1. Legal framework

1.1 Does your jurisdiction have a civil law system, a common law system or a hybrid system?

Brazil has a civil law system inspired by the Roman-German or continental Europe system. Therefore, the main material source of rules is the legislation, which includes:

  • the Constitution;
  • laws;
  • decrees;
  • regulations;
  • circular notices;
  • ordinances; and
  • other rules issued by government bodies.

The Federal Constitution of 1988 is at the top of the hierarchy of legal sources. Laws and regulations cannot be contrary to the Constitution; otherwise, they may be considered null and void. Other sources include:

  • customary practices;
  • legal doctrine;
  • analogy;
  • general legal principles; and
  • instruments resulting from private autonomous power such as contracts.

In Brazil, precedents issued by courts of law (case law) are not considered formal sources of law. However, they play an important role in supporting decision making by courts and aiding in the interpretation of law.

Brazil is a federal republic comprised of:

  • the Union;
  • states;
  • the Federal District; and
  • municipalities.

Each of these entities has the power to pass laws and regulations within its own jurisdiction. In general, the Union can legislate on the following matters:

  • criminal;
  • civil;
  • commercial;
  • procedural;
  • agricultural;
  • labour;
  • telecommunications;
  • radio broadcast; and
  • foreign trade.

The Union, states and the Federal District may concurrently legislate on certain matters, such as:

  • tax;
  • finance;
  • environmental liability; and
  • the protection of children and youth.

Under concurrent legislation, the Union must limit itself to establishing general guidelines, and the states and Federal District have supplementary jurisdiction. The jurisdiction of municipalities is limited to local matters.

1.2 Which legislative and regulatory provisions primarily govern the establishment and operation of enterprises in your jurisdiction?

The Constitution contains principles that govern:

  • the economic and social order; and
  • the general guidelines of the tax system.

In general terms, the main federal laws pertaining to establishment and operation of enterprises are:

  • the Consolidation of Labour Laws (Decree-Law 5,452/1943);
  • the National Tax Code (Law 5,172/1966);
  • the Law on Income Tax for Legal Entities (9,430/1996);
  • the Civil Code (Law 10,406/2002);
  • the Consumer Code (Law 8,078/1990);
  • the Declaration of Economic Freedom Rights (Law 13,874/2019); and
  • the Corporation Law (6,404/1976).

Regardless of the economic activities in which enterprises are engaged, before they start operating in Brazil, they must register with the Board of Trade at the place where their offices are located. The Company Registration and Integration Department (DREI) and the Board of Trade are in charge of company registration.

Depending on the nature of the enterprise, its area of business, its form of association and whether it falls under a regulated sector:

  • specific regulations may apply; and
  • preliminary government authorisation may be required before it can commence activities.

Examples include financial institutions and insurance companies.

In general, enterprises must comply with the following requirements:

  • Register with the Board of Trade before starting operations (this is not mandatory for small traders – that is, micro and small-sized entrepreneurs which are not organised as an entity – and rural traders);
  • Maintain regular bookkeeping; and
  • Analyse its accounting on a regular basis.

Regulated sectors in Brazil include the following:

  • agriculture, which is overseen by the Ministry of Agriculture;
  • health;
  • cosmetics;
  • medicines;
  • sanitation and foods, which are overseen by the Health Surveillance Agency;
  • telecommunications (subject to the National Telecommunications Agency);
  • energy, which is overseen by the National Agency of Electric Energy;
  • oil and gas, supervised by the National Agency of Oil, Natural Gas and Biofuels;
  • mining, which is subject to the National Mining Agency; and
  • insurance, which is regulated by the Superintendence of Private Insurance.

1.3 Which bodies are responsible for drafting and enforcing these provisions? What powers do they have?

At the federal level, Brazilian laws are drafted by the legislative branch in a bicameral process, where bills of law proposed by the Chamber of Representatives are later voted on by the Senate and vice versa. At the state and local levels, there is only one house in charge of drafting laws at each of these instances. Once published, the laws come into force on the same day of publication or on the date indicated, as some parties require time to adapt to the new rules. Thereafter, the executive branch bodies and the courts have the respective powers to enforce and interpret the application of enacted laws and regulations.

Specifically concerning the registration of enterprises, the DREI is a federal entity which is part of the Secretariat of the Micro and Small Business and Entrepreneurship of the Ministry of Development, Industry, Commerce and Services. Its duties include the regulation and control of company registration.

In regulated sectors, each agency has autonomous powers to issue rules and regulations within the limits of its powers under the Law on Regulatory Agencies (13,848/2019).

2. Types of business structures

2.1 What are the main types of business structures in your jurisdiction and what are their key features?

There are different forms of associations in which economic activities involving the production or circulation of goods and services can be conducted under Brazilian law. The most common are corporations and limited liability companies.

A corporation involves more formalities than a limited liability company as regards its organisation and operation, as the publication of certain corporate acts and documents is mandatory. Therefore, the publication and general operating costs of a corporation tend to be higher than those of a limited liability company.

Usually, corporations are the chosen vehicle for joint venture projects or other investments that require a certain level of sophistication, such as the ability to obtain public capital or issue securities and bonds. For wholly owned subsidiaries, limited liability companies are usually preferred, because the structure is simpler and cheaper.

2.2 What capital requirements apply to these different types of business structures?

There are no minimum capital requirements for the formation of corporations, except in special cases (eg, financial institutions, trading companies). Corporations may be organised with 'authorised capital' – that is, with less subscribed capital than the amount authorised by the articles of association/incorporation. In this scenario, an increase in the subscribed capital up to the authorised limit will require an amendment to the articles of association/incorporation. They must have at least two shareholders and the capital stock may consist of cash or any kind of assets with monetary worth. At least 10% of the cash subscribed capital must be fully paid up at the time of the company's incorporation and the remainder within five years.

As regards limited liability companies, due to a recent change in law, they may now be incorporated by a single quota holder. As for a corporation, the capital of a limited liability company may consist of cash or any kind of assets with monetary worth. However, payment of at least 10% of the subscribed capital is not required. The quota capital may be increased only once the totality of the quotas has been paid up, observing the pre-emptive right of quota holders to participate in the increase in proportion to their interest.

In addition, the capital of limited liability companies is divided into ideal parts (quotas), which are divided among the quota holders in percentages and are not physically represented by certificates. As the number of quotas held by each quota holder is established by the articles of association, any transfer or assignment of ownership over the quotas requires an amendment to the articles of association.

2.3 What is the process for establishing these different types of business structures? What procedural and substantive requirements apply in this regard? What is the typical timeline for their establishment?

The following procedures should be considered in order to incorporate a Brazilian limited liability company or a corporation:

  • Enrolment of foreign quota holders/shareholders before the Federal Revenue Service: Foreign quota holders/shareholders must be registered with the Federal Revenue Service in order to obtain their Cadastro Nacional de Pessoas Jurídicas (CNPJ) number. Once registration is finalised, the company has 90 days to indicate the ultimate beneficial owner abroad and present the appropriate documentation.
  • Registration of the foreign quota holders/shareholders with the Brazilian Central Bank (BCB).
  • Definition and appointment of a legal representative in Brazil: Every foreign-based company must be represented in Brazil by a local resident (either a Brazilian citizen or a foreign individual holding a permanent visa) with powers to:
    • receive judicial summons on behalf of the shareholders/quota holders; and
    • represent them both before the Brazilian company (eg, for voting at the quota holders' meeting) and before the Federal Revenue Office and the BCB.
  • The foreign-based company must grant a power of attorney (PoA) to a resident in Brazil. This PoA may be changed at any time, in which case a new one must be granted to another individual, revoking the previous one. The PoA must be signed, notarised and apostilled in its country of origin. Once in Brazil, the document must be:
    • translated by a sworn public translator; and
    • registered before the Registry of Deeds and Documents in the city in which the Brazilian company is domiciled.
  • Articles of incorporation/association: These must contain all necessary information regarding the company (eg, name, quota/share capital, corporate purpose, address). After the text has been approved, the articles of incorporation/association must be signed by the legal representatives of the foreign quota holders/shareholders in Brazil.
  • Registration with the Commercial Registry and the Federal Revenue Service: Once the registration procedure at the Commercial Registry has been completed, the company will automatically be enrolled with the Federal Revenue Service and will receive its own CNPJ number.
  • Opening of a bank account.
  • Enrolment with the BCB in order to register foreign capital: Foreign investments must be registered with the BCB and are subject to taxation.
  • Enrolment with the federal, state and municipal tax authorities, the Employees Severance Fund and the social security authorities, as applicable.

