In Brazil, commercial agency agreements are regulated under Brazilian Federal Law No. 4,886/65 as amended (the “Brazilian Agency Law”). The agent is defined by the Brazilian Agency Law as the legal entity or individual, with no employment relation, which performs on a permanent basis and on behalf of one or more principals, the mediation for commercial businesses, obtaining purchase orders to be sent to the principals and can perform or not the acts related to the execution of the transactions.
An agent shall be enrolled with the Commercial Agency Regional Council (in Portuguese, Conselho Regional dos Representantes Comerciais – “CORE”) to perform such activities. However, this requirement is not always observed. The absence of the enrollment does not invalidate a commercial agency agreement.
The Brazilian Agency Law is in force for more than 50 years, has incorporated changes in 1992 and 2010, but the main structure remains the same. It represents a thorough regulation and does not leave too much room for the parties to freely negotiate. It is important to have in mind that the commercial agent is protected and, in many ways, the indemnification and rights of the agent reflect reminiscences of an employment relationship.
As an example, principals shall take into account that it is quite difficult to avoid a termination penalty of 1/12th of all commissions paid throughout the entire duration of the agency agreement, unless the termination is caused by the agent, due to one of the restricted causes for termination by the principal, as more detailed described below.