Restrictions on the ownership of rural real estate

SRAlIL
New Jife in caveat emptor
This decisiOll ill Demagogue has been followed
in a numbcr of subscquent cases. SUl the
recenl High COlln case of Milkr v BMW
Fitlanu provides all in leresting contrast,
highlighting lhat the o ld maxim of ea\'Cal
emplor is nOI complclcly dead fel.
The case iJl\·olved a lende r who provid ed
funds fo r a borrowcr 's insuran ce policy. The
le nd er wrongly bel ieved the policy eould be
can celled, and a llcged iI had been mislcd
or d eecivcd by non-di sclosurc on lhe pan of
lhe borrower.
On lhe one hand, lhe courl approved lhe
Dl!lnagogue decision, accepting that silcnce or
non-discJosure of information may constitule
mislead ing or decepli\"c conducl in a variely
of circumsla nccs.
Howe\"cr, lhe judgcs were also careful lo
point o u l that panies of equal bargaini ng
Adriana Khalil
Daiuto
Demarest e Almeida
adaiutoO
demarest.com.br
Ana Beatriz
Almeida Lobo
power are nOI requircd 10 'volunteer
information' la protccl anOlhcr party from
the consequences ofthal party's 'careless
disregard' for its own in tcrcsts.
ln lhis p articular case lhe Icn der 10S1,
primarily bccause the borrowcr had provided
the relevant pol icy documem and lhe lender
had simp ly failed to read iI.
Conclus ion
Tile cases show lhat vcndors can no longer
simply hidc behind lhe veil o f eaveat emptor.
A vendor's si lence may be pcnalised under
antitrust law if it is, in ali lhe relevant
ci rcumstances, misleading or decepti"c.
Howevcr, the maxim of caveal emptor is nOI
completely dead, and a purchaser of land is
u nlikely 10 o btain relief from the courl where
its loss is seen LO be a conseque nce of iu own
carcless decisions.
Restrictions on the ownership
of rural real estate property
by foreigners
Demarest e Almeida
ab loboO
demarest.com.br
Hi5torical background
Since 1971 , lhe acquisition of rural eSlate
propertics by foreigners in Braúl is rulcd by
Federal Law No 5.709/ 7 1, and its regulatory
Decree No 74.965/74 ('Law 5.709').
According to such legislatio n, lhe
acquisition of a rural property by a foreign
ind ivid ual domiciled in the cOll ntry
('foreign ind ividual ') and a foreign company
amhoriscd 10 ael in Brazil ('bnul eh') is not
prohibi led , bUl merely limi led LO certain caps
describcd in the la\\'.
Thc reslrictions also applied 10 Brazilian
companies in which fore ig ncrs resident
abroad had lhe majorilYof lhe corporalC
capital, allho ugh such companics wcrc
suppo5ed 10 be cXl'mpl sinee lhey were
organ ised accordi ng 10 lhe laws of lJrazil
('Brazilian compan ies offoreign capital').
Neverthcless, paragraph 1, seclion 1 o f
Law 5.709 clearly sl:ned Ihal 'the Brazitian
eompany in which foreign individuais or
cntities h ave majority control oflhe corporale
capital, by any means, are also subjeCl lo thc
regime cSlablishcd by this Law .. . ' .
As a consequcnce lhereof, the restrictions
of Law 5.709 werc applieablc to (i) forcign
individuais; (i i) branches; and (iii) any
Brazilian companies offoreign capital.
The cnaClmenl of lhe Brazilian
ConSlilulion of 1988 incorporated
arlicle 17 1 wh ich included a legal and
constitutionallevel defin ition of 'Brazilian
company'. Ati companies organised
according tO lhe laws o f Brazil and
d om ieiled wilhin the Brazilian IcrritOry
wcre tO be considc red Brazilian anel wcre
not 10 be subjecl tO any kind of restriClions.
An interprelation of thc doctrine emerged
slating lhat, sinec Ilrazilian companies
offoreign capital were considered lO
be BraziJian companies, the lerms and
restrictions of Law 5.709 wcre no longcr
applicablc 10 such companies. The general
opinion was lhal paragraph I . section I of
Law 5.709 was la be consid e red, de facto,
REAL ESTATE NEWSLETTER
SEPTEMBER 2011
...
