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5 rules (with examples) you must not forget when you are closing a new transfer deal

Many of the readers of this blog are active protagonists of the football transfer market that opened last week in several countries.

As our readers thus know, a transfer of a football player is a complex transaction, which requires the perfect combination of multiple different factors and the convergence of interests that are sometimes divergent. Once the agreement over the basic terms of the deal is reached, difficulties seem to have been overcome for the satisfaction of all parties involved.

At that point, paperwork normally starts and the ball is passed to the lawyers (in-house and/or external), who are in charge of making sure that everything that has been agreed smoothly turns into reality.

However, finding an agreement over the exact legal terms of a deal may also involve entirely new and complex negotiations, with additional difficulties imposed by the extremely tight time limits and external pressure. When the divergences over the legal conditions result insuperable, the deal might be called off; in other occasions, wrong decisions may compromise the integrity, safety or effectiveness of the deal.

No doubt, this can be extremely frustrating for those transfer market operators who had spent their time and resources in finding an agreement that they deemed fit the needs of their clubs or players.

With this in mind, the aim of this article is to provide readers of this blog with a few brief and concrete insights on rules which might result critical in the moment of finalizing a transfer deal – and have sometimes given rise to cases where the common satisfaction for the reached agreement left space to legal battles and headaches.

1. DO IT ON TIME

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The “transfer deadline day” is always the most hectic day of transfer periods, as operators tend, for a variety of reasons, to leave deals for the very last minute.

In fact, clubs and agents may seek to hold the deal up until the last available moment, in order to try and obtain better conditions, while also considering parallel offers. Additionally, transfer deals are also often dependent on each other, so that when one deal is concluded, a series of consequent transfers, that had been put “on hold” depending on the positive outcome of the first, is triggered.

This comprehensible strategic behaviour needs, however, to be compliant with transfer regulations and the strict deadlines which they impose. As is known to our readers, in fact, pursuant to art. 6 par. 1 of the FIFA Regulations on the Status and Transfer of Players (“FIFA Regulations”), players may only be registered during one of the two annual registration periods fixed by the relevant association – the first and longer one (not exceeding 12 weeks) being normally before the start of the season, and the second and shorter one (not exceeding four weeks) in the middle of it.

As to the International Transfer Certificate (“ITC”) delivery, the process starts with both clubs involved uploading into the Transfer Matching System (“TMS”) all relevant transfer instructions together with a number of mandatory documents: when the information provided “matches”, the process is then moved to the associations for electronic ITC handling.

The fundamental rule to be aware of, in terms of time limits, is art. 8.1 par. 3 of Annexe 3 to the FIFA Regulations, pursuant to which “at the very latest, the ITC must be requested by the new association in TMS on the last day of the registration period of the new association”.

Since the regulations state that the ITC must be requested by the new association on the last day of the transfer window, and the condition for that to happen is that information submitted by both clubs into the TMS already matched, this necessarily means that all relevant paperwork should be completed and signed before such moment.

What happens, however, when such time-limit is not respected? The first and most obvious consequence is that the association of the new club will not be able to process the ITC request, making it impossible for the new club to register the player. However, the validity of contracts executed between the parties does not necessarily depend on compliance with administrative formalities and on the consequent transfer of the player’s registration to the new club. It might therefore be the case that, for instance, an employment contract signed between a player and the prospective new club remains valid and binding, even though such new club is not capable of registering, and therefore fielding, such athlete (until the subsequent registration period).

At this stage, one may wonder whether it would not be reasonable to introduce a certain degree of flexibility to the process, and whether it is not too strict, especially vis-à-vis the rights of a football player as an employee, to blockade the effectiveness of a transfer agreement because of administrative delays which in certain occasions amount to minutes, or even seconds.

The rationale to keep in mind in this respect is that time limits related to registration periods have to be applied strictly, since it is simply be impossible to strike a line between admissible and inadmissible delay. In other words, if the system would accept, say, a request filed “10 minutes” after the closure of the registration period, would it not be unjust to refuse a transfer which took place just one minute later? Since this reasoning could be conducted endlessly, it is therefore impossible to strike a fair line in this respect and, for this reason, FIFA applies a strict interpretation of the rule by not admitting any delay.

However, a couple of legal mechanism exist that allow for certain flexibility.

