Entity set up
Brazil
Although the Brazilian Law sets forth other types of companies, the Brazilian companies usually adopt the form of a limited liability company, (Sociedade Empresária Limitada) or of a corporation, (Sociedade Anônima).
Limited liability company (Sociedade Limitada)
- A Sociedade Limitada may have one or more quotaholders
- Capital divided into quotas. The ownership of quotas and any burden over such quotas are reflected in the articles of organization. It is possible to issue preferred quotas
- In principle, the liability of the quotaholders is limited to the total subscribed capital which has not been paid in by them
- Managers (quotaholders or not) are responsible for the day-to-day management of the company's business and for representing the company before third parties
- A Sociedade Limitada can also have a Board of Directors, with overall management responsibility;
- An annual meeting shall be held by the quotaholders in the first 4 months after the end of the previous fiscal year in order to approve the management's accounts as well as the company's balance sheet and economical results
- No public subscription or participation in the capital is allowed and a Sociedade Limitada cannot publicly trade its quotas or list on a stock exchange
- Taxed on its profits and gross revenues at a corporate level and quotaholders are exempt from income tax on dividend distribution
Note: Pursuant to the enactment of Law No. 13.874/19, which converted Provisional Measure No. 881/2019 into law and instituted the Declaration of Economic Freedom Rights, the Sociedade Limitadas were allowed to be incorporated by a sole quotaholder. Prior to such law, Brazilian Civil Code established that a Sociedade Limitada should have a minimum of two quotaholders.
Corporation (Sociedade Anônima)
- A Sociedade Anônima must have at least two shareholders. Exception is made to the incorporation of a whole owned subsidiary (sole shareholder company) provided that the incorporation must be made through a public deed and the sole shareholder must be a Brazilian company.
- Capital divided into shares. Different classes of shares allowed
- Generally, the ownership of shares and any burden over such shares are reflected in the corporate books
- The liability of the shareholders is limited to the total subscribed capital which has not been paid in by them
- Typical charter documents include: bylaws, minutes of shareholders' general meetings, resolutions of the board of officers and board of directors, corporate books
- Board of directors, if existing, has overall management responsibility; officers have day-to-day responsibility
- Shareholders typically subscribe and pay for stock issued by the corporation, either common or preferred
- An annual meeting shall be held by the shareholders in the first 4 months after the end of the previous fiscal year in order to approve the management's accounts and the corporation's financial statements
- A Sociedade Anônima may be a publicly traded company and offer its securities for sale to the general public
- Taxed on its profits and gross revenues at a corporate level and shareholders are exempt from income tax on dividend distribution
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