Corporation Law

1.Difference of limited liability company and joint-stock company
1.1 Limited liability company
[Also called Corporate Quota Limited liability, these companies have partners who contribute each with its share of the capital, that is, they each have their money invested in the formation of the company. Thus, their responsibility is proportional to the number of shares that each of them has. If the company’s debts, for example, a shareholder with 20% stake in the share capital of the company, will take only from his pocket the proportional value of its stake.]

1.2 Joint-stock company
[Corporations are companies that have their capital divided into shares that can be traded in financial markets. They can be publicly traded, may sell shares to any person or company to generate capital input for the company or privately held, where the stock split is only among the partners / internal shareholders and each will responsible for raising capital.]

2. Limited liability company
2.1 Partners
2.1.1 Number of partners
A minimum of two shareholders is required. The preferred shareholders could be either legal entities or individuals; also both of them could be foreigners.

2.1.2 Rights of partners (Shareholders)
Shareholders liabilities are limited to the total of the company’s capital; the capital announced by the shareholders do not has to be immediately paid up; the by-laws could provide the term that the shareholders shall paid up. It is important to mention that if the shareholders are foreigners they shall grant a power of attorney to their legal representative in Brazil.

2.1.3 General assembly of partners (Shareholders)
[The performance of Shareholders/Quotaholders Annual Meeting are mandatory for all Brazilian Corporations (S/A) and Limited Liability Companies (Ltda), for discussion and approval of financial statements as establish in Brazilian legislation (art. 132 of federal law 6.404/76 and art. 1.078 of the Brazilian Civil Code).
All Brazilian Corporations (S/A) and Limited Liability Companies (Ltda), on the four months following the end of the previous fiscal year (April 30th for most of companies), pursuant to article 132 of federal law 6.404/76 and article 1.078 of the Brazilian Civil Code, shall perform a Shareholders Annual Meeting (AGO) or a Quota holders Meeting (RQ), respectively, for discussion and approval of:
• Management’s report, exam, discuss and vote the company financial statements;
• Approval of the destination of the net profit and distribution of dividends; appointment of directors and the members of the board of auditors, if the case may be.
The AGO and the RQ are mandatory and shall be performed annually, even if there are no directors to be appointed or profit to be distributed.
The publishing obligation of financial statements of Limited Liability Companies with large incomes (grande porte) is subject of legal discussion, administrative and judicial. This type of Limited Liability Company shall evaluate in each case the necessity of publishing of its financial statements.] The place to hold the meeting
According to the Civil Code place is not regulated. Company decides when and where. The convenors and Proxy statement
According to the Civil Code Article 1072 and 1152
-Art. 1,072. The resolutions of the shareholders, complying with the provisions of art. 1010, shall be taken at a meeting or assembly, as provided in the articles of association and must be convened by the directors in the cases provided by law or by contract. The resolution in the assembly is required if the number of shareholders is greater than ten. Dispense up the call formalities set forth art. 1152, when all members attend or if they declare in writing aware of the location, date, time and agenda. The meeting or assembly become dispensable when all partners agree, in writing, on the subject that would be object of them. In the case of section VIII of the preceding article, administrators, there is urgency and with the consent of holders of more than half of the share capital, may require preventive composition.
-Art. 1,152. It is for the responsible registry to ascertain the regularity of certain publications in law, in accordance with the provisions of paragraphs of this article. Unless express exception, the publications ordered this book will be made in the official organ of the Union or the State, as the seat of the entrepreneur or of society, and in a major newspaper. Publications of foreign companies will be made in the official organs of the Union and the State which have subsidiaries, branches or agencies. The announcement calling the shareholders’ meeting will be published three times, at least, should mediate between the date of the first insertion and prior to the meeting, the time limit of eight days for the first notice, and five days, for later. A quorum
Unless approved in writing by all quotaholders, all matters to be decided by the quotaholders must be submitted for approval in a quotaholders’ meeting. The Limitada is required to produce annual accounts2 which must be approved by its quotaholders at an Annual Quotaholders’ Meeting. Minutes of such Annual Meeting, as well as the company’s Articles of Association (and amendments thereto), are required to be publicly filed at the Commercial Registry. Decision-making in the Limitada is generally a simple process, particularly where there are only two quotaholders. Each quota usually entitles the holder to one vote at a quotaholders’ meeting. However, quorum for resolutions in the Limitada is in general higher than a majority vote (i.e., 50% of the voting capital plus one voting quota) and that an equity interest of 75% is really required to ensure control. Method to reach the resolution

