Brazil | DPO Requirements – What foreign companies must do to stay compliant

13 Aprile 2025

  • Brasile
  • Compliance
  • Privacy e Trattamento dati

Since Brazil’s General Data Protection Law (LGPD) came into force in 2020, the country has taken steady steps to solidify its data protection framework. The Brazilian National Data Protection Authority (ANPD) has become an increasingly active regulator, issuing guidelines that clarify key roles and responsibilities under the LGPD.

One of the most recent and significant developments is ANPD Resolution No. 18, which defines the scope, duties, and governance expectations for Data Protection Officers (DPOs) in Brazil. While the DPO role was already part of the LGPD, this resolution sharpens the regulatory focus and introduces new formalities and responsibilities—especially relevant for multinational companies operating in Brazil.

Here’s what foreign businesses and their counsel need to know—and do—to remain in compliance:

DPO Appointment Must Be Formal and Documented

The DPO must be formally appointed by the data controller through a written, dated, and signed document. This document must outline the DPO’s activities and duties, and must be readily available to the ANPD upon request. This is not a formality to overlook: an undocumented DPO designation could lead to enforcement risks.

Backup Required: Designate a Substitute DPO

While small data controllers are often exempt from appointing a DPO, the Resolution requires that they still establish a reliable communication channel for data subjects—ensuring the exercise of data protection rights. This applies even to subsidiaries or low-volume processors.

Disclose DPO Identity Publicly

Companies must publish the DPO’s name and contact details prominently on their website. For corporate DPOs, the name of the legal entity and the responsible individual must be disclosed. This is a public-facing requirement—easily verifiable by the ANPD or data subjects.

Controllers Must Empower the DPO

Brazilian law now places affirmative obligations on data controllers to provide the DPO with adequate resources and autonomy. This includes access to senior leadership and freedom from interference, especially in decision-making related to data protection.

Identity and contact information

The data controller must publicly disclose, in a prominent and easily accessible location on their website, the DPO’s identity and contact details. At a minimum, this should include (i) full name, for individuals; or the business name/title of the entity + full name of the responsible person, for legal entities; and (iii) information on communication means enabling the exercise of data subject rights and receiving communications from the ANPD.

Key DPO Responsibilities

  • Responding to data subject complaints
  • Interfacing with the ANPD
  • Advising on incident response, data mapping, DPIAs, and internal policies
  • Promoting internal awareness and training
  • Ensuring risk mitigation strategies are in place

These obligations are not merely symbolic—they may require dedicated local support and a carefully structured compliance program.

No Strict Liability, But Conflict of Interest Rules Apply

DPOs are not personally liable for the controller’s actions. However, conflicts of interest must be proactively managed. A DPO cannot simultaneously hold a role involving strategic decisions about the processing of personal data—unless directly related to their duties.

Multinational organizations must take care when appointing global or regional DPOs with overlapping roles to avoid compliance pitfalls.

Failure to Comply Can Trigger Enforcement

If conflicts are not disclosed, or DPOs are inadequately appointed, the ANPD may apply sanctions. Controllers must document their decision-making, implement conflict-mitigation measures, or appoint alternative professionals when needed.

Final Thoughts: Legal Risk or Strategic Advantage?

With Resolution No. 18, Brazil aligns more closely with global data protection regimes, but with its own unique requirements. For foreign companies, the message is clear: the DPO role in Brazil is a regulatory obligation—not just a best practice.

Properly structuring this role offers not only legal certainty, but also the opportunity to demonstrate accountability and build trust with Brazilian consumers and regulators alike.

For international counsel, this is a strategic area where legal guidance is not just helpful—it’s essential.

The Brazilian market has not been immune to the protectionist wave of “America First.” If such measures persist over time, they could have a lasting impact on the local economy. Still, a sour lemon can often become a sweet caipirinha in the resilient and optimistic spirit that characterizes both Brazilian society and its entrepreneurs.

As is often the case in the chessboard of global economic geopolitics, a move from one player creates room for another countermove. Brazil reacted with reciprocal trade measures, signaling clearly that it would not accept a position of commercial vulnerability.

This firmer stance — almost unthinkable in earlier years — strengthened Brazil’s image in Europe as a country ready to reposition itself with greater autonomy and pragmatism, opening new doors to international markets. In a world where global value chains are being restructured and reliable trade partners are in high demand, Brazil is increasingly seen not just as a supplier of raw materials, but as a strategic partner in critical industries.

The rapprochement with Europe has been further energized by progress in the Mercosur–European Union Agreement, whose negotiations spanned decades and now seem to be gaining momentum. While the United States embraces a more isolationist commercial posture, Europe is actively diversifying its trade relations — and Brazil, by demonstrating a commitment to clear rules, economic stability, and legal certainty, emerges as a natural candidate to fill that gap.

The Direct Impact of U.S. Tariffs

The trade measures introduced under President Trump primarily affected Brazilian producers of semi-finished steel and primary aluminum, with the removal of long-standing exemptions and quotas. In 2024, Brazil exported US$ 2.2 billion in semi-finished steel to the United States, representing nearly 60% of U.S. imports in that category. In the same year, Brazilian aluminum exports to the U.S. reached US$ 796 million, accounting for 14% of the sector’s total. Losses in exports for 2025 are estimated at around US$ 1.5 billion.

Brazil’s Response and a New Phase

In April 2025, the Brazilian Congress passed a new legal framework for trade retaliation, empowering the Executive Branch to adopt countermeasures in a faster and more technically structured way. The new legislation allows, for example, the automatic imposition of retaliatory tariffs on goods from countries that adopt unilateral measures incompatible with WTO norms; the suspension of tax or customs benefits previously granted under bilateral agreements; the creation of a list of priority sectors for trade defense and diversification of export markets.

Beyond the retaliation itself, the move marked a significant shift in posture: Brazil began positioning itself as an active player in global trade governance, aligning with mid-sized economies that advocate for predictable, balanced, and rules-based trade relations.

An Opportunity for Brazil–Europe Relations

This new stage sets Brazil as a reliable supplier to European industry — not only of raw materials but also of higher-value-added goods, particularly in processed foods, bioenergy, critical minerals, pharmaceuticals, and infrastructure.

Moreover, as US–China tensions drive European companies to seek nearshoring or “friend-shoring” strategies with more predictable partners, Brazil, with its clean energy matrix, large domestic market, and relatively stable institutions, emerges as a strong alternative.

Legal Implications and Strategic Recommendations

This changing landscape brings new opportunities for companies and legal advisors involved in Brazil–Europe investment and trade relations. Particular attention should be paid to:

  • Monitoring rules of origin in the Mercosur–EU agreement, especially in sectors requiring supply chain restructuring;
  • Reviewing contractual and tax structures for import/export operations, including clauses addressing tariff instability or non-tariff barriers (e.g., environmental or sanitary standards), and clearly defining force majeure events;
  • Reassessing distribution and agency agreements in light of the new commercial environment;
  • Exploring joint ventures and technology transfer arrangements with Brazilian partners, particularly in bioeconomy, green hydrogen, and mineral processing.

From lemon to caipirinha

The world is becoming more fragmented and competitive, but also more open to realignment. What began as a protectionist blow from the United States has revealed new opportunities for transatlantic cooperation. For Brazil, Europe is no longer just a client: it is poised to become a long-term strategic partner. It is now up to lawyers and businesses on both sides of the Atlantic to turn this opportunity into lasting, mutually beneficial relationships.

“Questo accordo non è solo un’opportunità economica. È una necessità politica“. Nell’attuale contesto geopolitico, caratterizzato da un crescente protezionismo e da importanti conflitti regionali, la dichiarazione di Ursula von der Leyen la dice lunga.

Anche se c’è ancora molta strada da fare prima che l’accordo venga approvato internamente a ciascun blocco ed entri in vigore, la pietra miliare è molto significativa. Ci sono voluti 25 anni dall’inizio dei negoziati tra il Mercosur e l’Unione Europea per raggiungere un testo di consenso. L’impatto sarà notevole. Insieme, i blocchi rappresentano un PIL di oltre 22 mila miliardi di dollari e ospitano oltre 700 milioni di persone.

Vediamo le informazioni più importanti sul contenuto dell’accordo e sul suo stato di avanzamento.

Che cos’è l’accordo EU-Mercosur?

L’accordo è stato firmato come trattato commerciale, con l’obiettivo principale di ridurre le tariffe di importazione e di esportazione, eliminare le barriere burocratiche e facilitare il commercio tra i Paesi del Mercosur e i membri dell’Unione Europea. Inoltre, il patto prevede impegni in aree quali la sostenibilità, i diritti del lavoro, la cooperazione tecnologica e la protezione dell’ambiente.

Il Mercosur (Mercato Comune del Sud) è un blocco economico creato nel 1991 da Brasile, Argentina, Paraguay e Uruguay. Attualmente, Bolivia e Cile partecipano come membri associati, accedendo ad alcuni accordi commerciali, ma non sono pienamente integrati nel mercato comune. D’altra parte, l’Unione Europea, con i suoi 27 membri (20 dei quali hanno adottato la moneta comune), è un’unione più ampia con una maggiore integrazione economica e sociale rispetto al Mercosur.

Cosa prevede l’accordo UE-Mercosur?

