SUSEP opens Public Consultation on the draft Circular that deals with the Special Regimes of Fiscal Management, Intervention and Extrajudicial and Ordinary Liquidation
On December 22nd, the Superintendency of Private Insurance (SUSEP) published Public Consultation Notice No. 29/2022/SUSEP, which invites all interested parties to forward comments and suggestions within 30 (thirty) consecutive days to the draft of the Circular that provides for the Special Regimes for Fiscal Management, Intervention and Extrajudicial and Ordinary Liquidation applicable to capitalization companies, open private pension entities and local reinsurers.
In its statement, SUSEP mentions the need to update the regulations, as well as the consolidation of norms to facilitate handling and understanding by users.
SUSEP also mentions that the draft of the new Circular represents a continuation of the advances brought by CNSP Resolution No. 395/2020, regarding (i) provisions regarding the Special Intervention Regime (ii) the institution of the Single Register of Liquidators and (iii) the provision for legal entities to exercise the role of Interveners and Extrajudicial Liquidators in addition to dealing with matters of an operational nature that are no longer incorporated into CNSP Resolution No. 395/2020. An example of this is Annex I of the draft Circular, which consists of a form for registering interested parties in the Single Register of Intervenors and Liquidators.
Amongst the main highlights are:
- New definitions – ‘Single Registry of Intervenors and Liquidators’ and ‘Technical Area for Supervision of Special Regimes’: The draft Circular defines the ‘Single Registry of Intervenors and Liquidators’ as the “registry of natural and legal persons that express interest in exercising the role of Intervenor or Extrajudicial Liquidator within the scope of the market supervised by Susep”. It goes on that the aforementioned Single Registry must be organized and maintained by the ‘Technical Area for Supervision of Special Regimes’, in turn defined as the “body of SUSEP with competence to supervise the processes and activities related to the Special Regimes of Fiscal Management, Intervention and Ordinary and Extrajudicial Liquidation”. Both expressions were inserted in CNSP Resolution No. 395/2020.
- Remuneration of holders and Assistants of Special Regimes: The draft Circular standardizes and consolidates in a single entity the remuneration for all holders and Assistants of Special Regimes establishing that the remuneration of the Assistant will be equivalent to 80% (eighty percent) of that due to the Fiscal Director, the Intervenor and the Extrajudicial Liquidator. The Circular draft also changes segmentations in order to adapt to those established by CNSP Resolution No. 388/2020.
- Variable remuneration: The draft Circular maintains the forecast of fixed and variable installments in relation to the remuneration of the Extrajudicial Liquidator as already established in SUSEP Circular No. 478/2013. However, it updates the criteria for the holder of the Special Regime to be entitled to the variable installment establishing that (i) the monthly fixed installment will correspond to 60% (sixty percent) of the amount fixed in the respective applicable segment and (ii) the variable portion will consist of a reserve, with a contribution of the remaining 40% (forty percent) based on the provisions of the Bankruptcy Law (Law No. 11,101). The variable portion, as established in the draft Circular, will only be paid to the Extrajudicial Liquidator/Assistant who closes the Special Regime and after approval of the final accounts.
- Assistant as a possible substitute: Another innovation brought by the draft Circular concerns the possibility of the Assistant replacing the Fiscal Director, Intervenor or Liquidator and has to include the respective qualification in their appointment.
- Prohibition on the appointment of an Assistant in the case of an Intervenor or Extrajudicial Liquidator that is a legal entity: In addition to the innovation above, the draft Circular expressly provides for the impossibility of appointing an Assistant in cases where the Liquidator or Intervenor is a legal entity, which shall conduct the Special Regime by its own resources and collaborators.
- Enrollment and exclusion from the Single Register of Interveners and Liquidators: The draft Circular establishes that those interested in registering for the role of Intervenor and Liquidator must complete the form available in the annex to the draft Circular indicating the person responsible for conducting the Special Regime and its replacement, if any, which must be sent electronically to SUSEP, duly accompanied by the relevant documentation referred to in the draft Circular.
