Legal Guide for Foreign Investors - Apex-Brasil

228 Pages·2007·0.96 MB·English

Legal Guide
for Foreign Investors
in Brazil
2007 Edition
ISBN 85-98712-71-X
Brazil. Ministry of External Relations. Centro de Estudos das Sociedades
de Advogados (CESA)
Legal Guide for Foreign Investors in Brazil / Ministry of External Relations.
– Brasília : MRE: BrazilTradeNet, 2007.
228p.

1. Investments – Brazil 2, Foreign Investment – Brazil. I. Title

CDU 330.322
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.
Legal Guide for Foreign Investors in Brazil
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
Legal Guide for Foreign Investors in Brazil
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
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Legal Guide for Foreign Investors in Brazil Legal Guide for Foreign Investors in Brazil
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

Legal Guide for Foreign Investors in Brazil Legal Guide for Foreign Investors in Brazil
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

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Legal Guide for Foreign Investors in Brazil Legal Guide for Foreign Investors in Brazil
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
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Legal Guide for Foreign Investors in Brazil Legal Guide for Foreign Investors in Brazil
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
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