Provisional Measure increases the threshold of foreign equity holding in Brazilian Airline Companies

Today, March 2^nd 2016, Provisional Measure No. 714, of March 1^st 2016, was published and became effective. The main change introduced by this Provisional Measure is the increase, from 20% to 49%, of the authorized voting equity that a foreign company can hold in a Brazilian airline company. The transfer of voting capital to foreign companies is still subject to governmental approval.

The Provisional Measure also brought about a pioneering breakthrough by permitting that the equity held by foreign companies in Brazilian airlines be greater than 49%, provided that there is reciprocity in the treatment of Brazilian companies in the country of origin of the foreign company wishing to hold equity in a Brazilian airline.

It is important to remember that although the Provisional Measure became effective today, the continuity of its existence in the Brazilian legal system depends on the approval by Congress. If such Provisional Measure is rejected by Congress, or is not converted into law within 120 days of its issuance, it will lose its effectiveness as of the day of its issuance. In this case, Congress is encumbered in regulating the legal relationships created during this 120-day period, and, if Congress does not issue such regulation, the legal relationships shall continue to be governed by the extinct Provisional Measure.