Practice Areas. Company Formation Brazil

Dependent branch office or Brazilian company

In principle, the foreign entrepreneur wanting to become active on the Brazilian market has the choice of either opening a (legally) dependent branch office or founding a company under Brazilian law.

The dependent branch office will act on the Brazilian market in the legal form of its (foreign) mother company. In order to become operative, however, it requires the express consent of the Brazilian (federal) government (see Art. 11 § 1° Lei 4.657/1942 as well as Art. 1134 to 1.141 Código Civil and Instrução Normativa DRNC N° 76/1998).

Obtaining such consent is subject to a complex bureaucratic process which can take up to a year to complete. Even when the branch office has been approved and has commenced its operations, each subsequent change in the (foreign) mother company’s articles of association requires a renewed consent in order to attain effect in Brazil (Art. 1.139 Código Civil).

Additional costs and complexity also arise due to heightened disclosure obligations: In addition to having to publish the annual return of its branch office, the foreign company is – in Brazil – also obligated to comply with all the disclosure duties that are imposed upon it by the laws of its home country (Art. 1.140 Código Civil).

Finally, in light of the small number of dependent branch offices currently operating in Brazil, it can also not be assured that further problems won’t arise in the day-to-day use of this particular legal form (especially when dealing with the Brazilian administration).

Consequently, for the predominant number of cases of commencing a business activity in Brazil, founding a company under Brazilian law is clearly the recommendable course of action.

Types of business entities under Brazilian law

Brazilian corporate law provides for a wide variety of business entities. A close match can be found for anything from the sole proprietorship (counterpart: Empresa individual), the partnership (counterpart: Sociedade Simples), silent partnership (counterpart: Sociedade em Conta de Participação), general partnership (counterpart: Sociedade em Nome Coletivo) or limited partnership (Entsprechung: Sociedade em Comandita Simples) to the limited liability company (counterpart: Limitada) and the corporation (counterpart: Sociedade Anônima).

The most widely used types of legal entities are the Limitada [Ltda.] and the Sociedade Anônima [S/A]. Due to the reduced requirements for its formation and the greater flexibility of its structure, the former generally constitutes the best choice for an entry into the Brazilian market. It will therefore be examined in more detail in the following.

Formation of a Limitada

The statutory regulations for the formation and operation of a Limitada are set down in Art. 1.052 to 1.087 of the Código Civil. Subsidiarily, the rules governing the Sociedade Simples (Art. 997 to Art. 1.038 Código Civil) are applied. The Articles of Association can also stipulate for the supplemental application of the regulations governing the Sociedade Anônima (Lei 6.046/1976).


The foundation of a Limitada requires a minimum number of two shareholders. These can be natural as well as legal persons. Likewise, it does not matter whether they are Brazilians (respectively Brazilian entities) or foreigners (respectively foreign entities).

In order to commence their business activities in Brazil – even when those activities are limited to holding shares in a Brazilian company – the shareholders need to be enrolled with the pertinent Brazilian tax register [Cadastro Nacional de Pessoas Jurídicas; CNPJ for legal entities and Cadastro de Pessoas Físicas; CPF for natural persons].

In quite a number of cases (inter alia in the areas of labor law, tax law and product liability), Brazilian law will – either on a statutory basis or based on doctrine developed by jurisprudence – allow for a so called “lifting of the corporate veil”. This means that the company’s liabilities will be treated as immediate liabilities of its shareholders. Dues to the risk of such treatment, it is recommendable to only utilize specially designed legal entities as shareholders of a Limitada. Natural persons are strongly discouraged from assuming this position.

This is also the reason why the EIRELI [Empresa Individual de Responsabilidade Limitada which translates to „sole proprietorship with limited liability“], introduced as a new legal form by Law 12.441/2011 in force as of January 2012, will not be of much interest to foreign investor. While it does – for the first time – render it possible to found a (Brazilian) legal entity with a single shareholder, said position can only by filled by a natural person. In case the EIRELI’s corporate veil were lifted, this (natural) person would then become liable with all its personal assets.

Necessity of a Procurador

Foreign shareholders without seat/domicile in the country need to name a natural person resident in Brazil authorized to act as their receiving agent (to accept service of process) and represent them before the Brazilian tax authorities. The respective power of attorney has to be registered with a cartório (an institution similar to a notary public) as well as with the company register at the seat of the Brazilian entity whose shares are being held.

Usually, the attorney in fact (the so-called Procurador) will be vested with a power of attorney going beyond the aforementioned authorities and enabling him to comprehensively represent the respective shareholder in Brazil in order to facilitate the engagement in the country.

Articles of Association

The Limitada‘s Articles of Association need to be prepared in writing and filed with the competent company register. They are signed by the shareholders (or their representatives), an attorney licensed with the Brazilian Bar Association [Ordem dos Advogados do Brasil; OAB] as well as two witnesses. Notarization of the document is not required.

The minimum content of the Articles of Association is stipulated by Art. 1.054 in connection with Art. 996 Código Civil. Inter alia, they are required to make reference to the name, purpose and seat of the company, its registered capital and the distribution of said capital between the shareholders as well as to the company’s administration.

Company name

The name of a Limitada can contain the name of a natural person as well as fanciful term. The company’s purpose, however, also needs to needs to be discernible from it. The term Limitada or Ltda. needs to be added at the end. If the company name is used without such reference to the legal form, then the limitation of liability is considered to be waived (Art. 1.158 § 3 Código Civil).

In accordance with Art. 1.166 Código Civil, the company name is initially only protected in the state in which the company has its seat. It can be extended to other states (Art. 1.166 Parágrafo Unico Código Civil, in connection with Lei 8.934/94, Art. 61, § 2º Decreto 1.800/62 and Instrução Normativa DNRC N° 93/2002). In order to assure protection throughout Brazil, however, the registration of the name as a trademark should be taken into consideration.

