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Doing business in Brazil

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Doing business in Brazil - Global Risks in Entity Management

Doing business in Brazil - Global Risks in Entity Management

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  • Extra bullets: Brazil has a large territory of 8,514.877 KM2 and a population of 191 million of citizens (average 2012) Main language in Brazil is Portuguese. English and Spanish speakers are not common, speaking The climate of Brazil comprises a wide range of weather conditions across a large area and varied topography, but most of the country is tropical
  • Currently Brazil is the sixth biggest economy in the world and the largest in Latin AmericaIt is the largest consumption market in South AmericaDuring the past 10 year Brazil has developed a growing middle class that consumes a large variety of services and products, current GDP (PPP) per capita is $10,200, putting Brazil in the 64th position according to World Bank data.
  • Brazil has a mixed economy with abundant natural resources. Brazilian exports are booming, creating a new generation of tycoons. Major export products include aircraft, electrical equipment, automobiles, ethanol, textiles, footwear, iron ore, steel, coffee, orange juice, soybeans and corned beef. The country has been expanding its presence in international financial and commodities markets.
  • Anybody wishing to do business with Brazil and the Brazilians should be aware of the various cultural andstructural barriers which might confront them. Probably the most pervasive barrier encountered wouldbe the 'Custo Basil' or the 'Brazil Cost'. This term refers to the very real extra costs of doing business inBrazil — legal and bureaucratic complications, excessive taxation, inflation etc.Due to this 'CustoBrasil', it is important to work closely with local corporate compliance office.So, as with many countries, the opportunities are there and they are real but it is essential to understandthe local business landscape if you are to reap the rewards - regardless of whether your sector is bankingand finance, computing or pharmaceuticals, local knowledge is vital.Relationships come first, second and third in Brazil. Time spent working on the development of long-termfriendly relations is never a waste of resource.It is always a good idea to stress long-term commitment to Brazil and your Brazilian contacts. Try to keepin touch between contracts or projects. Your relationship with your Brazilian counterparts is not purelytransactional. It is personal as well.Although first meetings can be more formal. They are generally quite informal and relaxed. Punctuality isa variable commodity in Brazil. Meetings often start and finish late. It can be difficult to schedule morethan one or two meetings per day.Great emphasis is placed on the value of verbal communication. The things that people say are oftengiven greater weight than anything in a written format. Don't simply rely on emails to give information.Follow things up with a phone call or a meeting to discuss the matter. The use of emotion incommunication should be seen as a sign of enthusiasm and emphasis rather than as anger or loss ofcontrol. Brazilians use a great deal of body language, stand at relatively close proximity and have stronglevels of eye contact. Try to become comfortable with these - don't act in a reserved fashion.
  • Doing Business in Brazil requires opening a local legal entity. Registered entities need to follow Federal,State and Municipal Registers for operations and invoicingFor opening a Brazilian Company, foreign companies or person actins as shareholders or quota holdersmust appoint an attorney, who must be resident and domiciled in Brazil with local CPF Registration (moredetails about CPF below) and if abroad, they also have to register with the National Registry of Foreigners- RNE permanent. The company must also appoint at least one person (who meets the same conditions)to act as director / administrator of a company in Brazil.It is important to perform a name search with the Government authorities (State Board of Trade) wherethe company will be incorporated to verify the name can be used. It is noteworthy that in Brazil, thename of the company should compulsorily contain your main activity in the countryWith the approval of the name, the company should prepare its Articles of Incorporation or By-Lawscalled Social Contract (Contrato Social), which shall be signed by the partners and / or attorney / offoreign partners and file with the State Board of Trade where the company will be headquartered.
