registration may lead to consequences in the administrative, civil and criminal
spheres. CVM’s new Resolution considers the issuer not only the real estate
entrepreneur, but also the hotel operator, since the hotel brand linked to the
product offered is relevant for a decision on the investment to be made. Hence,
both the entrepreneur and the hotel operator may be held liable.
Even prior to the publication of the Resolution,
in analyzing the requests for waiver of registration as regards some
condo-hotels offers, CVM had already informed that the entrepreneur should
provide purchasers of independent units or fractions of the enterprise already
marketed with the same information that should be made available to new
purchasers as from the waiver of registration of the offer. However, as the New
Resolution has not covered this issue, new questions are now being raised by
entrepreneurs, such as, for example, how the entrepreneur should act, in
practice, before these former purchasers and whether there will be a
possibility of terminating or repurchasing the property units or fractions
marketed before the formal waiver of registration is granted and before the
information required for the purchaser to make a conscious decision on the
investment is provided.
Moreover, as the new Resolution requires
investors to confirm their assets in order participate in the offer: (i)
in the case of commercialization of independent units, investors must have
assets amounting to at least R$1 million or invest at least R$300 thousand in
the offer; and (ii) in the case of commercialization of notional fractions of
condominiums in general, qualified investors must have assets amounting to at
least R$1.5 million or invest at least R$1 million in the offer; we now
have a practical problem: what should be done if the purchasers of units or
fractions marketed prior to the waiver do not fall under the limits imposed?
The expectation is that CVM will act with common sense and flexibility to try
and resolve past problems, but without imposing obligations or penalties that
could affect the development of the enterprise and/or the return on investment.