What is the main source of law authorising this entity form?

Brazilian Civil Code (Law No. 10,406, of January 10, 2002)

Brazilian Corporation Law (Law No. 6,404, of December 15, 1976) – the Articles of Association may expressly set forth that the company will also be governed by the rules applicable to corporations in relation to the matters not expressly provided for in the Brazilian Civil Code or in the company’s Articles of Association.

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

The Limitada has separate legal personality.

(Maximum) period of existence

There is no maximum period of existence.

Governing document(s)

The Limitada is governed by its Articles of Association (Contrato Social) duly registered before the competent Board of Trade (Junta Comercial).

The Limitada's name must include either the words Limitada or its abbreviation Ltda. which is most commonly used, and must indicate the core business of the company, according to Brazilian Civil Code (although there are recently published normative instructions stating that the corporation's name does not have to expressly indicate the core business).

Liability of incorporators / shareholders

As a general rule, a partner is not liable for the company's obligations, but solely for the payment in full of the subscribed quotas. All partners are jointly and severally liable for the full payment of the amount of the subscribed capital.

(Governing) bodies

The Brazilian Courts can exceptionally disregard the corporate entity and pierce the corporate veil in very specific situations (deviation from the corporate purpose or confusion of assets – i.e., the failure to segregate the company’s assets from the shareholders or managers), if it is proven that the partner directly or indirectly benefited from the abusive practice, in order to extend the company’s liabilities to the partners and/or other companies in the same economic group, especially with respect to tax and labor-related debts.

The Limitada is managed by the Board of Officers (Diretoria), composed of one (1) or more individuals appointed by the partners, and may have a Board of Directors and a statutory Audit Committee.

Other particularities

The officers are not liable for obligations assumed on behalf of the company, unless they exceed their powers or violate the law or the Articles of Association.

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

It is possible for a Limitada to enter into cross border acquisitions. However, corporate restructuring transactions (amalgamation, spin-off and corporate transformation) can only directly involve Brazilian companies.

Can this type of entity be publicly listed or held?

No.

Can this type of entity be used for a non-profit or charitable organization?

No.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

Main acts and documents required for the incorporation of a Limitada:

• Execution of the Articles of Incorporation, which shall be registered before the local Board of Trade.
• Obtaining and executing the documents required for the registration of the partners and officers, including the relevant powers-of-attorney granted by the foreign partners to the local residents (if applicable).
• Registration of the company before the Brazilian Federal Revenue and other public enrollments.
• Obtaining operation licenses and permits, depending on the company’s activities.
• Disclosure of information on the ultimate beneficial owners of the foreign entities before the Brazilian Federal Revenue.

Involvement of notary, company register, governmental authorities and timing (estimate)

The timing for the complete incorporation of a Limitada is directly linked to the activities in which the company will engage in Brazil.

The whole incorporation process usually takes sixty (60) to ninety (90) days to be completed (depending on the activities, obtaining the operation licenses may take longer and, given the current situation of COVID-19 pandemic, further delays caused by lockdown restrictions are expected).

Main costs, including registration and similar fees (excluding legal fees)

The main costs are (i) legal fees (lawyers and paralegal services); (ii) fees charged by the public authorities; (iii) notarial fees for the legalization of the foreign documents; and (iv) fees charged by third-party service providers for legal representation and management services (if necessary). The costs may vary depending on the location, type of activities, number of partners etc.

Shelf companies can be purchased from third-party service providers. The cost may vary from USD 2,000 to USD 3,000.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

The corporate purpose must be provided for in the Articles of Association and registered before the competent Board of Trade.

Minimum number of incorporators / shareholders and residency requirements

One (1) or more partners, who can be either entities or individuals, domiciled/headquartered in Brazil or abroad. Foreign partners must appoint legal representatives in Brazil.

Minimum number of directors (or other applicable officers) and residency requirements

At least one (1) officer appointed by the partners in the Articles of Association or in a separate instrument, who may be a partner or not and must be resident in Brazil – i.e., only Brazilian citizens or foreigner’s resident in Brazil who have obtained a visa/authorization for residence, pursuant to the rules provided for in the Migration Law (Law No. 13.445/2017) are allowed to act as managers of a company

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

As a general rule, there is no minimum capital requirement.

Exceptions may apply if the company will engage in import and export transactions, or other very specific activities, in which case a level of capital compatible with such activities may be required on a case-by-case basis.

