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Collection Best Practices: Doing Business in Brazil
"Collection Best Practices: Doing Business in Brazil" educational webinar presented by Octávio Aronis in partnership with BARR Credit Services. About the Presentation: Throughout the webinar you can expect to gain an intelligence on conducting business in Brazil with information emphasizing credit practices. Beyond guidance in credit business, the presentation will cover what to expect when doing legal work in Brazil. BARRCredit.com Partnering with you to provide unmatched account receivable solutions around the globe!
Collection Best Practices: Doing Business in Brazil
- 1. Aronis Advogados Rua AfonsoBraz, 579, 12º andar - conj. 125 04511-011 - Vila Nova Conceição São Paulo - SP – Brasil Tel: 5511 - 3053 3036 octavio@aronisadvogados.com.br www.aronisadvogados.com.br The Best Credit Practices for Doing Business in Brazil By: Octávio Aronis International & Criminal Attorney Hosted by: BARR Credit Services May 15, 2018 Aronis Advogados All Rights Reserved
- 2. Aronis Advogados AllRights Reserved 2 Poll Question 4/17/18 Please choose the option that best describes your current situation: Option a - You are currently selling into Brazil Option b - You are planning to sell into Brazil Option c - You have no current plans to sell into Brazil, but would like to know more about doing business in the country.
- 3. Aronis Advogados AllRights Reserved 3 Credit Reports 4/17/18 • All the major international credit reporting companies are providing their services in Brazil and partner with Brazilian credit reporting companies. • Reports are issued in English. • In addition to the financial data, most important is to confirm if there are pending lawsuits, judgments, or other legal claims against the company. • You can verify the nature of the law suit or other claims through the public registries. • Each Brazilian state has its own registry. The one in São Paulo is www.tjsp.gov.br.
- 4. Aronis Advogados AllRights Reserved 4 Onsite Visits 4/17/18 Onsite visits allow us to: • Speak directly with the owners and executive management and get a feel for their honesty and forthrightness. • Evaluate the internal and external physical condition of the company. • Observe the general atmosphere and activity level of the employees. • Visit the local court and inquire about claims, suits, or judgments against the potential customer. • Visit local trade suppliers that have been previously provided to verify credit limits and payment history. • Psychological benefit can’t be overstated.
- 5. Aronis Advogados AllRights Reserved 5 Owner Background Checks 4/17/18 • You never know what red flags could be lurking in the background of the owners or executive management. • During my career I have come across owners who not only had several bankruptcies and other civil suits in their past, but criminal felonies as well. • In the end, the credit worthiness of any company is ultimately based upon the character of its ownership.
- 6. Aronis Advogados AllRights Reserved 6 Speak with Customer’s Corporate Counsel 4/17/18 • When doing an onsite visit or talking with a creditor’s customer on the phone, I will often ask if I can speak with their corporate counsel. • Talking directly with the customer’s corporate counsel often allows for the free exchange of information and sets the stage for two attorneys representing their clients to work together in an ethical framework. • Should the customer do something that could be interpreted as not in line with the contract, having direct communication to their corporate counsel can often resolve the dispute or issue.
- 7. Aronis Advogados AllRights Reserved 7 Confirm Enforceability of Documents 4/17/18 • I often receive contracts, purchase orders, invoices, and other documentation with terms and conditions that do not comport to the Brazilian civil code. • Even if your contracts are not in Portuguese, as long as the terms and conditions are enforceable, then under a certified translation, you can begin the process of leveraging your legal rights.
- 8. Aronis Advogados AllRights Reserved 8 Confirm Decisions in Writing 4/17/18 • With the increase in the use of televideo conferencing such as Skype, many decisions between parties are made but are not later verified in writing. • Terms and conditions that have been “Verbally Agreed To” have very little standing unless there is subsequent supporting documentation or a transaction history. • Get signatures on all important changes to any contracts and agreements.
- 9. Aronis Advogados AllRights Reserved 9 Never Rest on Your Credit Laurels 4/17/18 • It’s easy to become credit risk complacent when customers pay timely. • However, your Brazilian customer’s financial stability today is not a guarantee as to how they will be tomorrow. Therefore it’s necessary to: o Take out quarterly credit reports o Ask for annual audited financial statements (if this is possible) o Speak with your customer’s banker and o Keep your eyes and ears open through several channels are very important in order to avoid any non-payment surprises.