  • Transcript

    • 1. Jase ChoenniGlobal Business Development DirectorTMF GroupJoe DiLandroDirector of Sales, North AmericaComputershare Governance ServicesJune 19 & 26, 2013Doing Business in BrazilGlobal Risks in Entity Management
    • 2. Webinar Series: China, India & Brazil› Doing Business in Brazil, June 19 @ 1 pm EDT› Doing Business in Brazil, June 26 @ 1 pm GMT› Register at cgs.computershare.com› Doing Business in China & Doing Business in India webinars› Now on Computershare YouTube channelDoing Business in Brazil: Global Risks in Entity Management2
    • 3. Today’s Agenda› Welcome to Doing Business in China, India & Brazil webinars› Register at cgs.computershare.com› Why Brazil?› Business Culture in Brazil› Company Set-up, Compliance & Incorporating in Brazil› Obligated Registrations› Practical Realities› Managing Compliance Concerns› Questions & CommentsDoing Business in Brazil: Global Risks in Entity Management3
    • 4. Speaker ProfilesJase Choenni, Global Business Development Director, TMF Group› Based in Sao Paolo, responsible for all sales development in Brazil as well as crossborder relationships globally› Has been with TMF Group for just over a year› Previously at multinational companies including Procter & Gamble, ING, TNT, L’Oreal› Speaks Portuguese, Spanish, English, Dutch, French and GermanJoe DiLandro, Director of Sales, CGS, North America› Leads team responsible for marketing of compliance suite of governance products:global entity management, corporate board portals, and SEC filings software› Governance engagements at hundreds of Fortune 1000 companiesDoing Business in Brazil: Global Risks in Entity Management4
    • 5. Brazil: Country Overview› Brazil is a Federal Republic with 26 states› Country capital is Brasilia, but the main cities for doing businessare Sao Paulo and Rio de Janeiro› Brazil is a Civil Law country› The federal government is divided into 3 powers: Executive,Legislative and Judicial, as well as the 26 States. States also havemunicipalities, which add up to 5,566 -- called Cadastro naPrefeitura Municipal, this makes Brazil a highly complicatedcountry for local compliance› A regular business has to comply with all the 3 stages of thegovernment administration and other national country agencies› Portuguese is essential for the local compliance filings› Brazil has a mixture of highly educated work force and low costworkforce depending on the type of business to develop› 70% of Brazil’s population is Catholic. Religion is an importantconcern for Brazilians› Currency: Brazilian Real (country does not allow bank accounts inother currency)Doing Business in Brazil: Global Risks in Entity Management5
    • 6. Doing Business in Brazil: Global Risks in Entity Management› Brazil is the second largest globaldestination in terms of FDI value andfifth in terms of FDI projects› Brazil attracted $67 BN in FDI in2011 and $65.3 BN in 2012› The number of FDI projects in thecountry increased by 39% in 2011 toa record 507, creating an estimated161,166 jobsWhy Brazil?6
    • 7. FDI in BrazilDoing Business in Brazil: Global Risks in Entity Management7
    • 8. Doing Business in Brazil: Global Risks in Entity ManagementWorld Cup & Olympics Impact8
    • 9. Business Culture in BrazilCusto Brasil or the Brazil Cost. This term refers to the very real extra costs ofdoing business in Brazil — legal and bureaucratic complications, excessivetaxation, inflation etc. Due to this Custo Brasil, it is important to work closely withlocal corporate compliance office.Key things to remember:› Punctuality is a variable commodity in Brazil› Relationships come first, second and third in Brazil› Stress long-term commitment to Brazil and your Brazilian contacts› The use of emotion in communication should be seen as a sign of enthusiasmand emphasis rather than as anger or loss of control› Value verbal communication› Understand the local business landscapeDoing Business in Brazil: Global Risks in Entity Management9
    • 10. Company Set-up and Compliance› Establishing a company in Brazil has a very broad legislation regarding thetypes of company procedures and deadlines for starting a business› The two most common types of company are:a) Sociedade Limitada (LTDA)/Limited Liability Companyb) Sociedade Anônima (SA)/Corporation› The main difference between these two types of societys responsibility for thecompanys share capital as at LTDA responsibility of each member is limited tothe amount of their participation (shares), provided that capital is fully paid. Inthe SA, the liability of shareholders is always according to value of their shares› Besides the responsibility of differentiation, the process of opening a LTDA isrelatively fast, inexpensive, and why the vast majority of companies choose toset up a LTDADoing Business in Brazil: Global Risks in Entity Management10