Should the partners seek to appoint an expatriate officer, the Limitada must apply for a visa/authorization for residence and, for such purpose, the company must have a minimum of BRL 600,000 duly registered with the Brazilian Central Bank as capital investment. The investment requirement will be reduced to BRL 150,000 if the company undertakes to create ten (10) employment positions within two (2) years as from the issuance of the relevant visa/authorization for residence by the Brazilian Immigration Authorities.

The partners must pay-up the quotas in accordance with the conditions stated in the Articles of Association or in the relevant corporate approval. The company's bank account must be opened in Brazil after its incorporation.

Any foreign investment must also be subject to registration before the Brazilian Central Bank.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

No. Execution of the Articles of Incorporation (and all the corporate acts) by the partners may be carried out by virtue of a power of attorney granted to local residents.

The officers (who must be resident in Brazil) must personally execute the Articles of Incorporation.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

All Brazilian companies (and their foreign partners) must be enrolled with the Brazilian Federal Tax Authority (Receita Federal) and obtain the tax identification number (CNPJ) to begin their operations.

Due to the integration of the respective systems in the main States in Brazil, the registration of the Articles of Association with the Board of Trade automatically initiates the enrolment with the CNPJ.

Subject to the activities to be performed, a company may also need to obtain registrations with the State and Municipal Tax Authorities. The State enrolment is obtained along with the CNPJ and the Municipal enrolment is obtained by means of a separate process.

What is the title of the applicable company registry?

All the corporate acts must be registered before the competent Board of Trade (Junta Comercial).

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:

At least the following information must be filed before the Board of Trade and, therefore, will be publicly available: (a) Articles of Association, including the company’s name, address of the principal place of business, activities, the capital amount, its payment terms and apportionment between the partners, period of existence, management structure and routine governance matters; (b) managers’ identification; and (c) partners’ identification.

All Brazilian companies owned by foreign entities must disclose information on their ultimate beneficial owners before the Brazilian Federal Tax Authority (Receita Federal).

The most relevant corporate documents (which are intended to produce effects before third parties) must be registered before the competent Board of Trade, including annual Partners’ Meeting approving the management’s accounts.

The Limitada must publish specific corporate documents as required by law (e.g., mergers, consolidations, spin-offs, dissolutions, reduction of capital).

Most Brazilian authorities issue public certificates on existing lawsuits and outstanding debts.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

The Board of Officers (Diretoria).

Among other duties, the members of the Board of Officers represent the company and carry out management duties, according to the corporate purpose provided for in the Articles of Association.

The Articles of Association may establish that certain managerial decisions should be taken in executive board meetings only.

The Articles of Association must provide for the assignments and powers of each officer. As a general rule, the officers will not be held liable for any obligations assumed on behalf of the company as regards routine acts necessary for the company’s management.

If the Articles of Association are silent or there is no resolution adopted by the partners prescribing the officers’ duties, any officer may individually represent the company and take the actions necessary for its day-to-day operations.

How are the members of the executive body appointed, dismissed and replaced?

The members of the executive body (Board of Officers) may be appointed, dismissed and replaced at any time by the approval of the partners, and such approval must be duly formalized in the Articles of Association or in a separate instrument.

Note: The relevant corporate act approving the appointment, dismissal or replacement of the officers must be registered before the competent Board of Trade.

Is it possible to appoint corporate directors or must all directors be natural persons?

No, the members of the Board of Directors (if applicable) must be appointed by the Partners’ Meeting, according to the rules provided for in the Articles of Association.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

No, it is not required.

However, according to the Brazilian Civil Code, the partners of a Limitada may install the statutory Audit Committee, which must be composed of three (3) or more members (and a like number of alternates), partners or not, who must be resident in Brazil.

In addition, according to recently published rules, Limitadas are allowed to have a Board of Directors (in this case, the Brazilian Corporation Law shall apply).

The members of both bodies must be appointed, dismissed and replaced by the partners.

Such bodies are independent and separate from the Board of Officers (executive body).

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

Partners’ Meeting (Reunião de Sócios).

Among other matters expressly indicated in the Articles of Association, the Partners’ Meeting is in charge of the approval of the management’s accounts, the appointment or the dismissal of officers (if not included in the Articles of Association), as well as the merger, consolidation, spin-off, dissolution or liquidation of the company, etc.

In case the company has more than ten (10) partners, the so-called Assembleia is compulsory for corporate approvals, unless all partners agree in writing on the relevant matter.

Any changes to the Articles of Association must be approved by means of the execution of an Amendment to the Articles of Association by the partners.

