Incorporation of a “limitada” in Brazil.
And for ones who want to open a company in Brazil,
Regards
Nigel
Re: Incorporation of a “limitada” in Brazil.
Dear Mr xxxxxx
Further to our telephone conversation, please find below some preliminary information on the incorporation of a company in Brazil.
1. Legal Framework:
As mentioned to you, the corporate structures more commonly used in Brazil are the limited liability company (sociedade limitada or simply “limitada”) and the corporation (sociedade por ações or simply “S.A.”).
The simplest alternative for the formation of a company has always been the limitada, considering that very few formalities are required for its organization and operation. Thus, unless there was a specific reason for having a S.A. vehicle, we have recommended our clients in most of cases to form a limitada. We outline below the main aspects involved in the incorporation of a limitada.
A limitada must have at least two partners, which can be legal entities or individuals, Brazilians or not. In case the partners are not resident in Brazil, they must keep attorneys-in-fact in Brazil with powers to represent them in corporate matters in general.
Another power of attorney shall be granted to an individual resident in Brazil with powers to apply for the foreign partner’s enrollment with the Brazilian Federal Revenue Service (“CNPJ/MF”). For the purpose of this enrollment, we usually recommend that the attorney-in-fact be the Brazilian company’s manager.
At least one individual resident in Brazil must be appointed as the company’s manager. The manager will be in charge of the company’s management and representation. The manager will be entitled to validly bind the company and to perform the managing acts within the company’s purposes, with due observation of the limits established in the Articles of Association.
As a general rule, the capital stock of limitadas may be established by the partners in accordance with the actual needs of the Brazilian operation. The capital of the limitada must be fully subscribed at the date of its organization, but there is no legal requirement as to the exact term for paying-up such amount. Nevertheless, the partners must establish a time frame for the payment of the capital stock in the Articles of Association.
The capital of a limitada is divided into quotas, which are not represented by certificates, and which are transferred by means of an amendment to the company’s Articles of Association. A limitada may not issue securities of any kind (including debentures) and its quotas may not be publicly traded.
2. Organization Procedure of a Limitada.
A limitada will be considered as validly existing in Brazil through the filing of its Articles of Association with the Board of Commerce of the State where its headquarters will be located. The Board of Commerce of the State of São Paulo usually takes approximately five (5) business days to file an Articles of Association, but in these last two months it is taking much longer than that because many companies had to adapt their Articles of Association to the new Brazilian Civil Code, as mentioned in our call.
2.1. Registrations.
Foreign partners must apply for their enrollment with the CNPJ/MF simultaneously or right after the formation of the limitada. The attorney-in-fact in charge of the enrollment procedure shall be also responsible for keeping updated with the Brazilian Federal Revenue Services the foreign partners’ record information.
The enrollment of the partners with the CNPJ/MF is necessary in order to enable the partners to remit funds to Brazil for the payment of their respective participation in the company’s capital stock.
After its organization before the Board of Commerce, a limitada shall obtain the following basic additional registrations:
(i) General Federal Taxpayers’ Registry (“CNPJ/MF”);
(ii) Central Bank of Brazil (“RDE-IED”)
(iii) Municipal Taxpayer Registration (“CCM”); and
(iv) Municipal Service Tax Registration (“ISS” - required only if the limitada will render services).
After obtaining the CNPJ/MF, the limitada may open bank accounts and sign contracts. After the registration of the limitada with the Central Bank of Brazil and the registration of the foreign partner with the Individuals Federal Taxpayer’s Registry (“CPF/MF”),the limitada will be able to receive funds as capital contributions from its foreign partner. The procedures to obtain those registrations take approximately fifteen (15) business days.
As soon as the company is enrolled with the CNPJ/MF, it would be able to hire local employees, open bank accounts and sign contracts in general. However, other additional tax filings or government permits might be necessary depending on the company’s purposes.
Other additional registrations and/or government permits might be necessary, depending on the company’s activities.
3. Necessary Information and Documents:
The following documents will also be necessary for the formation of a Limitada in Brazil by foreign partners:
(a) a power of attorney for corporate general purposes granted by each one of them, containing the powers described in the attached Exhibit I;
(b) a power of attorney for purposes of enrollment with the CNPJ/MF granted by each of them to one individual resident in Brazil (we suggest that the grantee be the company’s manager),containing the powers described in the attached Exhibit II;
(c) in case the partners are legal entities, a certificate of good standing issued by the relevant authority from their respective place of incorporation; and
(d) in case the partners are individuals, copies of their passports and birth certificates.
All the documents indicated above must be (i) notarized, and (ii) legalized by the Brazilian consulate with jurisdiction over the area where the foreign partner is located/domiciled, before they are sent to us.
Should you have any further question on this matter, please do not hesitate to contact us.
