Brazil

This web site aims to provide some useful legal information for those persons who are willing to enter into any kind of relationship with the Federal Republic of Brazil – by focusing on some aspects related to international law and to domestic commercial law.
Therefore, this web site is not intended to exhaustively describe international law or domestic commercial law, but simply to focus the attention on the most interesting and practical aspects for those persons who are willing to enter into business relationships with the Country.
This web site has no political content: it is free and open to all persons who intend to give a contribution in the field of civil, commercial and administrative law. For every information, clarification or advice, please contact us at: mail@decapoa.com

About Brazil

Brazil is a federal state consisting of 26 states, in addition to the federal district of Brasilia, the Country's capital. 72% of the population, which is about 155 million people, lives in the urban areas of the Atlantic coast. In 1988 a new Constitution was adopted which, through the effective division of the legislative, executive and judiciary powers, has led to the emergence of a modern democratic system, similar to the Western model. Since 1994, then, Brazil has gone through a powerful economic growth thanks to a series of economic reforms, such as the privatization of some state enterprises and the incentives to investments by foreign companies.
The Federal Government has introduced a series of tax incentives, with the aim to especially support the industrial market, in particular those sectors for which Brazil usually depends mainly on import.
Thanks to the aforementioned interventions, today it is estimated that Brazil has foreign exchange reserves of over 325 billion dollars, of which more than $ 200 billion towards the United States.
The Brazil’s economic basis has also a positive outlook, since the Brazilian economy can count on a stable growth and on a long-term economic policy.
Therefore, Brazil is presented as an extremely attractive economic reality for foreign entrepreneurs. However, before making an investment, the necessary safeguards and precautions should be taken. In fact, for example, the foreign investor is required to provide, in advance, a statement of the investment amount to the relevant Brazilian governmental authorities, because he has to fulfill some currency obligations.
Moreover, it is always advisable that the entrepreneur provides appropriate contractual instruments, in order to define all aspects of the relationship with his local partner.
The law firm de Capoa & Partners, thanks to its ten years of experience on the international level as well as to its close cooperative relations with many local professionals, can offer to the interested entrepreneurs a fast and efficient consultancy which is well aware of the complexity of the legal and economic Brazilian reality.

Contract

Operators wishing to invest in the Brazilian market can take advantage of the benefits that Brazilian law provides for agency and distribution contracts.

Agency

Article 710 of the Brazilian Civil Code defines an agency contract as a contract by which a natural or legal entity is obliged, upon remuneration (retribuiçao), to regularly carry out particular business in a specific area, in favor and on behalf a third party, with no hierarchical subordination. Brazilian law provides that the agency agreement must necessarily be in writing; it is also advisable that the entrepreneur authenticates the signatures at the local conservatorship. In fact, although this fulfilment is not necessary for the effectiveness of the contract, by doing so the foreign investor - with little expense - precludes any possible future action for the disavowal of signatures. The law provides that the activity of the commercial agent can be entrusted to both natural and legal persons, whether they are Brazilian or foreign. Despite this possibility, it is obvious that it is appropriate to appoint a Brazilian agent, given the interpersonal nature of the activity, as well as the greater mastery of the language and of business practices that a native has. In addition to the written form, the agency contract must contain the following elements: - duration of the contract; - Indication of the activity area; - Exclusivity pact (if any); - The existence of guarantees (if any); - The agent's remuneration. It should be also pointed out that the so-called “del credere” clause (for which the agent only perceives the commission in the event that the buyer has actually paid the entrepreneur for the goods) is not considered eligible by the Brazilian law. In the event of termination of the contract with the principal, the Brazilian law provides for the right to indemnity for the agent.
If the agency contract terminates without just cause, the indemnity shall not be less than the amount equivalent to 8.3% of the total commissions accrued by the agent.