Scambio di beni:

  • Riduzione o eliminazione delle tariffe sui prodotti scambiati tra i blocchi, come carne, cereali, frutta, automobili, vini e prodotti lattiero-caseari (la riduzione prevista riguarderà oltre il 90% delle merci scambiate tra i blocchi).
  • Accesso facilitato ai prodotti europei ad alta tecnologia e industrializzati.

Commercio di servizi:

  • Espande l’accesso ai servizi finanziari, alle telecomunicazioni, ai trasporti e alla consulenza per le imprese di entrambi i blocchi.

Movimento di persone:

  • Fornisce agevolazioni per visti temporanei per lavoratori qualificati, come professionisti della tecnologia e ingegneri, promuovendo lo scambio di talenti.
  • Incoraggia i programmi di cooperazione educativa e culturale.

Sostenibilità e ambiente:

  • Include impegni per combattere la deforestazione e raggiungere gli obiettivi dell’Accordo di Parigi sul cambiamento climatico.
  • Prevede sanzioni per le violazioni degli standard ambientali.

Proprietà intellettuale e normative:

  • Protegge le indicazioni geografiche dei formaggi e dei vini europei e del caffè e della cachaça sudamericani.
  • Armonizza gli standard normativi per ridurre la burocrazia ed evitare le barriere tecniche.

Diritti del lavoro:

  • Impegno per condizioni di lavoro dignitose e rispetto degli standard dell’Organizzazione Internazionale del Lavoro (OIL).

Quali benefici aspettarsi?

  • Accesso a nuovi mercati: Le aziende del Mercosur avranno un accesso più facile al mercato europeo, che conta più di 450 milioni di consumatori, mentre i prodotti europei diventeranno più competitivi in Sud America.
  • Riduzione dei costi: L’eliminazione o la riduzione delle tariffe doganali potrebbe abbassare i prezzi di prodotti come vini, formaggi e automobili e favorire le esportazioni sudamericane di carne, cereali e frutta.
  • Rafforzamento delle relazioni diplomatiche: L’accordo simboleggia un ponte di cooperazione tra due regioni storicamente legate da vincoli culturali ed economici.

Quali sono i prossimi passo?

La firma è solo il primo passo. Affinché l’accordo entri in vigore, deve essere ratificato da entrambi i blocchi e il processo di approvazione è ben distinto tra loro, poiché il Mercosur non ha un Consiglio o un Parlamento comuni.

Nell’Unione Europea, il processo di ratifica prevede molteplici passaggi istituzionali:

  • Consiglio dell’Unione Europea: I ministri degli Stati membri discuteranno e approveranno il testo dell’accordo. Questa fase è cruciale, poiché ogni Paese è rappresentato e può sollevare specifiche preoccupazioni nazionali.
  • Parlamento europeo: Dopo l’approvazione del Consiglio, il Parlamento europeo, composto da deputati eletti, vota per la ratifica dell’accordo. Il dibattito in questa fase può includere gli impatti ambientali, sociali ed economici.
  • Parlamenti nazionali: Nei casi in cui l’accordo riguardi competenze condivise tra il blocco e gli Stati membri (come le normative ambientali), deve essere approvato anche dai parlamenti di ciascun Paese membro. Questo può essere impegnativo, dato che Paesi come la Francia e l’Irlanda hanno già espresso preoccupazioni specifiche sulle questioni agricole e ambientali.

Nel Mercosur, l‘approvazione dipende da ciascun Paese membro:

  • Congressi nazionali: Il testo dell’accordo viene sottoposto ai parlamenti di Brasile, Argentina, Paraguay e Uruguay. Ogni congresso valuta in modo indipendente e l’approvazione dipende dalla maggioranza politica di ciascun Paese.
  • Contesto politico: I Paesi del Mercosur hanno realtà politiche diverse. In Brasile, ad esempio, le questioni ambientali possono suscitare accesi dibattiti, mentre in Argentina l’impatto sulla competitività agricola può essere al centro della discussione.
  • Coordinamento regionale: Anche dopo l’approvazione nazionale, è necessario garantire che tutti i membri del Mercosur ratifichino l’accordo, poiché il blocco agisce come un’unica entità negoziale.

Seguite questo blog, vi terremo aggiornato sugli sviluppi.

In Brazil, the acquisition of distressed assets does not have to be stressful.

Due to the debtor’s insolvency situation, the acquirer must exercise additional caution to understand the extent of liabilities and to avoid risks of assuming undisclosed liabilities, losing assets in claw-back actions, or being held liable for fraud. In this context, due diligence becomes more thorough and detailed (and therefore more costly).

It is a common investment world jargon that the better the opportunities, the greater the risk; but also, the greater the risks, the better the opportunities.

Considering that excessive risk in the acquisition of distressed assets could deter investors and considering that new investments may be indispensable to save a company in crisis or to obtain funds to pay creditors, Brazilian legislation has chosen to protect acquirers of distressed assets with robust safeguards against risks.

The general rule stipulates that the acquirer will not pay anything beyond the defined price and will not assume any obligations of the debtor of any nature, remaining shielded from liabilities. In other words, creditors will have to compete to receive part of the price paid, but they cannot hold the acquirer responsible for the debt, even if the price is insufficient for settlement. Even if the seller fails to recover and is declared bankrupt, the acquisition remains irreversible.

The non-succession rule ensures that the purchaser or acquirer can invest safely in the debtor’s assets under judicial recovery without the risk of being held responsible for pre-existing obligations and liabilities. The absence of succession, therefore, stimulates competition for the asset to be alienated and consequently maximizes the values to be obtained and reverted for the benefit of the entire community involved in a judicial recovery process.

The assets subjected to the protection may be

  • a specific asset (machinery, production lines, trademarks, contracts);
  • establishments, branches, units; or even
  • the entire business activity as protected assets.

This circumstance, by providing a secure path, mitigates the requirements of due diligence, as risks are now controlled.

There are several safe paths available to acquirers:

  1. Asset acquisition as a means of reorganization: in the judicial reorganization proceedings (Chapter 11), the debtor may foresee in the plan the selling of assets and the conditions for acquisition, such as minimum price and auction rules. The highest bidder assumes the assets. The price paid is allocated as provided in the plan (usually, a portion is allocated to pay creditors, and another to invest in the debtor’s business activity).
  2. Direct sale: if selling assets is proven to be indispensable for maintaining the company, the judge may authorize a direct sale at a fair price. The judge may order valuation and auction, unless urgency or the absence of potential interested parties is proven. If an auction occurs, the first bidder may act as a stalking horse, with the right to match the best offer.
  3. Asset acquisition in liquidation: in case of declared bankruptcy, the acquirer may offer a price lower than the appraisal, without the requirement of being a fair price. In this case, it is unusual to dismiss an open auction proceeding.
  4. Debtor financing: the acquirer may offer to finance the business activity, providing money or supplies, aiming to acquire assets or as collateral for future payment of the financing.
  5. Credit acquisition for asset adjudication: the interested party can also take an indirect path, acquiring the credits involved in the procedure and assuming the position of the creditors. Credit acquisition is legitimate, and commonly the price paid is considerably lower than the value of the acquired credit. By becoming the holder of a reasonable percentage of the credits, the interested party may offer these credits as payment for the acquisition of the assets they are interested in.

There are still creative alternatives, which to some extent increase the risk in the transaction but may imply agility and lower investments. There are some other hints in the Legalmondo practical guide for buying distressed assets you can find here

There is only one indispensable requirement for controlling risks: the acquirer must be adequately advised by professionals experienced in distressed asset acquisition operations.

Riassunto

La riforma della Legge Fallimentare Brasiliana introduce importanti cambiamenti sia nelle procedure di risanamento che nelle misure di liquidazione.

In occasione del 15° anniversario della Legge Fallimentare Brasiliana è stata promulgata un’importante novella, frutto di necessità emerse nel corso della sua applicazione: la Legge Fallimentare, infatti, è spesso stata messa alla prova e le esperienze pratiche hanno dimostrato che alcuni strumenti necessitavano di aggiustamenti, mentre altri richiedevano un cambiamento completo.

L’obiettivo di questo articolo è quello di elencare le cinque novità più rilevanti.

#5 – Piano di risanamento presentato dai creditori

Prima della riforma: la formazione del piano di risanamento era di esclusiva competenza del debitore. Se la maggioranza dell’assemblea dei creditori avesse deciso di respingere il piano, la conseguenza automatica sarebbe stata la conversione in fallimento (liquidazione).

Ora: in casi come questo, i creditori hanno il diritto di presentare un piano di risanamento giudiziale alternativo. Di conseguenza, i creditori assumono un ruolo più rilevante nella ristrutturazione aziendale.

#4 – Mediazione incentrata sulla ristrutturazione

La mediazione è ora incoraggiata nei processi di risanamento giudiziale in corso, in modo che i creditori e i debitori possano trovare una via d’uscita per superare la crisi.

La novità più importante è la mediazione anticipata, il cui obiettivo è evitare di entrare nella procedura di risanamento e la liquidazione. In questa procedura, il debitore convoca i creditori per una negoziazione mediata e questi ultimi possono chiedere al giudice un ordine di sospensione delle misure esecutive.

