The globalization of boards of directors in Brazil
Comments on the recent legislation that opened executive positions for non-residents in Brazil
sexta-feira, 1 de julho de 2022
Atualizado às 08:35
After Federal Law 14.195/21 of August 2021 came about, non-residents (including Brazilians and non-Brazilians) may now be members of any executive or non-executive board of directors' position in Brazilian companies. Several companies adopted the new system in the past months, which shows that the governmental bodies, such as the states' chambers of commerce and the federal tax service were quick in internalizing the novelty.
As per the law, that modifies the Brazilian general corporate law (6.404/76 - "Lei das S.A"), foreigners (individuals, as a rule, never companies) may be appointed to all managing bodies of companies, provided that they keep a resident as their attorney-in-fact to receive service of process in court and legal notices from the Brazilian securities exchanges commission ("CVM"), for three (3) years following the term of their tenure.
The participation of foreigners as managers before the new statute was limited to holding seats within the Non-Executive Boards of Directors of firms, i.e., a constriction to non-executive positions. Now, any seat in Boards of Directors or Executive Boards (i.e., executive, or non-executive) are open to foreigners.
The department that is ahead of the chambers of commerce of the country (one for each of the 26 states and the federal district, hence 27) ("DREI"), has confirmed* that the new rule applies not only for joint-stock corporations, but to LLCs ("Sociedade Limitada") as well, the widest-used type of business association in the country, which should make for an extensive use of the new structure.
The option should foster a quicker start for foreign companies in Brazil, but also bolster the presence of veterans, who will now count on their trusted peers - or themselves - to help a hand in the Brazilian subsidiary's day-to-day business, without the need to immigrate to the country.
As attorneys supporting foreign investors in Brazil, we are hopeful that the handy new legislation that opens the country to our globalized reality will become a beacon for the flexibilization of local bureaucracy and government apparatus, making Brazilian companies more inclusive and agile.
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*DREI 19974.102462/2021-14
Adriano Consentino
Is a partner of the Corporate & Finance Department of SiqueiraCastro Advogados, holds an LL.M. in commercial law from the Université Panthéon-Assas in Paris and a general LL.M. from the University of Notre Dame Law School, Indiana, USA.