The incorporation of a corporation or limited liability company generally takes between 30 and 60 days from the date on which:

  • the shareholders approve the final draft of the articles of association; and
  • the powers of attorney are duly granted, notarised and legalised by the Brazilian consulate.

The overall process includes:

  • registration with the public authorities;
  • printing of the necessary tax forms;
  • opening of the proper accounting books; and
  • other actions aimed at making the company fully operational.

2.4 What requirements and restrictions apply to foreign players that wish to establish a business directly in your jurisdiction?

Brazil has very basic, stable and sound legislation on foreign direct investment (FDI) which has been in force for more than five decades. All foreign investors must appoint a representative in Brazil who, jointly with the representative of the company that receives the foreign investment, will be responsible for registering the investment in the BCB's Electronic Declaration of FDI Register.

In general, foreign quota holders/shareholders must be enrolled with the Federal Revenue Service in order to obtain their CNPJ number. Once registration is finalised, the company has 90 days to indicate the ultimate beneficial owner abroad and present the appropriate documentation.

According to Normative Instruction 2119/2022, an 'ultimate beneficial owner' is:

  • the person who directly or indirectly owns, controls or significantly influences a business entity; or
  • persons on whose behalf a transaction is conducted.

'Significant influence' means that the ultimate beneficial owner:

  • possesses more than 25% of the entity's capital, directly or indirectly; or
  • holds or exercises a preponderance of corporate resolutions and the power to elect a majority of its directors, even without holding the majority of the capital, if the beneficiary demonstrates use of its power by effectively managing corporate activities and guiding governing bodies.

Foreign legal entities that do not comply with the requirements described above may:

  • have their CNPJ registration suspended; and
  • be prohibited from carrying out transactions with financial institutions in Brazil. However, this restriction will not apply to:
    • transactions carried out before the suspension; or
    • the return of an investment to a foreign shareholder.

Participation of foreign capital in activities involving nuclear energy, health services, postal and telegraph services and the aerospace industry is forbidden.

Restrictions and limitations also apply to the following activities:

  • acquiring rural land;
  • launching and putting into orbit satellites, vehicles or aircraft;
  • acquiring property located in frontier areas;
  • providing financial services;
  • providing public air services;
  • conducting mining activities; and
  • owning and managing:
    • newspapers, magazines and other publications; or
    • radio and television networks.

2.5 What other opportunities, using people/entities not connected with the main person, are there to do business in your jurisdiction (eg, agency, resale); and what requirements and restrictions apply in this regard?

Foreign investments may be made, among other things, through:

  • the opening or expansion of companies;
  • mergers and acquisitions; and
  • the reinvestment of profits earned abroad.

Brazilian companies may receive FDI from both individuals and legal entities that are not resident in Brazil. Therefore, foreign capital may circulate freely, with only a few restrictions as described above.

3. Directors and management

3.1 How is management typically organised in the different types of business structures in your jurisdiction?

According to Brazilian law, only natural persons may be elected as directors and members of administrative bodies.

Corporations are managed by the following administrative boards:

  • a board of directors, which is mandatory for publicly held corporations and for those with authorised capital; and
  • a board of executive officers, which is mandatory for all types of corporations.

The board of directors is responsible for establishing the corporation's general business guidelines. The board of executive officers is the corporation's executive body and its members are granted powers to represent and legally bind the corporation. The articles of association/incorporation will stipulate the details of such representation.

The board of directors must be composed of at least three members; while the board of executive officers must be composed of one or more officers. Up to one-third of the members of the board of directors may be elected to the board of executive officers. A corporation must have an audit committee, which can operate permanently or otherwise. This committee can be called for at any shareholders' meeting.

Limited liability companies are managed by one or more administrators, who may or may not be quota holders. Administrators must be:

  • Brazilian citizens;
  • foreigners with a permanent residence visa; or
  • foreign individuals who are resident abroad and have appointed a legal representative residing in Brazil with powers to receive summons and subpoenas in judicial and administrative actions and proceedings.

3.2 Is the establishment of specialist committees recommended or mandated for certain types of enterprises? If so, which areas should they cover?

A corporation must have an audit committee, which can operate permanently or otherwise. The audit committee can be called for at any shareholders' meeting.

Brazilian law also provides for the establishment of an audit committee for limited liability companies, whose members' duties and operations are regulated by law and by the articles of association.

Certain types of committees may be recommended in order to assist the board of directors in:

  • defining quality standards and internal controls;
  • monitoring problems and assessing risks; and
  • proposing changes where necessary.

The members of a committee do not deliberate and do not decide on the proposed solutions, as this role generally belongs to the company's management. Usually, each committee is formed by professionals who are specialists in the scope of action.

3.3. Is the appointment of corporate directors permitted in your jurisdiction?

The appointment and election of directors are permitted under Brazilian law and is a decision of the shareholders. Article 997(vi) of the Civil Code states that:

  • only individuals can be responsible for the management of a company; and
  • the articles of association must expressly stipulate:
    • how many individuals will exercise the management of the company; and
    • their powers and attributions.

3.4 What requirements and restrictions apply to the appointment of directors, in terms of factors such as number, residence, independence, diversity etc?

The following people may not serve as administrators:

  • persons stipulated in special laws; and
  • for as long as the effects of a conviction persist, those convicted of:
    • a penalty that prohibits – even temporarily – access to public positions; or
    • a crime of bankruptcy, prevarication, bribery, graft or embezzlement, or against the popular economy.

Furthermore, the appointment of foreign administrators is now permitted by Law 14,195/2021. As such, administrators of limited liability companies and corporations can reside abroad, as long as they:

  • have a legal representative residing in Brazil; and
  • in the case of an administrator of a publicly held company, have powers – for at least three years after the end of their term of office – to receive:
    • summons in actions brought against them based on the corporate legislation; and
    • summons and subpoenas in administrative proceedings filed by the Securities and Exchange Commission.

The same rule applies to members of the board of directors who reside abroad.

3.5 How are directors selected, appointed and removed? Do any restrictions or recommendations apply to their tenure?

The appointment and removal of directors is decided on by the shareholders through a separate act (resolutions of shareholders' meeting) or an amendment to the articles of association, which must be registered with the Board of Trade in the state where the company's head office is located.

The appointment of non-partner directors will depend on:

  • the approval of at least two-thirds of the shareholders, while the capital is not paid up; and
  • the approval of partners holding quotas corresponding to more than half of the capital, after payment.

3.6 What are the directors' primary roles and responsibilities, and how are these exercised?

The responsibilities and duties of the administrators of a limited liability company are similar to those of the corporation's officers and directors.