The first one, which is offered for instance by the English Premier League, is the “sheet deal”, which is a short essential document confirming that an agreement for the transfer of a football player has been reached by two clubs. Upon submission of the “sheet deal”, clubs are granted a two-hour extension of the deadline to submit the full, required paperwork.

The second one is a slight exception to the rule, that has been granted on a case-by-case by FIFA; it relates to situations where the new club duly entered all relevant transfer instruction in the TMS, together with all executed contracts (therefore confirming that a complete agreement between all parties involved was found) before the transfer deadline; whereas, for different reasons, the old club failed to do so. Here, since no “match” exists in the TMS, no ITC request is generated prior to the expiry of the registration period and the registration of the player with the new club is thus, in principle, denied.

However, in such a scenario, no doubts exist as to the fact that a full and complete agreement between the parties had been found “on time” and that the buying club fulfilled, on its side, with all relevant requirements within the deadline. Considerations of equity and justice therefore lead FIFA to allow for the association to which the new club is affiliated to request a special exemption from the validation exception in the TMS, which FIFA happened to grant, according to the wording used by the worldwide governing body for football, “on an exceptional basis only” and “without prejudice to the appreciation of identical or similar matters in future”.

However, besides being to a certain extent uncertain, the registration of the player with the new club is in similar situations delayed, since the administrative proceedings related to the possible grant of such special exemption normally take some time. As such, more than being a possibility upon which transfer market operators shall rely, this is rather an exceptional remedy to be adopted when it resulted impossible to follow a different course of events even with all diligence required.

But what happens when even the requirements for such exception are not met? The first immediate consequence is that the registration of the player remains with the old club, even though all relevant documents have been executed. Needless to say, legal disputes are likely to arise in such situations, and additional consequences depend on the precise terms of an agreement between the parties, as well as on their respective interests on “maintaining” the deal despite the impossibility to (immediately) transfer the player at an association level.

Thus, for instance, when the transfer of the Spanish goalkeeper De Gea between Manchester United and Real Madrid (and conversely of Keylor Navas) at the end of the 2015 summer transfer period was not completed on time, at a first stage both parties published official statements accusing the other of negligent behaviour, but then, to the best of our knowledge, no legal action was taken. At the end – either because of contractual provisions or through a subsequent mutual agreement – the deal was called off, apparently without further consequences of legal nature.

The recent case of the Portuguese midfielder Adrien Silva, which attracted considerable attention from the media, ended up differently. The documents for his transfer from Sporting to Leicester City were submitted (apparently 14 seconds) after the end of the deadline day of the 2017 summer transfer period. Initially, the Player sought relief to, first, FIFA and, in appeal, the CAS to obtain international clearance, without success. As said above, indeed, subject to the extremely limited exception of the new club timely submitting all relevant instructions in TMS, the sports deciding bodies apply a restrictive interpretation of the rules related to time-limits during the registration period. As such, Adrien Silva remained ineligible to play for the English club. However (again, it is now known whether because of contractual provisions or by agreement of the parties), the deal was, on this occasion, maintained, and the Portuguese international was registered for Leicester City at the first available opportunity (i.e. opening of the FA winter registration period).

Finally, in certain cases, the agreement of the parties, or their reluctance to file a claim against the other, do not prevail and legal disputes become inevitable. Thus, for instance, in the case of Yannick Djaló, the French club OGC Nice and the Portuguese club Sporting had, on the last day of the 2011 summer registration period, agreed the transfer of the player, executed all relevant agreements, but only finalized the process by uploading the documents into FIFA TMS 4 minutes past midnight. Subsequently, OGC Nice was therefore unable to register the player, with whom, for different reasons, both clubs terminated their respective employment contracts – resulting in the player being “free agent” and signing to Portuguese rivals Benfica during the 2012 winter transfer window. Sporting, however, lodged a claim against Nice before the FIFA Players’ Status Committee (“FIFA PSC”) claiming a breach of the transfer agreement, which, due to the particular circumstances of the specific case, resulted in the FIFA PSC condemning the French club to pay Sporting the amount of EUR 1.000.000,00 (reduced by the CAS in appeal to EUR 800.000,00) for having acted negligently.

