New Rules For The Public Offering Of Distribution Of Promissory Notes In Brazil

On July 31, 2015 the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários - CVM) issued CVM Instruction No. 566 (CVM Instr. 566/2015), whose may purpose is to consolidate, update and give the same treatment to the provisions related to the public offering of distribution of promissory notes[1]. The new rules are part of the constant effort of regulatory improvement in our jurisdiction and this is a natural process of evolution of the Brazilian securities market.

By means of CVM Instr. 566/2015, CVM details the features that the promissory notes publicly offered must observe and the offering procedures available to the issuers.

1. Features

   Promissory notes may be issued by corporations (sociedades anônimas), limited liability companies (sociedades limitadas) and agribusiness co-operatives (cooperativas do agronegócio), comprising co-operatives whose activity is the production, marketing, processing or manufacture of agricultural products or inputs, or agricultural machinery and equipment.

   The promissory note must circulate for endorsement in black, containing the clause "without warranty" (sem garantia) given by the endorser. While object of centralized deposit, the movement of the promissory notes operates by book-entry releases on deposit accounts maintained by the central depository, which will endorse such notes to the final creditor at the time of extinction of the centralized deposit. These provisions must be included in the announcement of commencement of distribution and, as the case may be, of the prospectus or summary information blade.

   Upon issuance and subscription the promissory notes must be paid at sight and in Brazilian currency (Reais).

   The term of maturity of the promissory note shall no exceed 360 days counted from the issuance date. Each series must have only one repayment date. Promissory notes are not subject to this maximum period of maturity when they cumulatively: (i) arise out of a public offering distribution with restricted efforts, according to specific rules; and (ii) rely on the presence of a fiduciary agent of the note holders.

   The promissory note must contemplate that it will be redeemed and settled in Brazilian currency on the maturity date. The issuer can redeem in advance the promissory note, provided that there is a provision expressly admitting this possibility.

   The redemption of the promissory note implies the extinction of the title, being forbidden its maintenance in treasury. The partial redemption is made...