#3 – Operazioni su cespiti oggetto di procedure fallimentari

L’alienazione dei cespiti del debitore è oggi semplificata sia nel risanamento giudiziale che nel fallimento. Soprattutto nel fallimento – in cui è essenziale ottimizzare la valorizzazione dei cespiti – la legge autorizza la vendita anticipata, l’aggiudicazione da parte dei creditori e persino la donazione di cespiti che i creditori non sono interessati ad acquisire.

Inoltre, le acquisizioni di attività in difficoltà e le operazioni di fusione e acquisizione sono ora più sicure, grazie a una disposizione legislativa più chiara che prevede uno scudo di responsabilità a favore dell’acquirente.

#2 – Finanziamento del debitore in possesso (DIP)

La mancanza di incentivi a finanziare il debitore sottoposto a risanamento giudiziale è sempre stata motivo di critica da parte degli stakeholder. In assenza di disposizioni di legge, i potenziali finanziatori potrebbero essere diffidenti rispetto ai rischi dell’operazione e alla mancanza di chiari vantaggi per compensare il rischio.

Le critiche sono state affrontate con il riconoscimento giuridico del finanziamento del debitore durante il risanamento giudiziale. Questo tipo di finanziamento è noto come Debtor-in-Possession (DIP) Financing.

Il debitore è autorizzato, tramite autorizzazione giudiziale, a stipulare contratti di finanziamento per pagare il mantenimento delle sue attività e dei suoi beni, nonché per rispondere delle spese di ristrutturazione.

A garanzia del finanziamento, il debitore può offrire beni e diritti propri o di terzi, anche se appartenenti ad attività non correnti, cioè non originariamente destinate alla vendita, ma che servono alla struttura aziendale (ad esempio, macchinari).

#1 – Insolvenza transfrontaliera

La legge brasiliana ha finalmente incorporato la Model Law on Cross-Border Insolvency dell’Uncitral. Un mondo integrato e pieno di aziende globali impone di prevedere norme specifiche sull’insolvenza transfrontaliera, finora inesistenti, per eliminare l’insicurezza sulla portata delle procedure straniere per i creditori brasiliani e sugli effetti delle procedure brasiliane per i creditori stranieri.

Ora abbiamo un nuovo panorama, con la possibilità che le procedure all’estero abbiano effetti in Brasile e che le procedure brasiliane raggiungano gli stranieri.

Viene trattata in modo dettagliato la partecipazione degli stranieri in Brasile e la cooperazione internazionale tra giudici e altre autorità per mettere in moto i principi fondamentali che regolano l’intero sistema di insolvenza, ovvero il miglioramento della certezza del diritto, la gestione efficiente dei processi, la valorizzazione degli asset, la conservazione dell’azienda e l’ottimizzazione della liquidazione degli asset.

Queste sono le cinque principali novità, in sintesi. Se siete interessati a saperne di più su uno di questi argomenti o se volete rimanere aggiornati sull’insolvenza – ristrutturazione in Brasile, contattateci.

A legal due diligence of a Brazilian target company should analyze the existence and the content of Agency Agreements, including values paid to the agent and the nature of such payments and the factual situation of the target’s agents, in order to evaluate potential contingencies.

One usual suspect in legal due diligences of Brazilian target companies in M&A transactions that should not be overlooked is the existence of agency agreements, due to:

  • the obligation to indemnify the agent stipulated by law: at least 1/12th of all commissions paid throughout the entire term of the agency agreement; and
  • the risks for the agency being disregarded and considered as an employment relationship, subjecting the principal to compensate the agent as an employee with all rights, benefits, taxes and social contributions.

This should be considered for evaluation of potential contingencies and the impacts on the valuation of the target.

No doubt that agents can be an important component of the sales force of the business and can be strategic for the activity of the principal, in view of a certain independence and for not increasing the payroll of a company.

On the other hand, under Brazilian laws, the protective nature of the agency demands the principal a considerable level of attention.

Indemnification

Brazilian Federal Law No. 4,886/65 as amended – the Brazilian Agency Law – determines that the agent is entitled to, at the termination of an agency agreement, receive an indemnification of 1/12th calculated over all the commissions paid throughout the duration of the entire period of the agency agreement.

The Brazilian Agency Law stipulates that if the parties sign a new contract within 6 months after the expiration of the previous, the relation between agent and principal shall be deemed as the same relationship and thus, the duration to calculate the indemnification shall encompass the entire period (past and subsequent contract).

Termination by the agent

The Brazilian Agency Law also stipulates situations that agent could terminate the contract and still be entitled to receive the 1/12th indemnification:

  • reduction of the activities in disagreement with the contractual stipulation
  • breach of exclusivity (territory and/or products), if so stipulated in the agreement
  • determination of prices that makes the agency unfeasible and
  • default on payment of the commissions
  • force majeure

Termination without cause

Termination without cause can be done, upon payment to agent of the indemnification and with a previous notice of at least 30 days, in which situation the agent shall receive the payment of 1/3 of the remuneration received during the previous 90 days prior to the termination.

Can principal avoid the indemnification?

The only cases where the 1/12th indemnification would not be applicable are when the contract is terminated by principal with cause. The Brazilian Agency Law has limited situations for principal to terminate the contract with cause:

  • acts by agent causing disrepute of the principal
  • breach of obligations related to the agency activities
  • criminal conviction related to honor, reputation

These situations shall be clearly demonstrated. Producing the sufficiently strong evidence of the facts to configure cause for termination may not be an easy task, considering some of the facts may be subject to construing and interpreting by the parties, witnesses and ultimately the judge.

As a result, from past experiences, it is rare to see principals in conditions not to incur in the 1/12th indemnification.

Potential risk: configuring employment relationship

In addition to the indemnification, the activities developed by the agent could eventually be deemed as performed by a regular employee of the principal and, in this case, principal could be subject to compensate the agent as an employee.

Agent vs. employee

For the appreciation of the employment relationship, the individual acting as agent shall file a labor claim and demonstrate the existence of the employment relationship.

The Labor Court judge will consider the factual situation, prevailing upon the written agreements or other formal documents. The judge may rely on e-mails, witnesses and other evidence.

The elements of an employment relationship are:

  • Individual: in case the individual acts by himself to perform the services; Personal services: the services are in fact performed by the individual specifically to the Principal;;
  • Non-eventuality – exclusivity: the services are rendered in a regular basis;
  • Subordination: key factor – the individual has to follow strict instructions directed by principal, such as reporting to an employee of the principal, determined visits;
  • Rewarding – fixed remuneration: the individual is awarded regular amounts and expenses allowances

In the event the individual can demonstrate the existence of the elements to configure an employment relationship, he/she could have an award to entitle him/her to have his remuneration considered as of a regular employee for the last 5 years.

As a result, the individual would be awarded the payment of Christmas bonus (equivalent to 1 monthly remuneration per year), vacation allowance (1/3 of a monthly remuneration per year), unemployment guarantee fund (1 monthly remuneration per year) plus other benefits that he/she would be given as an employee of principal (based on the collective bargaining agreement between the employees’ and employers’ unions). The company would also be obliged to make the payment of the co-related social security contributions.

Needless to say, the result could turn into a considerable potential contingency.

The author of this article is Paulo Yamaguchi

The purpose of this post is to provide information about (i) the need of Brazilian companies for providing the Country-by-Country Reporting pursuant to the OECD Rules, Action 13 of the Base Erosion and Profit Shifting Actions (“BEPS Actions”) and (ii) the need to disclose the name of the final beneficial owner of entities with equity participation in Brazilian companies, or owners of assets in Brazil.

Country-by-Country Reporting Regulation

Normative Instruction RFB No. 1681 (“IN 1681/2016”) established the rules for the Brazilian companies to be compliant with the Country-by-Country Reporting Regulation (“CbCR”). The CbCR shall be presented annually considering the financial results of the previous fiscal year, as part of the fiscal declaration (ECF, which includes the information related to the corporate tax income return). Such declaration should be filled in accordingly with the list of mandatory information determined by IN 1681/2016 and pursuant to RFB Normative Instruction No. 1,422, of December 19, 2013.

The CbCR is the result of the BEPS Project (Base Erosion and Profit Shifting) of the OECD’s initiative, contained in Action 13 of the BEPS Actions, aiming the enhancement of transparency while taking into consideration compliance costs.

Multinational groups are obliged to deliver the CbCR if consolidated revenues for the fiscal year preceding the tax year of the declaration are equal to or greater than BRL 2.26 billion (or 750 million Euros, or if the local currency of the final controller of the group is equivalent to the mentioned amounts, as of January 31, 2015).

The Brazilian subsidiary is (or may be considered) a substitute of the final controller and, as such, bound to fulfill the CbCR in the following cases:

  • it is the final controller of the multinational group is not obliged to deliver the CbCR in its jurisdiction of residence;
  • the jurisdiction where the ultimate controller is located has signed an international agreement with Brazil, however, still not ratified by the competent authorities before the deadline for delivering the CbCR; or
  • there has been a systemic failure of the jurisdiction of residence of the final controller of the multinational group that has been notified by the Brazilian Federal Revenue Office to the resident entity for tax purposes in Brazil.

In case the Brazilian subsidiary is exempt from submitting the CbCR, it will still need to provide the identification and the jurisdiction of residence for tax purposes of its parent company.

