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Credits

This Legal Guide for Foreign Investors was prepared by Centro de Estudos das Sociedades de Advogados (CESA) a non-profit organization, with collaboration from member institutions. It has been ceded for publication and dissemination over the BrazilTradeNet (http://www.braziltradenet. gov.br) through a partnership for investment promotion with the Ministry of External Relations.



Collaborators

  • ARAÚJO E POLICASTRO ADVOGADOS
  • AZEVEDO SETTE ADVOGADOS S/C
  • BARBOSA, MÜSSNICH & ARAGÃO
  • BATISTELA ADVOGADOS E CONSULTORES JURÍDICOS
  • BRITO, MERCADANTE & ROCHA ADVOGADOS CASILLO – ADVOGADOS
  • CEGLIA NETO, ADVOGADOS
  • DEMAREST E ALMEIDA - ALMEIDA, ROTENBERG E BOSCOLI – ADVOCACIA
  • FELSBERG, PEDRETTI, MANNRICH E AIDAR – ADVOGADOS E CONSULTORES LEGAIS
  • GREBLER ADVOGADOS
  • LEFOSSE ADVOGADOS
  • MACHADO, MEYER, SENDACZ E OPICE – ADVOGADOS
  • MATTOS FILHO, VEIGA FILHO, MARREY JR. E QUIROGA ADVOGADOS
  • NEHRING E ASSOCIADOS – ADVOCACIA
  • NOVAES E PLANTULLI - ADVOGADOS
  • PAULO ROBERTO MURRAY – ADVOGADOS
  • PINHEIRO NETO ADVOGADOS
  • TELLES PEREIRA, AZZI, FERRARI E ALMEIDA SALLES - ADVOGADOS S/C
  • TESS ADVOGADOS
  • TOZZINI, FREIRE, TEIXEIRA E SILVA – ADVOGADOS
  • TRENCH, ROSSI E WATANABE – ADVOGADOS
  • ULHÔA CANTO, REZENDE E GUERRA – ADVOGADOS
  • VEIRANO ADVOGADOS
  • VENTURI, SANTELLO, CIASCA E FERREIRA ROSA ADVOGADOS
  • WALTER STUBER CONSULTORIA JURÍDICA
  • XAVIER, BERNARDES, BRAGANÇA, SOCIEDADE DE ADVOGADOS
  • YARSHELL, MATEUCCI E CAMARGO ADVOGADOS



Table of Contents

1. The Brazilian Legal System................................................................... 13

2. Institutions for Economic Development............................................ 15

2.1. Ministries ............................................................................................ 15

2.2. Chambers of Commerce...................................................................... 22

3. Foreign Capital......................................................................................... 23

3.1. General Features................................................................................. 23

3.2. Registration of Foreign Capital......................................................... 23

3.3. Currency Investments....................................................................... 24

3.4. Investment via Conversion of Foreign Credits................................ 24

3.5. Investment via Import of Goods without Exchange Cover ........... 25

3.6. Capital Market Investments............................................................. 26

3.7. Remittance of Profits......................................................................... 26

3.8. Reinvestment of Profits..................................................................... 27

3.9. Repatriation ....................................................................................... 27

3.10. Transfer of Foreign Investments....................................................... 28

3.11. Restrictions on Remittances Abroad................................................ 28

3.12. Restrictions on Foreign Investment ................................................. 28

4. Brazilian Foreign Exchange Regulations .......................................... 31

5. Forms of Association .............................................................................. 33

5.1. General Aspects.................................................................................... 33

5.1.1. Sociedade Anônima (S/A) ............................................................ 33

5.1.2. Sociedade Limitada (LTDA)......................................................... 35

5.1.3. Other Types of Companies and Forms of Association ............ 36

5.1.3.1. Sociedade em Comandita Simples ou por Ações................ 36

5.1.3.2. Sociedade em Nome Coletivo............................................ 37

5.1.3.3. Sociedade em Conta de Participação................................. 37

5.1.4. Consórcio...................................................................................... 38

5.2. Registration Process............................................................................. 38

5.2.1. Registration of Companies........................................................ 39

5.2.2. The Civil Registry of Legal Entities.......................................... 40

6. Public Companies .................................................................................... 43

6.1. General ................................................................................................. 43

6.2. Securities Market ................................................................................. 44

6.3. Management ........................................................................................ 45

6.4. Periodic Filing Requirements and Other Information....................... 46

6.5. Public Offers for the Buyback of Shares - POBS................................ 49

6.6. Primary and Secondary Public Offerings............................................ 50

6.7. Differentiated Listing on the São Paulo Stock Exchange (BOVESPA)........................................................................................... 51