Directors have the specific responsibility to act in the way that is most likely to lead to a successful outcome for the company. Pursuant to the Civil Code and the Corporation Law (6,404/76), for a director to perform his or her duties, he or she must take into consideration a number of statutory factors relating to the entity, including:

  • the long-term consequences of decisions;
  • the company's reputation; and
  • the interests of other stakeholders, such as:
    • employees;
    • customers; and
    • the community:

A director must:

  • be loyal to the company;
  • preserve the secrecy of confidential information; and
  • not use privileged information for personal gain or to the benefit of others.

In publicly held companies, directors must provide specific information to the shareholders about relevant matters and material facts, such as:

  • the number of transferable securities issued by the corporation, a controlled corporation or a corporation belonging to the same group that have been acquired or disposed of in the last fiscal year;
  • call options that were acquired or exercised in the last fiscal year;
  • indirect or complementary benefits or advantages that have been received or are being received from the company or any affiliated or controlled companies or companies belonging to the same group; and
  • the terms of employment agreements executed between the corporation and its officers/directors and senior employees.

3.7 Are the roles of individual directors restricted? Is this common in practice?

Rules and restrictions on the directors' mandate are established by the shareholders in the company's articles of association. Where the articles of association are silent, the directors may perform all acts pertaining to the management of the company. As it is not a corporate object, the encumbrance and sale of real estate assets will depend on what the majority of the shareholders decide.

In addition, directors are obliged to:

  • provide the shareholders with a justified account of their administration; and
  • present them with:
    • an annual inventory;
    • the balance sheet; and
    • the financial statements.

3.8 What are the legal duties of individual directors? To whom are these duties owed?

In exercising their duties, directors must exercise the care and diligence that any active and honest person would habitually employ in the administration of his or her own affairs. The duties of diligence, loyalty and information apply under Brazilian law.

3.9 To what civil and criminal liabilities are individual directors primarily potentially subject?

The directors of a corporation (members of the board of directors or of the board of executive officers) are not personally liable for obligations incurred:

  • on behalf of the entity; and
  • in the regular course of management.

However, directors may become liable for damages sustained by the corporation while acting within their respective duties or powers, but:

  • with negligence or wilful misconduct; or
  • in violation of the law or the articles of association/incorporation.

The Corporation Law provides that administrators must comply with certain management duties, such as the following:

  • to employ the due care and diligence that an active and honest person would usually employ in managing his or her own affairs;
  • to act in the interests of the corporation;
  • to be loyal to the corporation (not to use their position for their own benefit or the benefit of third parties); and
  • to inform the shareholders of material facts.

The liability of a limited liability quota holder is limited to the value of the subscribed quotas, when fully paid in. Quota holders are jointly liable in relation to the company's obligations (for the unpaid portion). The same principles as apply to shareholder liability apply to the quota holders of limited liability companies.

4. Shareholders/members

4.1 What requirements and restrictions apply to shareholders/members in your jurisdiction, in terms of factors such as age, bankruptcy status etc?

Shareholders must:

  • be in full possession of their civil capacity; and
  • not be legally impeded.

They can be:

  • individuals over the age of 18, Brazilian or foreign, who are in full possession of their civil capacity; or
  • national or foreign legal entities.

4.2 What rights do shareholders/members enjoy with regard to the company in which they have invested?

Even if this is not expressly stated in the articles of association/incorporation, the shareholders have the right to:

  • participate in the economic results of the company's activities;
  • vote on corporate resolutions;
  • supervise the administration;
  • participate in the split of corporate assets in the event of liquidation;
  • exercise any preferential rights; and
  • withdraw from the company.

4.3 How do shareholders/members exercise these rights? Do they have a right to call shareholders' meetings and, if so, in what circumstances?

The principal rights of the shareholders are as follows:

  • Profit sharing: Profits are distributed to the shareholders in proportion to their participation in the corporate capital, unless there is a contractual clause to the contrary. A provision that excludes any partner from participating in the profits is null and void.
  • Voting on corporate resolutions: Voting is the main instrument through which the shareholders can express their will to the other members and the company itself. It is a fundamental and indispensable right of the shareholders.
  • Supervise the management of the directors: The company achieves its corporate purpose through the activities of directors, who must use the company's resources within the powers established in the articles of association/incorporation with the aim of achieving the desired results. Unless otherwise stipulated, a shareholder may, at any time:
    • monitor the acts of management; and
    • examine the company's books and documents.
  • Corporate assets in the event of liquidation: The shareholders are treated as heirs of the company. After the payment of creditors, any surplus remaining will be shared among the shareholders in proportion to their share in the capital or as determined in the articles of association.
  • Preference: The articles of association may afford the shareholders:
    • preferential rights for each capital increase; or
    • the right to subscribe to a portion of such increase in proportion to their shareholding.
  • If the articles of association are silent on this issue, Article 171 of the Corporation Law affords the shareholders' pre-emptive rights.
  • Withdrawal from the company: This guarantees the shareholders the right to leave the company. The remaining shareholders may decide on the total dissolution of the company within 30 days of notification of a request to withdraw. This right can be exercised where:
    • the shareholder dissents on a subject such as the modification of the articles of association, merger or acquisition; or
    • the assignment of quotas is prohibited.
  • If a shareholder is unable to sell its quotas to a third party or another shareholder, the company will be obliged to liquidate the referred quotas.

The Corporation Law provides that the board of directors, if any, or the officers, in accordance with the articles of association, are responsible for calling the shareholders' meeting. A shareholders' meeting may also be called:

  • by the fiscal council, in cases provided for in Article 163(V) of the Corporation Law;
  • by any shareholder, if the directors delay for more than 60 days in convening a meeting in cases foreseen by law or by the articles of association;
  • by shareholders representing at least 5% of the capital stock if the managers do not respond, within eight days, to a request to convene a meeting, duly justified and with an indication of the matters to be dealt with; or
  • by shareholders representing at least 5% of the voting capital or 5% of the shareholders without voting rights, if the directors do not respond, within eight days, to a request to convene a meeting for the establishment of the fiscal council.

4.4 What influence can shareholders/members exert on the appointment and operations of the directors?

The directors must provide the shareholders with:

  • justified accounts of their administration;
  • an annual inventory; and
  • the balance sheet and financial statements.

Unless otherwise stipulated, at any time, the shareholders may also examine:

  • the company's books and documents; and
  • the status of the company's cash and portfolio.

4.5 What are the legal duties/responsibilities and potential liabilities, if any, of shareholders/members?

As a general rule, under Brazilian law, legal entities exist separately from the shareholders and, if regularly incorporated, acquire their own status as a 'corporate entity'.

As a consequence, the company's property is independent from that of its shareholders and constitutes a guarantee for debts incurred in the name of the company. Therefore, the shareholders should not be liable for the company's debts as long as:

  • the company's capital has been fully paid in by the shareholders; and
  • they act according to the law.

4.6 To what civil and criminal liabilities might individual shareholders/members be subject?

Shareholder liability is limited to the issue price of the subscribed or acquired shares. After the issue price of the shares has been paid in by the shareholder, the company's assets – rather than the shareholders' assets – will constitute a guarantee for debts incurred in the name of the company. However, this general rule of property independence is not absolute; in order to protect third parties, Brazilian law sets out certain cases in which the shareholders may be liable for the company's debts.

The obligations of the shareholders begin with the incorporation of the company. Their main obligation is to contribute to the formation of the corporate capital, in cash or assets. If a shareholder does not fulfil this obligation in the requisite manner and within the requisite timeframe, the shareholder will be considered as 'remiss' and the company may:

  • take legal action against it; or
  • exclude it from the company.

4.7 Are there rules governing the issuance of further securities in a company? Do rights of pre-emption exist and, if so, how do they operate? Can they be circumvented? If so, how and to what extent?

