Apart from incorporating a new company in Brazil, Brazilian law provides the possibility of a foreign entity to establish a branch to operate in Brazil. In this case, the branch of a foreign legal entity shall only start operating after the authorization from the Brazilian Federal Executive Branch has been granted.
Such authorization shall be requested to the Corporate Registry and Integration Department (DREI). The DREI will review and issue an opinion on the submitted documentation prior to forwarding it to the Ministry of State Head of the Secretariat of the Micro and Small Companies of the Presidency of the Republic for analysis and issuance of the final governmental authorization through the official press. As per current legislation, the competent official to issue said final authorization is the Ministry of State Head of the Secretariat of the Micro and Small Companies of the Presidency of the Republic (to which the DREI is subordinated).
Such governmental authorization is a procedure that is formalized in the capital of Brazil (Brasília) and takes approximately 6 (six) months to be granted, requiring several documents and information to be provided by the headquarters. All the documents must be (i) notarized, (ii) certified by the competent agency (i.e. by the County Clerk or the Secretary of State), (iii) legalized by the Brazilian consulate, with jurisdiction over the area where the foreign company is located, and finally (iv) translated to Portuguese by a sworn translator in Brazil.
In accordance with the provisions of the foreign company's Bylaws, the foreign company interested in setting up a branch in Brazil must approve a resolution authorizing the opening of such branch and establishing the branch's respective capital stock.
Once the opening of the branch is authorized by the Brazilian Federal government through its Ministry of State Head of the Secretariat of the Micro and Small Companies of the Presidency of the Republic, the next step will be the registration of this branch with the Board of Commerce of the State where the branch will be located and will carry out its business.
After such step is concluded, the branch shall (like subsidiary companies) be duly registered with the competent tax authorities (to be determined according to the corporate purposes of the branch). The registration with the National Registry of Legal Entities (CNPJ) is the first and most important enrollment for starting the business.
The foreign company shall designate a representative to act on its behalf, with powers to resolve any issues and receive service of process in Brazil.
In addition, it will be necessary to make a deposit of the amount of the capital stock attributed to the branch and, as approved by the governmental authorities, such deposit shall be made with an official Bank (and registered with the Central Bank of Brazil within 30 days therefrom).
The Brazilian branch shall be governed by Brazilian laws and will be subject to the Brazilian courts as to its acts or operations in Brazil.
The branch will operate with the foreign entity's registered name, being permitted to add to its name the words "Brasil" or "do Brasil".
The financial statements concerning the branch's operation in Brazil must be prepared in accordance with Brazilian laws.
If the foreign company is required to publish its financial statements and management acts under the law of its country of origin, these must also be published in Brazil under the penalty of its authorization to operate being revoked.
Whenever the foreign company's Bylaws is amended, for any reason, the branch must request the update of its corporate documents to the Federal Government in order to continue its operations under the new guidelines issued by its headquarters. In addition, whenever the branch is required to provide services in any Brazilian city other than the one where it was first incorporated, their legal representatives shall have to carry out the same formalities and procedures to set up a new branch in that other city.
Considering that the time, requirements and costs involved in the creation of a branch are significantly higher than the incorporation of a Brazilian company, this type of corporate vehicle is not so common, because the foreign investors usually prefer incorporating a new company (which will be a subsidiary of the foreign entity) rather than having a branch in Brazil. From a corporate standpoint, to incorporate a "sociedade limitada" requires very few formalities as compared to a branch of a foreign legal entity.
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.