BRAZIL LAW AND PRACTICE Contributed by: Alan Campos Elias Thomaz, Juliana Sene Ikeda, Ricardo Barretto Ferreira da Silva and Camila Sabino Del Sasso, Campos Thomaz Advogados
The Ltda structure provides greater contractual flex - ibility and simpler governance, and is suitable for enti - ties that do not require complex governance arrange - ments or that are fully owned by a limited number of corporate investors, including foreign entities. The SA structure offers more access to capital markets, man - datory financial disclosure, and a formal governance structure with a board of directors and fiscal council. For FDI, investors may freely incorporate or acquire equity in either form, subject to registration with BACEN. The choice between the SA and Ltda struc - ture carries implications in terms of capital mobility, regulatory oversight and exit strategies. Foreign inves - tors often favour the Ltda for initial operations due to its lower compliance burden, while SA entities are preferred for ventures anticipating public listings or complex joint ventures. 4.2 Relationship Between Companies and Minority Investors The relationship between companies and minority investors in Brazil is structured by statutory protec - tions under the Corporation Law and, for listed com - panies, CVM and stock exchange (B3) rules. Minority shareholders are entitled to equal treatment, informa - tion rights, tag-along rights and withdrawal rights in specific corporate events. For private companies (Ltda), minority investors’ rights depend heavily on the articles of association. Typical protections include pre-emptive rights, supermajor - ity voting thresholds for key matters and access to financial information. Under the Corporation Law, minority shareholders are entitled to convene or par - ticipate in general meetings and vote on key corporate matters, request information and clarifications from management regarding company affairs, and elect members of the fiscal council through minority repre - sentation mechanisms. The Corporation Law ensures tag-along rights in the event of a sale of control and enhanced protections for companies listed on the stock exchange. Brazilian courts and arbitral tribunals recognise the fiduciary duties of controlling shareholders and administrators, offering minority investors recourse against abusive conduct or oppression. Also, it has
increasingly emphasised good faith and transparency in shareholder relations, and arbitration has become the preferred forum for resolving corporate disputes involving minority rights, particularly in high-value investments. 4.3 Disclosure and Reporting Obligations FDI in Brazil is generally not subject to prior govern - mental approval, except in restricted sectors (eg, nuclear energy, health, media and others). The disclo - sure and reporting obligations apply under the BACEN RDE-IED system ( Registro Declaratório Eletrônico- Investimento Estrangeiro Direto ), which requires regis - tration of all foreign equity investments, reinvestments and capital repatriations. The foreign investor must submit basic information on the investing entity, the ultimate beneficial owner and the financial characteristics of the investment. Reporting obligations vary according to the size and nature of the investee company, with periodic updates required to ensure compliance with the Central Bank’s foreign investment registration framework. In addition, publicly held companies must comply with disclosure rules established by the CVM, covering material facts, significant changes in shareholding structures and regular financial reporting. Failure to comply with these obligations may lead to administrative penalties and affect the remittance of dividends or repatriation of capital. Compliance ensures transparency, macroeconomic monitoring and alignment with anti-money-laundering standards.
5. Capital Markets 5.1 Capital Markets Overview
Brazil’s capital markets are the largest and most sophisticated in Latin America, and are centred on B3 ( Brasil, Bolsa, Balcão ), the country’s only stock exchange and clearinghouse. Although bank financ - ing remains the predominant source of funding for most businesses – especially small and medium-sized enterprises – the use of capital market instruments has expanded considerably. Medium and large com - panies increasingly seek market-based financing to
67 CHAMBERS.COM
Powered by FlippingBook