Brazil: Brazil Issues Regulations Implementing The Clean Companies Act

Last Updated: 30 March 2015
Article by Salim Jorge Saud Neto

Keywords: Brazil, Clean Companies Act, bid-rigging, penalties

More than a year after Brazil enacted the Clean Companies Act (Law 12,846 of August 1, 2013) ("CCA"), President Dilma Rousseff signed Decree 8,420 (the "Decree") to regulate the Act. The regulations came on the heels of massive protests against corruption.

The CCA imposes strict liability on companies for bribery and offenses such as bid-rigging and collusion, and imposes severe sanctions on companies that fail to comply with the law. The potential penalties include administrative fines ranging from 0.1% to 20% of a company's annual gross revenues during the preceding year, or up to R$60 million if such revenues are difficult to determine. In addition, companies may face judicial sanctions, including dissolution, suspension, disgorgement of profits, loss of public contracts and prohibitions against obtaining incentives, subsidies, grants, donations or loans from public authorities.

The newly-enacted Decree clarifies many aspects of the CCA, including the penalties calculation and the standards for an effective compliance program.

Calculating Penalties

According to the Decree, five factors will be taken into account in determining the total penalty, with percentage fines for each factor ranging from 1% to 5% of the gross revenues earned during the fiscal year prior to the filing of the administrative proceeding, as follows:

  1. 1% to 2.5% in cases of continuous unlawful conduct
  2. 1% to 2.5% in cases where a company's officers and managers were aware of and tolerated the unlawful conduct
  3. 1% to 4% in cases where public services or construction is interrupted
  4. 1% if the offender is solvent
  5. 5% in cases involving repeat offenders

Rates ranging from 1% to 5% will be applied, based on the value of the contracts held by the company with the damaged public agency or entity, in amounts ranging from R$1.5 million to more than R$1 billion.

In addition five mitigating factors will be considered when determining the total penalty, with percentage reductions for each factor ranging from 1% to 5% of the gross revenues earned during the fiscal year prior to the filing of the administrative proceeding, as follows:

  1. 1% in cases of attempted offense
  2. 1.5% in cases in which the company provides restitution to the aggrieved agency
  3. 1% to 1.5% when a company cooperated with investigation
  4. 2% if the offender self-reports
  5. 1% to 4% if the company has a compliance program and applies it effectively.

If it is not possible to determine the penalty based on the aggravating and mitigating factors, or if the result of the calculation is equal to or less than zero, the penalty will equal: (i) 0.1% of the company's gross revenues earned during the fiscal year prior to the filing of the administrative proceeding, excluding taxes; or (ii) R$6,000.00.

In any event, the amount of the penalty will not exceed 20% of the company's gross revenues earned during the fiscal year prior to the filing of the administrative proceeding or three times the amount of the company's monetary gains nor shall the penalty be lower than the amount of the company's monetary gain.

Compliance Programs

The Decree provides minimum standards to be considered by the authorities whenever assessing whether a compliance program is effective and, therefore, entitles a company to a reduced sanction. According to the Decree, an effective programs requires:

  1. Top-level management commitment, including the company's board, which shall be evidenced by visible and clear support
  2. Standards of conduct, code of conduct and ethics applicable to all employees and directors and third parties, irrespective of role or function
  3. Standards of conduct, code of conduct and ethics applicable to all subcontractors, agents, suppliers and related third parties
  4. Regular training
  5. Regular risk assessment procedures
  6. Fair and accurate accounting
  7. Internal controls that assure accurate accounting and records
  8. Specific procedures to avoid fraud and unlawful conduct in bidding processes or in any relationship with a public entity (even if through a third party), such as payment of taxes or obtainment of authorizations, permits and certificates
  9. Independence, structure and authority of the internal department responsible for the enforcement of the compliance program
  10. Effective whistleblower mechanisms disclosed to employees and related third parties;
  11. Disciplinary actions in the event of breach of the compliance program
  12. Procedures ensuring that improper activity is detected, stopped, and remediated
  13. Appropriate due diligence for the hiring and supervision of third parties, such as suppliers, services providers, agents and associates
  14. Due diligences in mergers and acquisitions in third parties
  15. Continuous monitoring of the compliance program to prevent, detect and remediate CCA violations
  16. Transparency with regard to its political donations

The Decree reinforces the necessity of having an effective compliance program in place, as it requires that all leniency agreements that can be entered into under the CCA provide for the adoption of or improvements to a company compliance procedures, where necessary.

Originally published March 20, 2015

Visit us at Tauil & Chequer

Founded in 2001, Tauil & Chequer Advogados is a full service law firm with approximately 90 lawyers and offices in Rio de Janeiro, São Paulo and Vitória. T&C represents local and international businesses on their domestic and cross-border activities and offers clients the full range of legal services including: corporate and M&A; debt and equity capital markets; banking and finance; employment and benefits; environmental; intellectual property; litigation and dispute resolution; restructuring, bankruptcy and insolvency; tax; and real estate. The firm has a particularly strong and longstanding presence in the energy, oil and gas and infrastructure industries as well as with pension and investment funds. In December 2009, T&C entered into an agreement to operate in association with Mayer Brown LLP and become "Tauil & Chequer Advogados in association with Mayer Brown LLP."

© Copyright 2015. Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions