Doing Business in Brazil

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Brazil is the world’s fifth largest country. With an estimated population of 207 million in 2016, it is also the world’s fifth most populous country after China, India, the United States and Indonesia.

However there are a number of issues which you must consider when you are looking to set up your business in Brazil. This document takes you through some of the common questions we come across and gives you practical information about the issues you need to consider.

What type of Business Structure should we use?

General Business and Investment Climate

The Constitution establishes that foreign investments should be in the national interest, and foreign investment is welcome to the extent that it represents a long- term commitment to contribute to economic development, particularly in those areas that are high on the government’s priority list. These include the development of agriculture, technology, laborintensive industries and the manufacture of products that are currently imported and those that will increase exports.

Form of Foreign Investment

Investment made by foreigners is normally implemented by the incorporation of new entities or acquisition of existing companies. The majority of foreign business in Brazil is set up under the form of subsidiaries. The most common forms used are the Limited Liability Company (Sociedade Limitada - Ltda) or the Corporation (Sociedade por Ações - S/A). The financial year (12-month period) of Brazilian legal entities can be freely chosen for corporate purposes. Accordingly, certain Brazilian companies adopt the same financial year of the parent company, for corporate I reporting purposes (e.g. July 1st to June 30). Nonetheless, as companies are required to observe the calendar-year (January through December) for tax purposes, most of the Brazilian entities choose the same period as their corporate financial year.

Establishment (a branch of your overseas business)

One of the first decisions encountered by foreign enterprise entities undertaking direct investment in Brazil is whether to incorporate the business as a corporation (sociedade por ações) or a private limited-liability company (limitada);and whether to operate as a subsidiary of the foreign parent company or as a branch. The overwhelming majority of direct foreign investors choose the subsidiary form of operation, based primarily on the insulating effect that incorporation has on the liability of the foreign parent company for the subsidiary’s acts. The need to obtain local financing may also influence the decision to operate as a subsidiary. 

Corporations Organization and Incorporation Procedures

A corporation (sociedade por ações or SA) whether publicly or closely held, is organized and incorporated in accordance with Law 6404/76/11.638/07 (IFRS). If the corporation is, or eventually becomes, a publicly traded corporation, it is also subject to Law 6385/76 and the normative rulings enacted by the Brazilian Securities Commission or CVM.

An inaugural meeting of prospective shareholders must be held to approve the bylaws. This meeting must also enumerates the corporation’s core activities, elect management, and confirm the capital, registered office and distribution of shares (as per the subscription list). The incorporation of a corporation must involve compliance with the following preliminary requisites:

Subscription of all the shares into which the corporate capital stock is divided according to the bylaws. The initial subscribers must be at least two individuals or legal entities that are considered to be founders. Payment of at least 10% of the issue price of the shares subscribed in cash, unless specific legislation requires a higher percentage, and deposit of that cash in a bank within five days of receipt. This deposit is released when the corporation has been registered with the Board of Trade (Junta Comercial) or after six months if no registration is made.

Private subscription Corporations are incorporated by private subscription and can subsequently have their securities publicly traded. Incorporation by private subscription and subsequent transformation into publicly held corporations requires the following: Registration of the corporation as a publicly held corporation with the Brazilian Securities Commission or CVM.

Registration of the proposed issuance of shares or share trading with the CVM. Intermediation of a financial institution for the issuance or trading of shares. Capital structure (Share capital) There is no minimum share capital requirement for a corporation, except for financial institutions and insurance companies. Share capital must be stated in local currency and may be paid in cash or by credit assignment and/or any type of asset that is susceptible of a monetary assessment. The monetary value of an asset should be based on an appraisal report which must indicate the criteria and comparative data used to formulate its conclusions, to be approved by the shareholders at a general meeting. Shareholders using assets to pay in capital may accept or reject the amount approved by the other shareholders.

Both common and preferred shares must be nominative and evidenced in the registered book (book-entry shares). The issue of bearer shares is prohibited. The right to convert one type of share into another depends on the bylaws.

Share Classes 

A corporation’s capital may consist of common and preferred shares. Privileges, generally priority in the receipt of dividends and reimbursement of capital with or without premiums, and restrictions attached to preferred shares must be specified in the bylaws and must be in adherence with corporate law.

In general, corporations have at least two shareholders. The CVM may require a minimum number of shareholders in order to award listed status and may also establish a minimum par value. There is no statutory maximum number of shareholders.

Capital increases not authorized in the bylaws require the approval of shareholders in a general meeting. These increases generally result from one or more of the following:

  • Conversions of debentures or founders’ shares into common or preferred shares.
  • Conversion of debt into equity.
  • Exercising of rights acquired to subscribe shares.
  • Exercising of an option to purchase shares.
  • Capitalization of profits and/or reserves.

If a reduction of capital is deemed to be excessive or if there is a redemption of shares, the reduction becomes effective only 60 days after the publication of the minutes of the meeting at which the decision to reduce the capital was made. During this period, secondary creditors for securities issued prior to the date the minutes are published may oppose the capital reduction. The law further provides that if debentures issued by the corporation are in circulation, the capital reduction may be made only with the prior approval of the majority of debenture holders at an extraordinary general meeting.


Amounts subscribed in excess of the par value of shares issued must be classified as capital reserves, which can be used only for specific purposes. When the shares do not have par value, part of the share’s issue price can be assigned as capital payment and part as capital reserve.

Shares are generally freely transferable by the shareholders, but caution must be exercised in regard to any liens and encumbrances attached to the shares, as well as when there are nationality requirements, as is the case in the banking sector. The shareholders’ liability is limited to their investment in the corporation (in the amount subscribed).

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