The Participation of Investment Funds in Public Procurement

Projects such as the Education PPP of the State of São Paulo – Lot 1 (West)[1], the Basic Sanitation PPP of the State of Paraná – Lot 1[2], and the São Paulo Rodoanel PPP[3] share a common feature: the presence of investment funds as the winning bidders in the procurement process.

The participation of investment funds in concession and public-private partnership (PPP) tenders has become increasingly common. In light of this scenario, it is necessary to assess whether the requirements set forth in bidding documents are compatible with the legal nature of such funds, so as to allow for their effective participation.

This issue has drawn attention because, in recent experiences—both in project structuring and in procurement advisory—challenges and objections have arisen regarding the qualification requirements applicable to investment funds, which have ultimately hindered or even prevented their participation in bidding processes.

According to the objections and challenges presented, many of the qualification requirements set forth in the bidding documents would not be applicable to investment funds. Among these, for the purposes of analysis and discussion in this article, the following stand out:

(i) Legal qualification: which documents would be suitable to evidence the constitution and representation of the investment fund;

(ii) Tax compliance: the inapplicability of requirements for certificates proving tax, social security, and labor compliance; and

(iii) Economic and financial qualification: difficulties in proving minimum net worth and accounting ratios when required by the bidding documents, as well as the inapplicability of the requirement to present a bankruptcy clearance certificate.

To properly assess these issues, it is first necessary to understand the legal nature of investment funds.

As is well known, investment funds do not have legal personality. They consist of a pool of assets organized as a special type of condominium, intended for investment in financial assets, goods, and rights, in accordance with the specific rules applicable to each category of fund (see Article 1,368-C of the Brazilian Civil Code[4] and Article 4 of CVM Resolution No. 175/22[5]).

Indeed, as entities without legal personality, investment funds do not possess certain documents typically required of companies with legal personality. However, under public procurement legislation, this circumstance does not exempt them from complying with the requirements set forth in bidding documents, which must instead be met through equivalent documentation.

With respect to legal qualification, this requirement aims to demonstrate the bidder’s existence and its capacity to exercise rights and assume obligations. The documents usually required at this stage include the company’s articles of incorporation, together with their amendments, or its bylaws, or consolidated articles of association, as well as documents evidencing the appointment of officers or directors.

In the case of investment funds, due to their legal nature, they do not have articles of incorporation in the same manner as business corporations (e.g., incorporation minutes, articles of association, or bylaws). The equivalent documents that evidence their existence and representation are the resolution approving their establishment and the consolidated fund regulations registered with the Brazilian Securities and Exchange Commission (CVM) (see Article 7 of CVM Resolution No. 175/2022[6]).

In addition, it is customary to require the fund administrator to submit a statement: (i) confirming that the fund is active and duly registered with the CVM; (ii) identifying the individual authorized to act on behalf of the fund in the bidding process; and (iii) authorizing the fund to participate in the tender. Such authorization must be evidenced either by a specific resolution or by a provision in the fund’s regulations granting the administrator or manager, as applicable, the authority to enter into concession agreements, authorizations, or grants for public services and the use of public assets.

With respect to tax compliance, the objections raised are relevant, since—at least in theory—investment funds do not qualify as taxpaying entities.

On the other hand, even though they may not be considered tax subjects, investment funds are required to register with the Brazilian National Registry of Legal Entities (CNPJ) (Article 4 and item VI of Annex I of RFB Normative Instruction No. 2,119, dated December 6, 2022[7]), which enables them to obtain tax clearance certificates or certificates attesting to the absence of registration.

Accordingly, it is entirely reasonable for public authorities to require the submission of such certificates by investment funds, given that they are fully capable of issuing them, particularly to avoid creating exceptions for a specific bidder profile.

In some bidding documents, compliance is required from the fund’s administrator or manager, who, having legal personality, would be subject to such obligations. However, this requirement does not appear reasonable, as the administrator or manager is not liable for the debts or obligations of the investment fund they administer or manage.

As for economic and financial qualification, bidders are typically required to present a bankruptcy clearance certificate and balance sheets to demonstrate minimum net worth or accounting ratios.

With regard to the bankruptcy clearance certificate, it is understood that this requirement would not be applicable to investment funds, as they are not subject to bankruptcy proceedings, but rather to liquidation due to insolvency (see Article 1,368-E, paragraph 1, of the Brazilian Civil Code).

Although investment funds are registered with the CNPJ and may therefore obtain such certificates, their submission would be ineffective, as these certificates do not cover civil insolvency proceedings. Thus, requiring a bankruptcy certificate from investment funds does not serve the intended purpose.

While the legality of such a requirement may be questioned, the equivalent document applicable to investment funds would be a civil court distribution certificate covering civil insolvency actions, in order to verify whether there is any request for a declaration of insolvency against a specific class of fund units.

Finally, it would also be inappropriate to require compliance with this requirement from the fund’s administrator or manager, as they are distinct legal entities whose financial condition is not commingled with the fund’s assets.