The partners are required to hold annual partners' meetings to vote on certain matters, such as the approval of management’s accounts. Such partners’ meetings may be held with physical presence of the partners or remotely (online), subject to certain requirements established by normative instructions.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

Generally, decisions must be taken by at least the majority of the partners present at the meeting.

Certain matters, expressly set forth in the law, require the approval by a higher quorum, as follows:

• At least 3/4 of the capital: any amendments to the Articles of Association, merger, consolidation, spin-off, winding-up or dissolution of the company.
• At least 2/3 of the capital: appointment of an officer who is not a partner, if the capital contribution is fully paid-up.
• More than 1/2 of the capital: appointment or dismissal of officers and their remuneration (if not included in the Articles of Association) and bankruptcy filing.
• 100% of the capital: conversion of the corporate type (unless the Articles of Association provide otherwise) and appointment of an officer who is not a partner, if the capital contribution is not fully paid-up.
• The Articles of Association may establish other quorum requirements.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

The so-called large companies – i.e., entities with assets greater than BRL 240 million (approximately, USD 80 million) or revenues greater than BRL 300 million (approximately, USD 100 million) – are subject to rules on the hiring of external auditors and rules for preparation of financial statements applicable to publicly held corporations. Debate and litigation existed on whether large companies, including the Limitada, were also required to publish their financial statements in the Official Gazette and another newspaper with wide circulation, because the legislation does not expressly refer to the publication of the financial statements, but only to the preparation and audit thereof. Such matter has generated many debates and is still controversial.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

The Brazilian Civil Code only provides that an annual meeting shall be held by the partners in the first four (4) months after the end of the previous fiscal year in order to approve the management’s accounts.

In case the Limitada is also governed by the Brazilian Corporation Law, it will be subject to the same rules applicable to the corporations in relation to the matters not expressly provided for in the Brazilian Civil Code or in the company’s Articles of Association. Such applicability shall be analyzed on a case-by-case basis. As mentioned in the item above, the so-called large companies are subject to the external auditor rules and the rules for the preparation of financial statements applicable to publicly held corporations.

Is the entity permitted to determine its own financial year?

Yes, the date of the end of the fiscal year must be specified in the Articles of Association.

Is the entity subject to any statutory (external) auditor obligations?

As a general rule, external audit is not required for a Limitada. As mentioned in the items above, the so-called large companies are subject to the external auditor rules applicable to publicly held corporations.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

No.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Quotas.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Although it is not a common practice, according to recently published rules, Limitadas are allowed to issue preferred quotas (in this case, the relevant rules stated in the Brazilian Corporation Law shall apply).

What documentation is required for the transfer of ownership interests?

Any transfer of quotas requires an Amendment to the Articles of Association duly executed by the partners, including the assignor and assignee or their legal representatives, duly registered with the Board of Trade.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

As a general rule, partners may assign their quotas (i) to another partner without the approval of the other partners; and (ii) to third parties, provided that there is no objection of partners holding more than 1/4 of the corporate capital.

However, the partners usually set forth limitations to the transfer of quotas in the Articles of Association (such as a right of first refusal).

The amendment of the Articles of Association approving the transfer of quotas must be registered before the competent Board of Trade and the company’s public enrolments must be updated, as applicable.

The foreign investment must be also subject to registration before the Brazilian Central Bank.

Are there any applicable stamp duties imposed when transferring ownership interests?

No.

How are shares issued? (including information on payment obligations, registration requirements)

The capital of a Limitada is divided into quotas that represent the sum of money or assets transferred by the partners for the formation of the company.

The ownership of quotas is evidenced by the Articles of Association, as amended from time to time, and there is no issuance of certificates of ownership. The partners must pay-up the quotas in accordance with the conditions stated in the Articles of Association or in the relevant corporate approval.

The capital of the Limitada may only be increased after full payment of the previously subscribed quotas, and upon the registration of an Amendment to the Articles of Association.

The general rule is that, in the event of a capital increase, the partners have preemptive rights proportionally to the equity held by each partner.

The foreign investment must also be subject to registration before the Brazilian Central Bank.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

Any assets may be used for payment of the quotas representing the capital of a Limitada. In this case, no previous evaluation will be required, but all the partners will be jointly liable for the exact estimate of the value of the assets for a period of five (5) years counting from the registration of the Articles of Association.

