BRAZIL Law and Practice Contributed by: Rafael Lacerda, Eric Nahum, Rômulo Martins and Fernando Oliveira, Lacerda Diniz Advogados
2. Private Equity Developments 2.1 Impact of Legal Developments on Funds and Transactions In recent years, two developments have been most relevant to private equity in Brazil: tax reform and the consolidation of the funds rulebook. Tax Reform Constitutional Amendment No 132/2023 merges ICMS, ISS, IPI, PIS and Cofins into CBS (federal) and IBS (state), with phased implementation from 2026 to 2032. Impacts include pricing, margins and valuation models, requiring careful tax planning in SPAs and CVM Resolution 175 modernised fund regulation through various annexes. Under Annex IV, private equity investment funds (FIPs) remain equity- and quasi equity oriented vehicles (eg, shares, deben - tures, subscription warrants, convertibles and similar) and do not invest directly in crypto assets or carbon credits. Separately, the tender offer framework will be overhauled by CVM Resolution 215/2024 (replacing RCVM 85), with effectiveness postponed to 1 October 2025 by RCVM 230/2025. 3. Regulatory Framework 3.1 Primary Regulators and Regulatory Issues Primary Regulatory Authorities Brazil has no single, overarching regulator for private equity transactions. It is necessary to distinguish between direct investments and locally structured funds. For private equity deals carried out directly by offshore vehicles, no prior regulatory approval is required; registering the foreign direct investment with the Central Bank of Brazil (BCB) for foreign-exchange control purposes is sufficient. integration plans. Funds Framework By contrast, private equity funds organised in Brazil are regulated by the Brazilian Securities and Exchange Commission (CVM), which oversees their formation and operation, and the licensing of their managers. Regardless of structure, the Administrative Council for
Economic Defence (CADE) remains a key authority for merger review in M&A transactions. Merger Control Both direct transactions and investments via local funds are subject to Brazilian antitrust review when the thresholds set by Law No 12,529/2011 are met – namely, when one party’s economic group recorded annual gross revenues in Brazil above BRL750 million and the other party’s group recorded at least BRL75 million. For private equity funds, CADE looks to the aggregated revenues of all portfolio companies under common management, which often requires a request for CADE approval. CADE has also developed specific case law distin - guishing purely financial investments from acquisi - tions conferring material influence. As a result, even minority stakes may constitute notifiable transactions when accompanied by special rights – such as vetoes over strategic decisions or board appointment rights. CADE Resolution No 33/2022 clarifies that holdings above 20%, or with qualified governance rights, will generally require prior notification. Sectoral Regulation Beyond merger control, private equity investors face sector-specific requirements in regulated industries, whether investing through local or foreign vehicles. In the financial sector, for example, the BCB must pre- approve acquisitions of relevant stakes, assessing not only the investor’s financial capacity but also the proposed governance framework and the manager’s track record. Similarly, investments in electric-power concessions require approval from the Brazilian Elec - tricity Regulatory Agency (ANEEL), which reviews both technical and financial capabilities. In telecommuni - cations, the National Telecommunications Agency (ANATEL) supervises changes of control, requiring lawful source-of-funds documentation and, often, partnerships with operators that demonstrate techni - cal expertise. Merger control in Brazil is a pre-closing, suspensory regime; standstill applies and gun-jumping enforce - ment is active.
36 CHAMBERS.COM
Powered by FlippingBook