Quorum Resolution
Unanimous decision
  • appointment of managers/directors who are not quotaholders (until capital is fully paid up)


3/4 of the capital
  • merger, consolidation, dissolution and termination of liquidation procedures
  • amendments to the Articles of Association, including the appointment of directors/managers in the Articles of Association


2/3 of the capital
  • appointment of directors/managers who are not quotaholders, where the capital has been fully paid up
  • removal of directors/managers who are quotaholders and have been appointed in the Articles of Association; except as otherwise established by the same


More than half of the capital
  • dismissal of directors/managers who are not quotaholders
  • court-relief proceedings
  • appointment of quotaholder directors/managers at a Quotaholders’ Meeting
  • manager/director compensation if not established in the Articles of Association
  • liquidation of the Limitada for an indefinite term


Majority of the capital in attendance
  • appointment and dismissal of liquidators, and approval of their accounts
  • approval of management’s accounts
  • other cases not contemplated by law or in the Articles of Association (if these do not require a higher quorum)


Majority of the remaining quota holders
  • exclusion of quotaholders in default
  • judicial exclusion by gross negligence or supervening default


No opposition by more than one-quarter of the capital assignment of quotas to third parties

Legal representative
[Legal representative does not necessarily have to be a Brazilian and it is not necessary to have a Brazilian partner either. However, if the legal representative is a foreigner he must be resident and domiciled in Brazil with a permanent visa.
The legal representative is held personally liable for damages to the organization, its shareholders and third parties, in cases of improper or illegal actions, conduct and intentions. The company may request compensation for any losses.
Liabilities will arise if he acts against the interests of the company infringing the local legislation or the company’s Articles of Association.
Therefore, it is imperative to take precautionary measures, such as filing statutory documents with the Board of Trade, registering shareholder’s minutes with approvals, filing financial statements with explanatory notes, and meeting all reporting requirements established by law, with approvals from the shareholders, at least on a yearly basis. This will prove that all transactions and activities are in accordance with standard principles and corporate guidelines] .

Number and requirement of administrators
[Administrators may be the own members or people non-members, with duties assessed by the partners. The first case is more common in small limited partnerships, very approaching an individual firm. There is also the possibility to inform the partner in the contract that will be different administrator of the partner, but who actually buys commitments is the controller itself.
If there are several managing partners, the entry of new members is not transmitted this quality without specific permission from the other (art. 1060 and 1072, CC). However, if the social contract does not include provisions on the subject, the administration will be up to all (art. 1013, CC).
To determine if one of the partners as an administrator should be appointed by a majority of the voting capital (art. 1076, II, DC), and there should be provision in the social contract. Its dismissal by the approval of at least two thirds of the voting capital, unless otherwise provided by contract may only be performed.
Given the separation of the corporation in relation to the partner, the limited liability company ultimately answer for the acts of its officers who acted according to the laws for the benefit of society.
It is an administrator’s duty to employ all possible means to well perform their function, managing the company in the interest of its shareholders, always seeking more information and complementation studies, as taught by Fabio Ulha:
“(…) Undoubtedly the administrator expertise, their professionalism, avoid or decrease the number of failures, but not always ideal will be achieved. The law builds on the conduct of the average man and this concept is susceptible to variations in time and space. Today’s world is full of information is not possible to aggregate all the administrator to perform competently his duties should always be to recycling and guide its activities seeking the corporate purpose of the corporate entity. ”
Thus, it remains to set the administrator does not have personal responsibility for the acts that performed at regular acts of its function. Exception to this rule is when the administrator act: a) within his authority, however, act with malice or fault; b) violating the statute or law, in the case here too the strict liability. There must be therefore a breach of a statutory duty by the administrator with the required configuration of a causal link between the unlawful conduct and the result caused.]

