A New Model For Limited Liability Company In Brazil: The 'Empresa Individual De Responsabilidade Limitada' '—' 'EIRELI'

On July 12th, 2011, Brazilian Law n. 12.4411 was published by the official gazette, amending the Brazilian Civil Code (Law n. 10,406/02). This new amendment created a new type of limited liability company, the so called "Empresa Individual de Responsabilidade Limitada" or simply "EIRELI". Along with this new addition to the Civil Code, several questions regarding this matter arose.

This new company model is something that has long been expected by the Brazilian society and that has been discussed for too long behind the scenes in the Congress.

This new model of company works as a "sole proprietorship limited liability company", allowing one individual to own 100% of the company's quotas and will certainly be widely used as it creates a whole range of new opportunities.

1. Basic aspects of the "EIRELI".

   As already mentioned, this new company model allows one individual to own 100% of the company's share capital. Therefore, sole proprietorship of a limited liability company – where its owner is responsible only for the paid-up capital – has been created.

   This means that, unlike what happens to the other sole proprietorship corporate model, the "empresário individual" (individual entrepreneur), the EIRELI owner can draw a line between his personal goods from those of the company allowing its owner to carry out his business activities without worrying about being held personally liable for company's debts and other unwanted events.

   By doing so, the EIRELI owner directly distinguishes its personal estate than those of the company ("EIRELI"), creating a limit between them and their situation.

   A straight conclusion that can be drawn from this is that the EIRELI owner can now detach part of his belongings for this enterprise, isolating the remainder of the estate from the risks of the activities performed by the EIRELI.

   The general rule for limited liability companies ("Ltda.") in Brazil still applies to the EIRELI. Therefore, EIRELI owners must be aware that, for this reason, the general rules for piercing the corporate veil might apply to EIRELI type of companies.

2. Incorporating an "EIRELI" company

   In order to incorporate an EIRELI company in Brazil, the law (n. 12.441/11) sets out a few important requirements.

   In general, there are three requirements that stand out from the rest.

   The first2 one concerns the EIRELI corporate capital. According to the rules, the EIRELI shall have paid-in capital equal to at least the value of 100 (one hundred)...