Funding; Tokenization | Structuring Fundraising in Brazil via Tokenized Receivables Certificates: 4 Key Points for Companies and Investors

Raising funds in Brazil via the offering of tokenized Receivables Certificates (CR) through crowdfunding platforms is becoming an important option for small business companies.

In compliance with the conditions of Brazilian CVM Resolution 88, these public offerings of tokenized CR are carried out without registration with the Brazilian Securities and Exchange Commission (CVM).

See below 4 key points about the structuring of tokenized CR for funding small companies:

1. What is the Legal Structure of a Fundraising Through Tokenized CR Based on RCVM 88: There are several possible legal formats for structuring the offering of tokenized CR through RCVM 88, one of the main ones being the following: the debtor company (which wishes to raise funds) issues a corporate debt (e.g. debentures, commercial note) or assigns receivables in favor of a securitization company, which owns the crowdfunding platform.

The securitization company, in turn, distributes the tokenized CR through a public offering, under the terms of RCVM 88, Circular Letter 04/23 and Circular Letter 06/23, via a crowdfunding platform.

2. How is the Tokenization of the CR Issued in the Offering Carried Out? The placement of CRs with investors is carried out exclusively through the crowdfunding platform, and the CRs undergo a tokenization process by the securitization company through registration in the DLT (Distributed Ledger Technology) network.

The CRs are now represented by digital assets (tokens), according to the specific acronym and name in the blockchain. The Tokens are digital representations of the CRs and must comply with CVM Guidance Opinion 40.

3. Is the Offering Made With or Without Registration with the CVM? The public offering of the CRs is carried out under the terms of RCVM 88, Circular Letter 04/23, Circular Letter 06/23 and Law 14,430, and is exempt from registration and/or prior analysis by the CVM.

4. Offerings of Tokenized CRs May Include Collateral Package From the Debtor? Yes, the Debtor and third parties may provide collateral over fixed and other assets (e.g. fiduciary lien over assets and fiduciary assignment over credit rights, among others) and personal guaranties (e.g. aval and fiança) to reduce the credit risk of the tokenized CR offering.

It is a fact that the tokenization of financial assets will be a trend in the coming years in Brazil and worldwide, and raising funds through the issuance of tokenized Receivables Certificates (CR) through crowdfunding platforms, which is already a reality, has the potential to be one of the main sources of funding for small businesses.