BRAZIL Law and Practice Contributed by: Ihury Bastos Pereira Darmont, Filipe Starzynski, Karyn Yoshisaki, Ariel Goldstein and Artur Marangoni Cabral Fagundes, Darmont Advogados
3.2 Legal Structures Used by Managers In Brazil, sponsors, as indicated above, may organise themselves mainly as limited liability companies, due to the simplicity of the corporate structure and flex - ibility of the articles of association to distribute profits disproportionately. At the same time, many companies create structures to align incentives and segregate risks, such as spe - cific SPEs for project development in FIIs, SCPs or profit-sharing agreements, and co-investment vehi - cles. Individual compensation agreements and capi - tal incentives are indeed a major driver of corporate and contractual architecture (often the main one): the possibility of compensating via profits, deferring gains through carry/co-investment, and tying permanence/ performance to vesting and clawback often dictates the choice between limited liability companies (more agile and cheaper) and stock company (more robust for long-term equity). These arrangements are accompanied by partnership agreements and remuneration policies compatible with applicable regulations, including, but not limited to, CVM Resolution No 175/2022 and Brazilian Asso - ciation of Financial and Capital Market Entities (ANBI - MA) codes, with clear rules on entry and exit, succes - sion and disclosure when relevant to fund documents. 3.3 Regulatory Regime for Managers In Brazil, asset managers must be authorised by the CVM under CVM Resolution No 21. This regulation governs the professional management of securities portfolios and imposes requirements for registration, structure, conduct rules, and internal controls. Simultaneously, CVM Resolution No 175 governs fund constitution, operation, and service provision. It assigns specific responsibilities to the asset manager, such as compliance with portfolio composition and concentration limits, and to the fiduciary administrator. It also sets liability parameters for acts and omissions before the CVM. Regarding fiduciary duty, CVM Resolution No 21 establishes the typical duties of a fiduciary relation - ship: good faith, diligence, and loyalty. CVM Resolu -
tion No 175 supplements these with operational and liability obligations. For disclosures and advertising, CVM Resolution No 21 requires asset managers to maintain a public page. This page must include a Reference Form, code of ethics, and policies (such as risk management, trad - ing procedures and assessment performing). Asset managers are also required to periodically submit this information to the CVM. 3.4 Tax Regime for Managers Especially for alternative investment funds, there are other rates and rules. For instance, for Credit Rights Investment Funds, Multimarket Investment Funds and Private Equity and Venture Capital Investment Funds it is possible to have a fixed tax rate of only 15%, provided that the structure complies with some rules, especially of management control and administrative discretion of the vehicle, as well as certain levels of net liquidity and assets composition. In this sense, it is very important within the process of creation of the vehicle to observe the above- mentioned rules and decide if the fund will be cre - ated to reach the tax rate regime enacted by Law No 14.754/2023 (being classified according to Brazilian rules as “investment entities” ( entidades de investi- mento ) and adopt the above mentioned regime, as well as observe if it will attend to the differed tax pay - ment or the anticipated tax payment regime ( come- cotas ). Furthermore, other types of funds, such as real estate investment funds and Investment Fund for Agroindus - trial Production Chains, have specific tax rates, as well as tax reliefs for their investors, if the investment funds attend to specific rules of composition and other pro - visions of trade and register. 3.5 Rules Concerning Permanent Establishments In Brazil, CVM Resolution No 175 and Resolution CVM No 21 provides guidelines for investment funds and establishes that the fund’s fiduciary administra - tor must be an institution authorised to operate by the CVM and domiciled in Brazil. In addition, the contracted asset manager must also be a legal entity
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