BRAZ1L
rc\'Okcd by lhe enaClmenl of lhe Braúlian
Constilulion of 1988 because it included a
provision lhal was in nalure opposed to those
in Law 5. 709.
ln 1995, lhe enaClmCIlI of ConSlilulional
AmendmeIH No 6 re\'oked Article 171
of lh e Brazilian ConSlitution unde r lhe
premise that no dislinctions werc la bc
madc bClween a Brazilian company and a
forcign company.
Th is amcndmc nt reintroduced lhe
discussioll on whelhcr lhe rcstrictions
imposed by Law 5.709 should become
again applicable to Brazilian companies of
foreign capital. The majority of lhe dOClrine
adopted lhe interp retation that lhe
restriclions sh ould nOI become enforceab1c
again becallse:
• according to Brazilian principies of
application of lhe law, resuiction s cou ld
on l)' be imposed b)' a new law; and
• after Conslitutional Amendment No 6,
t!l e re cOllld no! be a n)' discrimi nalion
against Brazi lia n companies of forcign
capital, as they were considered 10 be
Brazili an.
As a consequc nce of this underslanding,
afle r Co nstilutional AmcndrnelH No 6, lhe
reSlrictions of Law 5.709 were considcred
lO be applicable onl)' to forcign individ uais,
branches a r foreig n cnlities domiciled
abraad (' foreign compan ies').
ln o rder to confirm this in terprctauon,
lhe AGU issued lhe Opinion AGU/LA01197 (lhe 'AGU 01 / 97'), published in
lhe Federal OlJicial Gautu on 22 J anuar)'
1999, slating lhal paragraph I, section 1 of
Law 5 .709, was 10 be con sidered revoked
as a whole, since iI clearly contradieted
lhe inlenlion s a nd in lerpretations of
lhe curre n t Braúlian ConslÍlution and
e\"en lhough articlc 171 of lhe Brazilian
COllslitulion of 1988 was rcvoked as well,
Ihis cOlllel no! restore an alrcady-n:voked
scction of lhe law.
Conscquc n ll)', forc ign invcstors wanti ng
10 acquire land in Brazil had only to
incorporatc a Brazilian company, which
was undoubtedly a much less bureaucralic
and fasler mClh od than mceli ng the
requiremellls seI oul by Law 5.709.
Howeve r, fon:: ign in\'cstors' increasing
intcrcst in acquiring propcrties in lhe
Brazilian rural arcas and lhe world shortagc
of natural resources made the Braúlian
Go"c r nment b ring lhe issue o f acquisition
of rural propenies hy fo reigncrs into
d iscussion again . '
••atl-.
As an om eial justifleation fo r issuing
lhe ACU 1/ 2010, lhe AGU referred to the
existcnce of a worldwide food crisis and
lhe possibilily Iha l, in lhe future, biodicsel
may be adopted, 011 a largc scale, as an
import.ant alternativc sourcc of ene rgy lha!
coul d llave the capacily to diversify lhe
pO\\lcr generalion malrix of Brazil, for ilS
own advanlage.
Morcover, in <ln artiele published in lhe
econ o mical ncwspapcr Valor Econômito on
22 June 2010, the Ministry of Agricultural
Devc10p men t slaled 'We are going
10 introducc a PAC (proposal for lhe
ame ndmenl oflhe Constitution) to make iI
elea r lO inveslors lhat the)' can invesl in any
fi eld , except in lands'.~
ln this sense, 0 11 13July 2010, lhe
Nat ional J ustice Council determined Ihat
lhe Real Estale RegislTY Omees should
send, e\'ery three months, to the Local
Internal Affai rs Offices (wh ich , in tum, will
send to the National Internal M fairs O ffi ce
and INCRA), a lisl of ali acquisitions of
rural properties by foreigners, whelher legal
entities or ind ividuaIs, in lh e ir respecli"e
jurisdiction s. The dcterminalion also
re quires lhe Local Inte rnal Affairs Offices
to regulate the Real Estate Registry O ffi ces
se n ding promptly a list of lhe aequisitions
previously made.
On 14July 2010 the Ministry fo r
Deve lopment, Mr Gui lherme Cassei, gave
an interview in which he elaimed Ihat
'today lherc is no contrai over lhe purchase
of la lld by lhe hand of Brazi lian companies
controlled by fore igncrs'. '
On 19 August 2010 lhe AGU isslled
ACU/ LA 01/2010, contrary 10 lhe AGU I
LA 01197 (that has been observed for lh e
lasl 13 years), in Ihc co n tex! ofseveral
journalislic ani cles published in lhe
Brazilian media whc rcb)' lhe Brazilian
Govcrnment had indicaled the need to have
more contrai over the acquisition of rural
lan d in Bradl b)' foreigne rs.
