Establishing A Company In Brazil

A. INTRODUCTION

1. A foreign company may establish itself in Brazil either through a branch or a subsidiary. Foreign individuals can also set up their own companies in Brazil. Branches are subject to prior approval being obtained from the Federal Executive Branch of Brazil and are most commonly used by foreign banks and airline companies. Due to the extremely complex procedure involved, the opening of a branch in Brazil is not generally recommended. Subsidiaries, which are Brazilian companies established under Brazilian law, represent a more straightforward approach to establishing a presence in Brazil. Although various types of companies exist under Brazilian law, the two most frequently used are the Limited Liability Company (Limitada) and the Corporation (Sociedade por Ações - S. A.). A new type of company having a single member and known as the single-member or individual limited liability company (EIRELI) also became available for individuals since January 20121.

   B. SETTING UP AS A "LIMITADA" OR AS AN "S.A."

1. The "Limitada" (or "Ltda.")

   1.1 Formation. The Limitada is the most simple, flexible and inexpensive type of company to operate. A Limitada requires at least two shareholders, also known as "quotaholders", whether or not Brazilian resident individuals or corporate entities. The quotaholders may incorporate a Limitada by executing a "Contrato Social" (Articles of Association) and comply with registration requirements of the local applicable registry in which the registered office of the company is to be located (either the Commercial Registry - or Junta Comercial - for business companies, and the Registry for Corporate Entities - Registro de Pessoas Jurídicas- for non-business companies).

   1.2 Capital. The corporate capital of the Limitada is divided into quotas, which represent each quotaholder's interest in the same. In this type of company, participants are liable only up to the value of the quotas for which they have subscribed. However, until the capital of the company is fully paid up, their liability extends to the entire capital of the company. All quotas usually have the same voting rights as well as a par value which is designated in the company's Articles of Association.

   1.3 Management. The Limitada must be managed by one of more individuals resident in Brazil (whether quotaholder(s) or not), appointed by the quotaholders in the Articles of Association or in a separate corporate document. Decisions are taken as set out in the Articles of Association.

   1.4 Resolutions/Quorum. Unless approved in writing by all quotaholders, all matters to be decided by the quotaholders must be submitted for approval in a quotaholders' meeting. The Limitada is required to produce annual accounts2 which must be approved by its quotaholders at an Annual Quotaholders' Meeting. Minutes of such Annual Meeting, as well as the company's Articles of Association (and amendments thereto), are required to be publicly filed at the Commercial Registry. Decision-making in the Limitada is generally a simple process, particularly where there are only two quotaholders. Each quota usually entitles the holder to one vote at a quotaholders' meeting. However, quorum for resolutions in the Limitada is in general higher than a majority vote (i.e., 50% of the voting capital plus one voting quota) and that an equity interest of 75% is really required to ensure control.

   1.5 The following chart illustrates the types of quorum required for resolutions in the Limitada:

   Quorum

   Resoluti...