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Failure to comply with this requirement may cause tax, commercial, and foreign exchange control consequences to said nonresidents.

Brazil - The Foreign Investment Regulation Review - Edition 5 - The Law Reviews

This identification number is mandatory for the registration of any operation with the Brazilian Central Bank of Brazil. As per recent guidance, it may be necessary to disclose in the CNPJ registry the complete chain of ownership up to the ultimate beneficiaries, as well as the legal representatives of owners. The Brazilian Central Bank BACEN is in charge of monitoring and regulating foreign exchange transactions regarding any inflow and outflow of proceeds in and out of Brazil, based upon the guidelines established by the Brazilian Monetary Council.

Foreign investments can be depicted into two main categories: The National Monetary Council sets Brazil's exchange controls. The Brazilian Central Bank, which is responsible for implementing policy, has a number of departments that deal specifically with foreign investment and exchange. The Brazilian government has enacted several rulings aiming to reduce the complexity of its exchange market. The Brazilian Central Bank guidelines allows legal entities and individuals to purchase and sell foreign currency and perform international transfers in Brazilian Reais, regardless the nature of the operation, with no restriction with respect to the amount involved therein.

Additionally, such regulation requires the operations in the foreign exchange market to be performed solely through market agents authorized by the Central Bank of Brazil for such purpose. This means that, in such transactions, either the buyer or the seller must be an agent authorized to operate in the foreign exchange market. There is no specific provision with respect to the documentation that must support the exchange contract. Normally, the contract whose execution led to the currency exchange is required, together with other documentation able to prove the transaction's lawfulness as well as its economic ground and the responsibilities of the parties involved therein.

The Brazilian Central Bank registers all investments, whether in the form of capital or in the form of loans. The registration process of foreign investments, whether in the form of capital or loan, is relatively simple and straightforward. Entities with authority to self-regulate, typically stock exchange and OTC market entities, are subject to supervision by CVM.


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These entities are responsible for overseeing their members and assuring their compliance with applicable rules and regulations. There are also entities that are purely self-regulators, such as the Brazilian Financial and Capital Markets Association ANBIMA , a private body engaged in promoting codes of best practice to participants in the financial and capital markets to engender the optimal environment for the evolution of these markets.

Direct foreign investments in the Brazilian economy are governed by Law 4, of 3 September 4, investments or direct investments as amended by Law 4, of 29 August , while foreign investments in the financial and securities markets are governed by Resolution 4, of 29 September of the Brazilian Monetary Council portfolio investments or indirect investments. Both categories are regulated, controlled and registered by the Brazilian Central Bank and must be carried out through exchange rate contracts.

The definition of foreign capital encompasses goods, machinery and equipment brought into Brazil without any initial expenditure of foreign currency for use in the production of goods or services, as well as financial resources brought into the country to be invested in economic activities. Such assets will only be considered foreign capital if held by individuals or corporate entities resident, domiciled or with their registered office abroad.

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Direct investments may be made through the remittance of foreign currency as a capital contribution to a Brazilian company or for the purchase of existing equity interests, or through contribution of assets to a company. A foreign investment must be registered with the Central Bank if 1 it is in a productive activity that may, in whole or in part, be conducted by a foreign investor, and 2 the investment qualifies as a foreign capital investment under the Brazilian foreign investment regulations. Therefore, with respect to investments in business activities such as trade, manufacturing or rendering of services, the initial investment, capital repatriations and dividend remittances must be registered with the Brazilian Central Bank.

This electronic registration must be made within 30 days of the date of the liquidation of the currency exchange agreement and does not require preliminary approval, considering it has a declaratory nature. Foreign investments should be registered in the currency of Brazil. Profits should be remitted in the currency of the country where the investor is resident or has its head office or where the branch making the investment is located.

Reinvestments of profits should be registered in the currency of the country to which the profits would otherwise have been remitted. This number is permanent and personal to the investor—investee pair, and must be used on the occasion of any financial transaction involving the investee and the foreign investor. Note that recently the Central Bank system started requiring Brazilian companies to disclose the country in which the foreign investor is incorporated or resident as the case may be and also the country in which the ultimate beneficial owners reside. Foreign investors may invest in the Brazilian financial and securities markets using the same fixed-income instruments i.