The risks related to possible delays in the submissions of all required paperwork into FIFA TMS are therefore evident, being connected, from one side, with the issue of not being able to count on the desired player (without the possibility of resorting to an alternative choice due to…the closure of the registration period!), as well as with negative economic consequences, from the other.

Summing up, the advise here is to do your best to, as far as possible, reach a complete agreement over the terms of the deal reasonably in advance to the closure of the registration period, so as to reduce the above-mentioned risks, while also allowing your lawyer some extra-time to negotiate the best possible conditions for the transfer under a legal perspective.

 

2. MEDICALS: ALWAYS BEFORE!

In my experience as a lawyer involved in the transfer market, not rarely I have seen employment contracts signed “subject to” the condition of the player passing a medical exam with the club’s medical department.

In general terms, such a conditional clause is contrary to the FIFA regulations and would most likely be disregarded by the relevant deciding bodies when assessing a claim eventually lodged by a player discarded on the basis of his lack of proper health conditions.

In fact, in accordance with art. 18 par. 4 of the FIFA Regulations, “the validity of a contract may not be made subject to a successful medical examination and/or the grant of a work permit.” In other words, any such conditions that are included in a contract would not be recognised and the contract would still be valid without the disputed clause.

However, the rule is valid exclusively in relation with employment contracts between a professional and a club and does not apply, for instance, in connection with a transfer (or loan) agreement executed between two clubs.

It is thus theoretically possible to enter into a valid transfer agreement subject to the conditions of the player passing a medical exam and, only if and when the player is approved by the relevant medical department, enter into a written employment contract with him. This could be of use mostly for the potential new club, which would bind the seller to the agreement while gaining additional time for the conclusion of the medicals; whereas, for the seller, this would bring a certain degree of uncertainty to the deal for a period of time, during which the club is unable to offer the player to eventually interested third clubs.

To the contrary, if both employment and transfer contracts are signed subject to such condition, and the player subsequently fails the medicals, an undesirable and tricky legal situation would arise, where the transfer agreement would most likely be considered as ineffective, whereas the employment contract with the new club might be considered as valid and binding.

Unsurprisingly, legal disputes may unfold in such scenario. For instance, during the 2010 winter transfer period, the Italian club Lazio and the Spanish club Villareal had reached an agreement for the transfer on loan of the Uruguayan midfielder Ledesma to Lazio, including a condition precedent clause, specifying that the agreement was conditional upon the Player (i) signing an employment agreement with Lazio; and (ii) passing a medical examination under the supervision of Lazio’s medical staff. On the same day, the player and Lazio signed an employment contract without any such conditional clause.

Subsequently, however, Lazio’s medical department found the player unfit to compete and the Italian club therefore refused to proceed with the transfer. Villareal then sued Lazio claiming the amount of the agreed loan fee before the FIFA PSC and, in appeal, the CAS, but both bodies decided to dismiss the Spanish club’s claim, ruling that art. 18 par. 4 cannot be applied to contracts between clubs and giving thus effectiveness to the conditions precedent clause included in the loan agreement.

The conclusion that we derive from the above is that, even though medicals are a key-part of transfer negotiations, since a club, that is in the process of investing considerable resources in order to secure itself an asset, needs to be sure of all qualities of such an asset, it is essential that the new club sets in place a proper coordination and logistics between its different departments (i.e. recruiting, medical and legal) so that, ideally, medicals are executed immediately after the moment when a complete agreement on terms is reached, but before all relevant contracts (or, at least, the employment contract) are signed.

3. MAXIMUM AMOUNT OF TRANSFERS

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The experienced readers of this blog will also no doubt be familiar with art. 5 par. 3 of FIFA Regulations, according to which, “players may be registered with a maximum of three clubs during one season. During this period, the player is only eligible to play official matches for two clubs. […]”.

The rule is, as is known, subject to the limited exception of the player moving between two clubs belonging to associations with overlapping seasons (where he therefore may be eligible to play in official matches for a third club during the relevant season).

Furthermore, in certain instances, FIFA has allowed an exceptional registration of a player with four clubs during a single season, provided that one of such registrations was done solely for the purpose of the player then being immediately transferred, on a loan basis, to another club, which FIFA labelled as a “purely technical” transfer which would not count as a new (additional) registration for the purposes of art. 5 par. 3 of FIFA Regulations.