Once the application for registration has been received, the Technical Area for Supervision of Special Regimes will notify the interested party of receipt of the application or its non-acceptance outlining which documents were not delivered, without, however, providing a deadline for the manifestation.
Also, the said registration may be excluded at any time if these is a verified (i) circumstance that may affect the reputation of the registrant or (ii) false statements and documents submitted.
- Indication of Interveners and Liquidators: If there is a need to recommend an Intervenor and/or Liquidator, the draft Circular reiterates the need to make up to 3 (three) nominations as already provided for in CNSP Resolution No. 395/2020. It also establishes other issues, in addition to the requirements already provided for in CNSP Resolution No. 395/2020, which must be observed by the Technical Area for Supervision of Special Regimes.
Before formalizing the nominations, the Technical Area for the Supervision of Special Regimes will ask the pre-selected candidates to present documents that prove they have fulfilled the requirements set forth in CNSP Resolution No. 395/2020 and duly listed in the draft Circular, which must be submitted within a period of up to 5 (five) days (subject to extension).
- Action Plan in the Fiscal or Recovery Department in the Intervention: The draft Circular establishes the minimum elements that must be included in the Action or Recovery Plan. The highlight is that any abnormalities must be reversed in their entirety by the end of the program, eliminating the requirement provided for in SUSEP Circular No. 556/2017 of reversing 50% (fifty percent) of abnormalities by half the term of the plan.
- Sale of real estate: If the Action Plan or Reorganization provides for the sale of real estate, in addition to the need for prior approval by SUSEP provided for in CNSP Resolution No. 395/2020 based on Law 11,101/2005, the draft of Circular establishes that the disposal must occur within a period of up to 60 (sixty) days and the projected value must be the historical cost.
- Extrajudicial Liquidation Action Plan: The draft Circular establishes the minimum elements that must be included in the Extrajudicial Liquidation Action Plan, which must clearly contain the steps also defined in the Circular draft as well as their respective deadlines for compliance. If compliance with any of the stages depends on an administrative decision by SUSEP, or even on a court decision, the deadline for compliance will be suspended.
Regarding the total term of the Special Settlement Regime, the draft Circular establishes that, if it is not possible to make an estimate, the plan must be presented for a period of 2 (two) years, with annual updating. The Technical Area for Supervision of Special Regimes will have a period of 30 (thirty) days, (extendable for another 30 (thirty)) to decide on the plan presented by the Extrajudicial Liquidator as well as to approve any changes to the plan, and the non-approval of the plan, (partial or total), must be duly substantiated. In this case, the Liquidator must review the plan within 15 (fifteen) days, non-extendable, counted from the knowledge of the fact.
- Fiscal, Intervention and Extrajudicial Liquidation Report: The draft Circular also establishes the minimum elements that must be included in the Fiscal, Intervention and Extrajudicial Liquidation Report, which must be presented within 60 (sixty) days after taking office, with a view to consolidating what was already provided for in SUSEP Circulars 556/2017 and 555/2017.
- Periodic Follow-up Report on Extrajudicial Liquidation: The draft Circular establishes the minimum elements that must be observed.
- Complementary information: The Circular draft maintains the provision for the possibility of requesting complementary information by the Technical Area for Supervision of Special Regimes of SUSEP addressed by SUSEP Circular No. 478/2013 and establishes that the complementary information must be delivered together with the Periodic Follow-up Report on Extrajudicial Liquidation and consolidated in a single report.
- Accountability Report: The Circular draft ratifies the prediction about the need for accountability addressed by CNSP Resolution No. 395/2020. In case the accounts do not deserve approval and/or if there is pecuniary damage repairable arising from the conduct of the person responsible for the Special Regime, it has been established that the Intervenor and the Extrajudicial Liquidator will be subject to the appropriate measures.