A foreign investor can only purchase or sell securities traded on stock or commodities exchanges, electronic systems or organised over-the-counter trades OTC , and securities or financial instruments traded on OTC markets that are not organised or that are organised by entities not authorised by CVM. Foreign investors may purchase Brazilian depositary receipts certificates representing securities issued by foreign publicly held companies, issued for purposes of trading on the Brazilian securities market.

To invest in the Brazilian financial and securities markets, a foreign investor must 1 appoint an agent in Brazil who must be a financial institution or institution authorised by the Brazilian Central Bank ; 2 register with CVM; and 3 enter into a custody agreement with a financial institution authorised to provide custodian services, in accordance with CVM Instruction of 27 March Transfer or remittance of such investments abroad is not permitted, except in cases of merger, amalgamation, spin-off, corporate reorganisation or succession. Foreign debt transactions may be made through the remittance of foreign currency i.

This electronic registration does not require preliminary approval. Foreign debt transactions shall also be registered in the currency of Brazil. Interest shall be remitted in the currency of the country where the transaction was originated. See also Section VI on taxation on financial transactions.

As a rule of thumb, Brazil does not impose restrictions on foreign investments. Nevertheless, some industries and assets are subject to specific laws and requirements from governmental authorities, such as:. Notwithstanding certain restrictions or limitations established by the Brazilian Federal Constitution and infr a-constitutional laws for some activities, such as those mentioned previously, Brazilian laws allow any foreign individual or entity to freely hold equity interest in a Brazilian company, provided a legal representative residing and domiciled in Brazil is appointed with powers to, among other things, receive orders for service of process in any matter related to the appointor being a partner of a Brazilian company and, if it is a foreign entity not an individual , to also manage its assets in Brazil through the Brazilian federal tax authority RFB.

With respect to managerial positions in Brazilian companies, only individuals rather than legal entities may be appointed to a management post of a Brazilian company, as further detailed below. Only Brazilian permanent residents may be appointed to executive posts in Brazilian companies, while, as a general rule, both Brazilian residents and foreigners may be appointed to roles on collective boards, such as boards of directors. Although there are several corporate types provided for in Brazilian law, business activities are mainly carried out by foreign investors in Brazil through three structures: According to data made available by the Brazilian Business Registration and Integration Department DREI , 3 Brazilian limited liability companies represent more than 43 per cent of all incorporations and about 98 per cent of all company incorporations registered with the Boards of Trade throughout Brazil from January to March Thus, it is the most common corporate model in Brazil.

The preference for this model is justified not only because of the simplicity of its incorporation and operation a limited liability company can be incorporated and ready to start its activities in Brazil in approximately five business days , but also because of the low incorporation, maintenance and operational costs, when compared with those of corporations. Brazilian limited liability companies can be incorporated by two or more partners, individuals or legal entities, resident or non-resident in Brazil. The incorporation procedures are not complex: Afterwards, some additional steps shall be taken according to the activities to be developed by the company, such as obtaining municipal and state tax enrolments and requesting necessary operational permits.

The capital stock is divided into quotas, which represent the share of the capital stock contributed by each partner, and the rights and obligations arising from that contribution. Quotas are mandatorily nominative and their ownership is registered in the articles of incorporation. Quotas mandatorily have a par value and their issuance must represent the amount of the capital contribution in monetary values. Any assignment or transfer of quotas must be formalised through an amendment to the articles of incorporation of the company, which must be registered with the local board of trade and are publicly available for consultation.

Generally, there are no minimum or maximum limits for the capital stock of a limited liability company, nor minimum capital stock to be paid up in advance for incorporation purposes. The management of limited liability companies may be exercised by one or more individuals residing and domiciled in Brazil it is not mandatory to be a partner , appointed in the articles of incorporation or through a separate act.

Therefore, only Brazilian natural individuals residing in Brazil or foreigners with a permanent visa can take office as managers of a Brazilian limited liability company. For the latter option, Brazilian Law provides five visa options: In the case of a permanent visa for a director, manager, officer or executive with management powers representing an economic group or conglomerate, the Brazilian company must have a minimum capital stock of , reais, in view of the fact that, among other requisites provided in the applicable law, the foreign company needs to make an investment in the Brazilian company in the amount of 1 , reais and hire 10 employees in the two years following the appointment of the manager, or 2 , reais, with no need to hire employees.

It is also possible for Brazilian limited liability companies to have a board of directors of a deliberative nature, in which case non-resident individuals are allowed to take office, provided they appoint a legal representative in Brazil with powers to receive orders for service of process.

