Ensuring Proper Representation of Foreign Partnerships in Brazilian Enterprises.

Valesca Camargos
Nov 16, 2023
6 min read

Updated: Oct 24, 2024

Introduction

In the rapidly globalizing world of business, companies often extend their operations beyond their home country's borders. Brazil, being one of the largest economies in the world, naturally attracts foreign investors and entrepreneurs. However, for a foreign resident wishing to become a partner of a Brazilian company, there are specific legal protocols to be observed. One such protocol is the mandatory appointment of a representative (procurador) within Brazil. This representative acts on behalf of the foreign resident, ensuring adherence to Brazilian regulations and serving as the point of contact for legal matters.

Legal Provision for the Requirement of a Proxy for a Non-Resident Partner

Brazilian corporate law has specific rules regarding non-residents who act as partners in Brazilian companies. One of these rules concerns the representation of these partners through a proxy.

According to Art. 119 of the Brazilian Corporations Law (Law No. 6,404/76), a shareholder resident or domiciled abroad must appoint a representative in Brazil with specific powers to receive summons in lawsuits against him/her based on the provisions of that law.

This legal provision ensures that there is a legal figure within the country capable of representing the interests of the foreign partner, while also ensuring that legal actions can be effectively initiated.

Manner of Granting the Proxy

Foreign entities or individuals desiring to be part of Brazilian businesses should acquaint themselves with the registration mechanisms set by the National Department of Business Registration and Integration (DREI). The DREI governs the specifics for public registration of commercial businesses within the Brazilian Commercial Registry.

DREI's Normative Instruction 81, issued on June 10, 2020, outlines the procedures for granting proxy to a representative in Brazil.

Specifically, Art. 15 of this instruction states that documents from abroad, including powers of attorney, must be authenticated by a Brazilian consular authority in the country of origin. If they are not written in Portuguese, they must be accompanied by a translation made by a public translator registered with any Board of Trade.

Therefore, for partners from countries that are signatories to the Hague Convention, they must grant the power of attorney (public or private) and then submit it to the apostille process in their country. When the document arrives in Brazil, it must be translated by a sworn translator before being included in the company's registration process with the commercial board.

For partners from non-signatory countries, the power of attorney must be prepared at the Brazilian consulate. Many consulates will issue the power of attorney in Portuguese, eliminating the need for a sworn translation in Brazil. However, if this is not the case, a translation will be required when the document arrives in Brazil.

If the partner or representative of the foreign company is passing through Brazil, they can grant the power of attorney directly at a Brazilian notary's office, thus avoiding the apostille, legalisation and sworn translation processes.

This power of attorney must be included when the company is incorporated in Brazil. In other words, a company that has non-resident partners cannot even be opened without the constitution of a representative.

Duration of the Proxy

When addressing the duration of the proxy, there is flexibility according to current Brazilian commercial registration practices. Both fixed-term and indefinite-term proxies are accepted. If the duration is not specified, it is presumed to be of an indefinite term.

Given the significant responsibilities entrusted to the representative, we suggest opting for a fixed-term proxy. This approach ensures periodic reviews and potential updates to the proxy, thus offering an added layer of security and control for the foreign stakeholder.

Powers Conferred to the Proxy

In the context of powers bestowed upon the representative, the Law 6.404/76 mandates that the proxy should at least have the power to receive legal notices in actions against the non-resident shareholder. However, practical necessities demand a broader scope of authority.

The foreign company, when becoming a partner in a Brazilian entity, must register itself in the National Register of Legal Entities (CNPJ). This requirement is laid down in the Normative Instruction 2119/2022 of the Brazilian Federal Revenue Service. The same instruction specifies in its Article 6, §1 that "In the case of an entity domiciled abroad, the representative in the CNPJ must be its attorney or legally constituted representative domiciled in Brazil, with powers to manage the assets and rights of the entity in the country and represent it before the Brazilian Federal Revenue Service."

Hence, the proxy should minimally encompass the following powers:

1. Receiving Legal Notices: The authority to receive legal citations in actions against the non-resident shareholder, as per Law 6.404/76.

2. Administrative Powers: The ability to manage assets and rights of the foreign entity in Brazil.

3. Representation before the Brazilian Federal Revenue Service: The mandate to represent the foreign entity in tax matters before the Brazilian Federal Revenue Service.

By adhering to the specific requirements for proxy documentation, foreign entities can ensure compliance with Brazilian regulations and protect their business interests effectively.

CPF and CNPJ Registration for Foreign Partners

In Brazil, foreign partners, whether individuals or legal entities, must meet certain fiscal requirements to establish a company.

For foreign legal entities, obtaining a National Register of Legal Entities is a must. This process is done online, requiring a copy of the company's bylaws and personal documents of the foreign company's administrator.

Firstly, it's essential to register on the CNDR (Non-Resident Declaratory Register). Once approved by the Central Bank, the information is sent to Brazil's Federal Revenue Service, which will assign a tax number and return it to the Central Bank the next day.

Registering on SISBACEN is crucial to request the tax number on the investor registration, with guidelines available on the Central Bank's website. With the tax number in hand, you can then proceed with registering the company with the Commercial Registry, ensuring the foreign partner's CNPJ is included in the company's bylaws.

For foreign individual partners, a CPF (Individual Taxpayer Registry) is needed. This involves completing a form available on the Federal Revenue Service's website, which, along with personal document copies, should be submitted to the Brazilian consulate in the individual's resident country. The consulate will then process the request, providing the registry. With the tax number acquired, you can request viability at the Commercial Registry, ensuring the foreign partner's CPF is included in the company's bylaws.

For Brazilians living abroad, it is not necessary to go to the Consular Office. The CPF enrolment service is preferably provided by e-mail by the Federal Revenue Service (cpf.residente.exterior@rfb.gov.br).

Non-resident Administrators in Brazil

The Law 14.195/21, known as the Business Environment Law, brought significant changes by allowing non-resident foreigners to be appointed as administrators of companies in Brazil. This initiative aims to simplify and reduce bureaucracy in the business environment, thereby improving Brazil's position in the World Bank's "Doing Business" ranking.

Before this legislation, only foreigners living in Brazil could hold administrative or directorial positions in limited or anonymous societies, requiring a specific visa. The only exception was being part of boards of directors, provided the foreigner had a representative in Brazil.

Law 14.195/21 modified the 2nd paragraph of article 146 of the Corporations Law (Law 6.404/76), enabling any administrator, including directors, to be a non-resident, as long as they have a representative in Brazil with powers to receive summons in corporate actions. This proxy must last for at least three years after the end of their tenure.

There were uncertainties regarding whether this change also applied to limited societies. However, DREI clarified that there's no prohibition against non-resident administrators in limited societies, based on Law 13.455/17 and Regulatory Instruction 81/2020 from DREI.

Therefore, for both corporations and limited societies, a proxy to a representative in Brazil must be provided when a non-resident foreigner is appointed as an administrator.

Conclusion

The legal provisions outlined in this article underscore the comprehensive nature of the regulations governing the involvement of non-resident partners in Brazilian businesses. These rules detail the requirements for proxy representation, fiscal registration, and the appointment of non-resident administrators. By understanding and adhering to these guidelines, foreign entities and individuals can ensure that their participation in Brazilian companies is in compliance with the established legal framework.

POWER OF ATTORNEY EXAMPLES: Click on the files below to download our power of attorney examples for the representation of a foreign partner in a Brazilian company.