Introduction
Suspension and its effects
Quick solution in some cases
Steps to lift suspension
Comment
Payments to foreign owners or mortgagees by Brazilian aircraft operators are subject to strict foreign exchange controls. The Brazilian operator must register the financial terms of the lease or loan with the Central Bank of Brazil through a computerised system (SISBACEN). The Central Bank registration in the SISBACEN system is commonly referred to as the "financial transaction registration" (ROF). Creditors receiving payments from Brazilian payors (eg, lessees) must obtain a Brazilian corporate identification number (CNPJ) as a prerequisite for the Brazilian operator to obtain a ROF. The only common exception to such registration applies to leases with terms of less than 12 months.
In 2016, rules promulgated by the Brazilian Revenue Service (SRF) increased the burden on registrants required to obtain a CNPJ registration number. The 2016 rules require registrants (including foreign companies) to submit to the SRF information relating to the entity's ultimate beneficial owners (UBOs), alongside a set of corporate documents. From 2016 onwards, new CNPJ registrations were required to comply with the 2016 requirements. There was some doubt as to whether registrants with CNPJ numbers issued prior to 2016 would have to comply with those rules. From 2016 until late 2021 it appeared that the older CNPJ registrations had been grandfathered and did not require compliance.
During the second half of October 2021, the SRF, without any prior notice or announcement, suspended the CNPJ registrations of many foreign companies. The SRF did not announce or immediately disclose the reason for the suspensions; however, over time it became apparent that the SRF was suspending CNPJ numbers due to failures to comply with the 2016 requirements. Most of the companies involved in aircraft finance whose registrations were suspended were special purpose entities acting as lessors. The suspension also affected three major trust companies active in aircraft leasing as owner trusts.
Since the SRF made no announcement of the suspensions, many lessors and banks were unaware that their CNPJ numbers had been suspended. Obtaining information from the SRF was difficult. When a CNPJ number is issued, the SRF registers an individual in Brazil who is considered the registrant's local agent. For CNPJ numbers that foreign (ie, non-Brazilian) lessors, banks and other creditors obtained years ago, however, many registrants were unaware of the names of their local agents. The SRF, however, refused to provide information to anyone other than the agent registered in its records. This extended the period of time many registrations remained suspended.
The suspensions created an issue for aircraft deliveries because the Brazilian lessees were unable to obtain ROFs and consequently unable to remit rentals and other amounts due under leases. In the case of lease novations and assignment assumption agreements, ROFs must be amended to take note of the new lessor and, as a result, those types of transactions were affected by the suspension. In addition, lease extensions usually require amendments to ROFs and could not be processed for lessors with suspended CNPJ registration numbers.
Another problem was related to filings with the Brazilian Aeronautical Registry (RAB). The RAB requires the submission of ROFs together with certain lease amendments. The suspension of a CNPJ might affect a lessor's ability to deregister an aircraft, though this is unlikely given the terms of the Cape Town Convention on International Interests in Mobile Equipment.
Brazilian operators also reported difficulty obtaining import approvals for incoming leased aircraft.
Most importantly, payments under existing ROFs were not interrupted by the suspension of any CNPJ number. But there is no assurance that in the future the remittance of payments to entities with suspended CNPJ registrations will not be interrupted.
A solution some lessors took to enable them to carry on with deliveries of leased aircraft was to novate the existing lease agreements to an owner trustee with a valid CNPJ number.
To lift the suspension, a basic entry document (DBE) must be submitted to the SRF online with a request to:
- change the registered agent; and
- provide UBO information.
In addition, a power of attorney granted to a person resident in Brazil to act as the registrant's agent with special powers to receive, process and manage the registrant's assets in Brazil is also necessary. All documents must be notarised, apostilled (or consularised, if emanating from a jurisdiction that is not a party to the Hague Convention for the Suppression of Unlawful Seizure of Aircraft) and translated into Portuguese by a Brazilian public translator. On average, the SRF takes between four and 21 days to lift the suspension from the day documents have been properly submitted to the SRF. In a few cases, however, the process took several months. At this time, all of the major trust companies active in aircraft finance have revalidated their CNPJ numbers.
The SRF provided no advance notice of its intentions in relation to CNPJ registrations. Therefore, lessors and banks active in Brazilian aircraft finance should verify the validity of their CNPJ numbers and take steps to ensure that the numbers are valid.
For further information on this topic please contact Kenneth D Basch or Priscila Uliana at Basch & Rameh by telephone (+55 11 3064 8599) or email ([email protected] or [email protected]). The Basch & Rameh website can be accessed at www.baschrameh.com.br.