Joint Ventures in Brazil

In Brazil, joint ventures (“JVs”) are not recognized as a distinct legal entity under the law. Instead, they are structured using legal vehicles already available in the Brazilian legal system, chosen depending on the needs of the parties. The concept of “joint venture” is essentially contractual in nature, with parties combining resources and efforts for a common business purpose, but without a specific legal type formally established by statute.

The key types of joint ventures are:

Contractual Joint Venture: Formed exclusively through a contract between the parties, as in a cooperation agreement. Each party retains its legal independence and assumes obligations as agreed. A common form is the “consórcio”, regulated under Articles 278 and 279 of the Corporations Law (Law No. 6.404/1976), which allows companies to cooperate on a specific project without creating a new legal entity.

Equity based joint ventures: Parties create a new company, typically a limited liability company, governed by the Civil Code or a corporation, governed by Law No. 6.404/1976. The joint venture is then governed by its articles of association or bylaws, and a shareholders’ agreement or a shareholders’ agreement and a JV agreement.

In case of an equity joint venture, the legal provisions applicable are the same ones applicable to any foreign direct investment in Brazil, as follows:

Industry restrictions: certain industries, as media and broadcasting, aviation, financial institutions, nuclear energy, postal services, health services, among others, have limits or restrictions on foreign ownership, meaning a joint venture with foreign partners must carefully assess regulatory compliance.

Rural land and border areas: acquisition or lease by foreign companies or Brazilian companies controlled by foreigners is restricted.

Foreign Investment: All foreign investment in Brazilian companies, whether in cash or kind, must be registered with the Central Bank of Brazil through its electronic system as a condition for remittance of dividends, repatriation of capital, and reinvestments.

Taxpayer number: All foreign companies holding shares or quotas of a Brazilian company, real estate property, vehicles, among other, must obtain a taxpayer number for controlling purposes.

Attorney-in-fact: A foreign shareholder must appoint a representative resident in Brazil with powers to receive service of process and for the purposes of the taxpayer number enrollment and updating.

Sector-Specific Regulatory Approvals. Depending on the industry, regulatory agencies (e.g., ANATEL for telecom, ANAC for aviation, CVM for securities) may impose requirements on foreign participation. These rules can dictate whether the JV is structured as a contractual one or as equity.

The structuring of an equity JV must take into consideration which legal vehicle would be more appropriate both as regards corporate structure and tax implications. 

Governing law options must be carefully analyzed considering Brazilian courts have jurisdiction over disputes involving Brazilian companies and may refuse to enforce exclusive foreign jurisdiction clauses if the matter is considered to fall under Brazilian public order. For instance, Brazilian law must govern the JV’s corporate instruments.

Any JV, whether contractual or equity, will require prior approval from CADE (Administrative Council for Economic Defense), under article 88 of Law 12.529/2011 combined with Interministerial Ordinance No. 994/2012, when:

• One group involved has had, in the year before the transaction, gross revenue in Brazil equal to or greater than BRL 750 million; AND
• Another group involved has had, in the year before the transaction, gross revenue in Brazil equal to or greater than BRL 75 million.

Transactions must be filed before implementation (closing), and their review time averages 30–45 days in fast-track cases, and up to 240 days (extendable) in complex cases.

CADE may approve the JV without restrictions, approve with remedies (structural or behavioral), or block the JV.

Implementing a JV without mandatory notification (“gun jumping”) is prohibited and subject to fines of BRL 60,000 to BRL 60 million (art. 88, § 3º, Law 12.529/2011), and possible annulment of the transaction.

Contributions for an equity JV may be made in cash or in kind (tangible or intangible assets, such as real estate, equipment, intellectual property, or receivables). In case of a corporation, contributions in kind must be supported by an appraisal prepared by three independent experts or one specialized company.

Certain kinds of assets do have to comply with regulatory requirements, such as: 

Real Estate: transfer to the JV must be registered with the competent Real Estate Registry (art. 1.245 Civil Code). If foreign partners are involved, restrictions may apply to rural or border properties (Law No. 5.709/1971). 

