Rafael Tridico Faria
Lawyer at Marcos Martins Advogados
On June 1, 2020, the National Monetary Council (CMN) published Resolution 4822, which regulates the joint and several guarantee company and the counter-guarantee company, both created by Complementary Law No. 169, of December 2, 2019, which will integrate the National Financial System.
The purpose of the joint guarantee company is to grant guarantees to its participating members (small business owners, micro-entrepreneurs and the legal entities set up by them) in the credit operations contracted by them[1].
In practice, the joint guarantee company will manage a “risk fund” of resources raised through agreements signed between its participating or non-participating partners, and may also sign agreements with public funds. These resources from the risk fund will be offered as guarantees in contracts between its members and financial institutions. This mechanism is intended to make it easier and cheaper for small and micro-entrepreneurs who participate in a joint guarantee company to access credit.
In turn, the purpose of the counter-guarantee company is to offer counter-guarantees to the joint-guarantee company, in order to protect the joint-guarantee company from possible defaults by its participating partners who have benefited from guarantees provided by the joint-guarantee company.
The Resolution also establishes that joint guarantee companies may enter into agreements with supporters, even funds intended to provide guarantees, which will provide resources to the company.
The CMN established prudence and governance requirements for these companies, notably with a view to safeguarding the soundness of these new institutes, allowing them to properly fulfill their mission of granting guarantees. Some of the requirements are: a limit on total exposure in guarantees, which may not exceed twice the total equity added to the resources of the company’s supporters; and a limit on the total value of the resources of the company’s supporters, which may not exceed eight times the value of the equity.
[1] CMN regulates joint guarantee companies and counter-guarantee companies. BCB, June 1, 2020. Available at: https://www.bcb.gov.br/detalhenoticia/17087/nota.
