Sao Paulo | Rio de Janeiro | Brasília | Curitiba | Porto Alegre | Recife | Belo HorizonteLondon | Lisbon | Shanghai | Beijing | Miami | Buenos Aires | New Delhi | Johannesburg THE BRAZILIAN CORPORATE LAW Presentation prepared for MBA Students of the University of Victoria José Paulo L. Alves Pequeno Partner – M&A Department São Paulo– 11 April 2013
THE BRAZILIAN CORPORATE LAW (i) INCORPORATING A COMPANY IN BRAZIL (ii) JOINT VENTURES (iii) MERGERS AND ACQUISITIONS
(i) INCORPORATING A COMPANY IN BRAZIL Types of Brazilian Companies - limited liability - Partners (Brazilian or foreign) - Sociedade Limitada (LTDA) - Sociedade Anônima (S.A.)
(i) INCORPORATING A COMPANY IN BRAZIL(i).2 Types of Brazilian Companies SOCIEDADE LIMITADA (LTDA) - Articles of Association - Objectives - Capital: - divided into quotas / quotas registered in AoA - no minimum requirement (in general) - Quotaholders: only one class / at least 2 quotaholders - Management: - one or more individuals/partners or non-partners; - resident in Brazil (Brazilian or foreign with permanent visa) - Registered address
(i) INCORPORATING A COMPANY IN BRAZIL(i).2 Types of Brazilian Companies SOCIEDADE ANÔNIMA (S.A.) - By-Laws - Share Capital: - always nominative shares / ordinary or preferred - payment in cash of at least 10 % upon incorporation - Shareholders: at least 2 - Types: - Public: Listed/Stock Exchange Market - Closed: Private offerings of shares
(i) INCORPORATING A COMPANY IN BRAZIL(i).2 Types of Brazilian Companies SOCIEDADE ANÔNIMA (S.A.) - Management: - Board of Directors (“Conselho de Administração”): - optional in closely held S.A.s - at least 3 members /need not to be resident in Brazil - Executive Board (“Diretoria”): - at least 2 executive Directors / resident in Brazil - Shareholders Agreement: transfer of shares, pre-emptive rights, voting rights etc. - specific performance of the obligations - favours S.A.s in Joint Ventures
(i) INCORPORATING A COMPANY IN BRAZIL INCORPORATING PROCEDURES 1 – Partners must obtain federal taxpayer’s number; 2 – AoA or By-Laws filed with Commercial Registry 3 – If NewCo is S.A.: publication of Incorporation Meeting in the press; 4 – Register of NewCo with Federal Revenue Service (CNPJ); 5 – Open Bank Account and pay in Capital; 6 – Register foreign direct investment with Central Bank of Brazil; 7 – Register NewCo with State Tax Authority, if applicable; and 8 – Register NewCo with Municipality. 9 – Additional Registrations and Licenses depending on the business Time Estimate: from 60 to 90 days.
(i) INCORPORATING A COMPANY IN BRAZIL FURTHER REGISTRATIONS Depending of the NewCo’s activities, for example: - SISCOMEX – foreign trade; - SISCOSERV – companies importing or exporting services; - Environmental State Department – mostly for industrial plants; - Local Regulatory Councils – whenever NewCo’s social objectives have special regulation. Example: Regional Council of Engineering and Architecture, Regional Council of Commercial Representatives, Regional Council for Administration Technicians, Sanitary Authority, etc.
(ii) JOINT VENTURESOnly business perspective: there is no need to have Brazilian partners(ii).1 Corporate Joint Ventures - NewCo: LTDA. or S.A.(ii).2 Non-Corporate Joint Ventures - Consortia - Partnerships (“Sociedade em Conta de Participação”)
(ii) JOINT VENTURES(ii).1 Corporate Joint Ventures- Incorporation of a new company (LTDA. or S.A.)- Agreements: - JV’s Formation Agreement (pre-contract) - Shareholders/Quotaholders Agreement - Articles of Association/By-Laws
(ii) JOINT VENTURES(ii).2 Non-Corporate Joint Ventures CONSORTIA- Do not have a legal status separate from their members- Registration with local Commercial Registry- Registration with Federal Revenue Services (CNPJ)- Obligations and liabilities undertaken by each member- One member must be appointed as leader- Registered address in Brazil
(ii) JOINT VENTURES(ii).2 Non-Corporate Joint Ventures PARTNERSHIPS (“Sociedades em Conta de Participação”)- Do not have a legal status separate from their members- Members: at least 2 - Ostensive Member: only one Undertakes obligations Manages the Partnership - Secret Member: investors without managing powers- Partnership Agreement: non-mandatory registry
(iii) MERGERS AND ACQUISITIONS(iii).1 Negotiations(iii).2 Due Diligence Exercise(iii).3 Shares Acquisition Agreement/Merger(iii).4 Antitrust Authorities
(iii) MERGERS AND ACQUISITIONS(iii).2 Due Diligence Exercise - Objective: identify contingencies and liabilities of the Target company - Succession - Perspectives: legal, environmental, tax and accounting etc. - Legal DD: corporate status; licenses (business, special licenses) and certificates; agreements; bank accounts; indebtednesses of partners; Labour status; judicial claims in course (tax, labour, consumers, commercial); Real Estate (property acquisition or lease agreements); Industrial Property (trademarks, patents) and others.