    • 11. Incorporating a Legal Entity in Brazil1. Preparation of a ―PoA‖ where by the foreign partners empowers a Brazilianresident to legally represent it before Brazilian authorities2. Sworn translation and notarization of the ―PoA‖ at a Brazilian Notary’s Office3. Obtainment of the Federal Taxpayer Identification Number (CNPJ card) of theforeign partners4. The preparation of the Articles of Incorporation of the Company and filing it inthe Trade Board5. Obtainment of the Federal Taxpayer Identification Number (CNPJ card) of theBrazilian Company6. Registration with the National Institute of Social Security ―INSS‖7. Registration with the state authorities for the purpose of collecting the Tax onDistribution of goods and services ―ICMS‖ and obtainment of the MunicipalTaxpayer Identification for the purposes of collecting the Municipal Tax onServices ―ISS‖Doing Business in Brazil: Global Risks in Entity Management11
    • 12. Legal Representation in Brazil› Highly sensitive role› Obligated to have a local director› Obligated to have a person sign on behalf of the foreign shareholders(Board of Trade and Federal Council)› Must be permanent resident› High responsibility and liability› Huge increase in outsourcing› Experience in signing is essential to ensure compliance› Rotation, bilingual and law context desirableDoing Business in Brazil: Global Risks in Entity Management12
    • 13. Registration Type Limited Liability Company Corporation1. Board of Trade orCivil Registry of LegalEntitiesEstimated RegistrationTime: 10 days1. Survey with the Trade Board to check up on the existence ofentities with the same commercial names.2. Preparation of the Articles of Incorporation of the Company andfiling3. Registration of the Minutes Books (of the Partners andAdministrators)*If Simples, the Articles of Association is registered before the CivilRegistry of Legal Entities * All the amendments of the Braziliancompany must be filed and registered before the competentauthority (Board of Trade or Civil Registry of Legal Entities)Although the corporationsmust register other three(3) books:(i) Registered ShareRegister Book;(ii) Share Transfer Book;And(iii) Attendance Book2. Brazilian PublicNotaryEstimated RegistrationTime: 30 days1.Elaboration of a power of attorney which the foreign partnersempowers a Brazilian resident to legally represent it beforeBrazilian authorities;2. Sworn translation and notarization of the POA at a BrazilianNotary’s Office3. If the company will have foreign shareholders, it is required toregister Foreigner Company and nominate a Brazilian resident tolegally represent it before Brazilian AuthoritiesIdem3. Federal RevenueServiceEstimated RegistrationTime: 15 days1. Obtainment of the Federal Taxpayer Identification Number (CNPJcard) of the Brazilian company and the foreign partners;2. Insert and keep updated the complete qualification of theCompany (name of partners, address, corporate purpose andcapital, name of the administrator(s), etc)IdemDoing Business in Brazil: Global Risks in Entity ManagementObligated Registrations13
    • 14. Registration Type Limited Liability Company Corporation4. State AuthoritiesEstimated Registration Time: 10 days1. Registration with the state authorities for the purpose ofcollecting the Tax on Distribution of goods and services ―ICMS‖2. Insert and keep updated the complete qualification of theCompany (name of partners, address, corporate purpose andcapital, name of the administrator(s), etc)Idem5. Employee’s Dismissal FundEstimated Registration Time: 10 daysRegistration with the Employee’s Dismissal Fund – ―FGTS‖,Ministry of laborIdem6. Municipal Tax AuthoritiesEstimated Registration Time: 10 days* The obtainment of the MunicipalTaxpayer Identification depends onfiling the Municipal Real State Tax(IPTU) of the property the companyis located at before the City Hall1. Obtainment of the Municipal Taxpayer Identification for thepurposes of collecting the Municipal Tax on Services ―ISS‖;2. Obtainment of the Municipal operating license; and3. Obtainment of the inspection certificate issued by the FireDepartmentIdem7. National Institute of Social SecurityEstimated Registration Time: 5 daysRegistration with the National Institute of Social Security―INSS‖Idem8. Brazilian Central BankEstimated Registration Time: 15 day*It depends on the remittance of thecapital by the foreign partnersThe foreign partners and the Brazilian Company which isrecipient of the foreign investment must obtain a number fromthe electronic declaratory registry of direct foreign investment(RDE-IED)IdemDoing Business in Brazil: Global Risks in Entity ManagementObligated Registrations14
    • 15. Registration Type Limited Liability Company Corporation9. Clearance Certificates*To attest the good health of theCompany. Must be kept updatedand issued from time to time• Overdue Federal Liabilities Certificate;• Government Severance Indemnity Fund (FGTS);• Clearance issued by the National Institute of Social Security(INSS);• Certificate from Tax and Civil Distributor;• Certificate issued by the Labor Court;• Civil Distributor Certificate of Bankruptcy;• Certificate issued by Protest Officers (among others)Idem10. Digital certificate issued by theFederal Revenue Service (e-CNPJor e-CPF)In order to be authorized by local authorities where the entity isestablished to issue the electronic invoices, also to check all thepending issues related to the company.Idem11. Integrated Foreign TradeSystem (Siscomex)(Term - 6 months)In case the company imports and exports goods Idem12. Authorization issued bythe SanitationPermitted issued by the Health Authorization/Sanitation License IdemDoing Business in Brazil: Global Risks in Entity ManagementObligated Registrations15
