1. Legal basis
Law No. 14.195/2021 was passed on August 26, 2021. It aims to simplify and de-bureaucratize the business environment in Brazil and is the result of the transformation of Provisional Measure No. 1.040/2021 into a law.
This initiative of the Ministry of Economy, which was proposed with the aim of improving Brazil’s ranking in the World Bank’s “Doing Business”, evaluates the “ease of doing business and the quality of the regulatory environment for entrepreneurs in 190 countries.”
Among the numerous changes introduced by Law No. 14.195/2021, one of the most important is the possibility of electing non-resident directors for joint stock companies incorporated in Brazil. Prior to the aforementioned law, both Brazilian and foreign non-Brazilian residents could be included in the board of directors of the company but were prevented from holding positions in the management that required representation of the company.
In this context, foreign natural persons could only hold a management position if they were domiciled in Brazil, i.e., if they were a resident of Brazil. This was to ensure that the company’s representatives could be found in the Brazilian territory so that they can receive all notifications, notices and/or service addressed to the company.
In this sense, Article 146, paragraph 2 of Law No. 6.404/76 (“S/A Law”) was amended by Law No. 14. 195/2021 and now provides that a director residing abroad must “appoint an agent residing in the country who is authorized to remain in office until at least 3 (three) years after the termination of the director’s term of office, to receive service of process in legal proceedings brought against him under the Companies Law, and to receive service of process and summons in administrative proceedings brought by the Securities and Exchange Commission (“CVM”) when he exercises the management of a listed company”.
With Normative Decree No. 112/2022, the National Agency for Company Registration and Integration (“DREI”), which supervises and regulates the commercial registries of the various Brazilian states, following the amendment of the Law on the Business Environment for joint stock companies, established that limited liability companies may appoint directors residing abroad.
Therefore, currently, a director, whether Brazilian or foreign, may reside outside of Brazil, provided that he or she has a proxy resident in Brazil.
2. Practical Aspects
However, more than a year after the entry into force of Law No. 14.195/2021, there has been no change in the procedures followed by the competent bodies in order to allow the appointment of a director who does not reside in Brazil in practice.
By Joint Letter SEI No. 28/2022/ME, dated May 2, 2022, the DREI gave to the commercial registries of the various Brazilian states some guidelines regarding the registration of corporate documents for the appointment of directors residing abroad.
However, to date, the “Redesim”, the system responsible for facilitating the registration and legalization of companies and businesses, has not been updated to include non-Brazilian directors in the National Registry of Legal Entities (“CNPJ”).
In view of the fact that, for the registration of the articles of association/amendment of the articles of association/resolution of the shareholders, which contains the appointment of the managing director, the basic registration certificate (“DBE”) issued by the “Redesim” is required, several companies failed to register the corporate documents and thus appoint the managing director.
The difficulties arose mainly in cases where the director residing abroad was the sole director of the company with its registered office in Brazil and did not yet have the registration in the Cadastre of
natural persons (“CPF”) or tax number, and also did not have a so-called e-CPF, a digital certificate that serves as a digital tax number and signature, which are required for the application and issuance of the DBE.
The DREI clarified in Joint Letter SEI No. 28/2022/ME that the changes in the CNPJ system are currently under consideration and that pending the adjustment of the system, the Commercial Registers will accept the Memorandum of Association/the amendment of the articles of association/the shareholders’ resolution without the submission of the DBE.
After the registration of the corporate act with the appointment of a resident abroad, the Commercial Registry must send a letter to the Tax Office (“Secretaria da Receita Federal”) informing it of the registration of the act, so that the latter can update the CNPJ of the company in question in order to keep the agencies database in sync. The duration for this update varies and is difficult to estimate.
The guidelines of the DREI have highlighted the difficulties in appointing a director residing abroad in Brazil for the most part, so that companies intending to make such an appointment can start registering the documents.
Last but not least, it should be mentioned that if the director residing abroad is the only director of the company domiciled in Brazil, due to various practical circumstances, such as the submission of certain required declarations to the authorities, he or she will usually have a registration in the Cadastre of Natural Persons (“CPF”) or a tax number and also an e-CPF (digital certificate), even if he or she is not liable to pay taxes in Brazil.
In the event that the company has other directors, such registration certificate is not necessarily required. However, it is advisable to check whether the Brazilian bank where the company has its account will allow the movement of accounts by directors without registration in the CPF.
Andreas Robert Beyersdorf is associate at Pacheco Neto Sanden Teisseire Advogados.
Julia Krautter Romeiro (PhD., LL.M.) is a German consultant at Pacheco Neto Sanden Teisseire Advogados.
