Applicability of Brazilian corporations’ law to local LLCs

The Brazilian Civil Code establishes in the sole paragraph of its article 1053 that the rules applicable to corporations would also be pertinent to limited-liability companies, provided that the latter’s bylaws authorize this supplementary treatment. Nonetheless, since the enactment of the Civil Code in 2002 the State Board of Trades (which in fact are the governmental authorities that regulate the registration of bylaws of commercial entities throughout Brazilian territory) were reluctant and contradictory whenever they should apply corporations’ rules to limited-liabilities companies given that some structures that are customary to corporations (such as preferred shares, board of directors vs board of officers, auditing committees, and so forth) could theoretically conflict with the set of norms governing limited-liability companies.

This legal conundrum was eventually settled by the enactment of the Normative Instruction n. 38 by DREI, the Portuguese acronym for Department of Corporate Registration and Integration, by means of which Brazilian government made clear that rules governing local corporations would also be applicable to limited-liabilities companies, provided that they do not directly conflict with the exclusive legal regulation of the latter (such as specific deliberation quorums). This new interpretation gave room to the creation of preferred shares, board of directors, auditing committees and other legal structures that are common in corporations also in limited-liability companies, amplifying the range of possibilities at the time investors decide to create business organizations in Brazil.

Welson H. Lassali Rodrigues 
Chiarottino e Nicoletti