Other than this, the rule is to be applied strictly and may therefore lead to undesired situations when not properly taken into account.

As a matter of fact, practical experience shows that, since “season” is defined by the FIFA Regulations as “the period starting with the first official match of the relevant national league championship and ending with the last official match of the relevant national league championship” it is therefore rather common that, by the end of the first registration period, a player would already have been registered with two clubs (e.g. a player moving between two European clubs in August).

In such (frequent) cases, when a second potential move of the player comes into play during the second registration period of the relevant season, an assessment shall be made by the potential third club (as well as by the player) as to whether the player has already taken part to official matches with the first two clubs.

The matter, which has recently come to the attention of the Italian media in relation to a rumoured transfer of the player Marco Borriello (who already played official matches during the current season with both Cagliari and Spal) should not be underestimated.

For instance, during the 2015 winter transfer period, the French club OGC Nice signed the French international Hatem Ben Arfa, after he had started the season with Newcastle United, where he had played a single match for the U21 Professional Development League, and then had been loaned to Hull City, where had taken part to several matches in the Premier League.

It was, therefore, undisputed that OGC Nice was the third club registering Ben Arfa during the 2014/2015 season, whereas it was unclear to the French club whether the U21 match played with Newcastle United was an official one, which would have triggered the player’s ineligibility for the rest of the season with the French side. The answer was given by FIFA, whom, upon formal consultation of the French Professional League (FFP), stated that the match at stake was to be considered as an official one, being encompassed by the definition given by the FIFA Regulations of official matches as “matches played within the framework of organised football, such as national league championships, national cups and international championships for clubs, but not including friendly and trial matches”.

Since the rule foresees the possibility of registering the player with three clubs, determining however that he can only play for two of them, the LFP therefore proceeded to homologate the contract, but Ben Arfa remained however ineligible to play for OGC Nice.

In other words, even though the rule is a rather simple one, and our readers are no doubt familiar with it, our advise is to anyway always take it into proper account, since it has happened that an international player, hired by an experienced club such as OGC Nice, was forced to remain without playing for a significant period of time, due to restrictions that possibly had not been fully evaluated in advance.

4. THE RISK OF UN-REGISTERED PLAYERS

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Hiring new players is a fascinating move for a club. It draws the attention of the media, booster the enthusiasm of the supporters, creates competition with other team-mates, satisfies the requests of the coach, but…what if this means that another player becomes in excess and is thus left out of the squad?

The issue of “un-registered” or “de-registered” players is a delicate one. A player may end up being left out of the squad for a variety of reasons, such as because the club is trying to force him into a renewal of his employment contract or to accept a transfer, or because of quotas imposed by the relevant league or national association, in particular on the number of foreign players that may be registered. This is indeed likely to be the most recurrent cause of de-registration of a player: a club hires a new foreign athlete in the hope that, by the end of the registration period, it will be able to “get rid” of another foreign player, which is no longer wanted and is meant to be replaced by the new one. However, for some reason, the transfer does not happen and the player remains, being, however, left out of the team’s list of players in order to make space for the newcomer.

Under a legal point of view, similar situations might be tricky and can only be resolved upon a detailed case-by-case analysis.

The starting point is that players are not automatically entitled to be fielded. Clubs have discretion on whether to line a player or not, especially when all other contractual obligations are complied with. The club has also discretion to oblige the player to train with the reserve team under justified reasons, for instance if he returns to full fitness after an injury or when the fitness of the player is proven to be below the level required to participate in the first team activities. However, if the employment agreement stipulates that the player has to train and play his matches with the first team, the club will not be in a position to exclude him from training with such team. Conversely, the jurisprudence of the FIFA Dispute Resolution Chamber (“FIFA DRC”) clarified that a player who terminates his contract for the same reason, but without a clause to this effect contained in his employment agreement, does so without just cause and normally would have to pay compensation to the club.

Besides the possibility of a contractual clause impeding the club to relegate the player to the youth or reserve team, multiple additional facts can surround the exclusion of the player from first team activities, which can cause him to terminate the contract with just cause. In some cases, the player is excluded from all sorts of training and is no longer welcome at the club, whilst in others the player is given absolutely unreasonable instructions from the club.