[There is no mandatory independent statutory-audit, unless the legal entity qualifies under the “Super Limitada” threshold.

Number and requirement of auditors
Under such concept, local financial statements of the Brazilian entity may be subject to a statutory accounting audit if book value of assets is higher than R$240 million, or gross revenue in excess of R$300 million/year. Such thresholds are based on the Brazilian entity’s previous year’s financial statements applicable to a group of companies under the same controlling parent, and whose combined assets or revenues reach the prescribed threshold.]

2.4.3 Authority of auditors(Same as in joint Stock Companies)

2.5 Other
2.5.1 Regulation of increase or decrease of capital
[The corporate capital can only be increased when it has been fully paid-up by the subscribers.]

2.5.2 Decision of dividend
[If allowed by the Articles of Association, or with the consent of all partners, dividends do not need to be distributed in proportion to the partners’ equity holdings.]

3.Joint-stock company
3.1 Shareholders
3.1.1 Number of shareholders
A minimum number of two shareholders are required and a minimum of 10 percent of the capital must be paid upon its incorporation.

3.1.2 Rights of shareholders
[Shareholders have the following basic rights: (i) participation in the company’s profits; (ii) participation in the distribution of the company’s assets if the company is wound up; (iii) control over the company’s management; (iv) priority in the subscription for shares, participation certificates, convertible debentures and subscription warrants; and (v) withdrawal from the company in the circumstances stipulated by law. Disputes among shareholders or between the shareholders and the company may be resolved by arbitration.]

