By André Jerusalem

As of October 31st of this year, a set of new rules related to public offerings for the distribution of Agribusiness Receivables Certificates (“CRA”) will come into effect, as provided for in CVM Instruction No.^the 600, published on August 1, 2018. As we will present below, this rule could bring great advances to the financing of agents involved in agribusiness, impacting one of the pillars of the Brazilian economy.

This standard brings important advances to the market, among which we highlight the following: (i) greater clarity on what may serve as collateral for CRAs, (ii) express possibility regarding the possibility of revolving securities, fundamental to the specific particularities of agribusiness, (iii) possibility of creating distinct classes of CRAs, (iv) greater detailing of the responsibilities of those involved in public offerings, (v) possibility of securitization companies conducting public offerings, and (vi) definition of the topics and formalities required for general meetings of CRAs holders.

Regarding what may serve as a basis for CRAs, article 3 of CVM Instruction no.^the 600 provides that CRAs must be related to the production, marketing, processing or industrialization of (a) agricultural products, (b) agricultural inputs, or (c) machinery and implements used in agricultural activities. Additionally, the rule also clarifies that CRAs must be constituted by credit rights of rural producers or cooperatives, or third parties linked to commercial relationships existing between producers or rural cooperatives.

Also worthy of note is the inclusion of the possibility of revolving the securities, which may seem trivial to readers less familiar with rural reality, but is of crucial importance to those involved in agribusiness. Until then, this topic had only been addressed by means of a Circular Letter; however, with the publication of the new Instruction, it is understood that the collateral may be replaced upon compliance with certain requirements, including that the amount of credit rights linked to the CRA be compatible with the payment of the remuneration and amortization provided for in the issuance, and that the Securitization Instrument be amended to provide for the linking of the new agribusiness rights acquired.

Finally, without prejudice to other points that may be subject to further in-depth analysis, we highlight that Instruction No.^the 600 expressly prohibits the accumulation of certain functions among the offering agents, among which it is worth noting the impossibility of the fiduciary agent acting as custodian or providing any other services to the issuance (Art. 18). This prohibition aims to avoid potential conflicts of interest that may negatively affect the CRAs and their holders, but which in turn may increase the costs of issuing such securities.