The AGU / LA 01 / 2010 simply supports the
thesis Ihat lhe re\'ocation of article 171 of
lh e Brazi lian ConSlitmion has removcd an)'
impcdiment to enforce paragraph I, sec tion
1 of Law 5.709 and, lherefore, iI should be
now considered applicable o nce again.
Wilh regard to lhe general pu blic's
opi nion, lhe repercussion of lhe AGU / LA
0 1/ 2010 dirccIly affects lhe plarers of lhe
agribusiness, lhe pu lp and paper companies,
and lhe foreig n im·cSlment funds lhat ,..ere
aCling in the Brazilian market.
INTERNATIQNAl BAR ASSQCIATION LEGAL PRACTtCE DIVISION
BRAZIL
lhe legal instruments used for the
interpretation
An im!X'rtant isslle to discuss is lhe fact that
ali these in terprelations of L1.W 5.709 am l lhe
applicability or derogation ofthe resuictions
to acquire rural property by forcigners is bcing
pracdsed by meaos oflhe AGU's Opin ions and
not by a law enacled by lhe Brazilian Congress,
basically bccause it is a mauer o fi nterpreladon
of lhe law by fed eral authoritics.
The AGU is mainly a legal advisor for lhe
ExecUli"e Branch and its opiniolls represem
the 'official interpretation' of aoy given issue.
Therefore, at lhe request ofthe President
lhe AGU, in"ested b)" lhe powers g ranlcd by
Tille VofComplememary Law No. 73,4 issued
lhe AGU/LA 01 /2010 which, with diffe rem
arguments, now Stales thal paragraph 1,
seclion I of Law 5.709 is in fael in force
and lherefore, ali the limitaLÍons con tained
thercin lO the acqllisiLÍon of rural p ropenies
are from noll' on applicabJc 10 Bn\zilian
companies offoreign capital.
SecLÍon 39 ofComplementar}' Law No 73
stales Ih,lI only lhe President of Brazil may
requesl lhe AGU to sludy an)' issue, and
section 40 determines that an Opinion issued
by the AGU, appro"ed by the Presidem and
published in lllC 01ftcial Gautle is binding on
lhe whole r ederal Adm inistration, inc1uding
lhe Real EStale Propeny Rcgistries.
Allhough AGU's opinion is not a final
and binding interpretalion on lhe public
in general and lherdore, its accuracy and
legal il}' may be d isputed bcfore the Brazilian
courls, it is binding on ali offices of the
execuüve branch ofthe Federal Go"enlment.
The effective restrictions
h is importam tO c1arify that lhe terms
and provisions of Law 5.709 do nol prohibit
jortigll compmlie.f lo acquire rural propertie5, bUl
establish limilalions 10 which lhe acquisition
of properl)' ma}' bc mOlde. Therefore, future
bllsinesses in BrOlzil ma)' continue , taking
into cOllsideration lhat a new step will have
to bc addcd to the checklist of acts anel
documents IH:cessary for lhe acquisition
- the authorisation of the Gm'crnmcnl
through INCRA.
Please fi nd bclow a detail of the limitations
provided for in Law 5.709:
(i) an authorisation by LNCRA is required
ro r lhe acc!lIisition by foreign ind ividuais
ofrural propcrt)'with more than lhree
aml fewcr than 50 rllralllnilS;
(i i) lhe legal limit of 25 per cen l ofland
in the same COllnty ('Mun icípio')
owncd by forcign individuais, foreign
companies anel /or Brazil ian companics
of foreign capital can nOI bc surpassed;
(iii) lhe legallimit of 40 per cenl of land
in lhe same Coumy (' Município' )
oWlled by foreign ind ividuais, fo reign
eompanies and / or Brazilian companies
offoreign capital ofthc same nationality
ean not be surpassed; and
(i\') authorisation of the Brazilian Congress
is requi red for lhe acquisition o\'er lhe
limits of (i i) and (iii) above.
