Conducting Business in Brazil. The 3 types of company a Danish decision maker should be aware of

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The business literature on how to do business in Brazil is vast and you will find information on this subject scattered all over the web .

Today Denmark Brazil is starting a series of posts on how to Conduct Business in Brazil.


What you will learn reading this post?

  • What are the 3 types of company a Danish company can establish in Brazil?
  • The Pros and Cons of each one of these type of companies?

PS: In Brazil there are at least 5 types of different business entities to be incorporated,however, I´m just mentioning the MOST RELEVANT forms of business for a Danish Company here.


PT3076_Forest_Branch

# 1.The Branches and Subsidiaries in Brazil

Incorporating a business in Brazil is time consuming.

Establishing a branch means making things even more complicated. Why is that?

Branches in Brazil are mostly used by very large corporations like airlines companies or foreign banks.

Pros of establishing a Danish Branch in Brazil

  • The only advantage you would have would be less obligations to present accounts
  • The only reason why you would want to establish a branch in Brazil is if the tax advantages you have in Denmark ( what is very unlikely) outweight the the disadvantages you will find in Brazil

Cons of Establishing a Branch in Brazil: 

  • Restrictions on foreing capital
  • Redtape. A Branch is not a Brazilian company, therefore there is a lot of bureocracy for the incorporation of branches in Brazil
  • To establish a branch your will first have to obtain a special request from the Ministry of Industry and Commerce and receive prior authorization though a Presidential Decree.
  • Upon Registration of the branch it is mandatory to prove the existence of the mother company, in your country of origin.
  • The process is complex and can be very lenghty.
  • A permanent resident must be entitled to act on behalf of the branch

# 2.The Limited Liability Company ( Limitada ou LTDA)

 

LTDA

Obs: The Limited Liability Company or Limitada as known in Brazil it is by far the most common, and easiest way to incoporate a company in Brazil.

Requirements to Establish a Limited Liability Company

  • A minimum of two Quota holders. A quota holder may be individuals or legal entities
  • If you are a Quota holder you don´t have to be Brazilian, but you MUST appoint a Brazilian to be the legal representative of the company, or if you want to appoint a foreing individual to be the officer or manager, he/she must hold a permanent visa and live in Brazil
  • No minumum capital requirement is imposed
  • In case you want to bring a foreing manager to run the company a minumum capital will be required by the Brazilian authorities
  • The company name must make reference to the main business of the enterprise

PROS of establishing a Limited Liability Company

  • Quota Holders are not personally liable for the obligations of the company
  • No minimum capital required
  • The Articles of Association of the Limitada provides majority for voting on several matters
  • Differently from the S/A,( I´m talking about the S/A´s below) the financial statements do not have to be disclosed
  • The members can always withdraw their share in case there are disagreements

CONS of establishing a Limited Liability Company

  • Doesn´t have a board of directors or an administrative comitte
  • Doesn´t issue any kind of securities exchanges
  • If there are more than 10 partners (shareholders) it is required to have meetings/calls for the shareholders and publish the calls/meetings in the Offical Gazette or as known in Brazil  Diário Oficial da UInião and in another Newspaper of wide circulation

# 3.The Sociedade Anônima or Corporation

 

sociedade-anonima

What differs the Sociedade Anônima (Corporation) from a Limited Liability Company, is that only the Corporations in Brazil that are allowed to issue shares that are going to be publicly traded in the stocks market.

A Corporation is formed in Brazil by Brazilian companies that are looking for an agressive expansion and that are looking to be funded.

Foreing companies in Brazil work under the Limited Liability Company regime.

The S/A is also quite complex. Here you will find the main topics on how to Establish a S/A in Brazil. In another article I´ll explain more in details for this type of company.

Requirements for Establishing a Corporation in Brazil

  • A Rule of Thumb: All relevant acts must be published in a newspaper of wide reach in Brazil
  • The Company must include the words Sociedade Anônima, or Companhia or the initials “SA” or “CIA”
  • Share Capital must be subscribed by at least two of the original subscribers
  • Appoint at least two Directors, a Budget Committee and a Board of Directors ( for publicly listed companies)
  • Companies trading publicly their shares must be audited every year, the privately held coporations on the other hand doesn´t face the same requirements

Conclusion:

  • Incorporating a company in Brazil is time consuming. Bureocracy is still a major barrier that makes the incorporation of a Business in Brazil such a drag.
  • It is very important to know upfront that all documents will have to go through a sworn translatation.
  • This is an important detail.Time is relative. The time required to establish a technology company,for instance, isn´t the same time required for the establishment of a healthcare company in Brazil. This means that you will need local advisory to know within how long time your company can be incorporated, and what are the papers and documents required.
  • Get used to the idea of going to a cartório. I’ll explain in another post a cartorio is and what is their function in Brazil
  • It is very important to remember that in Brazil most sectors have a regulatory body.These regulatory bodies sometimes may require more documents, and your lawyer has the obligation to  inform you about it. If you fail in providing the right documentation to these regulatory bodies, your company won´t be incorporated when you first planned
  • The Limited Liability Company is the preferred method of incorporation both by international companies and Brazilian companies, given the “ease” of incoporation.
  • To have your business incorporated in Brazil you either have to trust a Brazilian to act as the officer of your company, or you will have to find a foreigner holding a permanent visa.

Did I miss out on something? Please Let me know.

If you have any commments post it on the discussion thread!

Hope I could shed some light on your doubts on How to Establish a company in Brazil

Mange Tak

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Carlos Monteiro is a Brazilian citizen, graduated in Business Administration by the Catholic University of São Paulo. He lives in Odense, Denmark with his Danish Wife, Cathrine, and their half Danish /Brazilian daughter Ines Marie. You are very welcome to be in contact him at any time.

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