Articles 22/03/2018

BRAZILIAN LIMITED COMPANY – Brief Overview for the Foreign Investor

Author: Norberto Pasquatti

The Brazilian limited liability company is similar to the limited liability companies found in the French, German, and Italian legislations. Limited Companies are treated as corporations for all legal and for most tax purposes in Brazil, with distribution of profits to local or foreign quotaholders being tax-exempt.  Once the company is formed, with its corporate tax number, it can acquire property (tangible or intangible) and open bank accounts and hire employees.

The “Contrato Social

The Brazilian limited company is formed by two or more  individuals or two other existing companies, or any combination thereof (“quotaholders”), who form the limited company by executing a “Contrato Social”, i.e., the Articles of Association (or Articles of Organization, as sometimes it is freely translated into English). The Contrato Social is comparable to a combined Articles of Organization and the Operation Agreement, as these documents are known in US corporate practice. To be valid, the Contrato Social must be registered at the competent registry, as further described below.

Except for a few sectors of the economy, such as nuclear energy, broadcasting, newspaper, airline, mining along Brazil’s international borders, there are no restrictions on foreign enterprise ownership.

One of the required main provisions of the Articles is the registered capital committed to the company. The capital is represented by quotas, subscribed by at least two members There is no minimum capital and the quotas (units into which the capital is divided) are not represented by certificates. Rather, as mentioned, they are stipulated in the Articles, in a clause where it is shown how many quotas are subscribed by each member. In principle, all quotas have voting rights proportionate to their value, unless preferred non-voting quotas are adopted (as mentioned below).

Preferred Quotas Treasury Quotas and Board of Directors

Since last year, regulations were issued allowing limited companies to adopt preferred quotas and treasury quotas, similar to preferred shares and treasury shares, a traditional feature of Companies by Shares (i.e. regular stock corporations). Also expressly allowed by those new regulations is the possibility of having a Board of Directors. These novelties certainly result in an expansion of the use of limited companies as a vehicle for larger investments, especially where a joint venture or to facilitate the investments by a venture company. The permissibility of treasury quotas may also facilitate certain transfers between quotaholders, with withdrawals or purchase of quotas by the limited company itself, and existence of put or call options.

Funding by Loans

The funds to operate the company may be supplied also in the form of loans within certain limits, to comply with thin capitalization rules.


Business companies in general (service, commercial or industrial companies) have their articles of organization and amendments registered at the “Junta Comercial”, a State Registry of Companies.  Similarly, service Companies are also registered in the “Junta Comercial”. By contrast small, personal service companies (now called “sociedades simples” (simple companies), which are registered at a Notarial Office of Legal Entities (“Registro Civil de Pessoas Jurídicas”). The “sociedade simples” is generally designed for consulting services, or professional, scientific, or artistic activities, not normally associated with the idea of a typical enterprise.

Once signed, the articles must be submitted for registration within 30 days.

The new company must also be registered at the Federal Revenue Department [RFB, in its Brazilian acronym], to obtain its corporate taxpayer number [CNPJ], and local and state tax departments, before it is able to hire employees, operate and issue invoices.

Company Name

The name of the company must contain some indication of what type of business in which the company is involved.


Besides the capital and a clear purposes clause, the Articles must clearly indicate at least one of the members or a non member (always an individual, residing in Brazil) to be the Legal Representative (“Administrador”) of the company. As mentioned above, the regulations now expressly allow for the possibility of adopting a Board of Directors.

Manager’s  authority and Liability

The manager represents the company in and out of court but is not responsible for the obligations assumed under the company´s name, unless he acts against the law, or outside his scope of authority, as prescribed in the articles of organization. Generally, if the company does not pay taxes and social security obligations when due, or violate important environmental regulations, the Government will seek to impose personal liability also on the managers.

Manager’s Dismissal or Resignation

Subject to any private agreement among the members and a manager, the latter may be dismissed at any time, at the discretion of the members.  Conversely, the manager himself may file his resignation at the Company Registry and have it published, to protect his liability. Obviously, if he was the only manager, the members must immediately appoint a substitute, by way of an Amendment to the Articles or minutes of quotaholders´meeting.

Duration of the Company

The duration of the limited company may be for a fixed term or for an indefinite period of time (which is the usual practice).

Members’ Liability

The liability of the members is limited to the subscription of the respective quotas. However, while the registered capital is not yet paid up, all members are JOINTLY liable for such un-paid capital upon the liquidation or bankruptcy of the company. Once the capital has been fully paid in, the liability of the members is limited to the amount of the capital allocated to each member.


Since the quotas are stipulated in the Articles, this means that each time there is a capital increase or change, the articles must be amended through an Amendment Instrument filed with the Registry of Companies. In addition, an amendment is required when there is any transfer of quotas either among the current members, or by a member to a third party. A member may assign the quotas to another member, without need for prior approval of the other members, unless otherwise stipulated in the Articles. Other members representing at least ¼ of the registered capital may veto assignment to third parties.

Power of Attorney

For the formation of the limited company, the foreign or non-resident investor must appoint a representative who must be a person residing in Brazil. This is done by means of a power of attorney, which must be notarized and apostilled before being sent to Brazil, for official translation to Portuguese.

Representation Of Members by Proxy

At the meetings, the members may be represented by proxy issued to another member or an attorney-at-law. The Law requires that the members hold at least an annual meeting to approve the year-end financial statements, but there is no need for publication, except for limited companies classified as large companies, as defined by law.

Required Registration at The Brazilian Federal Revenue Dept. and Central Bank

Pursuant to the current tax regulations, foreign individuals holding certain kinds of assets in Brazil, among which quotas or shares in Brazilian companies, must be registered at the Federal Revenue Department (RFB) of the Brazilian Ministry of Treasury (“Ministério da Fazenda”).

In addition, the local subsidiary must register at the Central Bank of Brazil all funds remitted as capital or loans, in order to permit future remittances of dividends or repatriation of capital.

Certificate of Incorporation of The foreign company

For the purpose of RFB registration, the foreign entity must also obtain and send to its Brazilian attorney a certificate of incorporation (or equivalent document), issued by the competent authority, containing at least the following information:

a) Entity’s name;
b) Registered Office Address;
c) Corporate Objectives or Purposes;
d) Registered or authorized Capital (and which classes of stock the company may issue, if applicable);
e) Names of officers (or at least the name of the incorporators); and
f) Documentation identifying the final beneficiary/ies who control the company.