It is impo rtam to poinl OUl that in order
lO obtain slleh authorisalionsj a projCCl
regardi ng lhe exploiladon ofthc rural land
mUSl be prepared by an agro nomisl enginecr
and submitted to lhe aUlhoritics, atlesting to
lhe cconomic viability ofslIeh proj ecL
Furthermore, lhe Brazilian law au thoriscs,
in some spccial circumstanccs, lhe
acquisitions by foreigners of arcas largcr than
the maximum sizes abo\'c mentioned. For
sllch purpose, lhe foreigner must present,
bdore the National Security Council and
the Brd.Zilian Senale, a project con Laining
information and details regarding the use
ofsuch an arca. The Bnlzilian Senate must
prese/li its opinion baseei on lhe relcvant
interest oflhe project for lhe Brazilian
economy <lml after lhe approval by such
authorit}', lhe Presidem of Brazil shall grant
Lhe final aulhorisation to lhe foreign er to
explore sllch ruralland, as per lhe guideli nes
ofthe p rojecl presented.
NOle Ihat lhe releva n t Public Notaries and
Real Estale Registry Offices are forbidden tO
register an acquisition maele in violation of
Law 5 .709. If thc Public Notaries anel Real
Estate Registry Offices do nOl observe lhe
relevant legal provisions sllch registration
shall be considereel null a nd \'oid anel lhe
officials eon cerned shall be consid ered civilly
and criminal\y liablc.
ln a meeting held wilh INCRA officials lasl
year, tlLey stated Ihal ii was their understandi ng
that, as an additional limilat..ion and w;th
regarei LO foreign comp:mies anel Brazilian
companies of foreign capital, the size of lhe
propeny shall nol excced lhe cquivalent to 100
MEl in lhe Brazilian lerrilo ry. Any acquisilion
over lhese lim its mUSl be appro\"ed by lhe
Hrazilian Congress.
NOlwithstandi ng lhe abo"c, consideri ng
lhat INCRA officials inte nd to ap ply these
limitations, plcase find below an example of
how to determine lhe number of hectares in
REAL ES TAfE NE WSLETTER
SEPTEMBER 2011
BRAZIL
lhe corresponding MEl. Please note thal lhe
MEl value varies depcnding on the Stale in
which lhe rural eSI.llC property is located;~
Investors aftected
As a consequence of lhe publication of
AGU / LA 01 / 2010 lhe limilatiollS and
reslrictions sei forth by Law 5 .709 will be
applicable again to Brazilian compan ies of
foreign capi tal , lhe reslrictions of Law 5. 709
are now applicable 10:
• foreign companies and foreign individuais:
who are domiciled abroad and are
inlerested in acquiring, by any means, a
rural property;
• branches: lhe cstablishmcnl of a foreign
company duly aulhorised to opcrate in Brazil;
• Brazilian companies offoreign capital:
Hrazilian companics organiscd under the
li\wS of Brazil and domiciled wilhin lhe
Brazilian tcrrilor)' which are, in fact, an
inveslmen l \'chicle company ofa foreig n
cnlil)' or individual, in which the m:Uority
of the corporale capital of lhe \'ehicle
company is held, dircClly or indircctly by a
forcign pefSOn ar emit)' domicilcd abraad.
Although it is )'el nnclear, the aulllOrities
of INCRA implied Ihal iI was their lotem
thal contraI reaches lhe highcsllevc1 of lhe
corporale struCLUre. Si nce lhe aUlhorisation
process requires thal lhe majorit)'
shareholder of lhe Rraúlian companies of
foreign capital presem Iheir b)"-Iaws and
incorporalion documenLS, lhe participalion
of lhe foreign compan)' will alwa)'s bc clear
to lhe aUlhoritics and, thereforc, Ihey may
require the documenLS ofal1lhc forcign
companies until they reach lhe ullimate
cOlllralling shareholder.
The decelllralised SlruCLUres of both lhe
Public Regisu-ics ofCommerce and the Real
E5talc Regisu-y Offices somehow prevenled
lhe administrati,"e authorities fram imposing
the fu ll force of lhe AGU/LA. 01/2010 over
ali lhe in\"cstors affecled and detailed abo\"e.