7. Regulatory Framework of Local Capital Markets............................ 55

7.1. Relevant Laws Affecting Local Capital Markets........................................ 55

7.2. Local Regulatory and Supervisory Authorities .................................. 55

7.2.1. The National Monetary Council .............................................. 55

7.2.2. The Securities and Exchange Commission (CVM) ................. 55

7.2.3. The Central Bank....................................................................... 56

7.2.4. Self-Regulation........................................................................... 57

7.2.4.1. Stock Exchanges............................................................ 57

7.2.4.2. Organized Over the Counter Markets (OTCMs)....... 58

7.2.4.3. National Association of Investment Banks (ANBID)........................................................................ 59

7.3. Definition of Securities........................................................................ 59

7.4. . Offer and Distribution of Securities in Brazil.................................. 60

7.4.1. The Concept of Public and Private Offers for Distribution of Securities ................................................................................ 60

7.4.2. Registration Process ................................................................... 61

7.4.3. Registration of the Issuer as a Public Company ...................... 61

7.4.4. Requirements for a Public Distribution of Securities .............. 61

7.4.5. Issue of Depositary Receipts: Access to the Foreign Capital Markets.......................................................................... 62

7.4.6. Access to the Brazilian Market by Foreign Companies Through Security Depositary Certificate (BDR) Programs..... 62

7.5. Tender Offers for Acquisition of Shares of Brazilian Companies..... 63

7.5.1. Takeovers by Tender Offer......................................................... 63

7.5.2. Going Private - Delisting Tender Offer ..................................... 63

7.5.3. Voluntary Tender Offer ............................................................. 64

7.6. Investor Protection Rules .................................................................... 65

7.6.1. Disclosure by Public Companies ............................................... 65

7.6.2. Disclosure by Shareholders of Public Companies.................... 65

7.6.3. Market Manipulation and Other Fraudulent Practices in the Securities Market................................................................. 65

7.6.4. Insider Trading ........................................................................... 66

7.7. The Money Laundering Law............................................................... 66

7.8. Civil Remedies ..................................................................................... 67

7.8.1. Securities Sold in Violation of Registration and/or Prospectus Requirements .......................................................... 67

7.8.2. Insider Trading .......................................................................... 68

7.8.3. Fraudulent Brokerage Activities and Handling of Brokerage Accounts.................................................................... 68

