Brazil Securities Commission (CVM), through its Superintendence of Securitization and Agribusiness and Superintendence of Accounting and Auditing Standards, issued Joint Circular Letter CVM/SSE/SNC 2/2025 to address questions arising from Joint Circular Letter 1/2025 on the proper income distribution policy for Investment Funds in Agribusiness Production Chains (FIAGRO). The clarifications are framed against Law 8.668, CVM Resolution 39 and Normative Annex VI to CVM Resolution 175. The guidance states that a FIAGRO has no income to distribute when the sum of its accumulated result at the end of the prior financial year and the result of the current year is negative, even if the current-year result on a standalone basis is positive. If the fund has distributed income in advance of annual profit but, based on that calculation, ends the year with profit below the amount distributed or with a loss, the excess distribution must be recognised as a return of invested capital to unitholders. Provisions on investments or receivables must also be included in the distributable-profit calculation base, reducing the amount available for distribution, and the CVM notes that excess distributions should not occur where there is an indication that interim results may reverse by year-end.
Brazil Securities Commission (CVM) 2025-05-21
Brazil Securities Commission clarifies FIAGRO income distribution rules including loss tests and return-of-capital treatment for excess payouts
The Brazil Securities Commission (CVM) issued Joint Circular Letter CVM/SSE/SNC 2/2025 to clarify income distribution policies for Investment Funds in Agribusiness Production Chains (FIAGRO). FIAGRO cannot distribute income if the accumulated result is negative, and any excess distribution must be recognized as a return of invested capital. Provisions on investments or receivables must be included in the distributable-profit calculation, reducing the amount available for distribution.