The Decision
On April 23, 2026, the Brazilian Supreme Federal Court (Supremo Tribunal Federal – STF) resolved a key controversy affecting the Brazilian agribusiness sector: Brazilian companies controlled by foreign capital remain subject to the same restrictions applicable to foreign legal entities regarding the acquisition and lease of rural real estate.
The decision was rendered in the joint judgment of ADPF No. 342 (Action for the Protection of Fundamental Constitutional Precepts No. 342) and ACO No. 2.463 (Original Civil Action No. 2,463), with the opinion authored by Justice Gilmar Mendes.
The Legal Issue
The constitutional challenge in ADPF No. 342 centered on Article 1, Paragraph 1 of Law No. 5,709/1971, which subjects Brazilian companies in which foreign individuals or entities hold a majority interest and reside or are headquartered abroad to the same legal regime applicable to foreign persons.
The Brazilian Rural Society (Sociedade Rural Brasileira) argued that this provision lost its constitutional basis after Constitutional Amendment No. 6/1995 repealed Article 171 of the Federal Constitution, which previously distinguished between Brazilian companies controlled by domestic capital and those controlled by foreign capital.
The STF rejected this argument. According to the Court, Constitutional Amendment No. 6/1995 did not eliminate the constitutional foundation for such restrictions. Rather, such foundation is now found in:
- Article 190 of the Federal Constitution, which expressly authorizes the regulation and limitation of rural land acquisitions by foreigners; and
- Article 172 of the Federal Constitution, which governs the regulation of foreign investment in Brazil and focuses on the origin of capital rather than the nationality of the company itself.
ACO No. 2.463 and Legal Opinion SP No. 461/12-E
ACO No. 2.463 addressed a direct consequence of the constitutional dispute.
The São Paulo State Disciplinary Board of the Courts (Corregedoria-Geral da Justiça de São Paulo) had previously issued Legal Opinion No. 461/12-E, exempting notaries and real estate registrars in São Paulo from applying the restrictions of Law No. 5,709/1971 to acquisitions and leases involving foreign-controlled Brazilian companies.
Following STF’s ruling in ADPF No. 342, the Court declared the opinion invalid.
As a practical consequence, notaries and real estate registrars throughout Brazil must once again verify the ownership structure of acquiring entities and require the applicable authorizations from the National Institute for Colonization and Agrarian Reform (INCRA) before recording transfers or leases of rural properties involving Brazilian companies controlled by foreign capital.
Control Concept: Substance over Form
Corporate structures involving majority foreign ownership must now be assessed based on substantive control criteria rather than merely formal ownership records.
The relevant inquiry is not limited to what appears in the corporate documents. Instead, authorities will examine: who effectively exercises decision-making power; who holds dominant influence over the company; and who qualifies as the ultimate beneficial owner.
Pursuant to Article 116 of Brazilian Corporate Law (Law No. 6,404/1976), a controlling shareholder is an individual, legal entity, or group acting under a voting agreement or common control that: (i) Holds rights that permanently ensure a majority of voting power at shareholders’ meetings and the ability to elect a majority of the company’s managers; and (ii) Effectively exercises such power to direct corporate activities and guides the operations of the company.
Accordingly, the concept of control may encompass shareholder agreements, trustee and nominee arrangements, and any structure that concentrates economic and decision-making power in foreign hands.
Territorial Restrictions
Article 12 of Law No. 5,709/1971 regains full practical effect following STF’s decision.
Under the statute: (i) Foreign persons may acquire no more than 25% of the total area of a municipality; and (ii) No more than 40% of that 25% quota may be owned by persons of the same nationality.
Any acquisition exceeding these limits requires authorization by presidential decree.
Implications for M&A Transactions, Security Interests and Rural Credit
Due diligence reviews involving rural assets in M&A transactions and credit operations—whether through direct asset acquisitions or acquisitions of equity interests—must now assess not only current compliance but also the validity of historical acquisitions completed under the interpretation previously adopted by Legal Opinion No. 461/12-E.
For financial institutions, rural properties accepted as collateral in project finance and rural credit transactions may require reassessment where the borrower qualifies as a foreign-controlled Brazilian company under Law No. 5,709/1971.
The creation of fiduciary liens (alienação fiduciária) and other security interests over rural real estate in favor of foreign creditors has generally been accepted under Brazilian legislation and case law.
However, regulatory and enforcement risks remain relevant, particularly in connection with: foreclosure proceedings; consolidation of title by the secured creditor; and ultimate disposition of the collateral.
The Goiás State Court of Appeals has ruled that the granting of a fiduciary lien over rural real estate in favor of a foreign person or a foreign-controlled entity is not subject to the restrictions of Law No. 5,709/1971. Nevertheless, the court emphasized that a foreign creditor may not retain ownership of the property in satisfaction of the debt and must dispose of the asset in accordance with Articles 1,365 and 1,428 of the Brazilian Civil Code.
Following STF’s recent ruling in ADPF No. 342 and ACO No. 2.463, market participants should closely monitor future developments in case law concerning fiduciary security interests over rural real estate granted to foreign creditors and foreign-controlled entities.
Rural Leasing and Recharacterization Risks
Article 23 of Law No. 8,629/1993 extends the restrictive regime applicable to land acquisitions to rural lease agreements.
The STF’s decision increases the risk that courts and regulators may recharacterize contractual arrangements that effectively seek to circumvent the restrictions applicable to direct acquisitions of rural land by foreigners or foreign-controlled entities.
Legislative Outlook
The STF made clear that any relaxation of the current legal regime falls within the authority of the National Congress, subject to the parameters established by Article 190 of the Federal Constitution.
Currently pending before the Federal Senate, Bill No. 2,963/2019 proposes, among other measures: exempting acquisitions of up to fifteen fiscal modules from prior authorization requirements; and excluding foreign-controlled Brazilian companies from the restrictive regime established by Law No. 5,709/1971, except in specific circumstances.
Unless and until the bill is enacted, the restrictions established by Law No. 5,709/1971, as subsequently amended, remain fully applicable.
References
- Supreme Federal Court (STF) – ADPF No. 342 (case docket and procedural history):
https://portal.stf.jus.br/processos/detalhe.asp?incidente=4756470 - STF Informative Bulletin No. 1,214 – Official summary of the judgment (published May 4, 2026), pp. 9 et seq.:
https://www.stf.jus.br/arquivo/cms/informativoSTF/anexo/Informativo_PDF/Informativo_stf_1214.pdf - STF Official News Release – STF Upholds Restrictions on Rural Land Acquisitions by Brazilian Companies Controlled by Foreign Capital:
https://noticias.stf.jus.br/postsnoticias/stf-valida-restricoes-a-compra-de-terras-por-empresas-brasileiras-controladas-por-estrangeiros/