The deadline for providing the information will be the date for completing the ECF, to expire on 30 July 2018 for the fiscal year 2017. Failure to comply will expose the Brazilian subsidiary to the payment of a penalty of BRL 1,500.00 (USD 410 or EUR 340) per month. Submission of an incomplete CbCR may subject the Brazilian subsidiary a fine of 3% over the value omitted, inaccurate or incomplete.

Need to disclose beneficial ownership and how to do it

Brazilian companies are obliged to provide information on the person authorized to represent them, on the respective chain of equity interest, until the individuals characterized as final beneficial owner.

This information shall be provided when a Non-Brazilian entity present its application to obtain the Federal Corporate Taxpayers’ Registry (“CNPJ”). If the Non-Brazilian entity already has a CNPJ, it must update the CNPJ with the beneficial owner information by 31 December 2018.

Obtaining a CNPJ is mandatory for Non-Brazilian entities that have equity participation in Brazilian companies or other assets – financial investments, real estate, airplanes, ships, among others in Brazil.

This obligation is in force by means of the Brazilian Federal Revenue Office Normative Instruction No. 1634 (“IN 1634/2016“). IN 1634/2016 contains a list of information to be provided and documents to be delivered for that purpose.

On October 25, 2017, the procedure became mandatory also for Brazilian entities after publication of the ADE COCAD (Executive Declaratory Act – Registration Management General Coordination) No. 9/2017.

Fail to comply with the procedure can result in suspension of the CNPJ. This suspension could result in inability to execute bank transactions, financial investments and obtaining loans and, ultimately, prevent the remittance of dividends to other countries or even the receipt of funds by means of a loan or capital injection from the respective parent companies abroad.

Such information is not protected under fiscal secrecy, but the public employees shall not disclose this information pursuant to functional obligation of not disclosing information unless if summoned by court order.

The requirement for presenting the information on the beneficial owner is already familiar for investors in Brazil. The Brazilian financial institutions are responsible for obtaining information of their client up until the beneficial owner, pursuant to Circular Letter No. 3.461/2009 of the Brazilian Central Bank. The information provided to financial institutions are subject to bank secrecy.

These Brazilian financial institutions are severe on the provision and updating on the foreign parent companies. It is usual for companies with foreign shareholders to receive notices and warnings of possible blocking or closing the accounts if the required documents are not presented in full.

The author of this article is Paulo Yamaguchi

When M&A transactions in Brazil are deemed not successful by the investor the main reason for underperformance is generally the existence of debts or fiscal/labor contingencies materialized higher than evaluated, or unexpected material adverse changes.

The reasons for overlooking the debts and fiscal/labor contingencies is often the rush to close the investment. Either for avoiding a competitor to acquire the target, or to keep the leading position of the market share, for certain cases, the buyers may have not paid proper attention to what their advisors had to say before closing the deal.

  1. Local legal advisors

The legal advisors may take, for the perception of the executives eager to complete an acquisition, a bit longer than expected to round up facts and properly report the risks found. The perception for this lower pace to reach out the conclusions may differ from the executives due to the delay of seller to provide documents or clarify questions raised.

Slowing down a bit to the benefit of certainty is a sound advice.

Experienced Brazilian advisors shall always be included among the teams. Their knowledge on facing subtle change of applicable laws, rules or predominant court decisions is certainly valuable for better understanding the status of the target and the ways to mitigate risks.

Certain facts may not seem at first as significant risk for first timers dealing with Brazilian matters. However, the advisors do have a reason to raise the point and should be properly heard. Examples such as absence of one single clear certificate issued by a government department or a missing report on disposal of solid residues, that may not seem a big issue, could turn into a risk of suspension of activities of a plant.

An audit company is usually hired to identify tax and labor contingencies, but the audit company does not evaluate nor assess the numbers, only the maximum exposure. The legal advisors are in charge of the risk assessment and determination of the estimate of the contingencies. It is up to the buyer to accept and negotiate the relevant coverage for such contingencies.

Seller may not give full details of all issues of the target at first. It is the role of the advisors to investigate, request further documents and clarification to bring matters that affect the business to buyer’s attention. In a good faith scenario, seller would be willing to discuss the matters, to avoid future disputes or frustrations to buyer.

  1. Debt

Charges, penalties, interests and other compensations in financial operations turns these contracts full of minor details and very complex in anywhere in the world. Brazilian contracts are not exception. That is the reason why a proper assessment of the financial operations and obtain the real picture of the debt and related costs.

As usual, attention to change of control provisions are also relevant to mitigate risks – absence of consent or non-compliance of the required steps prior to closing the operation can cause acceleration of the financial operation and trigger cross-default provisions in other contracts that can also lead to acceleration of the financial operations.

  1. Tax/labor contingencies

Calculation and estimate of tax contingencies are specific for each tax and requires knowledge and a sound judgment to estimate exposure and appoint measures to cover the risks. Same level of care applies to labor-related contingencies.

Tax and labor matters are usually the most relevant risks to be observed in a Brazilian target. Complexity of regulation and the amount of obligations to fulfill makes these points significant.

  1. Material adverse change

Material adverse change clauses – “MAC Clauses” – are contractual provisions to mitigate negative effects or a substantial change to the parties. These provisions are admitted in Brazilian law, in view the M&A transaction documents are executed in good faith and respecting the parties’ freedom to commit to certain obligations.

Needless to say, the MAC Clauses should contain crystal clear language, with objective description of the facts, well defined applicable time period, cause and consequences duly described for proper and easy execution. If not, determination of MAC Clause event shall end on a dispute.

In the absence of MAC Clauses, Brazilian Civil Code contemplates the ability to any party in a continuous contractual relation to seek for the termination of the contract, by virtue of extraordinary and unpredictable facts, in the event such party is affected with excessive onus and generates extreme advantage to another party. Determination whether the parties were subject to extraordinary and unpredictable facts would depend nevertheless on ruling by a judge or arbitrator, as provided in the acquisition documents.

  1. Guarantees and Indemnification

For avoidance of future problems, the buyer should obtain strong and prompt executable guarantees. The (a) ability to withhold payments, (b) deposit of part of the purchase price in escrow account with clear rules for withdrawing the escrow amount are most likely measures to ensure a prompt indemnification. From previous experiences, other guarantees like pledge of shares, personal guarantee, lien or even chattel mortgage over real property are harder to execute and indemnify the prejudiced party.

De minimis clauses (minimum amount for a party to be indemnified – if not reached, the prejudiced party is not going to receive any indemnification) or basket (limitation of indemnifiable amount) are additions to the provisions for guarantees also acceptable for Brazilian M&A transactions.

The experienced advisors will make a difference to assist on the drafting of these provisions and to reflect what the parties discussed and agreed on the table.

  1. Break-up Fees

A conscious buyer will certainly avoid the risk of incurring in heavy break-up fees, with proper assessment provided by competent advisors of what may happen until closing. Nevertheless, in certain cases, even after signing a binding document, it might make sense paying a break-up fee even if substantial rather than entering into a risky transaction.

Recent Brazilian M&A transactions have included break-up fees, applicable in case of the regulatory restrictions are too high or in case the buyer gives up the acquisition. The highest break-up fee known was included in an offer made by Paper Excellence (member of Asia Pulp and Paper, based in Indonesia) was BRL 4 billion (over USD 1 billion or around EUR 900 million). The deal was not closed as another bidder had better credit check (even proposing lower break-up fees).

In 2015, Ânima paid BRL 46 million (around USD 12.5 million or EUR 10.6 million) of break-up fees to Whitney do Brasil – education sector – for giving up the acquisition due to changes on students’ public financing rules. In 2018, Ultragaz paid BRL 280 million (around USD 75 million or EUR 64 million) in break-up fees to Liquigás, due to the veto by the Brazilian antitrust authority for the operation.

  1. Recommendations

In this regard, the recommendations to avoid the referred reasons for a not satisfactory failure in M&A transactions in Brazil are:

  • Rely on local advisors: make sure that local Brazilian experts are included in the advisory team – the proper Brazilian legal, accountancy, tax and business experts can provide you with the necessary and valuable information for the proper decision-making process;
  • Listen to what the local advisors have to say: some matters raised may not seem to harm the deal, but it is important to let your advisor give you the full explanation and the reasons why the advisor is concerned about the topic. The advisor has a reason to bring the matters to discussion;
  • On the buy-side, ensure the existence of proper guarantees – feasible and enforceable – for prompt reimbursement of the losses, instead of discussions or long disputes;
  • Be very attentive in the preparation and discussion of the indemnification, procedure for indemnifying a prejudiced party, accommodating the business negotiation and the coverage to the risks explained by the advisors;
  • MAC Clauses shall be clear, precise and objective; and
  • However hard may be, it might make sense paying a break-up fee instead of completing a risky transaction.

The author of this article is Paulo Yamaguchi

Leopoldo Pagotto

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    When Life Gives You Tariffs… Make New Allies: Brazil, Europe and a New Trade Chapter

    3 Aprile 2025

    • Brasile
    • Distribuzione
    • Fisco e tasse

    Since Brazil’s General Data Protection Law (LGPD) came into force in 2020, the country has taken steady steps to solidify its data protection framework. The Brazilian National Data Protection Authority (ANPD) has become an increasingly active regulator, issuing guidelines that clarify key roles and responsibilities under the LGPD.