3.1.3 General meeting of shareholders Types of general meeting of shareholders
There are two kinds of General Meetings:

• Annual General Meeting—which has the purpose of verifying and approving management accounts, examining, discussing and voting on the financial statements, electing managers and members of the fiscal board, allocating net profits for each fiscal year and on the distribution of dividends, and approving monetary adjustments of the corporate capital; and
• Extraordinary General Meeting—which may address all the other matters and may take place at any time during the year.
The publication of the minutes of any shareholders’ meeting and of the annual financial statements is mandatory. The company must keep and maintain corporate books in order to register share transfers, share titles, shareholder meetings, officers and audit council The place to hold the meeting
Decided by Lei da Sociedades por Acoes Article 124.
Art. 124. The call far shall be by notice published for three (3) times, at least containing, besides the location, date and time of the meeting, the agenda, and in the case of amendment to the bylaws, indicating the matter.
The first notice of the general meeting shall be made: (Wording of the Law nº10.303, 2001).The privately held company, with eight (8) days in advance, at least, counted the time of publication of the first notice; not making the meeting will be published new ad, the second call, at least five (5) days; (Included by Law No. 10,303, 2001)
The public company, the period prior to the first call will be fifteen (15) days and the second call eight (8) days. (Included by Law No. 10,303, 2001)
Except for reasons of force majeure, the general meeting will be held in the building where the company has its registered office; when performing in another, the ads indicate, clearly, the place of the meeting that in no case may be held outside the headquarters location.
In private companies, shareholders who represent 5% (five percent) or more of the share capital, shall be convened by telegram or registered letter, dispatched with the notice provided for, since it has so requested in writing to company, indicating the full address and the order term of not more than two (2) fiscal years, and renewable; and its failure will be the right shareholder, the company’s management, compensation for damages.
Regardless of the formalities provided for in this Article, shall be deemed regular general meeting at which all shareholders.
The Securities and Exchange Commission may, in its sole discretion, by a reasoned decision of its Board at the request of any shareholder, and heard the company: (Included by Law No. 10,303, 2001)
increase to thirty (30) days from the date on which the documents relating to matters to be discussed are available to the shareholders, the time limit for publication in advance of the first notice convening the general meeting of a public company, when it has on matters that, due to their complexity, require more time so they can be analysis and consideration by shareholders; (Included by Law No. 10,303, 2001)
suspend for fifteen (15) days, the course of the period prior to the extraordinary general meeting to convene public company in order to understand and analyze the proposals to be submitted to the meeting and, if necessary, inform the company until the end of the suspension period, the reasons why it believes that the resolution proposed at the meeting violates legal or regulatory provisions. (Included by Law No. 10,303, 2001)
The public companies with shares traded on the stock exchange must submit, on the date of publication of the meeting call notice, the stock exchange where its shares are traded over the documents made available to shareholders for approval at the Shareholders’ Meeting general. (Included by Law No. 10,303, 2001) The convenors and Proxy statement
[Those attending a general meeting must prove their shareholder status. Shareholders may be represented by proxy.] The chairperson of meeting of the shareholders
[The decision-making and monitoring bodies of a company are: the Shareholders’ General Meeting; the Board of Directors (Conselho de Administração); the Executive Office (Diretoria); and the Fiscal Board (Conselho Fiscal).] The resolution of general meeting of the shareholders
[Resolutions are passed at general meetings, notice of which is required to be published in the official gazette and in a newspaper of general circulation, respecting the terms prescribed in the Corporation Law and in the bylaws. The notice requirements for the meeting may be waived if all shareholders attend the meeting or declare in writing knowledge of the location, date, time and agenda] Requirements for Resolutions
[At least 50% of the shareholders with voting rights are required for creating preferred shares, creating a new class of shares, changing the rights or preferences of any class of shares, reducing the mandatory dividend, approving any takeover or merger and amending the corporate purpose.] Right of resolutions Right of resolutions of pledge shares and transfer collateral shares
[As a general rule transfers are allowed and are not conditional on any approval as long as the transfer is duly registered in the share transfer book and in the share register. The bylaws or the shareholders’ agreement may provide for certain restrictions.]

Proxy Voting
According to Article 126 from the “Lei das Sociedades por Ações”.

Art. 126. The persons present at the meeting must prove their shareholder status, subject to the following standards:
Holders of registered shares will display if required, legal document of his identity;
Holders of registered shares or in custody pursuant to art. 41, in addition to the identity card, display, or deposited with the company if the statute so requires, a statement issued by the depositary institution. (Writing amended by Law No. 9457, 1997)
Holders of bearer shares will display their certificates or deposit document in accordance with paragraph II;
Holders of registered shares or in custody under Article 41, in addition to the identity card, display, or deposited with the company if the statute so requires, a statement issued by the depositary institution.

Legal representative (Same as in LTDA)

3.3 Management Council (Board of Directors)
3.3.1 What is a management council

[The Board of Directors (Conselho de Administração) acts as an interface between the General Meeting and the Executive Office. It has full authority to establish the economic, corporate and financial policies to be followed by the company, and to supervise the Executive Office activities on a permanent basis.]

3.3.2 Number of members of management council
The Board of Directors must be composed of at least three members.

3.3.3 Election, dismissal and resignation of members of management council
Board members are elected and removed by the General Meeting.

3.3.4 Requirements and period of office of members of management council
[Term of office cannot exceed three years, reelection being permissible, reelection being permissible. If the Board members reside abroad, they must be represented by a person resident in Brazil with powers to receive service of process in any lawsuits filed on the basis of corporate legislation. Board members must be shareholders.]

3.3.5 Rights
[The bylaws establish the number of Board members (at least three), how to replace them, their term of office (which will not exceed three years, with re-election being permitted), and the rules concerning their call, instatement and operation.]