Howe\"cr, last March, lhe AGU requcsled
lhe Mlnislry of Developmcnt. Industr)'
and Trade LO adopl some measures of the
Nalional Trade Registr.nion ( DNRC). This
was specifically regarding the issuance
of guldance di rected to the Soards of
Commercc of lhe whole lerrito r)' of Brazil
to take Illeasures to prohibil the filing ofa.n y
amcndment 10 articlC5 of associadon lhal
provide an)' change in the corporate control
of companies \\'hich own rural properties in
Brazil lhat would impl)' in lhe transfer lhe
control of sueh companies 10 fore ig n e ntities
or forcig n individuais.
The AGU has also requesled of lhe Ministry
of Agriculture, lhe adoplion of measures by
the Sccuritics Commission (CVM) regardi ng
lhe issuance of standard clauses and
condi lions lhal shall bc lIsed in commercial
papcrs or im'cslmem agreemenLS destined
to be lraded o n the slock exchange, rcfusing
lhe admissiOIl of sccurilies which are not in
accordance wilh lhe terms established hy
Brazilian la\\'.
Thc AGU has argued lhat some lisled
companics mighl bc using commercial slrategies
thal could, indireclly, resuh in lhe acquisition
of rural propcrties by foreign companies.
Transactions aftected
ln shorl, the acquisition, by any mcans,
of r ural estale properl)' is subject 10 the
t"estriclions detcrmined by Law5.709. Below
is a lisl of tlle types of lransaclions affected
by lhe new inlerprcta lion enforced by the
ACU/ LA. 01 / 2010:
• transfcr of real estate rural propcrty b)'
any title: whether graluilouS ar paid, lhe
lransfcr of a rural pt"open)' to a fore ign
compan)' ar a Brazilian company of
foreign capita l;
• lease of real estate r ural property: lhe Icase
and ali ilS subspecies arc also includcd
under lhe reslriclions of Law 5.709.
Allhough nOI origina ll)' included, Federal
Law No 8.629, e nactcd in February 1993
('Law 8.629'), eXlended lhe n:slrictions
of Law 5.709 10 1ease agreemen LS on
rural properties. Please note Ihal lhe
exploilation of lhe slIrface or lhe asseLS sei
o n th e rural eSlale propert)' is not incJuded
undcr lhese restrictions. The legal
definition of1easc (rurallease agreement,
'contraio de arrt1ldamelllo) SUites lhal therc
is a lease when one of the parties assigns
to the olher part)', for a delcrmi ned or
undClermined period oflime, the use
and cruoymellt of a rural property for
lhe purpose of agricultural, caltle. or
agroin dustrial exploilation;
• corporale transactions: by means of the
provisions of section 20 ofOecrec No
74.965/ 74 the resu-ictiolls also affecI
an)' lransfcr of shares or panicipalions
in Brazilian companics wh ich OWIl rural
propcrties, includi ng bUI nOI limilcd
to Illcrgers, spin-offs, incorporations,
consolidations, aml basically an)' operalion
that ent.ails a change in control of the
tNTERNATIONAL BAR ASSOCIATtON LEGAL PRACTICE DIVISION
BRAZIL
company owni ng lhe rural p ropert ics,
when the said changc in control implies
the panicipation of a fore ig n company ar
ind ividual domiciled abroad .
h is imponam to nOle that, whcn rderri ng to
Brazilian companies offoreign capital, whi1c
lhe terms and provisions of Law 5.709 refe r to
foreign companies or foreign individuais that
hold lhe majority of the corporale capital of
a Brazilian company by any mcans, lhe terms
of the AGU/ LA 01 / 20 10 stalC lhat in order
to equale a Brazilian company of forcign
capital to a foreign company for lh e purpose
of the application of Law 5.709, the follm"ing
cri teria musI be follm'o'ed:
• the fo reign company must n ot b e do miciled
\'o'ilh in the Brazilian lcrrilory;
• the fo reign company mUSl h o ld a
participa lion, by any means, in a
Brazi lian company; and
• lhal participation mUSl aMure lhe foreign
company lhe power LO conduct lhe
I'csolutions o f the shareho lelers' meclings,
10 appoint lhe majorilY of lhe managers,
d irectors or adminislrato rs of lhe Brazilian
company, and 10 conduCl the corporate
activities and direct the day.to-day acti\'ities
of lhe corporate boclies of lhe company.
