Governance in Private Companies with Structured Fundraising

There is a misconception that governance is a matter restricted to publicly traded companies, when in fact privately held companies that resort to the capital market to finance themselves, whether through debentures, commercial notes, receivables certificates, or securitization and FIDC structures, quickly realize that the closed corporate structure does not exempt them from consistent governance practices and that, on the contrary, the market itself begins to demand them as a condition of access.

From the moment a privately held company structures a fundraising campaign, it begins to interact with professional investors, securitization companies, trustees, credit rating agencies and, as the case may be, with the Brazilian Securities and Exchange Commission (CVM) itself, within the scope of CVM Resolution No. 160/2022. Each of these actors evaluates not only the asset or the receivables stream offered, but above all the quality of the information provided and the solidity of the controls that support that information.

The Economic Cost of Weak Governance

The effect is economic and quite direct, because weak governance increases the cost of capital. Inconsistent information, lack of audited financial statements, immature internal controls, and poor management of related-party transactions raise the perception of risk and, consequently, the rate that investors demand, especially in structures that operate with... covenants, This same vulnerability can trigger early maturity, demands for additional guarantees, or increased liquidity.

The pillars that the market expects to find are not surprising to those who follow the topic; they involve reliable and timely information, audited financial statements, internal controls and risk management proportionate to the size of the company, transparent treatment of transactions with related parties, and compliance with the fiduciary duties of administrators, with emphasis on the duties of diligence, loyalty, and information imposed by articles 153 et seq. of Law 6.404/76, to which is often added the establishment of a board or committees that bring discipline to the decision-making process.

Contractual Discipline and Legal Practice

It is important to understand that some of these requirements stem from the law and regulation, while others arise from the contract and the market's own discipline, so that... covenants Financial and non-financial obligations, reporting requirements, and early maturity scenarios are negotiated in the transaction instruments and bind the company regardless of its closed-end nature.

It is this framework, built from the structuring stage, that separates a well-priced fundraising from an expensive or unfeasible operation. Treating governance as an asset, and not as a mere cost, improves financing conditions and prepares the company for recurring and larger-scale fundraising. The role of the legal advisor is precisely to translate these requirements into a feasible structure, aligning documents, duties, and the real capacity for compliance.

Article prepared by: Antonio Mazzucco, Marina Moreno and Paula Suraci.