    One of the most recent and significant developments is ANPD Resolution No. 18, which defines the scope, duties, and governance expectations for Data Protection Officers (DPOs) in Brazil. While the DPO role was already part of the LGPD, this resolution sharpens the regulatory focus and introduces new formalities and responsibilities—especially relevant for multinational companies operating in Brazil.

    Here’s what foreign businesses and their counsel need to know—and do—to remain in compliance:

    DPO Appointment Must Be Formal and Documented

    The DPO must be formally appointed by the data controller through a written, dated, and signed document. This document must outline the DPO’s activities and duties, and must be readily available to the ANPD upon request. This is not a formality to overlook: an undocumented DPO designation could lead to enforcement risks.

    Backup Required: Designate a Substitute DPO

    While small data controllers are often exempt from appointing a DPO, the Resolution requires that they still establish a reliable communication channel for data subjects—ensuring the exercise of data protection rights. This applies even to subsidiaries or low-volume processors.

    Disclose DPO Identity Publicly

    Companies must publish the DPO’s name and contact details prominently on their website. For corporate DPOs, the name of the legal entity and the responsible individual must be disclosed. This is a public-facing requirement—easily verifiable by the ANPD or data subjects.

    Controllers Must Empower the DPO

    Brazilian law now places affirmative obligations on data controllers to provide the DPO with adequate resources and autonomy. This includes access to senior leadership and freedom from interference, especially in decision-making related to data protection.

    Identity and contact information

    The data controller must publicly disclose, in a prominent and easily accessible location on their website, the DPO’s identity and contact details. At a minimum, this should include (i) full name, for individuals; or the business name/title of the entity + full name of the responsible person, for legal entities; and (iii) information on communication means enabling the exercise of data subject rights and receiving communications from the ANPD.

    Key DPO Responsibilities

    • Responding to data subject complaints
    • Interfacing with the ANPD
    • Advising on incident response, data mapping, DPIAs, and internal policies
    • Promoting internal awareness and training
    • Ensuring risk mitigation strategies are in place

    These obligations are not merely symbolic—they may require dedicated local support and a carefully structured compliance program.

    No Strict Liability, But Conflict of Interest Rules Apply

    DPOs are not personally liable for the controller’s actions. However, conflicts of interest must be proactively managed. A DPO cannot simultaneously hold a role involving strategic decisions about the processing of personal data—unless directly related to their duties.

    Multinational organizations must take care when appointing global or regional DPOs with overlapping roles to avoid compliance pitfalls.

    Failure to Comply Can Trigger Enforcement

    If conflicts are not disclosed, or DPOs are inadequately appointed, the ANPD may apply sanctions. Controllers must document their decision-making, implement conflict-mitigation measures, or appoint alternative professionals when needed.

    Final Thoughts: Legal Risk or Strategic Advantage?

    With Resolution No. 18, Brazil aligns more closely with global data protection regimes, but with its own unique requirements. For foreign companies, the message is clear: the DPO role in Brazil is a regulatory obligation—not just a best practice.

    Properly structuring this role offers not only legal certainty, but also the opportunity to demonstrate accountability and build trust with Brazilian consumers and regulators alike.

    For international counsel, this is a strategic area where legal guidance is not just helpful—it’s essential.

    The Brazilian market has not been immune to the protectionist wave of “America First.” If such measures persist over time, they could have a lasting impact on the local economy. Still, a sour lemon can often become a sweet caipirinha in the resilient and optimistic spirit that characterizes both Brazilian society and its entrepreneurs.

    As is often the case in the chessboard of global economic geopolitics, a move from one player creates room for another countermove. Brazil reacted with reciprocal trade measures, signaling clearly that it would not accept a position of commercial vulnerability.

    This firmer stance — almost unthinkable in earlier years — strengthened Brazil’s image in Europe as a country ready to reposition itself with greater autonomy and pragmatism, opening new doors to international markets. In a world where global value chains are being restructured and reliable trade partners are in high demand, Brazil is increasingly seen not just as a supplier of raw materials, but as a strategic partner in critical industries.

    The rapprochement with Europe has been further energized by progress in the Mercosur–European Union Agreement, whose negotiations spanned decades and now seem to be gaining momentum. While the United States embraces a more isolationist commercial posture, Europe is actively diversifying its trade relations — and Brazil, by demonstrating a commitment to clear rules, economic stability, and legal certainty, emerges as a natural candidate to fill that gap.

    The Direct Impact of U.S. Tariffs

    The trade measures introduced under President Trump primarily affected Brazilian producers of semi-finished steel and primary aluminum, with the removal of long-standing exemptions and quotas. In 2024, Brazil exported US$ 2.2 billion in semi-finished steel to the United States, representing nearly 60% of U.S. imports in that category. In the same year, Brazilian aluminum exports to the U.S. reached US$ 796 million, accounting for 14% of the sector’s total. Losses in exports for 2025 are estimated at around US$ 1.5 billion.

    Brazil’s Response and a New Phase

    In April 2025, the Brazilian Congress passed a new legal framework for trade retaliation, empowering the Executive Branch to adopt countermeasures in a faster and more technically structured way. The new legislation allows, for example, the automatic imposition of retaliatory tariffs on goods from countries that adopt unilateral measures incompatible with WTO norms; the suspension of tax or customs benefits previously granted under bilateral agreements; the creation of a list of priority sectors for trade defense and diversification of export markets.

    Beyond the retaliation itself, the move marked a significant shift in posture: Brazil began positioning itself as an active player in global trade governance, aligning with mid-sized economies that advocate for predictable, balanced, and rules-based trade relations.

    An Opportunity for Brazil–Europe Relations

    This new stage sets Brazil as a reliable supplier to European industry — not only of raw materials but also of higher-value-added goods, particularly in processed foods, bioenergy, critical minerals, pharmaceuticals, and infrastructure.

    Moreover, as US–China tensions drive European companies to seek nearshoring or “friend-shoring” strategies with more predictable partners, Brazil, with its clean energy matrix, large domestic market, and relatively stable institutions, emerges as a strong alternative.

    Legal Implications and Strategic Recommendations

    This changing landscape brings new opportunities for companies and legal advisors involved in Brazil–Europe investment and trade relations. Particular attention should be paid to:

    • Monitoring rules of origin in the Mercosur–EU agreement, especially in sectors requiring supply chain restructuring;
    • Reviewing contractual and tax structures for import/export operations, including clauses addressing tariff instability or non-tariff barriers (e.g., environmental or sanitary standards), and clearly defining force majeure events;
    • Reassessing distribution and agency agreements in light of the new commercial environment;
    • Exploring joint ventures and technology transfer arrangements with Brazilian partners, particularly in bioeconomy, green hydrogen, and mineral processing.

    From lemon to caipirinha

    The world is becoming more fragmented and competitive, but also more open to realignment. What began as a protectionist blow from the United States has revealed new opportunities for transatlantic cooperation. For Brazil, Europe is no longer just a client: it is poised to become a long-term strategic partner. It is now up to lawyers and businesses on both sides of the Atlantic to turn this opportunity into lasting, mutually beneficial relationships.

    “Questo accordo non è solo un’opportunità economica. È una necessità politica“. Nell’attuale contesto geopolitico, caratterizzato da un crescente protezionismo e da importanti conflitti regionali, la dichiarazione di Ursula von der Leyen la dice lunga.

    Anche se c’è ancora molta strada da fare prima che l’accordo venga approvato internamente a ciascun blocco ed entri in vigore, la pietra miliare è molto significativa. Ci sono voluti 25 anni dall’inizio dei negoziati tra il Mercosur e l’Unione Europea per raggiungere un testo di consenso. L’impatto sarà notevole. Insieme, i blocchi rappresentano un PIL di oltre 22 mila miliardi di dollari e ospitano oltre 700 milioni di persone.

    Vediamo le informazioni più importanti sul contenuto dell’accordo e sul suo stato di avanzamento.

    Che cos’è l’accordo EU-Mercosur?

    L’accordo è stato firmato come trattato commerciale, con l’obiettivo principale di ridurre le tariffe di importazione e di esportazione, eliminare le barriere burocratiche e facilitare il commercio tra i Paesi del Mercosur e i membri dell’Unione Europea. Inoltre, il patto prevede impegni in aree quali la sostenibilità, i diritti del lavoro, la cooperazione tecnologica e la protezione dell’ambiente.

    Il Mercosur (Mercato Comune del Sud) è un blocco economico creato nel 1991 da Brasile, Argentina, Paraguay e Uruguay. Attualmente, Bolivia e Cile partecipano come membri associati, accedendo ad alcuni accordi commerciali, ma non sono pienamente integrati nel mercato comune. D’altra parte, l’Unione Europea, con i suoi 27 membri (20 dei quali hanno adottato la moneta comune), è un’unione più ampia con una maggiore integrazione economica e sociale rispetto al Mercosur.

    Cosa prevede l’accordo UE-Mercosur?