3.3.6 Regulations
The company’s bylaws must also set out the rules for instatement and operation of the Board of Directors and calling of Board meetings

3.4.1 What is a director?
The officers are immediately subordinate to the Board of Directors, and subject to the General Meeting only if there is no Board of Directors. The officers will represent the company in its dealings with third parties.

3.4.2 Number of directors
The Executive Committee will consist of two or more officers

3.4.3 Election, dismissal and resignation of directors
Can be elected and dismissed at any time by the Board of Directors.

3.4.4 Requirements and period of office of directors
[The bylaws will establish the number of officers permitted, the manner of their replacement, their term of office (which will not exceed three years, with re-election being permitted), and the assignments and powers of each officer.]

3.4.5 Rights
[Officers will perform their duties separately, according to their assignments and powers, but in keeping with the other officers, and will not be held liable for any obligations assumed on behalf of the company as routine acts necessary for the company’s management.]

3.4.6 Regulations
According to the bylaws

3.5 Auditor
3.5.1 Rights
The Audit Committee may request that the senior management appoints experts to verify facts that need to be clarified for them to discharge their duties.

3.5.2 Obligation
[This committee will be responsible for supervising the senior managers and providing information in this respect to the General Meeting.
Should the company have independent auditors, the Audit Committee members may request that they provide clarifications or information, or verify specific facts. It occasionally may play an important role in defending the company and its stockholders, when charged with examining the management acts in such a way as to ensure that they perform their legal and corporate duties.
The Audit Committee’s duties can be neither delegated nor attributed to any other body of the Company.

3.5.3 Requirements and period of office of auditors
The Audit Committee may be either permanent or appointed for a specific financial year. Should the Audit Committee not be permanent, it may be instated, at the stockholders’ discretion, at a general meeting.]

3.6.4 Payoff of auditors (Remuneration to Auditors)
According to Article 162 from the “Lei das Sociedades por Ações”.
Art. 162 may be elected only for the council tax individuals resident in the country, graduates in college-level course or who have exercised for a period of 3 (three) years, the position of business administrator or tax advisor. In localities where there are no qualified people in sufficient numbers to carry out his function, it will be up to the judge dismiss the company’s compliance with the requirements established in this article.
They can not be elected to the Supervisory Board in addition to the persons listed in Article paragraphs 147, members of board of directors and employees of the company or of a subsidiary or the same group, and the spouse or relative within the third degree of administrator company.
The remuneration of the supervisory board, in addition to reimbursement, mandatory, of locomotion and accommodation expenses necessary for the performance of duties, is set by the general meeting that elects them, and cannot be lower, for each member in office, ten percent of that average compensation paid to each director, excluding benefits, representation fees and profit sharing.