Intellectual Property: contributions of trademarks, patents, or technology must be registered with the INPI (Instituto Nacional da Propriedade Industrial).

Shares/Quotas in Other Companies: transfer requires compliance with corporate formalities of the target company and may need regulatory approval in regulated sectors (e.g., banking, telecom, insurance).

Moreover, if assets are imported as capital contribution, customs and foreign exchange regulations apply, and valuation must be consistent with Central Bank registration.

Tax considerations on contributions in kind by foreign shareholders must be carefully analyzed, such as the use of book or market value, import taxes and custom duties, transfer pricing and capital gains tax applicability.

Contributors are liable for the existence and valuation of contributed assets. In limited liability companies, partners are jointly liable for 5 years for overvaluation (art. 1.055, §1º Civil Code), and in a corporation the contributing shareholder is liable for 5 years to the company and third parties for overvaluation (art. 10, §6º Law 6.404/1976).

For a contractual JV, the foreign company can contribute in cash or in kind, but these contributions are not equity investments. They are treated as contractual obligations (cost-sharing, provision of assets, services, or technology), and their structuring must comply with foreign exchange, tax, and regulatory rules, and contributions remain legally owned by the foreign partner unless expressly transferred under contract.

When structuring a JV in Brazil, parties must balance legal certainty with commercial alignment. The success of a JV often depends not only on the legal architecture but also on a clear and fair distribution of roles and benefits. 

The primary legal issues to consider are: 

Choice of structure (contractual or equity);

Regulatory approvals;

Contributions in cash or kind, especially in a contractual JV;

Corporate governance and control, as definition of voting rights, quorum, veto matters, appointment of management and board members, deadlock situations and protection of minority protection;

Dispute resolution and choice of law;

Liability: environmental, labor, and tax liabilities, and joint and several liability rules in case of consortia;

Exit mechanisms: transfer restrictions (right of first refusal, tag-along, drag-along), put and call options, IPO clauses, liquidation triggers, valuation methods.

The main commercial issues relate to strategic objectives, level of integration, organizational culture, cultural differences, allocation of costs, risks and liabilities, profit sharing formula, commercial strategy: exclusivity, territorial restrictions, or joint marketing, financing and guarantees and securities structures, confidentiality, intellectual property, know-how (of each party and also developed by the JV), duration and termination.

An equity JV structures as a limited liability company must appoint one or more administrators (officers/managers), quota holders or not. Having a Board of Directors is not mandatory, as governance is usually simpler, handled through quota holders’ meetings and the administrators.

If the equity JV is created as a corporation one or more Officers are to be appointed. The Board of Directors is only mandatory public companies and closely held companies with authorized capital and more than 20 shareholders.

The appointment of non-resident individuals as administrators, Officers or Board members is subject to obtaining a taxpayer number is mandatory for control issues and to the appointment of a resident attorney-in-fact with powers to receive service of process. If liabilities arise, Brazilian authorities can more easily pursue the resident attorney-in-fact than a non-resident abroad. This creates a potential imbalance: the non-resident officer is formally liable, but in practice the local representative bears immediate exposure. This may discourage qualified individuals from accepting the role of attorney-in-fact.

In practical terms, a non-resident administrator or Officer may face limitations in opening or operating corporate bank accounts, as Brazilian banks often require the legal representative of an entity to be resident. Even in foreign-controlled JVs, it is common practice to appoint at least one Brazil-resident administrator/officer with effective managerial powers, while non-residents usually serve as Board members.

In a contractual JV, governance is defined contractually (e.g., steering committee, project manager), and parties may freely appoint foreign or local representatives. However, for practical enforceability, at least one representative domiciled in Brazil is usually designated.

Governing law options must be carefully analyzed considering Brazilian courts have jurisdiction over disputes involving Brazilian companies and may refuse to enforce exclusive foreign jurisdiction clauses if the matter is considered to fall under Brazilian public order. For instance, Brazilian law must govern the JV’s corporate instruments.