    Scambio di beni:

    • Riduzione o eliminazione delle tariffe sui prodotti scambiati tra i blocchi, come carne, cereali, frutta, automobili, vini e prodotti lattiero-caseari (la riduzione prevista riguarderà oltre il 90% delle merci scambiate tra i blocchi).
    • Accesso facilitato ai prodotti europei ad alta tecnologia e industrializzati.

    Commercio di servizi:

    • Espande l’accesso ai servizi finanziari, alle telecomunicazioni, ai trasporti e alla consulenza per le imprese di entrambi i blocchi.

    Movimento di persone:

    • Fornisce agevolazioni per visti temporanei per lavoratori qualificati, come professionisti della tecnologia e ingegneri, promuovendo lo scambio di talenti.
    • Incoraggia i programmi di cooperazione educativa e culturale.

    Sostenibilità e ambiente:

    • Include impegni per combattere la deforestazione e raggiungere gli obiettivi dell’Accordo di Parigi sul cambiamento climatico.
    • Prevede sanzioni per le violazioni degli standard ambientali.

    Proprietà intellettuale e normative:

    • Protegge le indicazioni geografiche dei formaggi e dei vini europei e del caffè e della cachaça sudamericani.
    • Armonizza gli standard normativi per ridurre la burocrazia ed evitare le barriere tecniche.

    Diritti del lavoro:

    • Impegno per condizioni di lavoro dignitose e rispetto degli standard dell’Organizzazione Internazionale del Lavoro (OIL).

    Quali benefici aspettarsi?

    • Accesso a nuovi mercati: Le aziende del Mercosur avranno un accesso più facile al mercato europeo, che conta più di 450 milioni di consumatori, mentre i prodotti europei diventeranno più competitivi in Sud America.
    • Riduzione dei costi: L’eliminazione o la riduzione delle tariffe doganali potrebbe abbassare i prezzi di prodotti come vini, formaggi e automobili e favorire le esportazioni sudamericane di carne, cereali e frutta.
    • Rafforzamento delle relazioni diplomatiche: L’accordo simboleggia un ponte di cooperazione tra due regioni storicamente legate da vincoli culturali ed economici.

    Quali sono i prossimi passo?

    La firma è solo il primo passo. Affinché l’accordo entri in vigore, deve essere ratificato da entrambi i blocchi e il processo di approvazione è ben distinto tra loro, poiché il Mercosur non ha un Consiglio o un Parlamento comuni.

    Nell’Unione Europea, il processo di ratifica prevede molteplici passaggi istituzionali:

    • Consiglio dell’Unione Europea: I ministri degli Stati membri discuteranno e approveranno il testo dell’accordo. Questa fase è cruciale, poiché ogni Paese è rappresentato e può sollevare specifiche preoccupazioni nazionali.
    • Parlamento europeo: Dopo l’approvazione del Consiglio, il Parlamento europeo, composto da deputati eletti, vota per la ratifica dell’accordo. Il dibattito in questa fase può includere gli impatti ambientali, sociali ed economici.
    • Parlamenti nazionali: Nei casi in cui l’accordo riguardi competenze condivise tra il blocco e gli Stati membri (come le normative ambientali), deve essere approvato anche dai parlamenti di ciascun Paese membro. Questo può essere impegnativo, dato che Paesi come la Francia e l’Irlanda hanno già espresso preoccupazioni specifiche sulle questioni agricole e ambientali.

    Nel Mercosur, l‘approvazione dipende da ciascun Paese membro:

    • Congressi nazionali: Il testo dell’accordo viene sottoposto ai parlamenti di Brasile, Argentina, Paraguay e Uruguay. Ogni congresso valuta in modo indipendente e l’approvazione dipende dalla maggioranza politica di ciascun Paese.
    • Contesto politico: I Paesi del Mercosur hanno realtà politiche diverse. In Brasile, ad esempio, le questioni ambientali possono suscitare accesi dibattiti, mentre in Argentina l’impatto sulla competitività agricola può essere al centro della discussione.
    • Coordinamento regionale: Anche dopo l’approvazione nazionale, è necessario garantire che tutti i membri del Mercosur ratifichino l’accordo, poiché il blocco agisce come un’unica entità negoziale.

    Seguite questo blog, vi terremo aggiornato sugli sviluppi.

    In Brazil, the acquisition of distressed assets does not have to be stressful.

    Due to the debtor’s insolvency situation, the acquirer must exercise additional caution to understand the extent of liabilities and to avoid risks of assuming undisclosed liabilities, losing assets in claw-back actions, or being held liable for fraud. In this context, due diligence becomes more thorough and detailed (and therefore more costly).

    It is a common investment world jargon that the better the opportunities, the greater the risk; but also, the greater the risks, the better the opportunities.

    Considering that excessive risk in the acquisition of distressed assets could deter investors and considering that new investments may be indispensable to save a company in crisis or to obtain funds to pay creditors, Brazilian legislation has chosen to protect acquirers of distressed assets with robust safeguards against risks.

    The general rule stipulates that the acquirer will not pay anything beyond the defined price and will not assume any obligations of the debtor of any nature, remaining shielded from liabilities. In other words, creditors will have to compete to receive part of the price paid, but they cannot hold the acquirer responsible for the debt, even if the price is insufficient for settlement. Even if the seller fails to recover and is declared bankrupt, the acquisition remains irreversible.

    The non-succession rule ensures that the purchaser or acquirer can invest safely in the debtor’s assets under judicial recovery without the risk of being held responsible for pre-existing obligations and liabilities. The absence of succession, therefore, stimulates competition for the asset to be alienated and consequently maximizes the values to be obtained and reverted for the benefit of the entire community involved in a judicial recovery process.

    The assets subjected to the protection may be

    • a specific asset (machinery, production lines, trademarks, contracts);
    • establishments, branches, units; or even
    • the entire business activity as protected assets.

    This circumstance, by providing a secure path, mitigates the requirements of due diligence, as risks are now controlled.

    There are several safe paths available to acquirers:

    1. Asset acquisition as a means of reorganization: in the judicial reorganization proceedings (Chapter 11), the debtor may foresee in the plan the selling of assets and the conditions for acquisition, such as minimum price and auction rules. The highest bidder assumes the assets. The price paid is allocated as provided in the plan (usually, a portion is allocated to pay creditors, and another to invest in the debtor’s business activity).
    2. Direct sale: if selling assets is proven to be indispensable for maintaining the company, the judge may authorize a direct sale at a fair price. The judge may order valuation and auction, unless urgency or the absence of potential interested parties is proven. If an auction occurs, the first bidder may act as a stalking horse, with the right to match the best offer.
    3. Asset acquisition in liquidation: in case of declared bankruptcy, the acquirer may offer a price lower than the appraisal, without the requirement of being a fair price. In this case, it is unusual to dismiss an open auction proceeding.
    4. Debtor financing: the acquirer may offer to finance the business activity, providing money or supplies, aiming to acquire assets or as collateral for future payment of the financing.
    5. Credit acquisition for asset adjudication: the interested party can also take an indirect path, acquiring the credits involved in the procedure and assuming the position of the creditors. Credit acquisition is legitimate, and commonly the price paid is considerably lower than the value of the acquired credit. By becoming the holder of a reasonable percentage of the credits, the interested party may offer these credits as payment for the acquisition of the assets they are interested in.

    There are still creative alternatives, which to some extent increase the risk in the transaction but may imply agility and lower investments. There are some other hints in the Legalmondo practical guide for buying distressed assets you can find here

    There is only one indispensable requirement for controlling risks: the acquirer must be adequately advised by professionals experienced in distressed asset acquisition operations.

    Riassunto

    La riforma della Legge Fallimentare Brasiliana introduce importanti cambiamenti sia nelle procedure di risanamento che nelle misure di liquidazione.

    In occasione del 15° anniversario della Legge Fallimentare Brasiliana è stata promulgata un’importante novella, frutto di necessità emerse nel corso della sua applicazione: la Legge Fallimentare, infatti, è spesso stata messa alla prova e le esperienze pratiche hanno dimostrato che alcuni strumenti necessitavano di aggiustamenti, mentre altri richiedevano un cambiamento completo.

    L’obiettivo di questo articolo è quello di elencare le cinque novità più rilevanti.

    #5 – Piano di risanamento presentato dai creditori

    Prima della riforma: la formazione del piano di risanamento era di esclusiva competenza del debitore. Se la maggioranza dell’assemblea dei creditori avesse deciso di respingere il piano, la conseguenza automatica sarebbe stata la conversione in fallimento (liquidazione).

    Ora: in casi come questo, i creditori hanno il diritto di presentare un piano di risanamento giudiziale alternativo. Di conseguenza, i creditori assumono un ruolo più rilevante nella ristrutturazione aziendale.

    #4 – Mediazione incentrata sulla ristrutturazione

    La mediazione è ora incoraggiata nei processi di risanamento giudiziale in corso, in modo che i creditori e i debitori possano trovare una via d’uscita per superare la crisi.

    La novità più importante è la mediazione anticipata, il cui obiettivo è evitare di entrare nella procedura di risanamento e la liquidazione. In questa procedura, il debitore convoca i creditori per una negoziazione mediata e questi ultimi possono chiedere al giudice un ordine di sospensione delle misure esecutive.