This may cause a n interpret.ation dispute
sin ce the AGU/ LA 01 / 20 10 somehow
extends and bends the qualification of lhe
fore ign shareholder. If bdore, a Brazilian
company lbal had a foreig n shareholder
holeling 49 per cen t of lhe corporale capital
was not cOllsidered \O bc inclueled within
lhe provisions of L1.W 5.709, now, lhe same
company may indeed be considered included
willl in lhe limi tations if a sharc ho lde rs'
agrecmen l was executed granting lhe said
forc ign shareholder lhe power 10 con trol
lhe company, ahhough it may nOl hold lhe
majority of lhe corporale capital.
\Vhen it comes to <lnalysing the effcclS
ofthis new interpretation in light Oflhc
ongoing tmnsactions, pleasc nOle thal, some
transaetions. depcnding on lheir stage, shall bc
affecled anel, Iherdorc, will ha\'c to be analysed
by INCRA in order to compl}' with Law 5.709:
a ) lransact ions regardi ng lhe lramfer
of rural propen ics: as per I\razilian
law, lhe mmsfer of ownership of real
estale property o n l)' occurs upo n the
regislration of the relevan l dced with the
Real Estate Regislry omce;
• If the public deed of transfcr of
property an d rcquired registraliom
have already bcen executed and
com p leted wilh lhe Real Estate
Registry Office before the issu an ce of
AGU/ LA 0 1/ 2010, lhey should nOl
be submitted for lhe approval o f any
new go\'eru mcntal age ncy, sin cc th ey
are considered lO be dosed deals,
protecled under the principie of
\'estcd righls, whieh proteclS lhe rights
constituted bcfore lhe enaetmen t ofa
law o r norm that may afTect lhem . \\'e
can safcly SlalC thal the transaClions
in\'olving rural estale properlies that
have bcen a lready d uly regislered with
the Real Estale Registry O ffice b efo re
the publicalion of AGU/ LA 0 1/ 20 10
will not be affected by it;
.1.11 lhe lransaclions doseei and
registered before thc publication o f
AGU/ IA 0 1/ 20 10 (with or wilhout
the certification by INCRA of the
geo-rcfercncing) are includ ed above.
Therefore, if a rural estate propcrty
was transferred to one of lhe subjeclS
affected by AGU/ LA 0 1/ 20 10 as
detailed abo\'c and $uch lransaction
was e ffectiwly and fully registercd with
lhe Real Estate Registry Office before
the publication of AGU/ LA 01 / 2010,
even withoUl the geo-referencing,
ii will nOl be affected by lhe
consequences arisi ng from AGU / LA
0 1/20 10 and sue h transfcr will not be
re\'okcd . Pleasc note that scction 273,
paragraph d) of AGU/ LA 01 / 2010
clcarly statcs Ihat 'd) lhe effects of
this Opinion must be cffecti\'e as from
lhe date of publicatioll in the Federal
Omeial Gazclte, as d etermincd o n
ArticIc 2, item XIII ofLaw No. 9.784
ofJanuary 29, 1999'. The said law
fir mly statcs lhal wilhin the Fed eral
Pub lic Admi niSlrdtion there will not
be a relroaCli\'c enforcemcnt of a law.
Note lhat no addilional documenlS are
requil'cd to pro\'e that the property
was duly transferred bcfore lhe
publication of AGU/ LA 01/2010. T he
dating of the registered doeunlents is
sufficient to prove su ch fact;
• If the public d eed of tra nsfer of
property 01' the required registrations
has nO! already been executed and /
or compleLCd with lhe Real Est.ate
Registry OfJice, it will h a"e to be
submitted fo r the approval oflNCRA,
sincc the tra nsactio n Ims nO! yet
completed lhe legal steps necessary
for lhe lransfer of the property right
(execution o f the publlc deed of
REAL ESTAle NEWSLETIER
SEPTEMBER 2011
transfer ilnd ils regislration bcfore lhe
correspond ing Real EStale Regislry
Office). ln lhiscase, wc are talking
abom tran!mctiolls whcre, aI lhe time
ofpublication of AGU / LA 0 1/ 2010
e ilher (i) lhe public dccd of tr,msfer
was not reI gramcd; aml/ar (i i)
regislralion of lhe public deed o~
transfer with lhe Real Estale Reg lslry
Office had nOl yel occurrcd:
b) lransactions rcgarding mcrgers,
consolida lion, spin-off and lhe transfer
of interesL~ in companies Ihal own rural
eSlale properties;
• lf lhe corporate documents necessary
