The fastest way to have a Brazilian company

Incorporating a company in Brazil takes time. In average, 3 months (for details about incorporation ,please see this post).

I have tried to speed up this process, but without much success. It depends on several independent things: availability of a translator, public hollidays, courier delivery, etc. 

Indeed, this is one of the aspects of Brazilian bureacracy and lack of competitivity. Each step of the task is slightly inneficient. Combined, they slow down the rythm of business. 

When the project includes a Brazilian partner, this hindrance does not matter much, because he will be expecting it and the plans would already have counted for the delay. 

But when the project is totally controlled by foreign parties, this kind of time is essentially counted as a waste. 

I have been experimenting with a system that is less safe, legally speaking, but that can be used to conduct business at a faster pace. Here it is: 

a) I will incorporate a service company in Brazil, with two nominee partners and one nominee director. The company will have the same name desired by the investor;

b) the nominee partners and directors will enter into a quota/shares sales agreement with the future investor. This agreement will allow for a 60-day period in which the buyer (the investor) will be allowed to participate in the company`s management/

c) the investor will prepare the documents required to take possession of the quotas/shares;

d) meanwhile, the Brazilian company may enter into agreements with local partner. The company will refrain from issuing invoices, however. The invoices will be issued only after the foreign investors formally acquire the quotas. 


In short, the procedure is an acquisition of shelf-company. But with some additional agreements that ensure that the foreign investor will have control over the company even before they are formally the owners. 

This strategy is more expensive than a regular incorporation. There will be extra costs with the nominee partners, with additional agreements, etc.

The advantage is that it could allow the foreign investors to conduct business in Brazil within 03 weeks, instead of 12 weeks. 

Business will be limited, of course, and this strategy will work better with service company. Also, import/export operations will not be possible at first, because any Brazilian company that is to engage in international trade must first obtain a license (the "Radar").  

Even so, this strategy will allow investors to have a legal presence in Brazil much faster than usual. 

SEE ALSO:

Incorporating a Brazilian company, step by step

List of documents for setting up a company in Brazil

Power of Attorney for setting up a company in Brazil – new rules

In order to incorporate a company in Brazil, the foreign investor must appoint a local representative who lives in Brazil.

Traditionally, this representative was required to have powers to receive court summoning and to answer to any civil subpoenas directed at the foreign investor.

This makes sense under Brazilian procedural law, that puts a lot of focus on making sure that respondents will be properly summoned to present his defence in administrative or judicial procedures. Rulings “in absentia” are exceptional.  By requesting the nomination of a Brazilian resident as representative of the investor, Brazilian authorities would always have someone close enough to be summoned by ordinary means (without the need for international communications between courts, etc.).

This is the basic idea.

Now, since Brazil is a very bureaucratic place, people soon noticed that is would be a waste of time to issue a one-line PoA, considering that several other actions also require a power of attorney. For example: registration of the investment before the Brazilian Central Bank, clearance of foreign currency exchange agreement, etc.

Not to mention that any alteration to the articles of the company, such as increase in equity or appointment of new directors, would also require the investor to sign the documents himself, or to name a proper representative in Brazil with powers to do so.

All things considered, a proper PoA would have 3 pages and a LOT of very specific powers.

Now, this “excess” of powers has contributed to a problem. Brazilian courts started to consider that this all-powerful attorney would act, in practice, as a company director. Thus, labour and tax courts started to redirect debt collection suits to the Brazilian representative, whenever the company didn`t have enough assets to pay for the debts.

This situation, albeit technically illegal, has persisted for some time.

Recently, the Brazilian Revenue Service has tried to make the representative`s personal liability official. It issued an administrative ruling stating that any foreign company looking for enrolment before the national taxpayer`s registry (the famous CNPJ) must name a local representative with full powers to manage the investor`s assets in Brazil.

By choosing these word, the Brazilian Revenue Service made clear that the local representative will be considered a kind of local manager, not only a representative able to receive summoning.

Please notice that the enrolment with CNPJ is one of the first steps required in order to incorporate a new company in Brazil, in case the foreign investor is a corporate entity (not an individual).  Therefore, there is no way around this requirement.

And this is not the only recent change.

The federal body responsible for standards in corporate regulation issued new guidelines in 2017. They include a provision requiring that all powers of attorney from foreign investors must not have a time limit. This is to say, they must be valid until a formal cancellation is filed before the Commercial Registry.

The two alteration, combined, result in a local representative that:

a)    Has powers to manage the investor`s assets in Brazil (to control the company);

b)    Is liable for company`s debts, since he will be considered a sort of director;

c)    Has power for an unlimited period of time, until he gives up the job or until his PoA is formally cancelled.

The situation is awkward, to say the least.

It has forced the new PoA documents to become even longer. Now they must include:

a)    Provisions for cancellation;

b)    Protection against tax and labour liability;

c)    Restrictions on powers, to prevent the representative from “taking over” the company.

So, there is little chance you will find a good template for a PoA, readily usable.

 The PoA is now a document to be drafted as carefully as the articles of the association of the company.


SEE ALSO:

Incorporating a Brazilian company, step by step
How to incorporate a Brazilian company through foreign direct investment
List of documents for setting up a company in Brazil

Power of Attorney for setting up a company in Brazil

Representatives of foreign investors in Brazil - Ultimate Beneficial Owner and management powers

All foreigners who own companies in Brazil or that invest in the Brazilian Stock Market, or even that own real estate in Brazil, must have a local representative.

