AuthorRicardo Barretto Ferreira da Silva - Paulo Marcos Rodrigues Brancher - Carla Amaral de Andrade Junqueira Canero
Ricardo Barretto Ferreira da Silva
Paulo Marcos Rodrigues Brancher
Carla Amaral de Andrade Junqueira Canero
Barretto Ferreira e Bran cher—Sociedade de Advogados (B KBG)*
Brazil is the large st economy in South America a nd one of the largest in the world.
This former agric ultural colony has evolved into a power in agribusines s and, more
recently, in the oil and gas sector, with the d iscovery of new oil reserves. T he coun-
try’s modern industries a nd service sector are a lso booming.
Brazil has a population of approximately 202 mil lion inhabitants, which is
concentrated largely in the southeas t region, mainly São Paulo, which is t he largest
city in Brazil a nd in South America.
Over the past 30 years, Bra zil successfully completed its political transit ion
from a military regime to a full democ racy. The government is committed to
strengthening f inancial stabil ity and to assuring t he protection of national and for-
eign inve stments .
Brazil’s major trading partners a re Argentina, Ch ina, and the United St ates.
Brazil is also a member cou ntry of MERCOSU R, an internationa l trade zone with
an extensive agenda that includes not only trade but environmental, educational,
and cultural polic ies. Other MERCOS UR members include Argenti na, Paraguay,
and Uruguay.
* The following additional memb ers of Barretto Ferreira e Brancher—Sociedade de
Advogados (BKBG) have contributed to this chapter: A ndré Fernandes, Luiz Eduardo Salles,
Cristiane Costa, L ionel Zaclis, Flávia Scabin, Rafael Schlik mann, Danielle Cavalcante;
Juliana Hansen, Camila Guglielmo, Carolina Gazoni, Fernanda Santos, Juliana Oshima,
Ingrid Santos, Michel le Bispo, Luciana Brandão, Lucas Bianchin i, Carolina Machado,
Isabella Vidigal.
66 Chapter 3
Brazil is a federative republic comprising states, municipalities, a nd the Federal
District. The cou ntry is governed by a presidential system a nd has three branches:
the executive, legislative, and judici ary at the federal, state , and municipal levels.
The president is elected for a four-year term (reelection being permit ted) and
is the head of the executive branch, which is t he government branch charged with
direct and indirect administration. The legislative branch is for med by a bicameral
National Congress, wh ich is responsible for passing proposed legislation before
it receives presidential sanction. T he judiciary system is compos ed of federal and
state courts. In add ition, Brazil has a federal law that permits arbitration to solve
conflicts i nvolving disposable patrimonial r ights.
The Brazilia n legal system is based on civil l aw and is founded on the Brazilia n
Federal Constitution of 1988.
Permanent Structures
Suitable Corporate For ms
Brazilian law provides for dif ferent forms of association for the conduct of eco -
nomic activities geared to t he production or circulation of goods and ser vices.
Among the corporate-ent ity types of companies, the most common are the cor -
poration (sociedade anônima or SA) and the limited liabil ity company (sociedade
limitada or LTDA).
LTDAs are disciplined by the Brazi lian Civil Code (L aw 10,406/02). The mini-
mum number of partners is t wo in this typ e of company. The capital of an LTDA
is divided into proportional par ts (quotas), distributed among the partners (quota-
holders), and not represented physically by certificates. T he number of quotas held
by each partner is establi shed in the company’s articles of incorporation , and any
transfer or assignment of ownersh ip over the quotas is subject to an amendment
to the articles of incorp oration. The corporate name may include the na me of the
partners or a fict itious name, but it is always accompanied by the expre ssion lim-
itada or its abbreviation, Ltda. T he corporate name shall also i ndicate the purpose
of the company in summar ized form.
LTDAs are managed by one or more administ rators, who shall be Brazi lian or
foreign individuals residing i n Brazil (with a permanent work visa) and who need
not necessarily be pa rtners. Brazil ian law permits the creation of an advisory board
and audit committee for the LTDA, whose resp ective duties and operation shall be
regulated in the ar ticles of incorporation.
SAs are governed by Law 6,404/ 76 (the Brazilian Corporation Act). An SA
operates under the corporate name i ndicating its corporate purpo se, with the addi-
tion of the expressions sociedade anônima or companhia in full or in abbreviated
form. There is no mini mum capital requirement for the formation of an SA , except
Brazil 67
in special cases (for example, f inancial inst itutions and trading compan ies). SAs
may be organized with “authorized capital”—that is, with les s subscribed capital
than the amount authoriz ed by the bylaws. In this scen ario, an increase of the sub -
scribed capital up to the authorized l imit will not be subject to a n amendment to
the bylaws. The capital stock is divided i nto shares, which may or may not have a
face value. The minimu m number of shareholders is two. Shares may be com mon,
preferred, or fruition share s according to the nature of the rights or benefits that
they confer on their owners , and registered or book entry, with respe ct to their
form. Brazilian l aw prohibits the issuance of bearer shares.
SAs may be of two kinds: publicly held or closely held, depending on whether
or not the securities issue d by them are listed for trading on t he securities ma rket
(stock exchange or over-the-counter market). Publicly held corporations are autho-
rized to raise fu nds with the investor commun ity and are currently submit ted to
the legislation that disc iplines the capital market, a nd also to the supervision of
and registration with the Brazilian Se curities Comm ission (Comissão de Valores
Mobiliários or CVM), which is a n independent adminis trative authority in charge
of regulating, controlli ng, and supervising t he Brazilian capital m arket.
The administ rative bodies of SAs are the boa rd of directors (conselho de
administração), which is mandatory for publicly held companies and for those with
authorized capital, and the board of executive officers (diretoria). The board of
directors is responsible for determ ining the company’s general business orientation;
the board of executive officers is the compa ny’s executive body, with the exclu-
sive responsibility of representing the SA before third parties. T he members of the
board of executive officers (diretores) will be individuals residing in Brazi l, whereas
the members of the board of direc tors may be individuals residing a nd domiciled
abroad, provided that they are represented by an attorne y-in-fact residing and
domiciled in Brazil , duly empowered to receive summons. The board of di rectors
shall be composed of at least th ree members, who may be shareholders or not, and
the board of executive officers shal l be composed of at least two officers , who may
be shareholders or not. The SA may optionally have an advisor y committee, whose
members may reside abroad and be remunerated by the Brazil ian company.
SAs shall have an audit commit tee, whose formation, when its operation is not
permanent, may be cal led for at any shareholders meeting, as provided by law.
Shareholders in an SA generally enter into sha reholders’ agreements, which
typically deal w ith such matters as the purcha se and sale of shares, the preemp-
tive rights related thereto, and exercise of voting r ights. The company must comply
with the provisions of the shareholders’ agreement whenever it is reg istered with
the company’s head offices. The protection of minority shareholders is provided
for by law and may be extended through provisions in t he corporate bylaws and
shareholders’ agreements.
Brazilian law considers compan ies regularly regist ered with the competent
public registry offic e as legal entities. Compan ies that develop business activities
are subject to registration wit h the Board of Trade (Junta Comercial).

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