An Opportunity For Foreign Investors

Author:Mr Fábio Figueira and Cintia Andrade
Profession:Veirano e Advogados Associados
 
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Brazil is a developing nation of approximately 200 million people incorporated as a federative republic with 26 states, a federal district where the capital city - Brasília - is located and over 5,000 municipalities, bound by a Federal Constitution dated 1988. The Brazilian economy generates over 50% of South America's total GDP.

As a civil law country, Brazil has several statutes and regulations applicable to all business activities, and a tax structure with over fifty different taxes applying at the local, state or federal level. Notwithstanding this fact, the federal government has a strong program of encouraging foreign investment due to finance and infrastructure development needs. As a general rule, except for certain sectors such as nuclear energy, banking and financial institutions, newspapers, television and the aerospace industry, for example, there is no restriction regarding the participation of foreign companies in the capital stock of legal entities incorporated in Brazil.

Although there are a few company forms, the two most common forms for incorporating a Brazilian company are the Limitada or Limited Liability Company, which is a hybrid between a corporation and a partnership; and the Sociedade Anônima or S/A (Joint Stock Company) , which is the basic Corporation form in Brazil.

The Limited Liability Company

Limitadas are regulated by the Brazilian Civil Code (Law 10,406, of January 10, 2002, as amended) and they are incorporated upon the execution of an Article of Association by, at least, two stockholders, also known as quota holders. The Article of Association must set forth, among other matters, on the Limitada's name, which shall refer to the company's corporate purpose; capital and quota division structure; management structure; the participation of each quota holder in the losses and profits; and any other provision the quota holders may choose to include.

As far as Brazilian law is concerned, there is no minimum corporate capital requirement or requirement for corporate capital to be paid-in upon the incorporation of the Limitada. The quotas represent the amount in cash, credits, rights or assets that each quota holder contributed when forming the Limitada. With regards to the management structure, through the Articles of Association (or a separate instrument if one is used), the quota holders may appoint one or more individuals to act as officers (administrators). Whether quota holders or not, and whether they are Brazilian...

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