- 10. Aronis Advogados AllRights Reserved 10 Brazilian Legal System 4/17/18 • Justice system is bureaucratic and slow. Lawsuits can take 3-5 years to reach a final judgment. • According to Conselho Nacional de Justica, in 2012, 70% or 92.2 million of all law suits filed remained unresolved. • Major problem is that the number of new suits is much higher compared to the ones resolved or finalized. • Justice system is working diligently but still not capable to meet the needs of the population. • Number of new lawsuits in 2012 reached 28.2 million, this figure is far in excess of the law suits that were resolved and finalized. • In 2012 every judge handled and pronounced decisions on a total of 1,450 cases, an increase in the handling rate of 1.4% compared to 2011.
- 11. Aronis Advogados AllRights Reserved 11 Courts in Brazil 4/17/18 Federal Courts Ordinary Federal Courts Divided into Criminal and Civil Courts, hear matters specified in the Constitution Specialized Courts • Federal Electoral Courts (administrative, civil and criminal jurisdiction, hear matters concerning elections and political parties) • Federal Labor Courts (hear individual and collective labor disputes) • Federal Military Courts (has jurisdiction over all military crimes) State Courts Sometimes divided into criminal and civil courts, hear matters that are not in the Federal Courts’ jurisdiction (family and minors, bankruptcy and public finance civil matters; criminal courts such as Jury Courts and Police Internal Affaires Courts.
- 12. Aronis Advogados AllRights Reserved 12 Types of Proceedings 4/17/18 Declaratory Action • Most common procedure to validate a credit instrument. Collection Suit • Judicially validated creditors or those with valid extra-judicial document may recoup credit. • New ‘on line attachment’ option facilitates payment. Summary Proceeding • For actions of which the value is under 60 minimum salaries (approx. USD 19,000). Monitory Action • Alternative to declaratory action, only requires written evidence of debt. • No period of limitations for recovery of credit based on documents (generally 10 years). • When the document is old, it may be difficult to recover credit.
- 13. Aronis Advogados AllRights Reserved 13 Documents Accepted 4/17/18 The greater the proof, the higher the chances of success! Basic Documents Necessary • signed contract • bill of lading • invoices • receipts of proper delivery of goods Also accepted • emails • bank statements • Witnesses Other Requirements • all documents translated by a sworn translator • Powers of Attorney must be notarized by the appropriate Brazilian Consulate.
- 14. Aronis Advogados AllRights Reserved 14 Enforcing Contracts in Brazil 4/17/18 • Extra-judicial documents from foreign countries are accepted when instruments are validated. • Documents must be translated by a sworn translator, and the values converted to Reals at an exchange rate accurate on the day of filing. • Settlements can be reached with a signed acknowledgement of debt, providing the debtor acknowledges the value and the terms of payment, and signs promissory note. Current Business Practices in Brazil • Legal costs are generally 1% of the claim’s value • Minimum legal costs charged by courts is approx. USD 50 • Maximum is approx. USD 19,000
- 15. Aronis Advogados AllRights Reserved 15 Arbitration 4/17/18 • Faster than ordinary litigation, it has become a popular means of solving disputes. • Necessary to have a clause that specifies an arbitration procedure in case of dispute. • According to Arbitration Law, arbitration decisions have the same effect as a court judgment. • Foreign arbitration decisions cannot violate Brazilian Law and must be ratified by the Superior Court of Justice.
- 16. Aronis Advogados AllRights Reserved 16 Judicial Recovery Procedure 4/17/18 • New law similar to the USA Chapter 11. • Enables companies to stop paying creditors during a determined period of time. • Companies must present a recovery plan, approved by all the creditors, that stipulates amounts due and payment schedule. • Can sometimes take up to twenty years to approve the plans.
- 17. Aronis Advogados AllRights Reserved 17 The Results of a $1 Million Claim 4/17/18
- 18. Aronis Advogados AllRights Reserved 18 Obrigado! Any Questions? For more information about our services, please feel free to contact me. Aronis Advogados Octávio Aronis, International Attorney International and Criminal Law Rua Afonso Braz, 579, 12º andar - conj. 125 04511-011 - Vila Nova Conceição São Paulo - SP – Brasil Tel: 5511 - 3053 3036 octavio@aronisadvogados.com.br www.aronisadvogados.com.br LinkedIn Discussion Group: The Latin America Legal, Credit and Collection Group 4/17/18