The shareholders have a preferential right to subscribe to a capital increase in proportion to the number of shares they hold. Through this pre-emptive subscription right, a shareholder has the right (but not the obligation) to subscribe in priority to new shares issued through a capital increase in proportion to its existing shareholding, thus maintaining the same position as it had before the increase.

Article 172 of the Corporation Law sets out exceptions to this general pre-emptive subscription right. For example, public companies with authorised capital can exclude or limit such right in their articles of incorporation in case of sale on the stock exchange or public subscription. In this way, they can raise funds on the capital markets right away, thus increasing the possibility of raising funds and enhancing the diversification of the capital market.

However, this exceptional rule is valid only:

  • for companies whose articles of association/incorporation provide for a capital increase and for the exclusion of the pre-emptive right or its exercise within a reduced term; and
  • within the limits of the capital increase that is authorised.

Another exception concerns a publicly held company that increases its capital specifically to exchange the new shares issued for the control of another company by means of a public tender offer. In this case, exclusion of the pre-emptive right or a reduction in the term for its exercise is allowed.

An exclusion of the pre-emptive right or a reduction in the term for its exercise can also be included in the articles of association/incorporation of open or closed companies that benefit from tax incentives pursuant to a specific law.

If the remuneration or compensation of the directors, and in some cases of company employees and service providers, involves the grant of stock options, the existing shareholders will have no pre-emptive rights either at the time of grant or at the time of exercise of the option.

Article 252(1) of the Corporation Law, which governs the incorporation of shares, expressly precludes the pre-emptive right of shareholders of an incorporating company to subscribe to a capital increase with the shares to be incorporated, replacing this with a right to withdraw.

4.8 Are there any rules on the public disclosure of levels of shareholding and/or stake building?

Law 13,818/2019 introduced new rules on the mandatory publications of corporations. According to Article 1, which came into force on 1 January 2022, the publications required under the Corporation Law must comply with the following rules:

  • They must be made:
    • in a newspaper with wide circulation published in the locality in which the company's headquarters are located;
    • in summarised form; and
    • with simultaneous disclosure of the full documents on the website of the same newspaper.
  • The newspaper must provide digital certification of the authenticity of the documents kept on its own page, issued by a certifying authority accredited under the Brazilian Public Key Infrastructure.
  • In the case of financial statements, the publication in summarised form must contain at least the following information, in comparison to the data for the previous fiscal year:
    • information or global values relating to each group;
    • the respective classification of accounts or records; and
    • extracts from the relevant information contemplated in the explanatory notes and from the opinions of the independent auditors and the fiscal council, if any.

Due to the changes introduced by Law 13,818/2019, it is no longer mandatory for corporations to publish in the Federal or State Official Gazettes, which represented a significant annual expense.

There have been no changes to the rules that apply to publications of corporate documents for limited liability companies. For these companies, publications in the Federal or State Official Gazette (depending on where the company is headquartered) and in a newspaper in circulation at the location of the head office is still required, in accordance with Article 1,152(1) of the Civil Code.

5. Operations

5.1 What are the main routes for obtaining working capital in your jurisdiction? What are the advantages and disadvantages of each?

Working capital is mainly obtained in Brazil from public and private banks. Public banks offer several credit programmes, usually with better conditions and at lower interest rates; but the bureaucracy in obtaining access to these may present difficulties. Private banks also offer several loans under various conditions, usually at higher interest rates than public banks. Credit can also be obtained from other institutions, such as fintechs, which offer different credit structures that may involve less bureaucracy; but the interest rates may be higher than those offered by banks.

Other sources – such as the issue of debentures in the case of corporations or the admission of new partners to the company – can also be considered.

Several factors – including the company's size and the market in which it operates – have a direct impact on the best option for a company. Therefore, in-depth analysis is recommended to clarify the advantages and disadvantages of each option.

5.2 What are the main routes for the return of proceeds in your jurisdiction? What are the advantages and disadvantages of each?

Company proceeds, where legally available, are mainly paid to the partners in the form of dividends, which are exempt from income tax and social security contributions.

The articles of association/incorporation should specify the mandatory dividends to be paid to shareholders; if they are silent on this matter, dividends are paid as provided for by the Corporation Law.

Limited liability companies are not required to specify in their articles of association the minimum profits to be distributed to quota holders. Distribution is based on the equity ratio, unless otherwise agreed between the partners, as unequal distributions are allowed. The exclusion of quota holders from profit sharing is null and void.

5.3 What requirements and restrictions apply to foreign direct investment in your jurisdiction?

Brazil is open to foreign investment; but sectors deemed strategic – such as financial institutions, broadcasting and the press – are either restricted to Brazilian nationals or subject to government control. Foreign investors must appoint representatives in Brazil.

Foreign investments should be registered with the Brazilian Central Bank (BCB); but no examination or verification of such foreign investments by the BCB is required, except in specific sectors.

Brazilian companies under foreign control can acquire, exploit and lease rural land. However, foreign nationals residing in Brazil, foreign companies and Brazilian companies controlled by foreigners must comply with certain conditions and obtain prior authorisation in order to acquire rural properties. Moreover, the acquisition of property located in border regions is subject to authorisation by the National Security Council.

5.4 What exchange control requirements apply in your jurisdiction?

Law 14,286/2021, in effect since December 2022, established a new legal framework for:

  • the exchange market;
  • Brazilian capital held abroad; and
  • foreign capital held in Brazil.

According to this law, operations in the exchange market:

  • may be freely carried out, without limitation in terms of amount, by institutions which are duly authorised by the BCB (which should ensure that operations are legal and that clients can be identified); and
  • must comply with:
    • the law;
    • National Monetary Council guidelines; and
    • BCB regulations.

Information on Brazilian capital abroad and foreign capital in Brazil may be requested by the BCB.

Exchange rates are freely agreed:

  • between authorised institutions; and
  • between such institutions and their clients.

Law 14,286/2021 ensures that foreign capital in Brazil will be given identical legal treatment to that given to Brazilian capital under equal conditions. Payment in foreign currency for obligations enforceable in Brazil is permitted – for example, for:

  • agreements concerning foreign trade in goods and services;
  • leasing agreements entered into by Brazilian residents based on foreign fundraising; and
  • the purchase/sale of foreign currency.

Entry and remittance of national or foreign currency should be carried out exclusively by the abovementioned institutions, but there are exceptions to this rule.

5.5 What role do stakeholders such as employees, pensioners, creditors, customers and suppliers play in shaping business operations in your jurisdiction? What other influence can they exert on an enterprise?

Stakeholders can directly affect companies' operations, whether positively or negatively; and the influence that each stakeholder can exert should be taken into consideration in decision-making processes.

As interests may diverge depending on the stakeholders concerned, companies should always seek a balance in meeting the demands and needs of these parties in order to realise optimal results for the company while simultaneously fulfilling their social role, thus benefiting the community as a whole.

5.6 What key concerns and considerations should be borne in mind with regard to general business operations in your jurisdiction?

Complex rules apply to business operations in Brazil. Therefore, specialised knowledge on the subject and continued monitoring of corporate operations are necessary to ensure that companies comply with all rules concerning issues such as:

  • corporate, tax and labour law; and
  • due registration procedures.

6. Accounting reporting

6.1 What primary accounting reporting obligations apply in your jurisdiction?

Corporations are required to publish their yearly financial statements, except where:

  • there are fewer than 20 shareholders; and
  • the corporation's net equity is less than BRL 10 million.

In the state of São Paulo, companies or groups of companies under common control with total assets exceeding BRL 240 million or gross revenues exceeding BRL 300 million in the previous fiscal year must publish their yearly balance sheet and financial statements in:

  • the State Official Gazette; and
  • a newspaper with wide circulation at the place where their headquarters are located.

