International transfers of Brazilian football players to leagues abroad generate millions of dollars annually, reaching US$935 million in 2023.
In them, the purchasing club acquires the federative rights, including the economic rights, of an athlete, paying the price in cash or in installments over 1, 2 or 3 years.
The sale in installments of the player’s economic rights constitutes receivables that the selling club now holds against the purchasing club, creating an opportunity for Brazilian and foreign investors (e.g. funds) to anticipate the payment flow of the transfer price. Transactions involving clubs from top-tier European leagues (e.g. Premier League, La Liga, Bundesliga, Seria A, among others) are preferred by investors, due to the lower credit and legal risk involved.
The anticipation of transfer receivables in football is in the interest of investors and, at the same time, a crucial tool for clubs to manage their cash flow in a global transfer market that represented, in 2023, more than US$9.6 billion.
See below 4 key legal points for local and foreign investors in purchase receivables transactions from international transfers of Brazilian football players:
1. Legal Due Diligence Involving the International Transfer of the Athlete: It is essential to carry out legal due diligence involving, among others, (i) the parties that hold the economic rights over the athlete in question, (ii) the regularity of the athlete’s registrations in Brazil and the transfer process to the destination club, (iii) the terms of the transfer and the purchase contract between the selling club and the buyer, which may restrict the assignment of receivables to third parties.
2. Solvency of the Buying Club and Default Risk Mitigation Mechanisms: Carrying out a detailed assessment of the financial condition and performance history of the buying club are important items for the selling club and also for the financier who wishes to anticipate receivables.
A mitigating factor is the fact that top leagues, such as the Premier League, provide that the defaulting club may be excluded in the event of non-payment of amounts related to international transfers.
3. Legal Due Diligence at the Selling Club: In receivables anticipation transactions, Brazilian and foreign lenders must pay attention to (i) the valid formalization of the international transfer of the target player and the corporate approvals of the selling club and the purchasing club, (ii) correct corporate approval and formalization by the selling club of the receivables acquisition transaction.
4. Formalization of the Receivables Acquisition Agreement and Notification of Assignment of Receivables: One of the key points for the legal protection of foreign and local investor/lender in a receivables anticipation transactions is the negotiation of the Receivables Purchase Agreement between the financier and the selling club, where the terms and conditions of the transaction are described.
Although Receivables Acquisition Contracts signed by foreign lenders are governed by foreign law (e.g. English law), it is important that the acquirer of the receivables, whether Brazilian or foreigner, observes the rule of art. 290 of the Brazilian Civil Code which requires, in credit assignments, that the debtor (buying club) be notified and expressly acknwledges the assignment of the receivable.
With a million-dollar annual volume, international transfers of Brazilian football players to leagues abroad represent an opportunity for local and foreign financiers, and selling clubs to anticipate the payment flow of the price.
