Doing business in Brazil - Global Risks in Entity Management

1. Jase Choenni
Global Business Development Director
TMF Group
Joe DiLandro
Director of Sales, North America
Computershare Governance Services
June 19 & 26, 2013
Doing Business in Brazil
Global 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 channel
Doing 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 & Comments
Doing Business in Brazil: Global Risks in Entity Management3

4. Speaker Profiles
Jase Choenni, Global Business Development Director, TMF Group
› Based in Sao Paolo, responsible for all sales development in Brazil as well as cross
border 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 German
Joe 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 companies
Doing 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 business
are 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 have
municipalities, which add up to 5,566 -- called Cadastro na
Prefeitura Municipal, this makes Brazil a highly complicated
country for local compliance
› A regular business has to comply with all the 3 stages of the
government 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 cost
workforce depending on the type of business to develop
› 70% of Brazil’s population is Catholic. Religion is an important
concern for Brazilians
› Currency: Brazilian Real (country does not allow bank accounts in
other 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 global
destination in terms of FDI value and
fifth in terms of FDI projects
› Brazil attracted $67 BN in FDI in
2011 and $65.3 BN in 2012
› The number of FDI projects in the
country increased by 39% in 2011 to
a record 507, creating an estimated
161,166 jobs
Why Brazil?
6

7. FDI in Brazil
Doing Business in Brazil: Global Risks in Entity Management7

8. Doing Business in Brazil: Global Risks in Entity Management
World Cup & Olympics Impact
8

9. Business Culture in Brazil
'Custo Brasil' or the 'Brazil Cost'. This term refers to the very real extra costs of
doing business in Brazil — legal and bureaucratic complications, excessive
taxation, inflation etc. Due to this 'Custo Brasil', it is important to work closely with
local 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 enthusiasm
and emphasis rather than as anger or loss of control
› Value verbal communication
› Understand the local business landscape
Doing 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 the
types of company procedures and deadlines for starting a business
› The two most common types of company are:
a) Sociedade Limitada (LTDA)/Limited Liability Company
b) Sociedade Anônima (SA)/Corporation
› The main difference between these two types of society's responsibility for the
company's share capital as at LTDA responsibility of each member is limited to
the amount of their participation (shares), provided that capital is fully paid. In
the SA, the liability of shareholders is always according to value of their shares
› Besides the responsibility of differentiation, the process of opening a LTDA is
relatively fast, inexpensive, and why the vast majority of companies choose to
set up a LTDA
Doing Business in Brazil: Global Risks in Entity Management10

11. Incorporating a Legal Entity in Brazil
1. Preparation of a ―PoA‖ where by the foreign partners empowers a Brazilian
resident to legally represent it before Brazilian authorities
2. Sworn translation and notarization of the ―PoA‖ at a Brazilian Notary’s Office
3. Obtainment of the Federal Taxpayer Identification Number (CNPJ card) of the
foreign partners
4. The preparation of the Articles of Incorporation of the Company and filing it in
the Trade Board
5. Obtainment of the Federal Taxpayer Identification Number (CNPJ card) of the
Brazilian Company
6. Registration with the National Institute of Social Security ―INSS‖
7. Registration with the state authorities for the purpose of collecting the Tax on
Distribution of goods and services ―ICMS‖ and obtainment of the Municipal
Taxpayer Identification for the purposes of collecting the Municipal Tax on
Services ―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 desirable
Doing Business in Brazil: Global Risks in Entity Management12

13. Registration Type Limited Liability Company Corporation
1. Board of Trade or
Civil Registry of Legal
Entities
Estimated Registration
Time: 10 days
1. Survey with the Trade Board to check up on the existence of
entities with the same commercial names.
2. Preparation of the Articles of Incorporation of the Company and
filing
3. Registration of the Minutes Books (of the Partners and
Administrators)
*If Simples, the Articles of Association is registered before the Civil
Registry of Legal Entities * All the amendments of the Brazilian
company must be filed and registered before the competent
authority (Board of Trade or Civil Registry of Legal Entities)
Although the corporations
must register other three
(3) books:
(i) Registered Share
Register Book;
(ii) Share Transfer Book;
And
(iii) Attendance Book
2. Brazilian Public
Notary
Estimated Registration
Time: 30 days
1.Elaboration of a power of attorney which the foreign partners
empowers a Brazilian resident to legally represent it before
Brazilian authorities;
2. Sworn translation and notarization of the POA at a Brazilian
Notary’s Office
3. If the company will have foreign shareholders, it is required to
register Foreigner Company and nominate a Brazilian resident to
legally represent it before Brazilian Authorities
Idem
3. Federal Revenue
Service
Estimated Registration
Time: 15 days
1. Obtainment of the Federal Taxpayer Identification Number (CNPJ
card) of the Brazilian company and the foreign partners;
2. Insert and keep updated the complete qualification of the
Company (name of partners, address, corporate purpose and
capital, name of the administrator(s), etc)
Idem
Doing Business in Brazil: Global Risks in Entity Management
Obligated Registrations
13