- Committee of Inquiry: The draft Circular contains former provisions of CNSP Resolution No. 335/2015 revoked by CNSP Resolution No. 395/2020 regarding the composition and duties of the Committee of Inquiry.
- Special Procedures: Based on Law No. 9,447/1997, the draft Circular provides for the possibility of SUSEP applying special procedures in supervised bodies related to (i) transfer to another company of assets, rights and obligations of the supervised body or of their establishments (ii) alienation or assignment of assets and rights to third parties and agreement with the assumption of obligations by another company and (iii) constitution or reorganization of a company for the transfer of assets, rights and obligations aimed at the general or partial continuation of the business or activity.
- Decree of the Fiscal Management Regime: The decree of the Special Fiscal Management Regime does not exempt the supervised body from complying with the obligations to which it was subject before the establishment of the Special Regime and does not affect the course of business or the functioning of the supervised body or withdraw from its administrators the powers conferred by the bylaws of representation and management.
- Failure to comply with determinations of the Fiscal Director: In addition to the provisions of CNSP Resolution No. 395/2020, the draft Circular reiterates what is already provided for in SUSEP Circular 556/2017 with regard to the appropriate measures in relation to those who fail to comply with determinations of the Fiscal Director.
- Request for prior authorization to SUSEP: The draft Circular ratifies the provisions of CNSP Resolution No. 395/2020 regarding the need for prior authorization from the Technical Area for Supervision of Special Regimes of SUSEP for acts by the Intervenor that imply disposition or encumbrance of the supervised body’s assets and in admission and dismissal of personnel. It also defines that the request for authorization that must be substantiated with elements that justify the measure. In addition, the realization of the supervised body’s assets may occur regardless of the Action Plan presented by the interested parties. The Intervenor is responsible for justifying the choice of direct sale to the detriment of the public offering, or vice versa, always deciding for the option that brings the greatest economic and financial benefit to the supervisee.
- The Liquidator’s duty of care: Regarding Extrajudicial Liquidation, the draft Circular establishes that the Liquidation decree ceases the operations of the supervised body. In addition to the provisions of Resolution No. CNSP 395/2020, this provides that the Extrajudicial Liquidator has broad management and liquidation powers. They ensure the proper management of the supervised body’s assets investing its financial resources preferably in assets with a lower risk level such as public securities and bank deposits of institutions in Segment 1 (S1) of CMN Resolution no. 4,533/2017.
- Transit of cash: Regarding the transit of cash between the current accounts of the supervised body and the Extrajudicial Liquidator or third parties, such as Assistants, agents and collaborators, the draft Circular brings the express prohibition.
- Leasing or leasing of assets: In addition to the possibility, (provided with prior authorization from SUSEP), of alienating movable or immovable property of the supervised body, the draft Circular brings the possibility of leasing or leasing movable or immovable property (in order to avoid its deterioration), and the results must be reversed in favor of the estate if it is not possible to proceed with the sale of the asset.
- Valuation of assets: With regard to the valuation of real estate, the draft Circular maintains the same conditions set out in CNSP Resolution No. 335/2015, revoked by CNSP Resolution No. 395/2020 in the sense that the Liquidator must hire as appraiser (i) the Caixa Econômica Federal or entity accredited by it (ii) a body or entity belonging to the Public Administration of the State and the Federal District for evaluation and expertise activities or (iii) a specialized company that proves that it has provided an appraisal service to at least two bodies of the Federal Public Administration, directly or indirectly, in the previous twenty-four months.
- Commission owed to SUSEP: The calculation of the commission owed to SUSEP must be provisioned for the value of the asset in the opening balance sheet, adjusted for any recovered assets and will be considered an extra-bankruptcy credit. This must be paid to SUSEP plus monetary restatement by the IPCA-15 at the end of the Extrajudicial Liquidation through GRU – discounting the amounts paid to the Extrajudicial Liquidator and his Assistant if any.