In the of the Russian player Igor Strelkov against the club CJSC FC Krylia Sovetov, the CAS clarified that, as explained above, there might exist circumstances allowing the club to mandate the player to train alone or with the reserve squad when his level of fitness is below the team’s one or when he’s recovering from an injury. However, football is a team sport and as such it is necessary that most training is conducted in a team and with a football. In the case, the player terminated his contract with just cause as the instructions of the club were unreasonable: training alone, receiving a training schedule without any defined objective to be obtained and having to complete said schedule with temperatures amounting between -10 and -15 degrees Celsius. In the same line, the CAS decided in the case between FC Dacia Chisinau and Goran Stankovski, that it was an unreasonable request from the Moldovian club for the Macedonian player to train on the 1st of January at 07:00, when all his teammates were enjoying holidays.

Non–registration or de–registration of a football player might indicate that the exclusion of the player is with a definitive effect, with the consequence that, under certain circumstances, he might be entitled to terminate his employment agreement with just cause. The FIFA DRC found, for instance, that a player who, besides being banned from doing all team activities and having a one month unpaid salary, was not registered by the club, had just cause to terminate his employment contract, despite the absence of a clause obliging the club to allow the player to train with the first team. If a player does not receive remuneration consistently and is not registered with the national association, he has just cause to terminate the contract, even if he’s allowed to train at the club. Both the FIFA DRC and the CAS pointed out in numerous cases that fundamental rights under employment agreements are, not only a timely payment of remuneration, but also the possibility to compete and access to training.

However, the case – by – case – analysis, necessary to determine whether a player is allowed to terminate his contract with just cause, leaves room for uncertainty. In the case of Ismaël Bangoura against Al Nasr Sports Club, the Guinean player was deregistered by the Emirati football club, as he was suspended for receiving a red card and was unavailable to the club due to his participation in the CAF Africa Cup of Nations. Therefore, the deregistration of the player by the club only had a limited effect. The player was still allowed to practice with the club, he received all his remuneration on time and there was no evidence that the deregistration was of a definitive nature. Based on the above and the fact that the player had not complained about the deregistration for three months before terminating his contract, the CAS – Panel decided that “while deregistration might in principle constitute a valid reason justifying termination, the Panel concludes that in the specific circumstances of the case at hand it does not”. The player was ordered (together with his new club FC Nantes) to pay a high sum as compensation to the club and was imposed a four months restriction on playing in official matches.

In some recent cases, such as those involving the Argentinean footballer Mauro Zarate (against Lazio) and the Slovenian player Erik Salkic (against the Russian club Arsenal), the players were found not to have just cause to leave the club, but, due to the specific circumstances of the cases, and particularly the fact that it seemed that the clubs were no longer “genuinely interested” in retaining them, the CAS found that no compensation would be payable to clubs.

The issue of the so-called “right to play” may therefore have an impact on the behaviour of clubs when hiring new players. When a club loses interest in a player’s services, and excludes him in different manners or even de-registers him, it risks ending up in a lose-lose situation. Either the breach is so serious that the player will be entitled to terminate the employment agreement with just cause and demand compensation, either the player will not have just cause, but he might be able to prove the lack of `genuine interest` by the club in his services and therefore not be condemned to pay compensation.

The advise to clubs here is therefore to act prudently and rationally when hiring new players, considering, in particular, the situation of players that, in light of the newcomer, may become exuberant or redundant, leading to undesirable legal disputes with potential economic negative consequences for the club.

5. TRANSFER CONDITIONED TO PAYMENT

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In most occasions, the reason why a club decides to transfer a player is of financial nature. As such, the position of a selling club can also become delicate, when it comes to making sure that the renounce to a talented athlete is actually recompensed. In fact, whereas the transfer of the player’s registration from one club to another is normally immediate, payment conditions can vary, with instalments delayed even during the course of years.

The main concern of the selling club is therefore to take all measures to grant the receipt of the payments, in exchange for which it has consented to release its athlete. But, one may say, wouldn’t it be a simple and feasible solution to guarantee that the money is received before the transfer of the player, by contractually conditioning the release of the player’s ITC to the receipt of a (first) payment by the buying club?

The answer, at least according to the FIFA Disciplinary Committee, is negative. The worldwide governing body for football considers, indeed, that using the FIFA TMS as a negotiation tool, such as when the delivery of the ITC is conditioned upon the payment of a certain amount, represents a misuse of the TMS and therefore a breach of the relevant regulations.