3.6.1 The type of shares Preference shares
[A company’s capital stock is divided into several kinds of shares, all of which have different advantages, rights or restrictions attaching to them. Shares need not have a par value, and may be represented by certificates. The bylaws of a closely-held company may restrict the circulation of shares, provided that they do not prevent their transfer. Should such restrictions be imposed by means of an amendment to the bylaws, they will only apply to the shares of those holders who have expressly agreed with them. Shares may be paid up by means of contribution of assets, goods, credits, technology transfer or any other assets capable of being appraised in cash. Appraisal of the assets must be carried out by an expert or specialized company, and approved by the shareholders in a general meeting. Common shares in a closely-held company may belong to different classes, depending on certain legal precepts. Shares of the same class confer on their holders equal rights. Each common share carries one vote at the general meetings. Preferred shares in a publicly- or closely-held company may belong to one or more classes, and carry rights and/or privileges that may include the right to elect certain members for the company’s administrative bodies, even if these preferred shares are granted no other voting rights.
Pursuant to law, the company may issue nonvoting preferred shares up to 50% of its total capital stock. Holders of preferred shares may be accorded the following privileges: (a) priority in the distribution of fixed or minimum dividends; (b) priority in capital repayment, at or without a premium; or (c) both advantages, on a cumulative basis. In order to be traded on the securities market, preferred shares without voting rights or with restricted voting rights must confer on their holders at least one of the following privileges: (i) priority in the payment of dividends corresponding to at least 3% of the share net equity value, in addition to the right to participate in the profit distribution on a par with common shares, after these have been ensured dividends equal to the minimum priority dividends; or (ii) the right to dividends, per preferred share, at least 10% higher than those paid to each common share; or (iii) the right to tag these shares along in a public offer for disposal of control, receiving dividends at least equal to those paid to common shares. Should there be preferred shares without voting rights or with restricted voting rights, the advantages and privileges attributed to them must be properly described in the company’s bylaws.
Companies to be privatized may create preferred shares of a special class (known as golden shares), which will be held by the privatizing entity on an exclusive basis. This class of share will be granted the powers set forth in the bylaws, including the power to veto resolutions passed by the general meetings on such matters as the bylaws may specify. The bylaws may also confer on one or more classes of preferred shares the right to elect, by separate voting, one or more members of the company’s administrative bodies, or even condition amendments to the bylaws to approval of the holders of one or more classes of preferred shares in a special meeting. Preferred shares without voting rights or with restricted voting rights will be entitled to vote if the company fails to pay fixed or minimum dividends within the time period set forth in the bylaws (not to exceed three consecutive financial years), retaining such right until actual payment of such dividends.]

3.6.2 Issue of new shares Issue of new shares when company be set up
[The bylaws may contain an authorization permanent Board for capital increase by issuing new shares up to a specified limit, no the approval of a shareholders’ meeting.
Shareholders have a preferential right to subscribe new shares or repurchase shares from other shareholders equal footing. Shareholders may limit the rights preferred share and to impose conditions on transfer of shares as “Tag Along”, “Drag Along” and agreements vote, among several others. This will be done by signing agreements shareholders, which must be kept at the headquarters of the Company.] Capital increase after setting up
[The bylaws (estatuto social) of a joint-stock corporation must state the corporation’s subscribed capital, and may also establish an authorized capital. The authorized capital consists of a limit (in Brazilian currency or number of shares) on which the subscribed capital may be increased by resolution of the board of directors without an amendment to these same bylaws, as opposed to the usual capital increase process which requires an approval by the shareholders’ general meeting.] The regulations of capital decrease
[A reduction of capital is allowed by the amount of accumulated losses, or if the capital considers excessive to achieve the purpose of business.] Treasury stock
Article 30 of the Brazilian law allows the acquisition shares to remain in treasury or for cancellation, if acquired their profits or reserves that are not legal.
If the company was open to the Commission rules should be followed Securities that may make the authorization in each case. These shares are not entitled to dividends or vote.

3.6.3 The issue price of shares
According to Article 13 of the “Lei das Sociedades por Ações”.
Art. 13. issuing shares at a price below their nominal value is forbidden. The violation of this article will import nullity of the act or operation and accountability of offenders, without prejudice to any criminal action if appropriate. The subscriber contribution that exceeds the nominal value constitute a capital reserve (article 182, § 1).

3.6.4 Methods for determining the Dividends
[Corporations incorporated after 2001 may issue nonvoting preferred shares up to 50 percent of the company’s total corporate capital. Nonvoting preferred shares must be issued with the following rights, on a cumulative or noncumulative basis: (i) priority in the distribution of fixed or minimum dividends or (ii) priority in capital repayment (with or without a premium).]

-Guide to Doing Business in Brazil, Mayer Brown, Tauil & Chequer.
-Guide to Doing Business in Brazil, by Pinheiro Neto Abogados for Sao Paolo Chamber of Commerce of the Associacao Comercial de Sao Paolo.
-Doing Business in Brazil, Crowe Horwath.
-COELHO, Fábio Ulhoa. Commercial Law Course. Volume 2 (Company Law). Sao Paulo: Saraiva, 2007, p. 474.