Sincerely,
EXHIBIT II
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that [NAME OF THE GRANTOR], a company duly organized and existing under the laws of the State of _______________, _____________, with head offices at ________________, represented herein by its [title], [name of the representative] (hereinafter referred to as the "GRANTOR"),hereby appoints and constitutes as its true and lawful attorneys-in-fact, Messrs., [nationality], [marital status], [profession], resident and domiciled in ________________, bearer of the Identity Card RG No. ________________, and enrolled with the Individual Taxpayers’ Registry (CPF/MF) under No. ________________ (hereinafter referred to as the "GRANTEE"),for them in the name, place and stead of the GRANTOR, acting jointly or severally, regardless of the order in which they are appointed, to perform the following acts and operations: (a) to organize a limited liability company (sociedade limitada) in Brazil (hereinafter referred to as the “COMPANY”); (b) to subscribe for quotas of the capital of such COMPANY, signing all necessary documents and paying the respective subscription price; (c) to approve the Articles of Association of said COMPANY, in the terms and conditions that they deem appropriate; (d) to execute the Articles of Association of the COMPANY and any other papers and documents necessary for that purpose; (e) to represent the GRANTOR in its capacity of partner of the COMPANY; (f) to appear at any partners’ meeting of the COMPANY and vote the quotas of the GRANTOR in relation to any matter submitted to the appreciation of the partners, including, but not limited to, the approval of financial statements and the election of managers; (g) to represent the GRANTOR with respect to any modification or amendment to the Articles of Association of the COMPANY, including, but not limited to, capital increases and transformation of the COMPANY into other corporate forms; (h) to sign any and all amendments to the Articles of Association of the COMPANY and any and all of its corporate books and documents; (i) to subscribe for new capital of the COMPANY and pay for the new capital so subscribed; (j) to receive service of the process in the name of the GRANTOR in case of legal proceedings arising from applicable corporate laws in Brazil; (k) to represent the GRANTOR before the Board of Commerce and the Civil Registrar of Companies of any State or jurisdiction in Brazil; (l) to represent the GRANTOR with the Central Bank of Brazil and apply for the registration of investments and reinvestments on behalf of the GRANTOR, signing all documents, forms and correspondence for that purpose; (m) to represent the GRANTOR with any public departments or agencies in Brazil, either at Federal, State or Municipal; and (n) in general, to represent the GRANTOR’s interests, practicing all acts deemed appropriate for the purposes herein included, the GRANTOR hereby approving and ratifying all that the GRANTEE or its substitutes may do or order to be done under the premises. The present Power of Attorney is valid until _______________, its delegation being permitted.
IN WITNESS WHEREOF, the GRANTOR has caused this document to be executed, in the City of __________, ____________, on this ------ day of ----------------, 2004.
____________________________
[NAME OF THE GRANTOR]
[name of the representative]
REMARK: This document must be (i) notarized, (ii) *certified by the competent agency, i.e. by the County Clerk or the Secretary of State (* only if the partner is headquartered in the United States of America) and (iii) legalized by the Brazilian consulate with jurisdiction over the area where the company is located, before it is sent back to us.
EXHIBIT II
POWER OF ATTORNEY
By this private instrument of power of attorney, [NAME OF THE GRANTOR], a company duly organized and existing under the laws of the State of _____________, _____________, with head offices at ___________________, with an indeterminate duration, which purposes are [broadly summarized], represented herein by its [title], [name of the representative] (hereinafter referred to as the "GRANTOR"),hereby appoints and constitutes as its true and lawful attorney-in-fact, _____________, [nationality], [marital status], [profession], resident and domiciled in ________________, bearer of the Identity Card RG No. ________________, and enrolled with the Individual Taxpayers’ Registry (CPF/MF) under No. ________________ (hereinafter referred to as the "GRANTEE"),for him/her in the name and place of the GRANTOR, to perform the following acts: (a) to represent the GRANTOR for the purpose of applying to the Brazilian Federal Revenue Services for the enrollment of GRANTOR with the General Taxpayers’ Registry of the Ministry of Finance (CNPJ/MF),according to the terms of Normative Ruling No. 200, of September 13, 2002; (b) to deal and solve any issues before the Federal Revenue Services, and to sign any document with that agency including but not limited to the Basic CNPJ Entry Document; (c) to manage, according to written instructions received on a case by case basis, the assets that GRANTOR has or may have in Brazil; (d) to be receive service of process on behalf of GRANTOR in case of judicial or administrative proceedings arising out of the application of Brazilian laws; (e) in general, to represent the GRANTOR’s interest, practicing all acts deemed appropriate for the purposes provided for hereunder, the GRANTOR hereby approving anything the GRANTEE may do or order to be done in connection with the above-mentioned items. This Power of Attorney shall be valid for an indefinite term.
IN WITNESS WHEREOF, the GRANTOR has caused this document to be executed, in the City of __________, ____________, on this ------ day of ----------------, 2003.
____________________________
[NAME OF THE GRANTOR]
[name of the representative]
REMARK: This document must be (i) notarized, (ii)*certified by the competent agency, i.e. by the County Clerk or the Secretary of State (*only if the partner is headquartered in the United States of America) and (iii) legalized by the consulate general of Brazil with jurisdiction over the area where the company is located, before it is sent back to us.