Distribution

The franchising contract, also called Franquia contract, became common in the Brazilian market. Preliminarily, it should be underlined that the franchising agreement in Brazil is regulated by Law no. 8955/94, that is why the entrepreneur who decides to invest in Brazil through the Franchising contract is sure to be protected by explicit legal provisions. According to the above-mentioned law, the franchising contract is defined as the instrument by which "the franchisee gives to the franchisor the right to use his own trademark or sign for commercial purposes, combined with the exclusive or semi-exclusive right of distribution of products and services and, if any, also the right to use his plant technologies and the administration of the store or of the operational system created or held by the franchisor, in exchange for direct or indirect remuneration, without clerical constraints ".
However, as in most countries of the world, before concluding a franchising contract, the franchisor will necessarily have to submit a pre-contract proposal to the franchisee containing all the necessary information, in order for the latter to have full knowledge of the business method used in the past and currently promoted by the franchisor. In this sense, the franchisor must provide the franchisee with, among others, the following information: - The history and the legal form of the company; - its financial statements; - Any pending lawsuits connected to the existing franchising contracts; - A complete description of the activity the franchisor wants to carry out; - Etc.
In drafting the franchising contract, it is recommended to always specify the amount of the royalties, the definition of the territory in which the franchisor can operate, as well as the reasons for termination. Moreover the entrepreneur should register the franchising contract at the Instituto Nacional da Propriedade Industrial (INPI), so that a greater protection is ensured, also with regard to third parties.
In addition, it should be emphasized that, in order to invest by means of franchising, a minimum investment of USD 50,000.00 is required, and it has to be legally declared at the Central Bank of Brazil (BACEN).

Franchising

The franchising contract, also called Franquia contract, became common in the Brazilian market. Preliminarily, it should be underlined that the franchising agreement in Brazil is regulated by Law no. 8955/94, that is why the entrepreneur who decides to invest in Brazil through the Franchising contract is sure to be protected by explicit legal provisions. According to the above-mentioned law, the franchising contract is defined as the instrument by which "the franchisee gives to the franchisor the right to use his own trademark or sign for commercial purposes, combined with the exclusive or semi-exclusive right of distribution of products and services and, if any, also the right to use his plant technologies and the administration of the store or of the operational system created or held by the franchisor, in exchange for direct or indirect remuneration, without clerical constraints ".
However, as in most countries of the world, before concluding a franchising contract, the franchisor will necessarily have to submit a pre-contract proposal to the franchisee containing all the necessary information, in order for the latter to have full knowledge of the business method used in the past and currently promoted by the franchisor. In this sense, the franchisor must provide the franchisee with, among others, the following information: - The history and the legal form of the company; - its financial statements; - Any pending lawsuits connected to the existing franchising contracts; - A complete description of the activity the franchisor wants to carry out; - Etc.
In drafting the franchising contract, it is recommended to always specify the amount of the royalties, the definition of the territory in which the franchisor can operate, as well as the reasons for termination. Moreover the entrepreneur should register the franchising contract at the Instituto Nacional da Propriedade Industrial (INPI), so that a greater protection is ensured, also with regard to third parties.
In addition, it should be emphasized that, in order to invest by means of franchising, a minimum investment of USD 50,000.00 is required, and it has to be legally declared at the Central Bank of Brazil (BACEN).

Costitution of a company in Brazil

Incorporating a new company in Brazil is simple and fast. The body responsible for the procedure is the "Junta Comercial", a government authority present in every state capital.
Of course it is advisable that before opening a company in the country, the entrepreneur makes use of the specialized advice of a lawyer, which allows him to make a more aware choice with regard to the form of the company and especially to the more advantageous tax system to be adopted.
It should be remembered that in Brazil the skilled labor supply is still poor, since the country does not have enough skilled professionals. Therefore it is advisable that the entrepreneur addresses to specific specialized agencies for the recruitment of skilled workers.

Disclaimer

Please note the following:
This web site and the information contained hereto have been developed and provided by de Capoa Law Firm for informational purposes only.
This web site is not intended to be, and is not a substitute for, legal advice. Please do not rely on any information in these pages as a source of legal advice.
This web site includes links to sites which have not been prepared by de Capoa Law Firm. These links are offered to you as a courtesy. De Capoa Law Firm has no association with them, and their inclusion does not imply endorsement or approval. De Capoa Law Firm is not responsible for the contents of any linked site or any link contained in a linked site.
This web site is not intended to be advertising. De Capoa Law Firm does not wish to represent anyone seeking representation based upon a review of this web site in any place where it does not comply with all laws and ethical rules.
No attorney-client relationship is created between you and de Capoa Law Firm by your use of this web site.

Studio Legale de Capoa & Partners - Via Massimo D'Arzeglio, 58 40123 Bologna - P.IVA 03339051207

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