Brazilian law expressly forbids contribution through the rendering of services.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

The Brazilian Civil Code allows the capital to be reduced in case the company has registered losses or excessive capital vis-à-vis its purposes and operations. In the latter case, the capital reduction resolution will only become valid and effective in case there is no opposition of creditors within ninety (90) days counted as of the date of publication of the relevant Amendment to the Articles of Association.

According to recently published rules, Limitadas are allowed to hold quotas in treasury for future transfer/sale.

Any requirements with respect to distributions to shareholders?

As a general rule, Limitadasmay approve distributions of accrued profits to their partners at any time and without any restrictions. If a partner is not a Brazilian resident, remittances of dividends at the commercial exchange rate are subject to prior registration with the Brazilian Central Bank.

Currently, profit distributions are not subject to income tax.

The Articles of Incorporation may authorize distributions of profits disproportionately to the equity held by each of the partners, provided that it is expressly provided in the Articles of Association.

As an alternative to the payment of profits, Limitadas may pay interest on equity to their partners, subject to the limitations set forth under the Brazilian tax laws.

In case the Limitada is also governed by the Brazilian Corporation Law, it will be subject to the same rules applicable to the corporations in relation to the matters not expressly provided for in the Brazilian Civil Code or in the company’s Articles of Association. Such applicability shall be analyzed on a case-by-case basis.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Although there is no specific provision in the Brazilian Civil Code related to the execution of a quotaholders agreement by the Limitadas’ partners, such an agreement is very common and accepted in Brazil.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The annual costs for the maintenance of a Limitada in Brazil are directly linked to the activities in which the company will engage, the number of branches and employees, and the size of the corporation, among other factors. In general, the company must maintain its business address, have officers/directors and can have employees.

Due to a greater level of formalism concerning the corporation, the Limitada is cheaper and easier to be incorporated, managed and maintained and, therefore, more widely used in Brazil. As a general rule, Limitadas are also not required to publish their financial statements, which may be an advantage for foreign investors in terms of costs savings and confidentiality. In addition, Limitadas are currently allowed to be incorporated by a single partner.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

Federal corporate income tax rates:

• Corporate Income Tax (IRPJ): 15%.
• IRPJ Surtax on taxable annual profits over BRL 240,000: 10%.
• Social Contribution on net profits: 9% (20% for banks in general, and 15% for certain institutions such as private insurance companies and capitalization companies).

Sales of goods performed by foreign companies through a legally binding Brazilian representative or a domestic branch are subject to corporate income taxation.

Remittance of funds abroad is generally subject to the withholding income tax but there are several exceptions to this rule (e.g., currently, the remittance of dividends is tax exempt).

Foreign investors may also be subject to different income tax rates on gains earned in financial markets.

There are several other applicable taxes, such as (i) the social contributions on gross revenues (PIS/COFINS) applicable at a general combined rate of 3.65% or 9.25% on gross revenues, (ii) the tax on financial transactions (IOF) whose rate may vary depending on the type of transaction (loan, exchange currency, interest participation), (iii) the State value-added tax (ICMS), (iv) the Municipal service tax (ISS) and others.

Summary of any specific matters, e.g. recent or prospective major legal developments

Several rules have been enacted in Brazil, given the presidential election in 2018 and since the beginning of COVID-19 pandemic, many of them related to changes in private and corporate laws. Among the main corporate legislative changes, the following stand out:

• Law No. 13,874, of September 20, 2019, the so-called “Economic Freedom Law”, establishing, among other provisions, (i) the creation of the limited liability company incorporated by a single shareholder (Sociedade Limitada Unipessoal); (ii) the inclusion in the Brazilian Civil Code of new provisions regarding investment funds; and (iii) some changes regarding the requirements that may trigger a request to pierce the corporate veil;
• Law No. 14,010, of June 10, 2020, establishing a transitional legal regime of civil law for the pandemic period. This law authorized, among other provisions, the annual partners’ meeting to be held remotely (online);
• Law No. 14,030, of June 28, 2020, establishing, among other provisions (i) the postponement of the deadline for the annual partners’ meeting; and (ii) amendments to the Brazilian Civil Code and Brazilian Corporation Law to authorize annual partners’ meetings to be held remotely (online);
• Provisional Measure No. 1,040, of March 29, 2020, aiming to facilitate and simplify the business environment and improve Brazil's placement in the World Bank's Doing Business Ranking. Such Provisional Measure is valid for sixty (60) days, which may be postponed for an equal period, and will be subject to approval by the National Congress to be converted into law.