7.8.3.1. Excessive or Unfair Profits or Commissions ............... 68



7.8.3.2. Operating While Insolvent or Financially Unsound and Other Losses Caused by Intermediaries .............. 68

7.8.4. Class Actions .............................................................................. 68

7.8.5. Waiver of Rights......................................................................... 68

7.8.6. Procedural Requirements........................................................... 69

7.8.6.1. Jurisdiction .................................................................... 69

7.8.6.2. Venue.............................................................................. 69

7.8.6.3. Statute of Limitations .................................................. 69

8. Tax System................................................................................................ 71

8.1. General Features................................................................................... 71

8.2. Federal Taxes ........................................................................................ 72

8.2.1. Income Tax ................................................................................. 72

8.2.2. Tax on Industrialized Goods ..................................................... 73

8.2.3. Tax on Credit and Exchange Transactions ............................... 73

8.2.4. Tax on Large Fortunes................................................................ 73

8.3. State (and Federal District) Taxes....................................................... 74

8.4. Municipal Taxes................................................................................... 74

8.5. Social Charges ...................................................................................... 74

9. Anti-Trust Legislation ............................................................................ 77

10. Brazilian Labor Law................................................................................ 81

11. Foreign Workers in Brazil ...................................................................... 85

11.1. Short-term Business and Tourist Visas............................................. 85

11.2. Temporary Work Visas ..................................................................... 86

11.3. Other Temporary Visas ..................................................................... 89

11.4. Permanent Employment Visa ........................................................... 90

11.5. Registration Upon Entry Into Brazil................................................ 91

11.6. Travel in Advance of Permanent or Temporary Employment ........ 92

11.7. Employment of Spouses/Offspring.................................................. 92

12. Acquisition of Real Estate in Brazil .................................................. 93

12.1. Introduction....................................................................................... 93

12.2. Possession and Ownership ................................................................ 94

12.3. Acquisition and Loss of Ownership ................................................ 95

12.3.1. General Provisions ................................................................. 95

12.3.2. General Considerations and Requirements Upon Purchase 96

12.3.3. Acquisition of Rural Land by Foreigners .............................. 97

12.4. Taxation.............................................................................................. 98

12.5. Real Estate Investment Funds ......................................................... 98

13. Environmental Legislation ................................................................. 101

13.1 Brazilian Environmental Policy ....................................................... 101

13.2. The Federal Constitution ............................................................... 102

13.3. Criminal Sanctions ......................................................................... 102

13.4. Administrative Sanctions ............................................................... 104

13.5. The Brazilian Environmental System ........................................... 105

14. Privatization, Concessions and Partnerships ................................ 107

14.1. The National Privatization Program ............................................. 107

14.2. Public Service Concessions ............................................................ 109

14.3. Major Industries privatized or Undergoing Privatization............. 109

14.4. Developments and Results of the Privatization Program ............ 109

14.5. Public-Private Partnerships.............................................................. 110

15. Public Tenders – Contracting of Works, Services, Procurement and Transfers by the Public Administration ................................... 113

15.1. Introduction..................................................................................... 113

15.2. Procurement Modalities .................................................................. 114

15.3. Authorization, Concession, and License to Provide Public Services.. 115

15.4. Qualification .................................................................................. 116

15.5. Tender Waivers................................................................................. 117

15.6. Administrative Contracts ............................................................... 117

15.7. Guarantees ....................................................................................... 118

15.8. Inspection and Extinction of Administrative Contract ............... 118

15.9. Other Contractual Features ............................................................ 119

16. Telecommunications ............................................................................. 121

16.1. Telecommunications in Brazil – Brief Overview ........................... 121

16.2. Development of Mobile Telephony ............................................... 123

16.3. The Telecommunications Regulatory Agency (ANATEL) ........... 124

16.4. General Telecommunications Law ................................................ 124

16.5. Telecoms Services Regimes ............................................................. 125

16.6. Transfer of Control of Telecom Companies .................................. 127

16.7. Taxes on the Telecoms Sector ........................................................ 128

16.8. Incentives ......................................................................................... 129

16.9. The Future of Telecommunication Services .................................. 129

17. Electric Power......................................................................................... 131

17.1. Background ...................................................................................... 131

17.2. Electric Power Sector Model Adopted in the 2nd half of 1990s ..... 132

17.2.1. Activities and Agents of the Electricity Sector .................. 132

17.2.2 Electric Power Sector Agencies............................................. 135

17.2.3. Contracts in the Energy Sector ........................................... 135

17.3. The Brazilian Electric Power Sector since 2003.............................. 137

17.3.1. Electric Power Sector Agencies............................................ 137

17.3.2. Electricity Sector Activities and Agents ............................. 138

17.3.3. Electricity Trading: The Pool (Regulated Environment) and the Free Trade Environment ........................................ 139

