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IntermediateBrazilian REITs · Lesson I3.3 · Module I3

The bylaws: the contract that rules everything

Module I3: The fund's documents

10 slides~4 minquiz at the end

In this lesson

  • The chapters of the bylaws
  • Investment policy vs fund name
  • Authorized capital and banned fees
See the slides
Printed contract with a pen on the page

Brazilian REITs · Lesson I3.3

The contract that rules the fund

Where it says what the fund can do — and what can change without asking you.

Blogtrepreneur · Wikimedia Commons · CC BY 2.0

Inside the bylaws

Six chapters worth reading

  • Purposethe segments it invests in
  • Investment policyassets, limits and the manager's leeway
  • Feesadministration, management, performance
  • Payoutshow and when income is paid
  • Meetings and quorumswhat needs a vote, and how many
  • New offeringsthe cap for issuing without a vote

CVM Res. 175, Annex III, art. 11, and general part, art. 48.

The misconception

The name does not bind the manager. The policy does.

"Logistics REIT"

  • the name is just a name
  • it does not say what may be bought

The policy in the bylaws

  • lists assets and limits
  • the manager cannot step outside it

Illustrative: if the policy allows offices, the "logistics" fund may buy one.

The issuance cap

How far it can issue without asking

R$ 1Bauthorized capital→no vote neededon the written terms
R$ 1.2Bwanted−R$ 1B=R$ 200Mneed a vote

General part, art. 48, § 2, VII, and art. 70, III. Illustrative figures.

The contract's own limits

What the bylaws cannot include

AllowedNot allowed
Feesentry feeexit fee
Votinga cap at 10% of shares or morea cap below 10%
Holdersthe same rule for alldifferent caps per holder

Annex III, art. 11, §§ 1 and 2. Voting rules: classes open to the general public.

In practice

Three steps before buying the share

  1. Find the bylawsadministrator's site, B3 or CVM
  2. Read the policywhat the manager may buy
  3. Check fees and the capwhat it costs and how much it can issue

Remember this

Three ideas from this lesson

  1. The policy is the fenceThe manager buys what the bylaws allow, not what the name suggests.
  2. Issuance has a capBeyond authorized capital, only with a vote.
  3. No exit feeAn entry fee is allowed; an exit fee, never.

Quick quiz · 1 of 2

May a REIT's bylaws include an exit fee?

See answer

No. Annex III (art. 11, § 1) allows an entry fee and forbids an exit fee.

Quick quiz · 2 of 2

R$ 500M authorized capital and the fund wants to issue R$ 700M. How much needs a vote?

See answer

R$ 700M − R$ 500M = R$ 200M. Up to the cap, the bylaws' authorization applies; beyond it, the meeting decides.

Lesson complete

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I4.1Intermediate · Lesson I4.1Dividend yield: the most misleading numberA high yield may be a property sale or a falling price, not a better fund.Continue
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Educational content, written for learners. Not investment advice.