    #3 – Operazioni su cespiti oggetto di procedure fallimentari

    L’alienazione dei cespiti del debitore è oggi semplificata sia nel risanamento giudiziale che nel fallimento. Soprattutto nel fallimento – in cui è essenziale ottimizzare la valorizzazione dei cespiti – la legge autorizza la vendita anticipata, l’aggiudicazione da parte dei creditori e persino la donazione di cespiti che i creditori non sono interessati ad acquisire.

    Inoltre, le acquisizioni di attività in difficoltà e le operazioni di fusione e acquisizione sono ora più sicure, grazie a una disposizione legislativa più chiara che prevede uno scudo di responsabilità a favore dell’acquirente.

    #2 – Finanziamento del debitore in possesso (DIP)

    La mancanza di incentivi a finanziare il debitore sottoposto a risanamento giudiziale è sempre stata motivo di critica da parte degli stakeholder. In assenza di disposizioni di legge, i potenziali finanziatori potrebbero essere diffidenti rispetto ai rischi dell’operazione e alla mancanza di chiari vantaggi per compensare il rischio.

    Le critiche sono state affrontate con il riconoscimento giuridico del finanziamento del debitore durante il risanamento giudiziale. Questo tipo di finanziamento è noto come Debtor-in-Possession (DIP) Financing.

    Il debitore è autorizzato, tramite autorizzazione giudiziale, a stipulare contratti di finanziamento per pagare il mantenimento delle sue attività e dei suoi beni, nonché per rispondere delle spese di ristrutturazione.

    A garanzia del finanziamento, il debitore può offrire beni e diritti propri o di terzi, anche se appartenenti ad attività non correnti, cioè non originariamente destinate alla vendita, ma che servono alla struttura aziendale (ad esempio, macchinari).

    #1 – Insolvenza transfrontaliera

    La legge brasiliana ha finalmente incorporato la Model Law on Cross-Border Insolvency dell’Uncitral. Un mondo integrato e pieno di aziende globali impone di prevedere norme specifiche sull’insolvenza transfrontaliera, finora inesistenti, per eliminare l’insicurezza sulla portata delle procedure straniere per i creditori brasiliani e sugli effetti delle procedure brasiliane per i creditori stranieri.

    Ora abbiamo un nuovo panorama, con la possibilità che le procedure all’estero abbiano effetti in Brasile e che le procedure brasiliane raggiungano gli stranieri.

    Viene trattata in modo dettagliato la partecipazione degli stranieri in Brasile e la cooperazione internazionale tra giudici e altre autorità per mettere in moto i principi fondamentali che regolano l’intero sistema di insolvenza, ovvero il miglioramento della certezza del diritto, la gestione efficiente dei processi, la valorizzazione degli asset, la conservazione dell’azienda e l’ottimizzazione della liquidazione degli asset.

    Queste sono le cinque principali novità, in sintesi. Se siete interessati a saperne di più su uno di questi argomenti o se volete rimanere aggiornati sull’insolvenza – ristrutturazione in Brasile, contattateci.

    A legal due diligence of a Brazilian target company should analyze the existence and the content of Agency Agreements, including values paid to the agent and the nature of such payments and the factual situation of the target’s agents, in order to evaluate potential contingencies.

    One usual suspect in legal due diligences of Brazilian target companies in M&A transactions that should not be overlooked is the existence of agency agreements, due to:

    • the obligation to indemnify the agent stipulated by law: at least 1/12th of all commissions paid throughout the entire term of the agency agreement; and
    • the risks for the agency being disregarded and considered as an employment relationship, subjecting the principal to compensate the agent as an employee with all rights, benefits, taxes and social contributions.

    This should be considered for evaluation of potential contingencies and the impacts on the valuation of the target.

    No doubt that agents can be an important component of the sales force of the business and can be strategic for the activity of the principal, in view of a certain independence and for not increasing the payroll of a company.

    On the other hand, under Brazilian laws, the protective nature of the agency demands the principal a considerable level of attention.

    Indemnification

    Brazilian Federal Law No. 4,886/65 as amended – the Brazilian Agency Law – determines that the agent is entitled to, at the termination of an agency agreement, receive an indemnification of 1/12th calculated over all the commissions paid throughout the duration of the entire period of the agency agreement.

    The Brazilian Agency Law stipulates that if the parties sign a new contract within 6 months after the expiration of the previous, the relation between agent and principal shall be deemed as the same relationship and thus, the duration to calculate the indemnification shall encompass the entire period (past and subsequent contract).

    Termination by the agent

    The Brazilian Agency Law also stipulates situations that agent could terminate the contract and still be entitled to receive the 1/12th indemnification:

    • reduction of the activities in disagreement with the contractual stipulation
    • breach of exclusivity (territory and/or products), if so stipulated in the agreement
    • determination of prices that makes the agency unfeasible and
    • default on payment of the commissions
    • force majeure

    Termination without cause

    Termination without cause can be done, upon payment to agent of the indemnification and with a previous notice of at least 30 days, in which situation the agent shall receive the payment of 1/3 of the remuneration received during the previous 90 days prior to the termination.

    Can principal avoid the indemnification?

    The only cases where the 1/12th indemnification would not be applicable are when the contract is terminated by principal with cause. The Brazilian Agency Law has limited situations for principal to terminate the contract with cause:

    • acts by agent causing disrepute of the principal
    • breach of obligations related to the agency activities
    • criminal conviction related to honor, reputation

    These situations shall be clearly demonstrated. Producing the sufficiently strong evidence of the facts to configure cause for termination may not be an easy task, considering some of the facts may be subject to construing and interpreting by the parties, witnesses and ultimately the judge.

    As a result, from past experiences, it is rare to see principals in conditions not to incur in the 1/12th indemnification.

    Potential risk: configuring employment relationship

    In addition to the indemnification, the activities developed by the agent could eventually be deemed as performed by a regular employee of the principal and, in this case, principal could be subject to compensate the agent as an employee.

    Agent vs. employee

    For the appreciation of the employment relationship, the individual acting as agent shall file a labor claim and demonstrate the existence of the employment relationship.

    The Labor Court judge will consider the factual situation, prevailing upon the written agreements or other formal documents. The judge may rely on e-mails, witnesses and other evidence.

    The elements of an employment relationship are:

    • Individual: in case the individual acts by himself to perform the services; Personal services: the services are in fact performed by the individual specifically to the Principal;;
    • Non-eventuality – exclusivity: the services are rendered in a regular basis;
    • Subordination: key factor – the individual has to follow strict instructions directed by principal, such as reporting to an employee of the principal, determined visits;
    • Rewarding – fixed remuneration: the individual is awarded regular amounts and expenses allowances

    In the event the individual can demonstrate the existence of the elements to configure an employment relationship, he/she could have an award to entitle him/her to have his remuneration considered as of a regular employee for the last 5 years.

    As a result, the individual would be awarded the payment of Christmas bonus (equivalent to 1 monthly remuneration per year), vacation allowance (1/3 of a monthly remuneration per year), unemployment guarantee fund (1 monthly remuneration per year) plus other benefits that he/she would be given as an employee of principal (based on the collective bargaining agreement between the employees’ and employers’ unions). The company would also be obliged to make the payment of the co-related social security contributions.

    Needless to say, the result could turn into a considerable potential contingency.

    The author of this article is Paulo Yamaguchi

    The purpose of this post is to provide information about (i) the need of Brazilian companies for providing the Country-by-Country Reporting pursuant to the OECD Rules, Action 13 of the Base Erosion and Profit Shifting Actions (“BEPS Actions”) and (ii) the need to disclose the name of the final beneficial owner of entities with equity participation in Brazilian companies, or owners of assets in Brazil.

    Country-by-Country Reporting Regulation

    Normative Instruction RFB No. 1681 (“IN 1681/2016”) established the rules for the Brazilian companies to be compliant with the Country-by-Country Reporting Regulation (“CbCR”). The CbCR shall be presented annually considering the financial results of the previous fiscal year, as part of the fiscal declaration (ECF, which includes the information related to the corporate tax income return). Such declaration should be filled in accordingly with the list of mandatory information determined by IN 1681/2016 and pursuant to RFB Normative Instruction No. 1,422, of December 19, 2013.

    The CbCR is the result of the BEPS Project (Base Erosion and Profit Shifting) of the OECD’s initiative, contained in Action 13 of the BEPS Actions, aiming the enhancement of transparency while taking into consideration compliance costs.

    Multinational groups are obliged to deliver the CbCR if consolidated revenues for the fiscal year preceding the tax year of the declaration are equal to or greater than BRL 2.26 billion (or 750 million Euros, or if the local currency of the final controller of the group is equivalent to the mentioned amounts, as of January 31, 2015).

    The Brazilian subsidiary is (or may be considered) a substitute of the final controller and, as such, bound to fulfill the CbCR in the following cases:

    • it is the final controller of the multinational group is not obliged to deliver the CbCR in its jurisdiction of residence;
    • the jurisdiction where the ultimate controller is located has signed an international agreement with Brazil, however, still not ratified by the competent authorities before the deadline for delivering the CbCR; or
    • there has been a systemic failure of the jurisdiction of residence of the final controller of the multinational group that has been notified by the Brazilian Federal Revenue Office to the resident entity for tax purposes in Brazil.