(iii) MERGERS AND ACQUISITIONS(iii).3 Shares Acquisition Agreement/Merger - Acquisition: shares/quotas of Brazilian companies or establishments - Shares/Quotas Purchase Agreement - 100% of target company’s capital or another percentage - If not entirely acquired: Shareholders Agreement - Commercial Establishment Acquisition: assets of a company - Directly or through Brazilian holding company - Merger: if the case, takes place after the acquisition of quotas/shares
(iii) MERGERS AND ACQUISITIONS(iii).4 Antitrust Authorities - CADE: Federal Agency for Competition Control/Antitrust - M&A or other private transactions shall be submitted for CADE’s analysis if one of the parties registers a gross turn-over in Brazil equal or superior to R$ 400 million and the other party a turn-over equal or superior to R$ 30 million in the preceding fiscal year. - Filing before CADE: Prior to completion.
PUBLIC BIDSLegal Framework1 – Federal Law no. 8.666, of 22 June 1993 (as) regulates public bids and contracts with theAdministration. Its dispositions are binding to all governmental entities and agencies whetherfederal, state or municipal.2- Legal Principles (article 3), among others: * isonomy * legality * impersonality * morality * equality * publicity * administrative probity * conformity to bid notice requirements
PUBLIC BIDSLegal Framework3 - Competitive Bidding *In principle foreign companies may also participate, but at its discretion theAdministration may require a joint venture with a Brazilian company. * Untie Criteria - The only legal preference to Brazilian company’s services andproducts will be in case of a tie with the foreign company’s proposal. (article 3, § 2nd). * Transparency – all acts and steps in the administrative biddings must beaccessible to public, except for the contents of the bidders’ proposals until their opening(article 3, § 3rd).
PUBLIC BIDSLegal Framework 4. Bid Types (article 22) * competition – it must be adopted when there is a qualification stage for the bidders to prove they meet the minimum qualification requirements set out in the invitation to bid; * prices assessment – it is a procedure that aims a shorter and quicker bid. A party with interest in participating in future bids apply for its registration with the public authority or agency. If the party’s registration is granted its credibility is presumed and it will be allowed to participate in future bids of this type. * invitation – it is the simplest kind of bid. The Administration invites pre-registered parties to participate in the bid. * exam – it relates to the hiring of technical or artistic independent workers; * auction – it is a type normally used for the sale of public assets, but can also be adopted in purchases.
PUBLIC BIDSLegal Framework 5 – Choosing the type of bid for engineering services • up to R$ 150,000 – invitation • up to R$ 1,500,000 – prices assessment • above R$ 1,500,000 - competition For other services: • up to R$ 80,000 – invitation • up to R$ 650,000 – prices assessment • above R$ 650,000 - competition
PUBLIC BIDSLegal Framework 6 - Qualifying to Bid a) Legal Qualification – documents certifying its existence and good standing, thus, its ability to enter into an agreement with the Administration; b) Technical, Economical and Financial qualification – documents showing its ability to comply with its obligations under the agreement with the Administration; c) Regular Fiscal Status – documents proving that no tax obligations are past due or, if the case, that these will not jeopardize the fulfillment of its obligations under the agreement. The Administration may ask the parties to provide a guaranty to their participation by means of a cash pledge, performance bond, bank guaranty or insurance. This guaranty shall not exceed 1% of the estimated amount of the agreement. Foreign companies must provide the same documents and information in conformance with the Law of its own country.
PUBLIC BIDSLegal Framework 7. Invitation to Bid – Necessary Contents a) the inviting Authority; b) the type of the bid; c) date and place for the interest party to present its documents / proposal; d) date of the opening the interested party’s envelopes; e) the object of the bid; f) terms and conditions for the signing of the agreement; g) penalties for the breach of obligations; h) qualification requirements; i) decision criteria, with clear dispositions and parameters; j) place, time and access codes for long distance communication that will be available for information on the bid or clarification on its terms; k) equivalent conditions between Brazilian and foreign companies in case of international bidding; l) acceptance criteria of global or unit prices, as the case may be; m) indexation criteria; n) payment conditions; o) rules on appeals
PUBLIC BIDSLegal Framework 8. A Standard Procedure of a Competition for the Acquisition of Products or Equipment •Publication of the invitation to bid in the Official Gazette; •30 days for the parties to present two separate envelopes: one containing its documents and another containing its proposal; •Public Session for Opening the Qualification Envelopes and the bidders’ analysis of the each other’s documents; •Decision of the Bidding Committee on the bidders’ qualifications; •Public Session for the opening of the envelopes containing the proposals; •Decision of the Bidding Committee on the winning proposal; •Signing the Agreement.
PUBLIC BIDSLegal Framework 9 - Special Regime of Public Bids related to the Soccer Confederation Cup to be held in 2013, the Soccer World Cup in 2014, the Olympic Games in Rio de Janeiro in 2016 and Airports located within the range of 350 km from the cities hosting the games (Law 12.492 of 4 August 2011) Objective: to provide speed to the Government Procurement for improving the infra- structure for the holding of the forthcoming sports events within the available timeframe. Possible Criteria for Selecting the Winning Bid: • Best Price; • Best Price balanced with Best Technique; • Efficiency (more savings to the Government in the execution of the Agreement) The stage of the presentation of the bidders’ legal, fiscal and technical documents (the so-called Qualification documents) has been transferred to the moment following the announcement of the winner. Only the winner’s documents will be required.
THANK YOU !JOSÉ PAULO L. ALVES PEQUENO +55 (11) 5188.8090 firstname.lastname@example.org www.noronhaadvogados.com.br