Brazil: Senate Approves General Law Of State-Owned Companies

The Brazilian Senate approved last March, the Senate Bill no. PLS 555/2015, which sets forth provisions on the legal bylaws of public companies, government controlled (private) companies, and subsidiaries thereof, comprising any and all public company, and (private) company controlled by the government, States, Federal District and Municipalities that exploit the economic activity of production or sale of goods, or performance of services, even if the economic activity be subject to the Federal Government´s monopoly regime.

This bill brings important changes in the management of state-owned companies, and for that reason, is quite extensive (97 articles), whose structure is as follows:

a) Title I: the provisions applicable to public companies and government controlled (private) companies, split into three chapters. The Chapter I brings preliminary provisions, chapter II disciplines the public company´s and the government controlled (private) company´s corporate regime, and chapter III deals with the social function of the public company and of the government controlled (private) company;

b) Title II; the provisions applicable to public companies, government controlled (private) companies, and subsidiaries thereof that exploit economic activity of production or sales of goods, or performance of services, split into three chapters. The chapter I regulates the bidding processes, chapter II, the contracts, and chapter III, the supervision by the State and Society;

c) Title III: final and transitory provisions.

The rules of corporate governance stipulated for the companies subject to the law aim to secure further transparency by means of structures and practices of internal controls, appropriate composition of administration and obligations of the controlling shareholders.

The approved text alters the applicable rules for contracts of goods and services to be made by the companies subject to referred law. The following provisions are highlighted below:

a) The amounts of the limits for the bidding process waiver stipulated in the Law no. 8,666 of 1993 are increased and will be R$100,000.00 for holding bidding processes for engineering works and services and R$50,000.00 for other services and purchases;

b) Other 16 hypotheses of bidding process waiver are established; out of these 16  hypotheses, 13 reproduce cases already provided for in the Law no. 8,666 of 1993; as a novelty, the transfer of goods to agencies and entities of the Public Administration are waived of bidding process for public companies and government controlled (private) companies, including the exchange, donation of movable property for purposes and uses of social interest and the sale of shares, negotiable instruments, and goods that are produced of sold;

c) The rules relative to direct contracts, due to non-enforceability of a bidding process, are similar to those provided for in the Law no. 8,666 of 1993;

d); Unlike the Law no. 8,666 of June 21, 1993, the bill does not define the bidding process modalities, only lays down  the procedures that must be adopted in each stage  and defines the acceptable criteria of judgment of the proposals, to be established  in the call notices such as lower price,  highest discount, best technical combination and price, best technique, best artistic content, best price offer, best economic return, and best allocation of disposed assets.

e) The possibility of the public companies and government controlled (private) companies to restrict the participation in their bidding processes to pre-qualified suppliers is admitted, but guarantees that the pre-qualification process will be public and permanently open to the registration of any interested party;

f) The bill admits the integrated contract of works and services in which contractor prepares and develops the basic and executive projects/designs, besides promoting the execution of the engineering work and service, assembly, tests, pre-operation, and other necessary and sufficient operations for the final delivery of the object, in a similar way to the form adopted in the Differentiated Regime of Public Procurement - RDC, created by the Law no. 12, 462, of August 4, 2011.

It is important to point out that the bill repeals the legal provisions that authorize the enactment of decrees to institute simplified bidding process procedures for Petrobras and Eletrobras.

The bill was submitted for analysis and to be voted by the Chamber of Deputies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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