However, all partners are jointly liable for fully paying up the stock capital. However, in light of the incredible amount of statutory obligations of a labour and tax nature, the limitation of liability in this corporate model should be assessed on a case-by-case basis by legal counsel. The EIRELI is the most recent corporate type created by Brazilian law, 9 and it emerged from a shortcoming verified in the Brazilian corporate legal system: In general terms, a limited liability company with only one partner 10 is the same as an EIRELI, except for three main differences:.

Not only is the EIRELI almost the same as a single-partner limited liability company, but the applicable law is also substantially the same: A Brazilian corporation is the most commonly used structure for larger businesses, in view of its robustness in terms of corporate governance, transparency in terms of publicity, and the range of alternative fund-raising structures available. Part of this is because the corporation is the only corporate type to have a dedicated law, consisting of articles: Brazilian corporate law allows the securities of corporations to be traded in the capital markets, thus corporations may be closely held or publicly held, with the latter subject to several additional specific regulations established by CVM.

Publicly held corporations are subject to more comprehensive regulations, requiring, for example, disclosure of quarterly financial statements and publication of other information, such as material facts. With the exception of Brazilian wholly owned corporations, which have specific incorporation requirements, Brazilian corporations must have at least two stockholders, which can be legal entities or individuals, Brazilian residents or foreigners or any combination of these.

The capital stock of both publicly and closely held corporations is represented by shares. All shares must be nominative. Bearer shares have not been permitted in Brazil since the early s. Shares may be common or preferred. Shares may be issued with or without par value. As a general rule, both types of shares entitle their holders to voting rights; however, the voting rights of preferred shares may be suppressed or limited. Note that, under Brazilian corporate law, the number of preferred shares with suppressed or limited voting rights may not exceed 50 per cent of all shares issued by the corporation concerned.

The preferences of the preferred shares may consist in priority in the distribution of fixed or minimum dividends or priority in the reimbursement of capital, with or without premium.

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Preferred shares of publicly held corporations without voting rights or with limited voting rights must entitle their holders to broader preferences regarding other dividend rights or tag-along rights in the event of a public offering for change of control. Certain stock exchange listing segments, such as the above-mentioned Novo Mercado, require the corporate capital to be represented by common shares only.

Closely held corporations may issue different classes of common and preferred shares. The differences between the classes of common shares issued by closely held corporations may consist in 1 convertibility into preferred shares; 2 a requirement that the shareholder be a Brazilian resident or not; or 3 the right to vote separately to fill certain positions in administrative bodies of the corporation.


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  4. Publicly held corporations may only issue preferred shares of different classes. The payment of the stock capital may be made by cash contributions, or transfer of assets assets, credits or rights , provided that any asset to be contributed is suitable to be valued in monetary terms. As a general rule, Brazilian corporate law does not require a minimum capital amount, although companies in certain industries must have a minimum capital amount according to the competent regulatory agency.

    The payment of the corporate capital in cash may be made by means of a single instalment or several instalments credit payment ; however, at the point when the shares are issued to be paid in cash, at least 10 per cent of the subscription amount must be paid promptly in cash at the moment of the subscription. In contrast to Brazilian limited liability companies, corporation stockholders are not jointly liable for the payment of the stock capital. The liability of a given stockholder is limited to the amount the stockholder has subscribed to the corporation corporate capital. However, because of the incredible amount of statutory obligations of a labour and tax nature, the limitation of liability in this corporate type should be assessed on a case-by-case basis by legal counsel.

    Only individuals rather than legal entities may be appointed to management positions. The management of a corporation consists of a board of officers with at least two Brazilian residents and also a board of auditors that operates on a non-permanent basis. The members of the board of officers are the only individuals capable of representing the corporation, subject to the provisions of the by-laws.

    The Corporation Law also provides for a board of directors, comprising at least three individuals, who may be Brazilian residents or foreign individuals. As a general rule, having a board of directors is not mandatory; however, publicly held corporations must have a permanent board of directors.

    Corporate law also provides for other cases in which the board of directors is mandatory, such as corporations with authorised capital and government-controlled corporations. Brazilian corporate law also provides for other securities that might be issued by the corporations, such as participation certificates, debentures and subscription bonuses. Certain stock exchange listing segments do not allow the issuance of certain securities. Certain transactions involving publicly held corporations are subject to specific rules, such as the acquisition of control, which requires the acquiring party to make a public offer to acquire the remaining common shares not included in the control block for at least 80 per cent of the amount paid per share for the shares held by the selling entity or entities.

