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RURAL LANDS AND RESTRICTIONS ON FOREIGNERS

13/04/2020

On April 8, Law No. 13,986 was published in the Official Gazette and results from the conversion of the Agribusiness Provisional Measure (MP No. 897/19). Law No. 13,986, among its other provisions, amends Laws No. 5,709/71 and 6,634/79 to allow the attachment of in rem guarantees to rural lands in favor of foreigners, including those lands located within the border strip; provides for the segregation of rural lands from owner estates; and the Rural Land Certificate (CIR), as well as provide for the Solidary Guarantee Fund (FGS) to introduce innovations involving the extension of credit to the agribusiness sector by changing the legislation that regulates the respective credit titles, such as the Rural Product Certificate (CPR), the Agricultural Deposit Certificate (CDA), the Agricultural Warrant (WA), the Agribusiness Credit Rights Certificate (CDCA), the Agribusiness Letter of Credit (LCA) and the Agribusiness Receivables Certificate (CRA).

By amending Paragraph 2 of Article 1 of Law No. 5,709/71 and Paragraph 4 of Article 2 of Law No. 6,634/79, the new legislation allows the attachment of in rem guarantees to rural properties in favor of foreign individuals or foreign entities or foreign-controlled Brazilian entities, under fiduciary transfer, of property in liquidation of transaction, payment in kind or otherwise. This authorization also applies to the properties located in the so-called “Border Strip”.

In addition, Law No. 13,986/20 establishes the possibility of segregating rural lands from the owner’s assets, with the purpose to introduce dynamism and increase creditor security in rural credit operations.

The segregation allows the owner of rural land to separate the land or part of the land from the owner’s assets, to guarantee obtainment of loans with the financial market through the issuance of a Rural Product Certificate (CPR) or Rural Land Certificate (CIR).

It is important to mention that the segregation applies to the land, accessions and improvements, excluding crops, equipment and animals and any rural land can be segregated, except (i) properties already affected by mortgage, fiduciary transfer or other in rem burden or that have any of the restrictions provided in Article 54 of Law No. 13,907/2015 registered at the respective recording; (ii) small rural lands; and (iii) rural lands subject to homestead rights.

Further to other aspects of incommunicability, the segregated rural assets will not be affected by the effects of bankruptcy, civil insolvency or judicial reorganization of the owner, as well as will not include the bankrupt estate.

The formalization of the segregation regime depends on a request by the owner and upon the registration at the recording of the rural land, which must be in good standing before the land and environmental authorities.

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