Starting July, 2017, this representative will be more subject to government scrutiny and, at the same time, will be required to have more managerial power over the investor`s assets.  On the other hand, it is expected that the representative will be at a higher risk of being liable for tax fraud or labour debts.


This comes along with a rule that requires that the ultimate beneficial owners of any company investing in Brazil be revealed to the Federal Government.

The result of these rules, I think, is that the cost of keeping local representatives will increase. Instead of using young professionals or junior accountants as representatives, the investors will have to select lawyers or executives. Costs with D&O insurance should also go up.

On the plus side, it looks like the new president is taking steps to speed up the registration of foreign investment. Let`s see if the policies even out one another. I sure hope so. 

Practical guide - incorporating in Brazil

This guide has been compiled by the Chilean firm Harris Gomez, with whom I work often, usually advising international investments involving Australia, Chile and Brazil.

They have based it on several reports drafted by me over the last couple years.  The final result is excellent.

List of documents for setting up a company in Brazil

YOU MAY ALSO WANT TO READ: 
How to incorporate a Brazilian company through foreign direct investment
Power of Attorney for setting up a company in Brazil

Incorporation of a company in Brazil requires registration with several governmental authorities. The mandatory registrations are the following: As a first step, the Articles of Association or By-laws must be filed with the Commercial Registry or the Civil Registry (depending on the company’s objectives), in the State where the company is headquartered. Companies become corporate entities, with a legal entity status different from those of the holders of its shares or quotas, only after the Articles of Association or By-laws have been registered.

In order to avoid misunderstandings, unnecessary disbursements and time wasting, at this stage we shall focus on the necessary documents to register the Brazilian company.

Foreign entities or individuals holding shares or quotas in Brazilian companies must maintain an attorney (representative), resident in Brazil, with powers to receive service of process in legal actions involving its holding of shares or quotas.

The foreign entities or individuals shall also be enrolled before the Brazilian Internal Revenue Service (obtaining a CNPJ or CPF). We will take care of obtaining such registrations.

I)         GENERAL INFORMATION

1)      Name of the partners (Brazilian individuals must provide ID, CPF and full address and personal qualifications; Brazilian companies must provide articles of association, CNPJ, ID of the directors and minutes of the meeting that approved the incorporation;  for foreign partners, the documents are described below)

2)      Name of the directors

LTDA (Limited Liability Company): At least one director

S/A (Corporations): At least two directors

The directors must be Brazilians citizens that live in Brazil, or foreigners who live in Brazil with a permanent visa.

3)      Company address in Brazil, along with a copy of the last bill of the city tax on real estate (IPTU) for such address.

4)      Company capital

LTDA (Limited Liability Company): Capital may be paid in the future.

S/A (Corporations): 10% of the capital must be sent through bank transference, before the company is incorporated. Details on this will be discussed in the future.

5)      Company’s purpose of business (objectives);

6)      Name of the company’s representative with powers to receive court summoning (the representative must be a permanent resident in Brazil, either a Brazilian of a foreigner bearing a permanent visa).

II)       LIST OF DOCUMENTS

1)  In case the foreign shareholders are individuals:

(a)       copy of the passport;

(b)       birth certificate (must indicate name of the father and mother);

(c)       power of attorney to a Brazilian representative (a form follows enclosed);

(d)       curriculum vitae (not mandatory, but useful);

(e)       proof of residence (may be issued by the local city hall or by the Brazilian consulate, depending on the country);

Note:    All these documents must be certified by a notary public, and subsequently submitted to the Brazilian consulate for its legalization. After the documents are certified and legalized in the country of origin they shall be sent to us. We will have them translated by a sworn translator in Brazil.

2) In case the foreign shareholders are companies or corporations:

(a)       proof of investing company’s legal existence in the country of origin;

In general, this document is a certificate or declaration issued by the register of commerce in which the company is registered, containing the declaration that the company is duly registered and existing under the laws of the place of incorporation.

(b)       investing company’s articles of incorporation currently in force;

Articles of incorporation issued or stamped by the register of commerce, along with the declaration of the register of commerce or the corporate secretary that this is the version of the articles of incorporation currently in force.

(c)       proof of investing company’s current officers and directors;

This document usually is one of the following: (i) register of officers and directors, issued or stamped by the register of commerce; (ii) minutes of the meeting(s) that elected the current officers and directors, issued or stamped by the register of commerce; (iii) a certificate by the register of commerce containing the list of current officers and directors.

Plus, ID or passport of the directors or officers.

(d)       power-of-attorney to investing company’s representative in Brazil;

Power-of-attorney in which the Investing company grants to a Brazilian resident the power (i) to be summoned in any lawsuit, action or procedure in Brazil; (ii) to perform the necessary registration of the foreign investment before the Central Bank; (iii) to sign all documents related to the acquisition of shares and to perform the filings of such documents before Brazilian Register of Commerce. These are the minimum powers required by law and needed to perform the transaction envisaged by you.  We enclose a form of powers-of-attorney.

Note:    All these documents must be certified by a notary public, and subsequently submitted to the Brazilian consulate for its legalization. After the documents are certified and legalized in the country of origin they shall be sent to us. We will have them translated by a sworn translator in Brazil. 

YOU MAY ALSO WANT TO READ: 

How to incorporate a Brazilian company through foreign direct investment

Power of Attorney for setting up a company in Brazil