[ESTABLISHING A BUSINESS ENTITY IN BRAZIL] 61
ESTABLISHING A BUSINESS ENTITY IN BRAZIL The two most common forms of legal entities incorporated in Brazil are the limited liability company (“ Limitada ”) and the corporation (“ S.A. ”). These are considered the most attractive types of companies given that they are the only entity types which both have the following advantages in common: (i) the liability of the equity holders is generally limited to their equity interest (subject to certain specificities described below); (ii) either can be utilized for any type of business activity (e.g. services, industry, commerce etc.); and (iii) generally speaking, neither has any minimum capital requirements (and when required, is by virtue of their activities carried out and not associated with their particular corporate type). 1. Recent updates to Brazilian Corporate Laws. In recent years, Brazilian corporate laws have undergone several changes with the aim to improve and modernize the country´s business environment. 5 Some of the notable changes are the following innovations: • a Limitada can now be held by only one partner (individual or legal entity); 5 Within this framework, Law 13,874 enacted on September 20, 2019 (“Law of Economic Freedom”), Law 14,030 enacted on June 28, 2020, Supplementary Law 182 enacted on June 1, 2021 (“Startup’s Legal Framework”), Law 14,195 enacted on August 26, 2021 (“Law of Business Environment”) , Law 14,382 enacted on June 27, 2022, Law 14,451, enacted on September 21, 2022, along with some regulatory changes were put into operation by the Brazilian National Department of Companies’ Registration and Integration through its regulations (“DREI”).
• digital and remote general meetings for both Limitada and S.A. are now governed by express legal provisions;
introduction of plural vote for S.A.;
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• non-residents may now be elected as officers/managers, provided they are represented by a Brazilian resident for the purpose of receiving service of process; • no longer necessary to include a Limitada’s main activity in its name; • possibility to appoint only one officer in a S.A. (similarly to a Limitada); • replacement of corporate books by electronic corporate books; • possibility to issue preferred quotas in Limitadas, without voting rights (although this matter is still under academic debate); • extinction of the corporate type known as “Eireli”, a type of Limitada with one sole partner that became obsolete since all Limitadas are now allowed to be held by only one partner;
simplification publication procedures and requirements, enabling (i) closely held corporations with gross revenue of up to BRL 78,000,000.00 to publish their corporate acts and financial statements in electronic format on a digital platform maintained by the Federal Government and on their website, and (ii) other corporations to publish only a summary of their corporate documents and financial statements in a newspaper with wide circulation, as long as the documents are available on such newspaper website (the publication in the Official State Gazette is no longer necessary); and of S.A.’s
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ILN Corporate Group – Establishing a Business Entity Series
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