The financial statements of the following companies, among others, should be audited by independent auditors:

  • publicly held corporations; and
  • limited liability companies with:
    • total assets exceeding BRL 240 million; or
    • gross revenues exceeding BRL300 million.

6.2 What role do the directors play in this regard?

The appointed administrators of a legal entity should take all relevant measures required to ensure due compliance with:

  • legal obligations in general; and
  • the applicable accounting rules.

Law 6,404/1976 provides that the board of directors is responsible for preparing the corporation's balance sheet and financial statements, which should clearly state:

  • the status of its assets; and
  • any changes that occurred in the relevant fiscal year.

Directors are not obliged to prepare financial statements themselves; such documents might be prepared by accountants and related professionals. However, any systems adopted by the company for this purpose should be consistent with its size and operations to ensure compliance with the applicable laws and rules.

Law 6,404/1976 also specifies that the corporation's administrators, as well as duly qualified accountants, should sign the financial statements.

The company's administrators may be held personally liable for any losses caused if:

  • in exercising their powers, they act with negligence or wilful misconduct; or
  • losses result from a violation of the law or articles of association/incorporation.

Thus, administrators may be liable in case of:

  • failure to prepare the balance sheet and/or financial statements;
  • false accounting statements; or
  • documents containing gross errors.

With regard to limited liability companies, the Civil Code provides that balance sheets and financial statements, as well as the company's inventory, should be prepared at the end of each fiscal year. The company's administrators must:

  • render a justified account to the company's partners concerning their administration; and
  • submit to the partners the balance sheet, financial statements and inventory.

6.3 What role do accountants and auditors play in this regard?

Accountants are in charge of preparing the balance sheet, the financial statements and the company books, among other things. Auditors carry out objective and independent analyses of the company's balances sheet, financial statements and accounts to ensure that they are accurate and comply with applicable rules and accounting standards.

6.4 What key concerns and considerations should be borne in mind with regard to accounting reporting in your jurisdiction?

Depending on the specific kind of company, different reporting procedures and deadlines may apply. Therefore, careful examination of the relevant laws and rules and appropriate control of compliance are required to ensure the company's good standing.

7. Executive performance and compensation

7.1 How is executive compensation regulated in your jurisdiction?

The compensation of executives is regulated by:

  • the Corporation Law for corporations; and
  • the Civil Code for limited liability companies.

Other rules might apply to executives in specific sectors, such as those holding positions in financial institutions.

7.2 How is executive compensation determined? Do any disclosure requirements apply?

Shareholders' meetings determine the global or individual amount of executive compensation, including:

  • benefits;
  • representation allowances; and
  • participation in the company's profits in some circumstances.

Publicly held corporations must disclose information on executive compensation.

On taking office in corporations, executives should state the number of shares, subscription bonuses, options to purchase shares and debentures convertible into shares issued by the company and controlled companies or companies of the same group that they hold. Upon request, other information might need to be provided to the shareholders.

Compensation of executives of limited liability companies may be:

  • set in the articles of association; or
  • decided by the company's partners.

7.3 How is executive performance monitored and managed?

Companies may establish policies or guidelines on:

  • the monitoring and management of executive performance; and
  • the expected conduct and results.

However, executive performance should always accord with:

  • the applicable laws and regulations;
  • the company's articles of incorporation/association;
  • other corporate acts; and
  • further applicable principles and practices.

7.4 What key concerns and considerations should be borne in mind with regard to executive performance and compensation in your jurisdiction?

Companies and executives should be aware of and comply with all applicable laws and rules concerning executive performance and compensation, which is particularly important in regulated markets. Reliable corporate governance and transparency on such aspects may be important for the company – for example, when attracting investment.

8. Employment

8.1 What is the applicable employment regime in your jurisdiction and what are its key features?

The employment regime in Brazil is regulated by the Consolidation of Labour Laws and the Federal Constitution, which apply to both Brazilian employees and foreigners working in the country under a visa.

Employment agreements set out the employment terms and are usually executed in writing. As per the legislation, employees are entitled to:

  • working hours capped at eight hours per day or 44 hours per week;
  • compensation for overtime;
  • night shifts bonuses;
  • weekly paid rest, preferably on Sundays;
  • paid vacations of 30 calendar days;
  • a vacation bonus, equivalent to one-third of the employee's monthly remuneration;
  • a Christmas bonus, equivalent to one month's remuneration; and
  • leave as allowed by law (eg, maternity leave).

Employers should also make monthly deposits to the Employees' Severance Fund (FGTS) corresponding to 8% of their monthly compensation. Collective bargaining agreements, which set the percentages for yearly salary increases and other covenants, may also apply.

8.2 Are trade unions or other types of employee representation recognised in your jurisdiction?

Yes, trade unions and employee representation bodies are recognised in Brazil.

8.3 How are dismissals, both individual and collective, governed in your jurisdiction? What is the process for effecting dismissals?

Where employees are entitled to employment stability (eg, pregnant women), dismissals can only occur for cause. Otherwise, dismissals without cause can occur at any time with prior paid notice of 30 days, plus three days per year of employment with the employer, up to a total of 90 days. The employee is also entitled to receive the following severance payments:

  • salary balance;
  • indemnification for untaken holidays;
  • proportional vacation bonus; and
  • proportional Christmas bonus.

Additionally, the employee is entitled to receive an amount corresponding to 40% of the total FGTS deposits, which is a fine charged against the employer. The relevant collective bargaining agreement conditions should also be complied with in case of dismissal without cause.

An employee may be dismissed for cause in the event of the following:

  • dishonesty, theft, robbery, fraud or forgery;
  • improper conduct or bad behaviour;
  • unauthorised trading on his or her own behalf, or on behalf of a third party, without the employer's authorisation in a way that competes with or is prejudicial to the employer;
  • a unappealable criminal conviction;
  • negligence in the execution of duties;
  • habitual or on-duty inebriation;
  • breach of company secrets;
  • acts of insubordination;
  • abandonment of employment;
  • physical offences (other than self-defence or defence of third parties);
  • gambling; or
  • loss of legal qualifications or requirements for the exercise of his or her profession due to malicious conduct.

No minimum notice period is required for dismissal for cause. Severance payments comprise only:

  • salary balance; and
  • proportional payment for due holiday and holiday bonus.

Negotiation with the relevant unions is required in case of collective dismissals.

8.4 How can specialist talent be attracted from overseas where necessary?

Companies organised in Brazil are free to attract foreign talent, but residence permits and visas are required for these professionals to be allowed to enter Brazil and work in the country. The type of residence permit and visa required will depend on the specific situation.

8.5 What key concerns and considerations should be borne in mind with regard to employment in your jurisdiction?

Workers are deemed the weaker party in the employment relationship and Brazilian labour laws aim to protect them. Therefore, employers must comply with all applicable legal provisions regarding both labour and social security, to avoid the application of relevant fines and sanctions.

9. Tax

9.1 What is the applicable tax regime in your jurisdiction and what are its key features?

Brazil has a complex tax regime, with taxes applied at all levels: federal, state/district and municipal. An array of different taxes apply, each with its own calculation base (eg, revenue, profit or transaction amount). The government may grant deductions, exemptions or credits depending, for example, on parameters such as:

  • income;
  • company size;
  • productive sector; and
  • presence in certain regions.

All taxes must observe the following principles:

  • legality (the tax must be created by force of law);
  • isonomy (taxes must not arbitrarily discriminate against taxpayers in equivalent conditions);
  • non-retroactivity (no tax can be charged prior to the entry in force of a law);
  • anteriority (a tax can only be charged or increased 90 days after the enactment of the law that established it);
  • non-confiscation (a tax must not constitute a violation of property due to its high amount); and
  • contribution capacity (non-imposition of equal charges for taxpayers with different capacities).

