Legal view: Fiduciary Lien

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08 February 2012

Christian de Lima Ramos and Ben-Hur Cabrera of Sao Paulo-based law firm Ramos, Zuanon e Manassero Advogados examine the growing use of fiduciary lien on credit transactions in Brazil to create security over collateral.

The utilisation of the fiduciary lien on credit transactions involving a Brazilian party, to create security interests over relevant collateral has increased steadily in the last few years, providing an interesting alternative to the traditional instruments of pledge (movable assets) or mortgage (real properties). Generally, creditors consider the fiduciary lien stronger than the traditional instruments because: (i) pursuant to article 49, §3 of Law nr.11,101/2005, the credit secured by a fiduciary lien should not be subject to the effects of the judicial recovery procedure eventually filed by the borrower/grantor; and (ii) the recovery procedures applicable to a credit secured by a fiduciary lien are generally more expeditious than the legal procedures available to those credits secured by pledge or mortgage.

Upon execution of the fiduciary lien agreement, the creditor thereof shall be considered the new owner (fiduciary creditor) of the relevant property, which was originally owned...

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