BRAZIL Law and Practice Contributed by: Daniel Zugman and Frederico Bastos, BVZ Advogados | Bastos, Bari, Vilela e Zugman
ers or controllers who caused or benefited from the abuse. This is an exceptional remedy and requires evidence of improper use of the legal entity. Brazilian law generally permits the delegation of specialised functions to qualified third parties where authorised by law or by the governing documents. However, delegation does not normally relieve the fiduciary of supervisory duties or liability for wilful mis - conduct, fraud or gross negligence. Likewise, con - tractual provisions seeking to exclude liability for such conduct are generally unenforceable. 6.3 Fiduciary Regulation Brazil has no trust-specific prudent investor rule, as trusts are not recognised under Brazilian law. Never - theless, Brazilian law imposes general duties of care, diligence and good faith on persons responsible for managing another person’s assets. Foundation administrators, estate administrators, company directors and other fiduciaries must exer - cise the level of care expected of a reasonably diligent manager and may be held liable for negligent invest - ment decisions or conflicts of interest. In the financial and capital markets, licensed asset managers, fiduciary administrators and investment fund administrators are subject to regulation by the Brazilian Securities Commission (CVM), which impos - es duties of care, suitability, risk management and act - ing in investors’ best interests, reflecting principles similar to a prudent investor standard. Where foreign trusts are involved, the fiduciary’s investment duties are generally governed by the law applicable to the trust rather than by Brazilian law. 6.4 Fiduciary Investment Brazil does not adopt a codified fiduciary investment theory comparable to the Modern Portfolio Theory, as trusts are not recognised under Brazilian law. Instead, fiduciaries and other asset managers are subject to general bona-fide parameters and statutory duties of care, diligence and loyalty, requiring them to act as reasonably prudent persons when managing another person’s assets. Unlike the Modern Portfolio Theory, the Brazilian approach focuses on the prudence of
individual management decisions rather than assess - ing investments on a portfolio-wide risk-and-return basis. There is no general statutory requirement for diver - sification applicable to private foundations or family holding companies. However, fiduciary administra - tors, licensed asset managers and investment fund administrators regulated by the Brazilian Securities Commission (CVM) are subject to suitability, diversi - fication, risk-management and best-interest obliga - tions reflecting principles similar to those underlying the Modern Portfolio Theory. As Brazil has no domestic trust regime, these issues arise primarily in relation to foundations and corporate vehicles. Private foundations may not be organised for profit, although they may own interests in operating companies as investments consistent with their insti - tutional purposes. By contrast, family holding com - panies are widely used to own and manage operating businesses and remain subject to the ordinary rules of Brazilian corporate law, including directors’ duties and general corporate governance requirements. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship For civil law purposes, residence is the place where an individual ordinarily lives, while domicile is the place regarded as the centre of that person’s legal affairs, generally combining physical presence with an inten - tion to remain, subject to certain statutory forms of legal domicile. For private wealth and tax purposes, tax residency is the most relevant connecting factor. Tax residency is governed by the income tax legislation and does not necessarily coincide with civil-law domicile. Broadly speaking, an individual becomes a Brazilian tax resi - dent upon obtaining a permanent visa, entering into an employment relationship with a Brazilian employer or remaining in Brazil for more than 183 days, whether consecutive or not, within any twelve-month period.
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