The most common taxes currently in force in Brazil are set out in the following table.

  • Income tax for individuals (IRPF)
  • Income tax for legal entities (IRPJ)
  • Social contribution on net profit (CSLL)
  • Import tax (II)
  • Export tax (IE)
  • Excise tax on industrialised goods (IPI)
  • Tax on financial operations (IOF)
  • Tax on rural property (ITR)
  • Contribution to the Social Integration Programme (PIS)
  • Social security financing contribution (COFINS)
  • Contributions for intervention in the economic domain (CIDE)
  • Social security contribution (INSS)
  • Employees' Severance Fund
  • Tax on the sale of goods and services (ICMS)
  • Tax on the property of vehicles (IPVA)
  • Tax on causa mortis estate transmission and donations (ITCMD)
  • Municipal service tax (ISS)
  • Real estate property tax (IPTU)
  • Real estate transfer tax (ITBI)

9.2 What taxes apply to capital inflows and outflows?

Capital inflows and outflows are currently subject to IOF at a rate of 0.38% on the liquidation of the exchange. The Brazilian real is the exclusive currency accepted in the local banking system. For this reason, inflows and outflows of currency must undergo foreign exchange operations, which are formalised through foreign exchange agreements executed between the foreign investor or the Brazilian company and local banks.

All foreign investors must appoint a representative in Brazil (attorney-in-fact) who, jointly with the representative of the company receiving the foreign investment, will be responsible for declaring and registering the investment. The Brazilian representative is responsible for electronic registration of the foreign capital entering Brazil, using the Electronic Declaration of Foreign Direct Investment (FDI) Register (RDE-IED) in the Brazilian Central Bank (BCB) Information System. Registration of foreign investment is mandatory in Brazil.

Federal Law 14,286/2021, in force since 30 December 2022:

  • consolidated the legislation on the foreign exchange market and on international capital; and
  • amended previous laws (eg, Laws 4,131/1962, 9,069/95 and 11,371/2006) on the registration of foreign capital.

Other normative rules apply in this regard, such as those issued by the National Monetary Council and the BCB (eg, Resolution 3,844/2010 and Circular Notices 3,689/2013, 3,814/2016 and 3,822/2017, as amended from time to time).

The BCB issued Resolution 278/2022 to regulate Law 14,286/2021, establishing a series of innovations, such as the following:

  • Only investments equal to or greater than $100,000 need be declared to the BCB.
  • Financial transactions via foreign exchange or international transfer in Brazilian reals can only be linked to the RDE-IED system if they are equal to or greater than $100,000.
  • Companies must provide periodic statements on FDI received, as follows:
    • Companies with assets equal to or greater than BRL 300 million must provide quarterly statements;
    • Companies with total assets equal to or greater than BRL 100 million must provide annual statements; and
    • Companies with total assets equal to or greater than BRL 100,000 must provide a five-year declaration statement, in addition to their annual statements.

9.3 What key exemptions and incentives are available to encourage enterprises to do business in your jurisdiction?

Brazil offers a number of exemptions and incentives to national and foreign investors at the federal, regional and local levels. Most incentives are granted after the submission of a project indicating information such as:

  • the minimum amount invested; and
  • the number of job positions created.

The main laws relating to research and development (R&D) are:

  • the Law of the Good (11,196/2005); and
  • the Informatics Law (8,248/1991).

The Law of the Good provides for:

  • a reduction in income tax;
  • a reduction in tax on the acquisition of equipment destined for R&D;
  • accelerated depreciation of new machinery; and
  • accelerated amortisation of certain R&D expenses.

The Informatics Law grants benefits to the IT sector for the automation and production of equipment in Brazil. Some of the available FDI programmes are as follows:

  • Regime Especial de Incentivos para o Desenvolvimento da Infraestrutura: Infrastructure companies that participate in the Programme for Acceleration of Growth may qualify for incentives such as an exemption from PIS and COFINS for acquisitions of:
    • imported or national inputs;
    • construction services; and
    • products for incorporation in their fixed assets.
  • The applicable sectors are transportation, energy, irrigation and sewage; and the benefits apply for up to five years from grant.
  • Regime Especial de Tributação para a Plataforma de Exportação de Serviços de Tecnologia da Informação: This regime benefits companies whose activities exclusively encompass software development or the provision of IT services. It grants:
    • an exemption from PIS and COFINS for the purchase of IT products and services; and
    • an exemption from IPI on imported goods, in the absence of national equivalent.
  • Specific conditions apply.
  • Regime Especial de Aquisição de Bens de Capital para Empresas Exportadoras: This is a special regime for the acquisition of capital goods for companies that export over 50% of their gross revenues from the sale of goods and services. An exemption from PIS and COFINS is available for the acquisition of imported or national capital goods for up to three years from grant.
  • Programa de Apoio ao Desenvolvimento da Indústria de Equipamentos para a TV Digital: This provides support for the development of the digital television industry by granting exemptions from IPI, PIS and COFINS for:
    • the acquisition of raw materials and software for research and production; and
    • the sale of final products.
  • Programa de Apoio ao Desenvolvimento Tecnológico da Indústria de Semicondutores: This provides support for the technological development of the industry of semiconductors, displays and light-emitting diodes by granting exemptions from IPI, PIS and COFINS for acquisitions of raw material for research and production and for the sale of final products.

Other incentives include:

  • funding from public banks;
  • no taxation on dividends;
  • reduced tax on investments in capital markets by non-residents;
  • tax-free areas such as the Zona Franca de Manaus and export processing zones; and
  • regional incentives for companies established in the northeast and north regions of Brazil.

9.4 What key concerns and considerations should be borne in mind with regard to tax in your jurisdiction?

There is a lack of clear guidelines in relation to the assessment of many taxes. This usually requires a case-by-case analysis by tax specialists and provides scope for different interpretations by taxpayers on the one hand and the tax authorities on the other. For instance, there have been judicial disputes relating to the grant of PIS/COFINS credits in relation to the constitutionality of including ICMS in the PIS/COFINS tax base.

It is also important to keep abreast of tax law developments motivated by political changes. Changes in government usually result in:

  • the revision of tax rates, deductions or exemptions; or
  • the reinstatement of taxes that had previously been abolished.

10. M&A

10.1 What provisions govern mergers and acquisitions in your jurisdiction and what are their key features?

The main provisions applicable to mergers and acquisitions are the Civil Code and the Corporation Law. The Civil Code sets forth rules on:

  • obligations;
  • contracts and their negotiation;
  • property;
  • inheritance; and
  • business law.

The Corporation Law specifically addresses Brazilian corporations, whether privately held or listed on stock exchanges.

10.2 How are mergers and acquisitions regulated from a competition perspective in your jurisdiction?

From a competition perspective, mergers and acquisitions may be subject to mandatory pre-merger clearance by the competition authority, the Administrative Council for Economic Defence (CADE), depending on whether legal and regulatory thresholds are met. Under the antitrust laws, the following transactions are subject to pre-merger review clearance and can be defined as 'concentration acts':

  • the merger of two or more formerly independent companies;
  • the acquisition of control (or portions thereof) of one or more companies by one or more other companies, pursuant to the purchase or exchange of stocks, shares, bonds or securities convertible into stocks or assets;
  • the merger of one or more companies into one or more other companies; and
  • the entry by two or more companies into an associative contract, consortium or joint venture (except when used for bids promoted by the direct and indirect public administration and for contracts arising therefrom).

The legal thresholds for mandatory pre-merger review are as follows:

  • At least one of the groups involved in the transaction had annual gross sales or total turnover in Brazil in the year prior to the transaction of at least BRL 750 million; and
  • At least one other group involved in the transaction had annual gross sales or total turnover in Brazil in the year preceding the transaction of at least BRL 75 million.