17.3.4. Planning................................................................................ 141

17.3.5. Unbundling .......................................................................... 141

17.4. Conclusion ....................................................................................... 141

18. Regulation of Financial Institutions and Leasing in Brazil.......... 143

18.1. Financial Institutions ...................................................................... 143

18.2. Principal Financial Institutions....................................................... 143

18.2.1. Public Sector......................................................................... 143

18.2.2. Private Sector........................................................................ 144

18.3. Main Requirements for Financial Institutions in Brazil ............... 145

18.4. Minimum Capitalization Standards ............................................. 146

18.5. Foreign Investment in Brazilian Financial Institutions ................ 147

18.6. Leasing.............................................................................................. 147

19. Electronic Commerce............................................................................ 149

19.1. General Aspects................................................................................ 149

19.2. Legal Aspects.................................................................................... 150

19.3. Brazilian Laws on Virtual Transactions ......................................... 152

19.4. Tax Issues Relating to Electronic Commerce ................................ 155

19.5. Intellectual Property ....................................................................... 155

19.6. Domain Names ............................................................................... 156

19.7. Electronic Documents as Evidence................................................. 157

19.7.1. General Theory of Evidence ................................................ 157

19.7.2. Classification of Electronic Documents ............................. 159

19.7.3. Documentary Media ........................................................... 159

19.7.3.1. Types of Evidence .................................................. 160

19.7.3.2. Evidence of the Existence of the Document ...............160

19.7.3.3. Provenience of Declarations and Electronic Signatures ..161

19.7.3.4. Evidence of the Content of the Document ......... 162

19.7.4. Legislative Responses ........................................................... 163

19.7.4.1. Executive Order (MP) 2.200-2 and Other Bills ... 164

19.7.5. Conclusions........................................................................... 165

20. Information Technology ...................................................................... 167

20.1. National Information Technology Policy ...................................... 167

20.2. Incentives for Development and Local Production of It Goods and Services ..................................................................................... 168

20.3. Tariff Policy and MERCOSUR ....................................................... 170

20.4. Software Legal Protection ............................................................. 170

20.4.1. Taxes Applicable to Operations Involving Software ........ 171

20.4.1.1. Taxes on Sales of Off-the-Shelf Software ........... 172

20.4.1.2. Taxes on Customized Software ........................... 173

20.4.2. Software Related Remittances.......................................... 174

20.5. Internet............................................................................................. 175

20.6. Bills of Law ...................................................................................... 175

20.7. Final Comments ............................................................................. 176

21. Commercial Representation and Agency Agreements ................ 177

22. Distribution Agreements .................................................................... 179

22.1. Commercial Distribution Agreements .......................................... 179

22.2. Ordinary Distribution Contracts .................................................. 183

23. International Intellectual Property Contracts .............................. 185

23.1. General Features .............................................................................. 185

23.2. Patents .............................................................................................. 185

23.3. Trademarks....................................................................................... 187

23.4. Technology Transfer Agreements .................................................. 188

23.5. Franchising ....................................................................................... 190

24. International Treaties .......................................................................... 193

24.1. Overview.......................................................................................... 193

24.2. Trade ................................................................................................. 193

24.3. Intellectual Property ....................................................................... 194 24.4.Taxes .................................................................................................. 194

24.5. Latin America .................................................................................. 195

24.6. MERCOSUR .................................................................................... 195

25. Antidumping in Brazil ......................................................................... 201

25.1. Introduction..................................................................................... 201

25.2. Concept and Core Elements of Dumping ..................................... 201

25.3. Anti-Dumping investigations in Brazil ......................................... 203

25.4. Conclusion ....................................................................................... 206

26. Commercial and Civil Litigation........................................................ 207

26.1. Jurisdiction in Civil and Commercial Cases ................................. 207

26.2. Litigation Costs ............................................................................... 207

26.3. Initial Proceedings ........................................................................... 208

26.4. Evidence............................................................................................ 209

26.5. Court Rulings .................................................................................. 209

26.6. Provisional Remedies ...................................................................... 210

26.7. Appeals ............................................................................................. 210

26.8. The Enforcement of a Judgment ................................................... 211

26.9. Collection Proceedings .................................................................... 212

27. Consumer Rights in Brazil – Legal Framework and Enforcement ........................................................................................... 213

27.1. General Definition ........................................................................... 213

27.2. Development of the Law ................................................................ 213

27.3. Scope ................................................................................................ 213

27.4. Enforcement..................................................................................... 214

27.5. Trends ............................................................................................. 214

28. Arbitration and Upholding of Foreign Court Rulings and Arbitration Awards ............................................................................. 217

28.1. Subject Matter and Applicable Rules ........................................... 217

28.2. Arbitration Proceedings .................................................................. 217

28.3. Recognition and Enforcement of Foreign Arbitration Awards..... 218

28.4. Foreign Sentences ............................................................................ 219

29. International Aspects of Brazilian Jurisdiction ............................. 221

29.1. General Jurisdiction of Brazilian Courts ....................................... 221

29.2. Choice of Forum ............................................................................. 221

29.3. Judicial Cooperation ....................................................................... 222

29.4. Recognition and Enforcement of Foreign Judgments in Brazil .... 224

29.5. Jurisdiction of International Arbitration Tribunals....................... 226



1.
The Brazilian Legal System

Brazil is a federative republic, constituting an indissoluble union of States, Municipalities, and the Federal District.

Brazil’s legal system is codified, and laws are issued by the Federal Government, States, and Municipalities, each within its own sphere of authority. Court decisions entail correct application of current Brazilian laws. When no specific legal provision exists, courts decide based