Company purpose

The company may pursue any lawful purpose. The Articles of Association need to specify this purpose in detail. It will determine whether the company will be registered as a non-commercial Limitada with the Registro Civil or as a commercial Limitada with the Registro Público de Empresas Mercantis and will also be relevant with regard to any further permits that may need to be obtained before the company can commence its activities.
If the company purpose is expanded or changed, this necessitates a change of the Articles of Association (subject to registration with the competent company register).

Company seat

The company’s seat needs to be known at the time of registration and the company’s complete address needs to be stated in the Articles of Association. In case the company does – at the time of incorporation – not yet have its own premises, the use of a so-called „virtual office“ might be considered. Such offices (whose address will fulfill the statutory requirements with regard to the company’s seat) are offered by various providers throughout Brazil. Aside from the mere address, these providers generally offer additional services such as mail forwarding, call-center services or the (short- or longer term) provision office space.

The company can open branches in or outside of Brazil. Such branches also need to be disclosed in the Articles of Association with their full address. In case the company adds a branch subsequent to its foundation, this necessitates a change of the Articles of Association.

Registered Capital

Other than in the case of the EIRELI, which requires a registered capital of at least one hundred times the miminum salary, there are no minimum capital requirements stipulated for the foundation of a Limitada. Since the nominal value of the individual shares may not be set below one centavo, it would theoretically be possible to found a Limitada with a registered capital of two centavos (i.e. two hundredths of a real).

Not least because the registered capital can be seen as a reflection of the company’s respectability and given the fact that it is common for banks and other creditors to inspect the (freely available) Articles of Association of their potential business partners, it is recommendable to furnish the Limitada with a registered capital adequate to pursue its company purpose.

The registered capital can be provided by contributions in cash as well as by contributions in kind. Contributions can also be made in the form of know-how or intellectual property rights. It is not possible to effect a contribution by means of rendering a service vis-à-vis the company (Art. 1.055 § 2 Código Civil).

Aside from a case of a lifting of the corporate veil (as referred to above), the shareholders’ liability will – once the registered capital is fully paid in – be limited to the amount of their respective share.


The administration of a Limitada can be exercised be one or more of the shareholders themselves as well as by one or more persons without a share in the company. With the exception of very specific cases, a director [Administrador] does not need to be a Brazilian citizen. He (or she) must, however, be in possession of a permanent residence permit.

The appointment of the director can be effected via the Articles of Association as well as in a separate document.

On priciple, the Limitada will – according to the regulations introduced by the („new“) Código Civil of 2002 – only be validly bound those acts of its director(s) that observed the limits of the authority afforded to him/them (cf. Art. 47 as well as Art. 1.155 Código Civil).

This means that a third party would (inter alia) not be able to invoke the validity of a contract concluded with the Limitada if the director (or directors) representing the company had breached his (or their) authority in the conclusion of the respective deal, provided that the limitation of authority was provided for in the Articles of Association and that these were properly recorded with the competent company register (see Art. 1.015 Parágrafo único, Inciso I Código Civil).

The question of whether the Brazilian jurisprudence will interpret the statutory guidelines in a way that will bestow comprehensive effects (vis-à-vis third parties) upon the limitation of a director’s authority as long as such limitation is set out in the Articles of Association or whether such effects will be limited to cases in which an actual inspection of the Articles of Association could have been assumed or would have been deemed advisable under the circumstances has not been finally settled. Nevertheless, it is clearly recommendable to restrict the authority of the director(s) in the company’s Articles of Association – especially when the respective position(s) is/are not filled by shareholders – limiting it to a scope necessary and sufficient to ensure the company’s effective day-to-day operation.

Foundation process

Once the necessary documents have been prepared and compiled, they are filed with and – following their examination – recorded by the competent company register.

Upon registration, the company will be accorded a registration number [Número de Inscrição no Registro de Empresas; NIRE] and can subsequently request its inscription into the tax register [CNPJ] with the Brazilian (federal) tax authority [Receita Federal]. In certain states, the process has already been unified and registration with the CNPJ will be effected as part of the formation process.

The registered capital can now be transferred to a (previously opened) company account. If the transfer is effected by a foreign shareholder, it will need to be registered with the Brazilian Central Bank [BACEN] within a maximum of thirty days, in order to allow for a later repatriation of the capital and/or future profits.

After registration with the company register has occurred, further registrations (on a municipal and state level) need to be taken care of. Depending on the company’s specific purpose, additional permits and/or licenses might need to be requested.

Services Rolim, Mietzel, Wohlnick & Calheiros LLP

In close cooperation with one of the Brazilian offices, RMW&C will accompany you in all matters relating to a company foundation in Brazil as well as with regard to a corporate restructuring of any entity that has already been set up in the country. In this context, we will especially render the following services:

• Counsel on the set-up of all types of business entities available under Brazilian law (if required in collaboration with special advisors to cover aspects of business strategy and/or taxation)

• Preparation or adaptation/redesign of your (future) company’s Articles of Association

• Compilation of the accompanying agreements (such as the contract for the managing director, employment agreements, compliance guidelines, rental agreements, etc.)

• Assisting you with finding the required shareholder representative [Procurador] and accompanying you in concluding the respective agreements and registering the necessary powers of attorney

• Counseling you on compliance with the formal requirements regarding foreign documents and accompanying the necessary legalization process as well as taking care of the required translation by a certified translator (licensed to practice in Brazil)

• Filing the required applications with the Brazilian central bank [BACEN], the competent company register and all other authorities to might be relevant in the individual case

• Effecting the necessary inscriptions with the relevant tax registers and obtaining all necessary permits for the operation of your business in Brazil