Corporate Law and Foreign Investment
Enacted on August 26, 2021, Law No. 14,195 brought relevant changes to Brazilian corporate law, aiming to improve the business environment and to improve the country's position in the World Bank’s “Doing Business” ranking.
The first set of legal changes aims to ease the setting-up process of companies, mainly through the digitalization of applicable procedures. Please find below a summary of these legal changes:
- The unification of federal, state, and local tax registrations with the National Taxpayer Register of Legal Entities (CNPJ);
- The removal of a prior address search for business purposes;
- The previous verification of trade name on the Internet and optional use of CNPJ identification number as trade name;
- The corporate acts registered with the Registry of Commerce will not require the signature certification by a public notary anymore;
- The signature of the responsibility statement by the company’s legal representative for issuing the business licenses may be performed electronically;
- The creation of a federal online system for an immediate consultation on the existence of a trade name, register of sole entrepreneurs, and legal entities without a physical place of business, offering an online and unified service for the payment of fees involved in the business registration process.
The second set of legal changes aims to protect minority shareholders, increasing their decision-making power in certain matters, aligning the Brazilian Corporate Law (Law No. 6,404) with the good corporate governance practices recommended by the World Bank. Among the main changes, we emphasize the following ones:
- For publicly-held corporations, increase from 15 to 21 days for the notice period (and remittance of preparatory information and documents) for scheduling general shareholders’ meetings. The purpose of the change is to provide more time to the shareholders to become aware of the relevant information before the meetings. The Brazilian Securities and Exchange Commission (CVM) is authorized to adjourn the meeting for up to 30 days if the relevant documents are not duly disclosed to shareholders;
- For publicly-held corporations, prohibition of accumulation for CEO and Chairman of the Board of Directors positions, a situation considered to be an non-recommended corporate governance practice, respecting the adaptation period of 360 days;
- For publicly-held corporations, the obligation to have at least one independent director in the composition of the Board of Directors, which will be further regulated by CVM;
- As detailed in our previous specific newsletter, the introduction of the dual-class share mechanism in the Brazilian Corporate Law, which is limited to up to ten votes per ordinary share, allowed only in corporations with no shares traded on the capital market yet;
- For all corporations, the permission for officers and board members to officially reside abroad, as long as they maintain an attorney-in-fact in Brazil with the certain powers required by the Law.
Finally, the third set of changes refers to business reduction of bureaucracy, including the simplification and digitization of processes necessary to the exercise of business activities in Brazil, including as new features:
- The transformation of the current solely-owned business form named “EIRELI” into a solely-owned limited liability company (sociedade limitada), a procedure that will be regulated by the Department of Business Registration and Integration (DREI);
- Permission for legal entities to hold general shareholders’ meetings remotely by electronic means, ratifying the legal changes enacted during the COVID-19 pandemic;
- Permission that, when the main place of business is virtual, the address provided for registration purposes is the same used by the individual entrepreneur or one of the partners of the business association entity.