Among the innovations brought about by Executive Order 1,103 (MP 1,103/22), which deals with general rules applicable to the securitization of receivables and the issuance of receivables certificates, among other topics, one of the most relevant is the possibility of establishing a fiduciary arrangement in operations whose receivables are linked to the payment of any type of securities.

Published on March 15 by the federal government, the executive order establishes in the sole paragraph of its article 17 that "securitization operations are considered to be the issuance and placement of securities[1] with investors, whose payment is primarily conditioned on the receipt of funds from the receivables that back it.

Until then, the possibility of establishing a fiduciary arrangement was restricted to operations involving Real Estate Receivables Certificates (CRIs) or Agribusiness Receivables Certificates (CRAs), as provided for in articles 9 of Law 9,514/97 and 39 of Law 11,076/04, respectively. Article 24 of the new executive order, however, extends the possibility of establishing a fiduciary arrangement to operations whose receivables are linked to securities of any kind:

"Article 24. The securitization company may institute a fiduciary arrangement over the receivables and over the goods and rights that are subject to the collateral agreed in favor of the payment of the Receivables Certificates or of other rights and securities representative of securitization operations[2] and, if any, of the compliance with obligations assumed by the grantor of the receivables."

Article 25 and paragraph 7 of article 21 determine that the fiduciary arrangement will be instituted by unilateral declaration of the securitizing company, when signing the securitization consent or the instrument of issuance of the securities in question. Both the securitization consent and the instrument of issuance must be registered with an entity authorized by the Central Bank of Brazil or the Securities and Exchange Commission of Brazil, which are responsible for exercising the activity of registration or centralized deposit of financial assets and securities, according to Law 12,810/13.

Once the fiduciary arrangement is established, article 26 of MP 1,103/22 determines that the receivables linked to it will be subject to the following rules:

  • they will constitute separate equity, which should not be mixed with the company's common equity or with other separate equity of the securitizing company resulting from the creation of a fiduciary arrangement in other securities issuances;
  • they will be kept separate from the common equity and other separate equity of the securitizing company until full amortization of the issuance to which they are allocated is completed;
  • they will be destined exclusively for the liquidation of the securities to which they are allocated and for payment of management costs and related tax obligations, observing the procedures established in the issuance documents;
  • they will not answer before the creditors of the securitizing company for any obligation;
  • they will not be subject to the creation of collateral by any of the creditors of the securitizing company, whatever priority they might have; and
  • they will only be liable for the obligations inherent to the securities to which they are linked.

The new rule is not entirely new to the market. Something similar to the fiduciary arrangement was already being done in operations that did not involve real estate receivables - CRIs or CRAs - through some legal rules. An example are financial debentures, regulated by Resolution 2,686/00, of the Brazilian Monetary Council. In these operations, a fiduciary assignment was usually constituted over the financial receivables linked to the issuance, to protect the investor against creditors of the securitization company. These mechanisms, however, brought about a series of operational complications, complexity in the structuring of documentation, and an increase in costs with registration in notaries of deeds and documents of the collateral, especially in the case of revolving receivables.

By making possible a greater standardization in the structuring of operations with different securities, providing a reduction in costs and greater legal security for investors in relation to the shielding of the linked receivables against creditors and other obligations of the securitization company, PM 1,103/22 contributes to strengthening the securitization industry in Brazil.

The rule entered into force on the date of its published, but still needs to be converted into law by the Brazilian Congress. Its term of duration is 60 days, extendable automatically for the same period, if the vote is not completed within the deadline stipulated.


[1] Emphasis added

[2] idem