to transfer lhe quotas, shares a r
participation interests; or lh e docume nts
necessary 10 mcrgc or incorporale lhe
companies in a corporale reorganisation
were gramed and regislered wilh the
Public Regislry of Commerce, lhe
Registry of Shares or lhe Company
and lht: Real Estale Regislry (when
applicablc) bcfore lhe issuance of AGU/
lA O1/ 20 I O, thesc tr.tnsaclions should
nOI be submitted for lhe approval of any
new governmental agency, sitlct: lhey are
considered to be closcd dcals, prolectcd
und er the principIe of \'csled rights;
• If lhe corporate docume nts
necessary 10 tra nsfer the quolas,
shares or panicipalion in leresl..s; ar
lhe documenls ncccssary 10 merge
ar incorporate the companics in a
corporale reorganisalion were granted
but nOI rei registered Wilh lhe Public
Registr y ofCommerce, the Regislry
ofShares or lhe Com pany and lhe
Real Estate Regi my (\"hcn applicable)
before lhe issuatlce of AGU /
lA 01 / 2010, lhey shall have 10 be
sublll iued for the apprO\".t1 of INCRA,
since lhe transaclÍon has no! reI
compleled lhc legal SICpS nccessary 10
complele lhc lransfer or Ihc interesL~
ar lhe corporate reorganisation .
AGU / lA 01 / 2010 was publishcd in the
O.fficial Gautteon 23 AuguSt 2010, w~ich is lhe
date la be considcred for lhe anal)'sls of lhe
eITeclS o\"er ongoing transactions.
Funher, iI is importanl to nOte lhal due
10 the fan Ih at ownership of ru ral land
will bc suhjecl 10 prior amhorisalion , when
foreclos ing a guaranlee the creditar will no
longer bc allowed to bc awarded lhc property
but will lla\'c to wait for its public auction
(which may, in theory, affeel lhe actual v.tlue
Of llle propeny).
Authorisation process
According 10 information providecl. by.
INCRA, Ihc request seeking aUl honsauon
10 pllrchase lhe rural property or to cl o~e
a lransaction reg-.trdi ng a company oWllmg
r ural eSlale property shall be submilled ~o
INCRA, du ly accompanied by the followll1g
documen ts:
• usual documentation related to lhe property;
• lhe corporale documents of the company
interested in lhe acquisilio n ;
• lhe project to be implemented in the
acquircd propcrty.
As wc have bcell informed , if lhe reqllesting
com pany has a foreign shareholder dom iciled
abroad with majorilY of lhe corporale
capita], it will be n ecessary to file a1so (i) lhe
corporate documents ofthe ~id s ha reh~! der;
(ii) a certificate of good standmg; and (iii) .a
power of allorney appointing a representaU\'e
of lhe shareholder who must be empowered
to be subpocnaed.
The fili ng will be directed .by INCRA t~ th ~
corresponding Ministr)' lO whlCh lhe explouauon
projecl Ofthe rural property i~ rel.awd. .
DcspilC lhe above, INCRA IS slll1 workll~g
on the e laboralion ofan internal instrucuon
10 determine the guidelines of such previous
approvaJ. Considering Ihat lhe mandatory
character of such a proccdure is quite recent,
nobody is able to ascenain how long seeking
an ap p roval may lake. T his is lhe maill
problem facing foreign inveslors.
Conclusion
The cur renl adm in istratio n seems 10 be
\'ery aware of the damaging effects tbis kind
of res!riction may cause to the eco no my
of the counlr y and, Iherefore, should
somc how search for an escape c1au5c la
allow once again lhe acquisition of propeny
withou! limitations although maintaining
certa in requircments in arder lO e n able th e
Governmcnt la con duct an ongoing su rvt:y
on lhe acquisition of rural eSlale propcrty
b)' forei g ncrs.
On 18 April of Ihis year lhe ncwspapcr
O &laJo de São Paulo published Ihat at leasl
USS 15bn of invesunents fai lcd to enter Brazil
sincc AGU / lA 0 1/ 2010, according to a study
commissioncd by lhe Br.tzilian Assüciation of
Agribusiness anel Rural Mark.eting (ABMR&A).
According to recen t.l y publishcrl ncws,
lhe Federal Government is evaluating lhe
possibilily of crcaling a Regulato~y Agency
for Rural Lands (ARTR) , subord m:llcd la
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