Neil Montgomery
Neil.montgomery@montgomery.adv.br
Mariana Elena Boéchat de Moura
Mariana.boechat@montgomery.adv.br
Most multinational companies willing to set up shop in Brazil and form a limited liability company (Ltda.), the most common, less costly and simplest form of corporate entity to be incorporated in Brazil, have always asked whether such type of company could be managed by a non-resident executive from overseas.
Until very recently, the answer to such question was “no”, since Brazilian law used to require that only resident individuals were eligible for serving in the capacity of corporate officer at such type of entity. This has now changed thanks to new legislation enacted in the second half of 2021. Such legislation provides an excellent opportunity for multinational companies with subsidiaries in Brazil and foreign individual investors owing their own Brazilian Ltdas. to reduce costs with the dispensation of the appointment of local corporate officers, thereby enhancing their control over their Brazilian companies.
In August 2021, Law No. 14,195/21 (known as the Business Facilitation Law) was enacted, inter alia, to amend Law No. 6,404/96 (Brazil´s Law of Corporations – LSA), thereby permitting the appointment of non-resident individuals as officers of corporations. Shortly after its enactment, the DREI – the federal governmental body issuing general instructions to State Commercial Registries – issued regulations confirming such understanding.
Although the LSA is specific to corporations (sociedades anônimas, in Portuguese), it may secondarily apply to Ltdas. (sociedades limitadas, which are governed by the Brazilian Civil Code) that include in their articles of association an express provision for such application, and as long as such application does not compromise the essence of a Ltda.
Due to the absence of specific legal authorization, as in a great number of other cases in the past (such as the possibility of having preferred quotas or quotaholder agreements), questions were raised about the application of such LSA provision to Ltdas., which resulted in negative responses from Commercial Registries not allowing Ltdas. to file corporate documents in which non-resident individuals figured as officers of such type of company.
More recently and after several complaints, Commercial Registries (most decisions emanating from the State of São Paulo) finally began accepting Ltda. filings with such provisions.
In this regard, even though Law No. 14,195/21 was enacted in the second half of last year, only now is it safe to say that Brazilian Ltdas. may appoint a non-resident individual for the position of corporate officer. The sole proviso is that such non-resident officer needs to appoint an individual resident in Brazil for the specific purpose of acting as an agent for service of process, for the duration of the corporate officer’s mandate and for a minimum period of 3 (three) years after the non-resident executive no longer occupies such corporate officer position, pursuant to the new wording of clause I of the second paragraph of article 146, of the LSA – as provided for by Law No. 14,195/21.
March 2022