Due diligence

Demonstrating title or legal ownership

How does one demonstrate title to or legal ownership of a vessel registered under the laws of your jurisdiction?

Legal ownership of a vessel is demonstrated by a certificate of ownership issued by the Port Authority (vessels with up to 100 gross tonnage) or the Maritime Tribunal (vessels with more than 100 gross tonnage).

Liens

How can one determine whether there are any liens recorded over a vessel?

Contractual liens such as ship mortgages are recorded with the Maritime Tribunal. Any person may run a search in such tribunal to determine whether there is a lien recorded over a vessel. Certain non-contractual liens are not recorded with the Maritime Tribunal (at least until a court order is obtained), including those deriving from the activities of the owner, such as maritime liens. For such liens, it is possible to run searches and obtain certificates with the various courts, notaries and company registers where the owner is located or has activities.

How does one determine whether there are any security agreements, liens, charges or other encumbrances granted by a vessel owner or affiliated party who might be a borrower, guarantor or other credit party in connection with a vessel finance transaction?

Contractual encumbrances (1) if created over a vessel, are registered with the Maritime Tribunal and possibly with Registries of Titles and Documents and (2) if created over other assets of the vessel owner (or its affiliates), are usually registered with such other assets’ relevant registries and possibly with Registries of Titles and Documents (eg, insurance assignments). It is possible to run searches with the Maritime Tribunal, Registries of Titles and Documents and other relevant registries where the vessel owner and its affiliates are located or carry out their activities. It may not be possible, however, to determine if there exist securities over certain types of assets without the cooperation of the vessel owner (eg, charges over the shares of a closely held corporation, as these charges are recorded in such corporation’s books only, which are not publicly available).

Public registry searches

Can one determine whether an obligor registered in your jurisdiction is duly organised and in good standing from a search of a public registry?

It is possible to run searches with (and obtain certificates from) public authorities and registries and governmental agencies to determine whether an obligor is duly organised and in good standing, including if an obligor is authorised to carry out its activities, has outstanding tax payments, is subject to bankruptcy and other insolvency proceedings or has unpaid debts subject to collection actions. There may be a practical difficulty in carrying out these searches, as different states have distinct authorities, registries and courts.

Can the shareholders or other equity interest holders, directors and officers or other authorised signatories of an obligor organised in your jurisdiction be determined from a search of a public registry? If not, how are these parties customarily identified?

Corporate documents and extracts indicating the managers of a company can be obtained from the Board of Trade. These documents will also contain information on the equity holders of a limited liability company but not on the shareholders of a publicly traded or closely held company. Nevertheless, equity holders are not entitled to execute documents on behalf of a company. Execution through powers of attorney would require an obligor to provide copies of the relevant powers of attorney. Officers’ certificates are usually provided by obligors to lenders to disclose corporate documentation and confirm corporate authority.

Debt obligation

What corporate or other entity action is necessary for an obligor to enter into or guarantee a debt obligation? When is action by the board of directors or other governing body required? Must shareholders approve a guarantee?

Depending on the type of company and security and the company’s organisational documents, corporate approval may be required for an obligor to enter into or provide a security. Limited liability companies are required by law to obtain shareholders’ approval to create a security over real estate properties. Corporations are required by law to obtain directors’ approval to give a security over real estate properties or guarantee for third parties’ debts. Other securities may require similar approval. As common practice, the articles of association and by-laws of Brazilian companies include some sort of corporate approval to enter into loans or other finance transactions.

Obligations of foreign lenders

Must foreign lenders qualify to do business in your jurisdiction to extend credit to a borrower organised in your jurisdiction? Will foreign creditors be deemed resident as a consequence of making a loan or other extension of credit to an obligor within your jurisdiction?

No, foreign lenders need not be licensed, qualified or otherwise entitled to carry on business in Brazil to extend credit to a Brazilian borrower. However, foreign lenders will be required to obtain a taxpayer number from the Brazilian tax authority, but they will not be deemed to be residents or domiciled in Brazil by reason only of extending credit to a Brazilian obligor.