Parties should be attentive to the definition of 'economic groups' pursuant to specific CADE regulations. If a concentration which requires pre-merger review is not notified, the contracting parties may be subject to penalties.

CADE's Resolution 17/2016 sets out specific rules applicable to associative contracts. A compulsory notification requirement depends on:

  • the revenue or turnover of the economic groups involved;
  • whether the duration of the contract is longer than two years; and
  • the establishment of a common endeavour for the exploitation of economic activity.

It applies in the following circumstances:

  • The contract provides for the sharing of the risks and results of the economic activity that constitutes its object; and
  • The contracting parties are competitors in the relevant market that is the subject of the contract.

'Economic activity' is considered to constitute the acquisition or offer of goods or services on the market, even if not for profit, as long as this activity can hypothetically be performed for profit by a private company. 'Contracting parties' are understood as those directly involved in the transaction, as well as their groups, as defined by CADE. Even contracts executed before the enactment of Resolution 17/2016 are subject to its terms if they meet the notification thresholds.

10.3 How are mergers and acquisitions regulated from an employment perspective in your jurisdiction?

Formal employment arrangements are expressly governed by the labour laws, under which employers are obliged to:

  • disburse payroll and other taxes; and
  • contribute to social security funds and the Employees' Severance Fund (FGTS) in support of social programmes and policies for the benefit of employees.

There are also other kinds of contractual arrangements with individuals (or legal entities known as PJs) that, while not formal employment contracts, may nonetheless be characterised as an employment relationship. In such cases, the employer will be subject to obligations under the labour legislation. This could happen:

  • in the context of an investigation by the Brazilian authorities (the Ministry of Labour or the Office of the Labour Attorney General); or
  • if the case is brought to court by the contracted individuals.

In this context, regardless of who is in command of a given M&A target, there is a risk that a court may recognise employees' rights, which could lead to extra expenses.

When examining a services relationship between an individual or a PJ and the hiring company, the Brazilian courts will examine various factors in order to determine whether an employment relationship exists, as follows:

  • the provision of services on an ongoing basis;
  • remuneration with a fixed salary;
  • a robust personal component to the provision of services;
  • evidence of services being managed by the hiring company; and
  • no modification to the relationship after the hiring company recognises the individual or PJ as an employee.

Other issues of concern in the context of an M&A transaction include an array of Labour Law requirements, including whether the target complies with requirements in relation to:

  • payment for overtime or night-time work;
  • bonus payments – mainly whether these are regarded part of the salary, in which case payment of taxes and deposits to the Employees' Severance Fund will be due;
  • the apprentice quota (between 5% and 15% of the workforce);
  • allowances for teleworking employees;
  • Christmas bonus and vacation bonus;
  • maternity, paternity and sick leave; and
  • food and transportation allowances.

Through comprehensive legal due diligence, it is possible to assess these and other employment risks in connection with mergers and acquisitions in Brazil. Once these risks are known, it is up to the negotiating parties to address them accordingly, defining the liability that each party will bear in the phases of the deal up to post-closing. This could include:

  • revising all services contracts;
  • promoting changes where needed; and
  • considering model contracts for the hiring of services and employees.

10.4 What key concerns and considerations should be borne in mind with regard to M&A activity in your jurisdiction?

Interested purchasers should conduct thorough due diligence on the target across all areas, including:

  • corporate aspects and governance;
  • good-standing certificates from courts and other government bodies;
  • tax;
  • labour;
  • litigation;
  • crime;
  • environment;
  • competition;
  • data privacy;
  • anti-bribery and anti-corruption compliance;
  • intellectual property;
  • real estate; and
  • specific sectoral issues, especially in regulated sectors.

Customised agreements should also be designed to reflect the peculiarities of the target, the sector and the risk assessment, balancing out liability and indemnity.

The assistance of experienced local counsel should be sought in light of:

  • the complexity of the Brazilian legislative and regulatory framework; and
  • the different cultural aspects at play in the negotiation of M&A deals.

11. Financial crime

11.1 What provisions govern money laundering and other forms of financial crime in your jurisdiction?

The White Collar Crimes Law (7,492/1986) defines some of the main financial crimes – specifically, those committed against the Brazilian financial system. These include various types of fraud pertaining to financial institutions, such as:

  • mismanagement;
  • the release of privileged information;
  • false statements;
  • accounting fraud;
  • off-book accounting;
  • operation of a financial institution without authorisation or with falsely obtained authorisation;
  • money smuggling;
  • tax evasion; and
  • other types of fraudulent activities.

The crime of money laundering is established by Laws 9,613/1998 and 12,683/2012.

Other crimes of a financial nature are set forth in diverse laws, including:

  • tax evasion (Law 4,729/1965);
  • terrorist financing (Laws 9,613/1998 and 13,260/2016);
  • corruption (Law 12,846/2013);
  • organised international crime (Law 12,850/2013);
  • drug trafficking (Law 11,343/2006);
  • securities fraud;
  • insider trading (Laws 6,385/1976 and 13,506/2017);
  • competition economic crimes (Law 12,529/2011); and
  • digital crimes (Laws 12,735/2012 and 12,737/2012).

The Penal Code sets forth some other crimes involving financial assets, including:

  • passive corruption by a public official (Article 317);
  • active corruption perpetrated by individuals who influence the acts of public officials through the offer of an advantage or promise thereof (Article 333);
  • human trafficking (Article 149-A);
  • embezzlement by a public official (Article 312);
  • smuggling and embezzlement of duties or rights owed in connection with international trade and exports controls (Articles 334-334-A); and
  • various types of fraud (Articles 171-179).

11.2 What key concerns and considerations should be borne in mind with regard to the prevention of financial crime in your jurisdiction?

Measures to prevent financial crimes include:

  • a good internal governance structure;
  • a robust compliance programme designed on the basis of a risk assessment exercise and encompassing:
    • policies;
    • standards;
    • information security patterns;
    • training and education;
    • crisis management strategies; and
    • periodic internal and independent external audits; and
  • up-to-date awareness of legislative changes, to ensure that the compliance programme and governance structure are amended as necessary.

12. Audits and auditors

12.1 When is an audit required in your jurisdiction? What exemptions from the auditing requirements apply?

Publicly held corporations, companies with total assets in excess of BRL 240 million or with annual gross revenues in excess of BRL 300 million and certain other corporations must have their financial statements audited by independent auditors, even if they are established as limited liability companies, as per Law 11,638/2007. These companies must also establish an audit committee. Companies listed on the stock exchange or operating in sectors such as banking and insurance are also subject to an independent audit requirement. For an exemption from the audit requirement, the rule of thumb is that companies or sectors for which periodic audits are not required by law are exempt.

12.2 What rules relate to the appointment, tenure and removal of auditors in your jurisdiction?

Article 1,179 of the Civil Code provides that regular bookkeeping must be conducted by a licensed accountant, who must be registered with the local regional accounting council (CRC). Financial institutions are subject to the rules on auditing issued by:

  • the Brazilian Central Bank (BCB);
  • the National Monetary Council (CMN);
  • the Securities and Exchange Commission of Brazil (CVM);
  • the Accounting Federal Council (CFC); and
  • the Institute of Independent Auditors of Brazil.

Under Law 6,404/1976, enterprises established in the form of a corporation must have an audit committee, which can operate permanently or otherwise. This committee can be called for at any shareholders' meeting. These companies are required by law to publish their annual financial statements, except for those corporations with:

  • fewer than 20 shareholders; and
  • net equity of up to BRL 10 million.