- Special powers: The draft Circular establishes, as already provided for in CNSP Resolution No. 335/2015, that the granting of special powers to confess, recognize the validity of the request, compromise, waive rights, receive, give discharge and signing a commitment will only be up to after prior notification to SUSEP with demonstration of the need. If this is not possible in these cases, the idea is to grant powers to lawyers to represent the supervised bodies in the forum in general and their delegations.
- Advance of Resources: In addition to what was already established by CNSP Resolution No. 395/2020, the draft Circular establishes in the same sense already provided for by the revoked CNSP Resolution No. 335/2015, that requests for advance of resources to the SUSEP must be substantiated, with a breakdown of the nature of the expenses and the Liquidator may request an advance for a period of 2 (two) months within the same fiscal year. The Rendering of Accounts Report must be accompanied by copies of proof of payments made and the statement of bank transactions for the period, and any new requests for advances will be subject to the delivery and approval of the Rendering of Accounts Report for the period prior to the request.
- Conciliation Project: The draft Circular maintains what was already provided for in CNSP Resolution No. 335/2015 revoked by CNSP Resolution No. 395/2020, with respect to the Conciliation Project, which must be prepared by the Liquidator to put an end to administrative and judicial proceedings in progress, and the respective project must consider the order in which the credits are classified and be based on objective, transparent and impersonal criteria. The conciliation project can only be presented after the consolidation of the general list of creditors of the supervised body and is applicable only to legal and administrative proceedings in progress with start-ups dependent on approval by SUSEP. Furthermore, as the conciliation project is not pertinent to the specific case, it will be down to the Liquidator to present the proper justifications for not adopting the measure.
- Performance Assessment of the Extrajudicial Liquidator: While SUSEP Circular No. 478/2013 provided for the assessment of the Liquidator every 3 (three) years and the compulsory replacement every 4 (four) years counted from the appointment, the draft of the Public Consultation Circular provides for an annual assessment of the Extrajudicial Liquidator and excludes the provision regarding compulsory replacement.
- Transfer of Corporate Control: The draft Circular establishes that the change of corporate purpose to an activity that is not part of the National Private Insurance System. The transfer of corporate control of the supervised body will only occur upon decision of the Board of Directors of SUSEP and after payment of the creditors, whose right to receive arises from contracts related to operations related to the market regulated by SUSEP. This does not affect what is established in the classification of credits and privileges granted to policyholders and beneficiaries by Decree-Law No. 73/1966, Complementary Law No. 109 /2001 and, where applicable, the provisions of Law 11.101/2005.
- Creditor Payment Schedule: In addition to the necessary approval by the competent Director, already provided for in CNSP Resolution No. 395/2020, the draft Circular also establishes the need for a statement from the Technical Area for Supervision of Special Regimes.
- Election or Appointment of the Ordinary Liquidator: In order to prove compliance with the prohibitions set forth in article 102 of CNSP Resolution No. 395/2020, regarding the election or appointment of the Ordinary Liquidator, the draft Circular establishes that within the maximum period within 10 (ten) days of the general meeting of shareholders or creditors, the minutes of election/appointment to SUSEP.
- Report proving payments: In addition to reiterating the provisions of CNSP Resolution No. 395/2020, the draft Circular establishes the information which must be included in the respective report in the sense that it is up to the Ordinary Liquidator to forward a bimonthly report demonstrating the planned payments and those made in the period.
The draft proposes the revocation of the following provisions: Circular SUSEP No. 328, of July 13, 2006 SUSEP Circular No. 390, of December 28, 2009 SUSEP Circular No. 478, of September 30, 2013 and SUSEP Circular No. 548, of March 15, 2017.
Interested parties should send their comments and suggestions to the draft by 01/23/2023, to email@example.com using the specific standardized table, available on the Susep website click here.
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