    In case the Brazilian subsidiary is exempt from submitting the CbCR, it will still need to provide the identification and the jurisdiction of residence for tax purposes of its parent company.

    The deadline for providing the information will be the date for completing the ECF, to expire on 30 July 2018 for the fiscal year 2017. Failure to comply will expose the Brazilian subsidiary to the payment of a penalty of BRL 1,500.00 (USD 410 or EUR 340) per month. Submission of an incomplete CbCR may subject the Brazilian subsidiary a fine of 3% over the value omitted, inaccurate or incomplete.

    Need to disclose beneficial ownership and how to do it

    Brazilian companies are obliged to provide information on the person authorized to represent them, on the respective chain of equity interest, until the individuals characterized as final beneficial owner.

    This information shall be provided when a Non-Brazilian entity present its application to obtain the Federal Corporate Taxpayers’ Registry (“CNPJ”). If the Non-Brazilian entity already has a CNPJ, it must update the CNPJ with the beneficial owner information by 31 December 2018.

    Obtaining a CNPJ is mandatory for Non-Brazilian entities that have equity participation in Brazilian companies or other assets – financial investments, real estate, airplanes, ships, among others in Brazil.

    This obligation is in force by means of the Brazilian Federal Revenue Office Normative Instruction No. 1634 (“IN 1634/2016“). IN 1634/2016 contains a list of information to be provided and documents to be delivered for that purpose.

    On October 25, 2017, the procedure became mandatory also for Brazilian entities after publication of the ADE COCAD (Executive Declaratory Act – Registration Management General Coordination) No. 9/2017.

    Fail to comply with the procedure can result in suspension of the CNPJ. This suspension could result in inability to execute bank transactions, financial investments and obtaining loans and, ultimately, prevent the remittance of dividends to other countries or even the receipt of funds by means of a loan or capital injection from the respective parent companies abroad.

    Such information is not protected under fiscal secrecy, but the public employees shall not disclose this information pursuant to functional obligation of not disclosing information unless if summoned by court order.

    The requirement for presenting the information on the beneficial owner is already familiar for investors in Brazil. The Brazilian financial institutions are responsible for obtaining information of their client up until the beneficial owner, pursuant to Circular Letter No. 3.461/2009 of the Brazilian Central Bank. The information provided to financial institutions are subject to bank secrecy.

    These Brazilian financial institutions are severe on the provision and updating on the foreign parent companies. It is usual for companies with foreign shareholders to receive notices and warnings of possible blocking or closing the accounts if the required documents are not presented in full.

    The author of this article is Paulo Yamaguchi

    When M&A transactions in Brazil are deemed not successful by the investor the main reason for underperformance is generally the existence of debts or fiscal/labor contingencies materialized higher than evaluated, or unexpected material adverse changes.

    The reasons for overlooking the debts and fiscal/labor contingencies is often the rush to close the investment. Either for avoiding a competitor to acquire the target, or to keep the leading position of the market share, for certain cases, the buyers may have not paid proper attention to what their advisors had to say before closing the deal.

    1. Local legal advisors

    The legal advisors may take, for the perception of the executives eager to complete an acquisition, a bit longer than expected to round up facts and properly report the risks found. The perception for this lower pace to reach out the conclusions may differ from the executives due to the delay of seller to provide documents or clarify questions raised.

    Slowing down a bit to the benefit of certainty is a sound advice.

    Experienced Brazilian advisors shall always be included among the teams. Their knowledge on facing subtle change of applicable laws, rules or predominant court decisions is certainly valuable for better understanding the status of the target and the ways to mitigate risks.

    Certain facts may not seem at first as significant risk for first timers dealing with Brazilian matters. However, the advisors do have a reason to raise the point and should be properly heard. Examples such as absence of one single clear certificate issued by a government department or a missing report on disposal of solid residues, that may not seem a big issue, could turn into a risk of suspension of activities of a plant.

    An audit company is usually hired to identify tax and labor contingencies, but the audit company does not evaluate nor assess the numbers, only the maximum exposure. The legal advisors are in charge of the risk assessment and determination of the estimate of the contingencies. It is up to the buyer to accept and negotiate the relevant coverage for such contingencies.

    Seller may not give full details of all issues of the target at first. It is the role of the advisors to investigate, request further documents and clarification to bring matters that affect the business to buyer’s attention. In a good faith scenario, seller would be willing to discuss the matters, to avoid future disputes or frustrations to buyer.

    1. Debt

    Charges, penalties, interests and other compensations in financial operations turns these contracts full of minor details and very complex in anywhere in the world. Brazilian contracts are not exception. That is the reason why a proper assessment of the financial operations and obtain the real picture of the debt and related costs.

    As usual, attention to change of control provisions are also relevant to mitigate risks – absence of consent or non-compliance of the required steps prior to closing the operation can cause acceleration of the financial operation and trigger cross-default provisions in other contracts that can also lead to acceleration of the financial operations.

    1. Tax/labor contingencies

    Calculation and estimate of tax contingencies are specific for each tax and requires knowledge and a sound judgment to estimate exposure and appoint measures to cover the risks. Same level of care applies to labor-related contingencies.

    Tax and labor matters are usually the most relevant risks to be observed in a Brazilian target. Complexity of regulation and the amount of obligations to fulfill makes these points significant.

    1. Material adverse change

    Material adverse change clauses – “MAC Clauses” – are contractual provisions to mitigate negative effects or a substantial change to the parties. These provisions are admitted in Brazilian law, in view the M&A transaction documents are executed in good faith and respecting the parties’ freedom to commit to certain obligations.

    Needless to say, the MAC Clauses should contain crystal clear language, with objective description of the facts, well defined applicable time period, cause and consequences duly described for proper and easy execution. If not, determination of MAC Clause event shall end on a dispute.

    In the absence of MAC Clauses, Brazilian Civil Code contemplates the ability to any party in a continuous contractual relation to seek for the termination of the contract, by virtue of extraordinary and unpredictable facts, in the event such party is affected with excessive onus and generates extreme advantage to another party. Determination whether the parties were subject to extraordinary and unpredictable facts would depend nevertheless on ruling by a judge or arbitrator, as provided in the acquisition documents.

    1. Guarantees and Indemnification

    For avoidance of future problems, the buyer should obtain strong and prompt executable guarantees. The (a) ability to withhold payments, (b) deposit of part of the purchase price in escrow account with clear rules for withdrawing the escrow amount are most likely measures to ensure a prompt indemnification. From previous experiences, other guarantees like pledge of shares, personal guarantee, lien or even chattel mortgage over real property are harder to execute and indemnify the prejudiced party.

    De minimis clauses (minimum amount for a party to be indemnified – if not reached, the prejudiced party is not going to receive any indemnification) or basket (limitation of indemnifiable amount) are additions to the provisions for guarantees also acceptable for Brazilian M&A transactions.

    The experienced advisors will make a difference to assist on the drafting of these provisions and to reflect what the parties discussed and agreed on the table.

    1. Break-up Fees

    A conscious buyer will certainly avoid the risk of incurring in heavy break-up fees, with proper assessment provided by competent advisors of what may happen until closing. Nevertheless, in certain cases, even after signing a binding document, it might make sense paying a break-up fee even if substantial rather than entering into a risky transaction.

    Recent Brazilian M&A transactions have included break-up fees, applicable in case of the regulatory restrictions are too high or in case the buyer gives up the acquisition. The highest break-up fee known was included in an offer made by Paper Excellence (member of Asia Pulp and Paper, based in Indonesia) was BRL 4 billion (over USD 1 billion or around EUR 900 million). The deal was not closed as another bidder had better credit check (even proposing lower break-up fees).

    In 2015, Ânima paid BRL 46 million (around USD 12.5 million or EUR 10.6 million) of break-up fees to Whitney do Brasil – education sector – for giving up the acquisition due to changes on students’ public financing rules. In 2018, Ultragaz paid BRL 280 million (around USD 75 million or EUR 64 million) in break-up fees to Liquigás, due to the veto by the Brazilian antitrust authority for the operation.

    1. Recommendations

    In this regard, the recommendations to avoid the referred reasons for a not satisfactory failure in M&A transactions in Brazil are:

    • Rely on local advisors: make sure that local Brazilian experts are included in the advisory team – the proper Brazilian legal, accountancy, tax and business experts can provide you with the necessary and valuable information for the proper decision-making process;
    • Listen to what the local advisors have to say: some matters raised may not seem to harm the deal, but it is important to let your advisor give you the full explanation and the reasons why the advisor is concerned about the topic. The advisor has a reason to bring the matters to discussion;
    • On the buy-side, ensure the existence of proper guarantees – feasible and enforceable – for prompt reimbursement of the losses, instead of discussions or long disputes;
    • Be very attentive in the preparation and discussion of the indemnification, procedure for indemnifying a prejudiced party, accommodating the business negotiation and the coverage to the risks explained by the advisors;
    • MAC Clauses shall be clear, precise and objective; and
    • However hard may be, it might make sense paying a break-up fee instead of completing a risky transaction.

    The author of this article is Paulo Yamaguchi

    Geraldo Fonseca

    Aree di attività

    • Diritto societario
    • Recupero credito
    • Fallimentare
    • Commercio internazionale
    • Contenzioso
    Contatta Geraldo