For financial institutions and other entities which are authorised to operate by the BCB, as well as for auditors of publicly held corporations, the removal and replacement of an auditor are mandatory where his or her independence to perform the audit services which he or she was hired to provide is affected in any way. Regardless of the auditors' independence, they must be replaced after five full consecutive years of providing audit services to the same entity, and must then wait for at least a further three years before entering into a new contract with the same entity. (CMN Resolution 4,910/2021 and CVM Resolution 23/2021). The audit committee is also in charge of monitoring and assessing the independence of the auditor and can also hire specialists.

12.3 Are there any rules or recommendations that limit the scope of services as regards the provision of non-audit services by an auditor?

The auditors of publicly held corporations, which are subject to regulations issued by the CVM, are expressly forbidden from providing consultancy services that may suggest a loss of their objectivity and independence. Article 23 of CVM Resolution 23/2021 lists the following prohibited consultancy activities:

  • assistance in organisational restructuring;
  • company valuation;
  • re-evaluation of assets;
  • determination of amounts for provisioning or for technical reserves and provisions for contingencies;
  • tax planning;
  • remodelling of accounting, information or internal control systems; and
  • provision of any other services or products that influence or could influence decisions taken by the administration of the audited entity.

12.4 Are there any rules or recommendations which cap the remuneration of an auditor as regards payment for the provision of non-audit services?

For companies in general, there are no rules or recommendations that cap the remuneration of an auditor for the provision of non-audit services. In this sense, the costs may vary depending on the scope, complexity and nature of the service. For instance, the cost of non-audit consultancy services for the acquisition of companies or assets will most likely differ from those relating to tax compliance.

Under CMN Resolution 4,910/2021, which applies to financial institutions and other institutions that are subject to operational authorisation by the BCB, the audit committee of a company oversees the remuneration of the independent auditor and its replacement where necessary, but not specifically in relation to non-audit services. An independent auditor cannot be hired or maintained to provide audit services if the total amount of fees and expenses for auditing the relevant entity (whether alone, together with a controlling company or together with controlled or related entities) in the year during which those services are provided equals or exceeds 25% of its total income in such year.

13. Termination of activities

13.1 What are the main routes for terminating business activities in your jurisdiction? What are the advantages and disadvantages of each?

Under Brazilian law, a corporation may be dissolved, liquidated or extinguished:

  • by operation of law:
    • when its term of duration expires;
    • in the cases set forth in its articles of association/incorporation;
    • by resolution of a shareholders' meeting;
    • if only one shareholder exists, verified at an annual shareholders' meeting, and the required minimum of two shareholders is not reinstated by the following year's annual meeting; or
    • by cancellation of its authorisation to operate;
  • by court decision:
    • where its incorporation is annulled in a claim filed by a shareholder;
    • where it is proved that the corporation cannot achieve its corporate objectives; or
    • in the event of bankruptcy, as provided by law; or
  • by decision of a competent administrative authority, in the cases and manner provided for by law.

During the liquidation process, the company maintains its status as a legal entity until it is extinguished. Shareholders are entitled to receive assets from the corporation in the event of liquidation, as long as there is an outstanding balance once all of the corporation's obligations have been satisfied.

A limited liability company may be liquidated and dissolve upon:

  • the expiration of its term of duration, unless this term expires and, without opposition by any member, the company is not placed in liquidation. In this case, the company will extend its duration for an indefinite period;
  • unanimous agreement of its members;
  • decision of members representing an absolute majority, in case of a company organised with indefinite duration; or
  • expiry of the specific authorisation to operate, in the form of law.

A company also may be dissolved:

  • by court decision;
  • at the request of any member; or
  • where:
    • its incorporation is annulled;
    • its corporate purpose is exhausted; or
    • its unenforceability is verified.

Dissolution and/or liquidation procedures must be conducted in conformity with the procedures established by law. The company's assets will be used to settle its liabilities and any remaining balance will be distributed among the members in proportion to their holdings.

13.2 What key concerns and considerations should be borne in mind with regard to the termination of business activities in your jurisdiction?

The liquidation procedure may be burdensome and will depend on:

  • the current status of the company; and
  • its past activities in periods of time not affected by the statutes of limitation.

In April 2022, the government launched the second phase of its Modernising Brazil programme, aimed at enhancing the efficiency and modernising the public administration in Brazil, including in relation to the commencement and cessation of business. This programme is the successor of the Much Simpler programme launched in 2015 and maintains the simplified procedures relating to the commencement and cessation of business activities. These simplified procedures are available for all types of corporate entities, except companies whose shareholders are legal entities.

Under this procedure, it is possible for business owners to terminate a company immediately, with no need to submit clearance certificates of tax, labour and social security debts. Debts connected to the National Register of Legal Entities will be transferred to the Individual Taxpayers Register of legally liable natural persons. Likewise, a business may be closed pursuant to a single act before the Board of Trade.

14. Trends and predictions

14.1 How would you describe the current landscape for doing business and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Brazil has been extending its adherence to the instruments of the Organisation for Economic Co-operation and Development (OECD) as part of its efforts to become a member. In June 2022, OECD members adopted the Roadmap for the Accession of Brazil to the OECD Convention. Four months later, Brazil filed its initial memorandum with the OECD, providing the basis for the alignment of its legislation, policies and practices with OECD standards across 32 sectors. The document states that Brazil now adheres to 108 OECD standards, with adherence to 45 other instruments pending. In this context, further legislative changes can be expected in the coming years in preparation for Brazil's accession to the OECD.

Proposals on tax reforms have been under discussion for some years now and, in December 2023, Congress approved a major legislative initiative under discussion for over 3 decades. Both houses of Congress had submitted proposals for constitutional amendments aimed at modifying the Brazilian tax system. PEC 110/2019, tabled by the Senate, was archived in November, 2023, due to approval of a substitute proposal to PEC 45/2015. PEC 45/2019, tabled by the House of Representatives, was approved on December 15, 2023 and the Constitutional Amendment 132/2023 resulting thereof was promulgated on December 20, 2023. Changes are supposed to occur gradually, starting in 2026, with integral enforcement of the new system expected for 2033, and they include, among others, just to name a few:

  • simplification and unification of consumer tax;
  • reduction in tax rates for some economic sectors;
  • tax on luxury water and air transportation;
  • progressive tax on certain goods like cars, depending on their environmental impact;
  • progressive tax on estate transmission and donations and new tax on inheritance abroad;
  • creation of a cashback system on tax collected.

For indirect taxes, the key objective is to consolidate various taxes and contributions. PIS and Cofins will be extinct and replaced with the Contribution on Goods and Services (Contribuição sobre Bens e Serviços – CBS). ICMS (state tax) and ISS (municipal tax) will be replaced with the Tax on Goods and Services (Imposto sobre Bens e Serviços – IBS).

The recent modifications fall under the first part of the tax reform envisaged. There is a second part left for deliberations, concerning income tax. Therefore, for the next 12 months, it is expected that Congress regulate some of the new provisions by means of supplementary laws (Leis Complementares) and, perhaps, that it start debating the introduction of a withholding tax on dividend, as well as changes to income tax.

In addition, several bills aimed at revising the labour laws are under discussion by both houses of Congress; however, it is not possible to predict whether or when the proposed changes will be introduced. Moreover, it is possible that the new federal administration which assumed power in January 2023 may introduce changes to the labour rules in the future.

15. Tips and traps

15.1 What are your top tips for doing business smoothly in your jurisdiction and what potential sticking points would you highlight?

Observing the law and best practices in the specific sector of activity is key to ensure smooth operations in Brazil. Ideally, a foreign enterprise should engage the assistance of experienced local advisers, given the complexity of the Brazilian legislative and regulatory framework and the different cultural aspects at play.

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.