    • 16. Doing Business in Brazil: Global Risks in Entity ManagementTime To Comply16
    • 17. Doing Business in Brazil: Global Risks in Entity ManagementTime To Comply17
    • 18. Annual Company Compliance1. Keeping and maintaining the statutory registers and the official minute book2. Preparing and filing with the local Board of Trade Registry in each appropriate state, theresolution of the Quota holders approving the annual Financial StatementsOutside the annual scope of service: The annual Foreign Investment registry filingCompanies which are in receipt of foreign investment are required to make an annual updateof their economic-financial data for the base date of December 31 of the previous year, in theCentral Bank of Brazil Information System (SISBACEN).To be update corporate changes:› The registrations with the Employee’s Dismissal Fund (―FGTS‖),› the obtainment of the Federal, State and Municipal Taxpayer Identification,› the registration with the National Institute of Social Security (―INSS‖)› the registration with the Brazilian Central BankDoing Business in Brazil: Global Risks in Entity Management18
    • 19. Some Practical Realities› Van der Lande industries won 2 bids to handle luggage at key airports› Ossa Spain won bid to build tunnels for Brazilian government› Qelp won LATAM contract with Telefonica coordinated from Brazil› Polycom totally professionalized their streams in Brazil› Many smaller set up of companies testing the market› Outsourcing payroll of the employees new trendDoing Business in Brazil: Global Risks in Entity Management19
    • 20. Practical SupportHow TMF could help you in Brazil:› Incorporating a company› Legal representation (both local director and shareholder signing)› Accounting, Reporting & Tax Compliance› Payroll & Benefits› Statutory Registers› Opening a bank accountDoing Business in Brazil: Global Risks in Entity Management20
    • 21. Subsidiary Governance & ComplianceHow do you manage the Compliance Risks?› Is there professional firm assigned?› Are local rules being followed?› Entity setup in accordance with founding documents?› Are filings being managed?› When have entities been reviewed?Doing Business in Brazil: Global Risks in Entity Management21
    • 22. Risks & Concerns: How Are They Managed?Compliance Risk ConcernsFormation Is there a formal workflow approval process?Organisational Notification Who else needs to know?Board Details/Formation Who needs to understand this?Jurisdictional Rules Does the organisation understand what is required?Necessary Filings Are there penalties, requirements to consider?Registered Capital How is this managed?Intellectual Property Protection How do you confirm these are protected?Ongoing Maintenance Can you verify entity information is accurate?Doing Business in Brazil: Global Risks in Entity Management22
    • 23. Approval Process In BrazilCatherineA GEMSapprover forall legalentitiesReviews theFormation RequestApprovesor RejectstheRequestfor thelegalentityAdamA GEMS updater ofdata held forIndian legalentitiesForms thelegal entityandsubmitstheRequestHow does the organisation Approve Formations?Doing Business in Brazil: Global Risks in Entity Management23
    • 24. Verifying Data Accuracy: Ongoing MaintenanceHow do you ensure Ongoing Compliance?Doing Business in Brazil: Global Risks in Entity Management24
    • 25. Compliance ModuleDo you know the entityis in Good Standing?› Is the entity in compliancewith internationaljurisdictional rules?› Have you completednecessary filings?› Is the entity in compliancewith the by-laws?› Does it have a completedata record?Doing Business in Brazil: Global Risks in Entity Management25
    • 26. Benefits of a Compliance Dashboard› Continious audits using self-defined parameters› Conduct validity checks› Compliance monitoring› Detect and resolve issues in time› Integrated Notification Manager & Task-Manager› Enforce compliance standards› Flexible user screens, report-wizards,integration of business processesAuditDetect& EditImplementSecurity(RiskManagement)Govern(CorporateGovernance)TransparencyDoing Business in Brazil: Global Risks in Entity Management26
    • 27. What Other Information Needs to Be Shared?GEMSGlobal EntityManagement SystemLegalDepartmentFinanceDepartmentComplianceManagementBankingDepartmentAuditorsTaxDepartmentInvestorsRelationsEntityManagementTrade MarksDepartmentWho needs current information within a company?Doing Business in Brazil: Global Risks in Entity Management27
    • 28. Webinar Series: China, India & Brazil› Doing Business in Brazil, June 26 @ 1 pm GMT› Register at cgs.computershare.com› Doing Business in China & Doing Business in India webinars› Now on Computershare YouTube channelDoing Business in Brazil: Global Risks in Entity Management28
    • 29. Questions & CommentsThank you for joining us. What questions do you have?› Joe DiLandroComputershare Governance Servicesjoe.dilandro1@computershare.com› Jase ChoenniTMF Groupjase.choenni@tmf-group.comWatch for this webinar on www.youtube.com/computershareDoing Business in Brazil: Global Risks in Entity Management