    A hostile takeover bid is typically presented through a tender offer intended to acquire the common shares at a substantial premium. Furthermore, hostile bids can result in major changes for the organisational and administrative structure of target company. Joint ventures resulting in a limited liability company or a corporation are permitted according to applicable law, provided the foreign partner of the joint venture complies with the requirements to be a shareholder or partner as the case may be described herein.

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    Furthermore, a joint venture with a foreign partner usually results in a corporation because of the stricter and thorough corporate governance of a corporation. For matters of clarity, joint ventures can also be structured on a contractual basis only, without the incorporation of an actual entity. Foreigners may also seek to carry out investments through investment funds. For this purpose, the main type of investment fund pursued by foreign investors is the private equity investment fund FIP.

    A FIP is organised as a condominium a pool of assets , without legal personality, which must be registered with CVM this authorisation is automatically granted upon presentation of the required documentation. FIPs must invest at least 90 per cent of their net assets in shares, debentures, warrants or other securities that may be converted into or exchanged for shares issued by publicly held or privately held Brazilian corporations, and also in quotas of limited liability companies on certain occasions.

    A FIP must be administered and managed by a legal entity authorised by CVM to conduct professional asset management activities, and it can have an investment committee, which may share investment and disinvestment decisions with the administrator or the manager. The general meeting of investors is the highest authority of the FIP. Any amendment to the by-laws of the FIP shall require the approval of the general meeting of investors.

    If these requirements are met, all gains resulting from transactions carried out by the FIP when distributed to the foreign investor are subject to a zero per cent withholding tax. Although the vast majority of foreign businesses are set up in the form of Brazilian subsidiaries of affiliates, Brazilian law recognises the legal personality of a foreign company, permitting the formation of a branch of a foreign company in Brazil.

    However, the formation of a branch in Brazil requires specific executive authorisation granted by a presidential decree after generally long and bureaucratic proceedings. Upon request, the foreign company must deposit an amount of the capital destined for the operations in Brazil. Nonetheless, for convenience, this structure tends to be adopted by some industries, such as international airline carriers. Investments using this form may typically involve the direct acquisition by the foreign company of assets or a business unit in Brazil.

    Some specific tax and liability suboptimal characteristics of a Brazilian branch are applicable and must be assessed on a case-by-case basis. Brazilian law distinguishes between Brazilian and foreign investors. Pursuant to the Brazilian Competition Law, 13 any transaction in which at least one of the parties involved has registered gross revenue in the preceding year or businesses in Brazil above the threshold of million reais, 14 and at least one other party involved has registered a gross revenue in the preceding year or businesses in Brazil above the threshold of 75 million reais, must be filed with CADE, as a request for market concentration approval.

    Under Brazilian Competition Law, a request for market concentration approval may be classified as a summary procedure or an ordinary procedure. The request shall be treated as a summary procedure 1 for transactions involving joint ventures; 2 when there is no relation horizontal or vertical between the economic groups of the parties involved; 3 when the horizontal market concentration is less than 20 per cent of the relevant market; 4 if none of the parties involved in the transaction holds a 30 per cent share or more of vertically related markets; or 5 if the transaction constitutes a horizontal market concentration between the economic groups of the parties concerned in excess of 20 per cent but less than 50 per cent.

    The request will be treated as an ordinary procedure in all other scenarios. The analysis of a request by CADE may result in three outcomes: All request procedures for market concentration approval submitted to CADE will be treated as non-confidential, in keeping with the publicity principles applicable to administrative bodies in Brazil.

    This non-confidential aspect of the procedures contributes to third-party control of market concentration approval requests, given that these are public interest matters, and a market concentration must not harm any market participants, either by way of market position or prices for products, goods or services related to the transaction.


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    CADE shall grant a decision to any requested procedure for market concentration approval within days, with the option for a single day extension period, if duly justified by CADE. In the case of investigations by CADE into misconduct, the procedure will be confidential until its conclusion, and CADE will notify the parties regarding the submission of their administrative defences. The Brazilian Competition Law sets out behaviour that constitutes misconduct by market participants, including cartels, international cartels, cartels in public bid procedures, influencing uniform conduct, predatory pricing, retail price-fixing, territorial fixing and client bases, exclusivity agreements, combined sales, abuses of dominant market position, refusal to hire, sham litigation and imposing difficulties on competitors.