The risk for clubs adopting such conduct is to be sanctioned by the FIFA Disciplinary Committee – according to a decision involving the Argentinean club CA Independiente and the Italian club Genoa CFC during the 2012 summer registration period.

The clubs had agreed to condition the issuance of the ITC for the transfer of the player Julian Alberto Velazquez upon the payment of a significant amount by Genoa CFC, by including a clause in the contract requiring the first payment to be done before any step was taken to process the transfer in the TMS.

Subsequently, without any actual payment taking place, the clubs waited for thirty days following the execution of the contract before taking any steps in TMS; finally, on the last day of the Italian registration period, Genoa entered the relevant instructions, whereas Independiente did not, which resulted in the transfer being stuck.

FIFA took a rather severe stance in the case, while considering that conditioning the issuance of the ITC was a serious breach of the Regulations, which jeopardised the transparency of international transfers, representing, in particular, a violation of art. 9 FIFA Regulations, which stipulates that the ITC shall be issued free of charge without any conditions, as well as of art. 2 para. 4 of Annexe 3 to the FIFA Regulations.

The decision, which was not appealed to the CAS, was criticized to a certain extent. By stating that the issuance of the ITC must be without conditions, the position of selling clubs is weakened. However, the decision is justified when looked at from the player’s side, as it would be unfair to him to “put on hold” his position, as he would remain uncertain of whether his transfer takes place or not, being dependant on a payment upon which he has no control.

Taking into account the above, selling clubs are advised to look for alternative solutions. The possibility could be explored, for instance, of entering into a conditioned preliminary agreement, by means of which the selling club would assume the obligation of entering into a definitive transfer agreement only subject to receipt of a certain payment; or, of conditioning, not only the (preliminary or definitive) transfer agreement, but the entire transfer, meaning both the transfer contract as well as the employment contract, so as to be able to formally count on the player’s agreement to the transaction.

Still, there is, to the best of our knowledge, no jurisprudence validating the above options, even if, from the other side, the same cases of Independiente and Genoa CFC were not appealed to the CAS and thus, theoretically, a similar situation involving other clubs in the future might be overturned. More traditional solutions include requesting the buying club to provide bank guarantees or promissory notes, or contractually sanctioning the eventual delays in payments with significant penalty clauses or default interests (within the limits of what is acceptable according to the applicable law), while also reminding that the recent introduction of art. 12-bis into the FIFA Regulations helped speeding up the recovery of transfer-related credits.

6. CONCLUSIONS

In this article, we briefly outlined a few legal issues, which could potentially be critical at the moment of finalizing a deal. Obviously, transfers of players, especially when of an international dimension, are complex transactions and involve several other legal aspects, which vary from case to case and which need to be attentively addressed in order to avoid that a potentially successful deal turns into a failure.

Finally, we deem it important to make our readers aware of the fact that substantial reviews of the rules regarding contractual stability included in the FIFA Regulations have been approved by FIFA and will most likely be published and become effective in the next months.

The amendments were the result of long negotiations between FIFA, FIFPro, the European Club Association and the World Leagues Forum under the umbrella of FIFA’s newly formed Football Stakeholders Committee, which includes confederations, member associations and professional football stakeholders. The negotiations had started as a consequence of the legal complaint lodged by FIFPro against FIFA before the European Commission in September 2015, which will now be withdrawn.

On 6 November 2017, FIFA announced the agreement by detailing that “the new rules will streamline dispute resolution between players and clubs, particularly for decisions in cases of overdue payables” and that “the changes will also introduce a new provision to avoid the abusive conduct of parties, such as players being forced to train alone.”

The rules have not been officially published by FIFA and we therefore prefer to avoid commenting on them at this stage.

However, since such rules may have an immediate impact on the long-term planning of your club, and people involved in the football legal community may already have had access to them, we recommend you to consult your lawyer on this matter already during the registration period currently opened, so at to be sure to structure transactions in line with the needs determined by the new regulations.

Stefano Malvestio
Attorney-at-Law at Bichara & Motta Advogados
For further information about the content of this article, please feel free to contact the author at:
stefano.malvestio@bicharaemotta.com.br – LinkedInTwitter 

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