Indeed, if the fund’s administrator or manager becomes subject to judicial reorganization, bankruptcy, or intervention, the liquidator, temporary administrator, or intervener, as applicable, will be required to fulfill the administrator’s obligations, indicating that the effects of such events do not extend to the investment fund itself (Article 133 of CVM Resolution No. 175/22[8]).

With respect to balance sheets, investment funds are required to maintain accounting statements in accordance with CVM regulations. Accordingly, compliance with this bidding requirement may be achieved through the submission of consolidated financial statements, which include a balance sheet, income statement, and cash flow statement, duly audited by an independent auditor registered with the CVM and disclosed in accordance with applicable regulations (see Section III – Financial Statements and Audit Reports of CVM Resolution No. 175/2022[9]).

In some cases, it is possible to submit the most recent quarterly report filed with the CVM, together with a statement from the administrator and a licensed accountant indicating the fund’s net worth (see Article 27, item III, of CVM Resolution No. 175/2022[10]). Although accepted in some tenders, it is important to note that this information is not audited.

As observed, certain qualification requirements set forth in bidding documents are indeed incompatible with the legal nature of investment funds. Therefore, considering that, when drafting bidding documents, public authorities may not create exceptions for specific bidder profiles—pursuant to the principle of equal treatment—nor require documents other than those provided for by law—pursuant to the principle of legality—it becomes necessary to adopt a degree of flexibility, or at least an understanding of the qualification documents submitted by investment funds, in light of their legal nature and in accordance with the principle of moderated formalism.

Thus, in order to ensure broad participation by bidders with the technical and financial capacity to perform the contractual object, qualification requirements must not only be limited to those strictly provided for by law and necessary for the commencement of contract performance, but must also be clear and compatible with the bidders’ profiles, so as to avoid imposing requirements that are materially impossible to fulfill due to the legal nature of the bidder.

Rafael Silva Dantas.

[1] The Novas Escolas Oeste SP Consortium, formed by Engeform and the Kinea fund, was declared the winner of the tender. Available at: https://exame.com/brasil/leilao-escolas-sp-consorcio-novas-escolas-sp/

. Accessed on May 19, 2025.

[2] The Consultoria Consortium, formed by AEGEA and the Perfin and Kinea funds, was declared the winner of the tender. Available at: https://www.aen.pr.gov.br/Noticia/Saneamento-Consultoria-arremata-primeira-PPP-da-Sanepar-que-preve-R-12-bilhao-de

. Accessed on May 19, 2025.

[3] The Via Appia fund was declared the winner of the tender. Available at: https://www.cnnbrasil.com.br/economia/macroeconomia/via-appia-concessao-rodoanel-norte-sp-2023/

. Accessed on May 19, 2025.

[4] Federal Law No. 10,406/2002. Article 1,368-C. An investment fund is a pool of assets organized as a special type of condominium, intended for investment in financial assets, goods, and rights of any nature.

[5] CVM Resolution No. 175/22. Article 4. An investment fund is a pool of assets organized as a special type of condominium, intended for investment in financial assets, goods, and rights, in accordance with the specific rules applicable to the fund’s category.

[6] CVM Resolution No. 175/22. Article 7. An investment fund must be established by a joint resolution of the essential service providers, who are responsible for approving, in the same act, its regulations.

[7] RFB Normative Instruction No. 2,119/22. Article 4. All entities domiciled in Brazil are required to register with the CNPJ, as well as each of their establishments located in Brazil or abroad, prior to the commencement of activities, pursuant to Annex I.

Annex I – ENTITIES REQUIRED TO REGISTER WITH THE CNPJ: VI – national investment clubs and funds and non-resident investors constituted in accordance with the rules of the Brazilian Securities and Exchange Commission (CVM).

[8] CVM Resolution No. 175/22. Article 133. In the event of intervention, temporary special administration, extrajudicial liquidation, insolvency, or bankruptcy of an essential service provider, the liquidator, temporary administrator, or intervener, as applicable, shall be required to comply with the provisions of this Resolution.

[9] CVM Resolution No. 175/22. Article 19. The administrator must submit to the CVM, through an electronic system available on the internet, the following information: I – quarterly, within 15 (fifteen) days after the end of the civil quarter to which the information refers: (a) the fund’s net asset value and, if applicable, that of its classes of units; and (b) the number of units issued. II – semiannually, within up to 60 (sixty) days after the end of the relevant semester: (a) the semiannual report, as provided in Article 20 of Annex VIII; and (b) a list of judicial or extrajudicial claims, whether in defense of unitholders’ rights or claims brought by unitholders against the administration of the fund, indicating the date of commencement, procedural status, and final outcome, if any. III – annually, within 90 (ninety) days after the end of the fiscal year, the fund’s financial statements and, if applicable, those of its classes of units, accompanied by independent audit reports.

[10] CVM Resolution No. 175/22. Article 27. The administrator is responsible for: (…) III – submitting the monthly report to the CVM, through an electronic system available on the internet, in accordance with the model set forth in Supplement G, within 15 (fifteen) days after the end of the month to which the information refers.