14. Registration Type Limited Liability Company Corporation
4. State Authorities
Estimated Registration Time: 10 days
1. Registration with the state authorities for the purpose of
collecting the Tax on Distribution of goods and services ―ICMS‖
2. Insert and keep updated the complete qualification of the
Company (name of partners, address, corporate purpose and
capital, name of the administrator(s), etc)
Idem
5. Employee’s Dismissal Fund
Estimated Registration Time: 10 days
Registration with the Employee’s Dismissal Fund – ―FGTS‖,
Ministry of labor
Idem
6. Municipal Tax Authorities
Estimated Registration Time: 10 days
* The obtainment of the Municipal
Taxpayer Identification depends on
filing the Municipal Real State Tax
(IPTU) of the property the company
is located at before the City Hall
1. Obtainment of the Municipal Taxpayer Identification for the
purposes of collecting the Municipal Tax on Services ―ISS‖;
2. Obtainment of the Municipal operating license; and
3. Obtainment of the inspection certificate issued by the Fire
Department
Idem
7. National Institute of Social Security
Estimated Registration Time: 5 days
Registration with the National Institute of Social Security
―INSS‖
Idem
8. Brazilian Central Bank
Estimated Registration Time: 15 day
*It depends on the remittance of the
capital by the foreign partners
The foreign partners and the Brazilian Company which is
recipient of the foreign investment must obtain a number from
the electronic declaratory registry of direct foreign investment
(RDE-IED)
Idem
Doing Business in Brazil: Global Risks in Entity Management
Obligated Registrations
14

15. Registration Type Limited Liability Company Corporation
9. Clearance Certificates
*To attest the good health of the
Company. Must be kept updated
and 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)
Idem
10. Digital certificate issued by the
Federal Revenue Service (e-CNPJ
or e-CPF)
In order to be authorized by local authorities where the entity is
established to issue the electronic invoices, also to check all the
pending issues related to the company.
Idem
11. Integrated Foreign Trade
System (Siscomex)
(Term - 6 months)
In case the company imports and exports goods Idem
12. Authorization issued by
the Sanitation
Permitted issued by the Health Authorization/Sanitation License Idem
Doing Business in Brazil: Global Risks in Entity Management
Obligated Registrations
15

16. Doing Business in Brazil: Global Risks in Entity Management
Time To Comply
16

17. Doing Business in Brazil: Global Risks in Entity Management
Time To Comply
17

18. Annual Company Compliance
1. Keeping and maintaining the statutory registers and the official minute book
2. Preparing and filing with the local Board of Trade Registry in each appropriate state, the
resolution of the Quota holders approving the annual Financial Statements
Outside the annual scope of service: The annual Foreign Investment registry filing
Companies which are in receipt of foreign investment are required to make an annual update
of their economic-financial data for the base date of December 31 of the previous year, in the
Central 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 Bank
Doing 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 trend
Doing Business in Brazil: Global Risks in Entity Management19

20. Practical Support
How 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 account
Doing Business in Brazil: Global Risks in Entity Management20

21. Subsidiary Governance & Compliance
How 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 Concerns
Formation 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 Brazil
Catherine
A GEMS
approver for
all legal
entities
Reviews the
Formation Request
Approves
or Rejects
the
Request
for the
legal
entity
Adam
A GEMS updater of
data held for
Indian legal
entities
Forms the
legal entity
and
submits
the
Request
How does the organisation Approve Formations?
Doing Business in Brazil: Global Risks in Entity Management23

24. Verifying Data Accuracy: Ongoing Maintenance
How do you ensure Ongoing Compliance?
Doing Business in Brazil: Global Risks in Entity Management24

25. Compliance Module
Do you know the entity
is in Good Standing?
› Is the entity in compliance
with international
jurisdictional rules?
› Have you completed
necessary filings?
› Is the entity in compliance
with the by-laws?
› Does it have a complete
data 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 processes
Audit
Detect
& Edit
Implement
Security
(Risk
Management)
Govern
(Corporate
Governance)
Transparency
Doing Business in Brazil: Global Risks in Entity Management26

27. What Other Information Needs to Be Shared?
GEMS
Global Entity
Management System
Legal
Department
Finance
Department
Compliance
Management
Banking
Department
Auditors
Tax
Department
Investors
Relations
Entity
Management
Trade Marks
Department
Who 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 channel
Doing Business in Brazil: Global Risks in Entity Management28

29. Questions & Comments
Thank you for joining us. What questions do you have?
› Joe DiLandro
Computershare Governance Services
joe.dilandro1@computershare.com
› Jase Choenni
TMF Group
jase.choenni@tmf-group.com
Watch for this webinar on www.youtube.com/computershare
Doing Business in Brazil: Global Risks in Entity Management