The Brazilian Receivables Fund, known as “Fundo de Investimento em Direitos Creditórios – FIDC”, can be an attractive vehicle for economic groups that have a volume of accounts payable to suppliers in Brazil, aiming at capturing “marginal gains”.
Nicknamed as “Supplier” FIDC, this type of fund allows the economic group’s holding company or controlling shareholder to set up the fund to advance supplier receivables payable by one or more companies of the group, with tax advantages for the fund, controlling shareholders, and the operating company.
We highlight below 5 key points about Supplier FIDC and why economic groups operating in Brazil should have one:
1. What Is the Supplier FIDC? It is a Brazilian receivables fund, known as Fundo de Investimento em Direitos Creditórios – FIDC, regulated by the Brazilian Securities and Exchange Commission (CVM) regulation 175.
2. How a Supplier FIDC Is Managed? Investment funds, such as the Supplier FIDC, are vehicles managed by an administrator and manager registered with the CVM, that follow the rules established in the Fund’s Charter document (Regulamento) with regard to the use and management of invested funds by investors, parties’ obligations, compliance, reporting to investors, auditing and other aspects.
3. What Type of Receivables Supplier FIDCs Can Acquire? The type of receivables, and legal instruments that constitute them, to be acquired by Supplier FIDCs must be provided for in the Fund’s Charter document (Regulamento), which may include credit rights arising from duplicates, commercial contracts, invoices, among others.
4. What Tax Benefits Does the Supplier FIDC Have: Supplier FIDC is a vehicle with favorable taxation. Transaction for the purchase of receivables within the fund are exempt from Brazilian taxes IR, IOF, CSLL, PIS and Cofins, with taxation only on the distribution of profits and redemptions by the shareholder.
5. Why Does the Supplier FIDC Generate Benefits for the Suppliers of the Economic Group? FIDC Supplier provides liquidity to the suppliers of the economic group, who in many cases sell to be paid 30, 45, 60 days later to the company and run the risk of mismatch of working capital according to their cycle of product or service.
With the cost of incorporating, administering and managing Supplier FIDCs increasingly competitive, it is a private credit investment vehicle to be considered by economic groups in Brazilian given its benefits for investors, suppliers and the drawee/paying company.
