By contrast, the principal strength of a Limitada lies in its flexibility and customization characteristics being subject to less regulation and bureaucracy compared to the S.A. It follows that the Limitada is by far the most popular type of corporate entity in Brazil. There are currently more than 6 million active Limitadas compared to the less than 200 thousand active S.A 6 . The tables below delineate and compare the most relevant characteristics and the basic differences between a Limitada and a S.A.

• reduction of the minimum quorums applicable to amendments of Limitada’s governing documents, which now requires the approval of partners holding more than 50% of the share capital, instead of the previous quorum of 75% of the share capital. 2. Limitada x S.A.: Summary of the most relevant characteristics and the basic differences. The Limitada is governed by the provisions of the Brazilian Civil Code, law 10,406/02 (the “ Civil Code ”), as amended, and the S.A. is governed by the Corporation Law, law 6,404/76 (the “ Corporation Law ”), as amended. The Articles of Association of a Limitada may state that the company is subsidiarily governed by the Corporation Law, in which case the latter will apply whenever the Civil Code is silent on any aspect. A S.A. may be either publicly or closely held. A publicly held S.A. must be registered with the Brazilian Securities and Exchange Commission (“ CVM ”) for purposes of having its stocks traded in the Stock Exchange. A closely held S.A., as the name suggests, is a private entity, which does not issue shares to the public. For purposes of this article, only the characteristics of a closely held S.A. are to be considered. Since the S.A. was conceived to be the type of entity aimed at more substantial ventures, it is subject to more rigorous regulation. Given its nature, the S.A. is less adaptable and suitable to customization and tend to be too bureaucratic in some instances. However, it is important to acknowledge that the Startup’s Legal Framework has reduced some of the burden and bureaucracy for closely held corporations with gross revenue of up to BRL 78,000,000.00, such as the requirement for publication of corporate acts.

6 Information available on DREI’s website: de-empresas/painel-mapa-de-empresas

ILN Corporate Group – Establishing a Business Entity Series

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