The current world is surrounded by new forms of advertising and propaganda, and with the advancement of the internet and the influence of social networks, we are faced with a new essential character for the vast majority of advertising of this new generation: digital influencers.
These people, in their vast majority, are creators of content for the internet, actors, models or people known by the media, in which large companies come to see their large numbers, engagement and followers of these social networks as a real machine to boost sales.
However, according to the Consumer Protection Code, a new problem arises that we need to face: what is the responsibility of these characters, digital influencers, when the consumer is injured in any way?
In this article we will explain what is the responsibility of digital influencers in front of advertisements that cause some damage to their followers, who eventually become consumers of the product.
First of all, one should understand the civil liability present in the Civil Code, characterized by the legal notion of liability that presupposes someone’s harmful activity, which violates a pre-existing legal norm, subordinating the consequences of the act practiced.
That is, according to the Civil Code, when an attitude of someone, who violates a legal norm, causes damage to others, there is an obligation to repair this damage, due to legal liability.
Thus, civil liability originates from the aggression to an extremely particular interest, in which it subjects the offender to restore the thing to its previous state, or, if he cannot, to payment in the form of pecuniary compensation in return.
It is worth mentioning that responsibility has its assumptions, which are: human conduct; damage or injury; and causation. That is, it is not enough just to have had the consumer’s loss, it is necessary that it is proven that the act of the influencer, for example, is related to the damage caused.
Civil liability is divided into subjective and objective civil liability, so that the subjective is the result of a damage caused due to a culpable or intentional act, while the objective is characterized by the non-need for the characterization of guilt.
Advertising is guided by the consumer relationship, which is made up of the figure of consumers and suppliers, with the consumer being the final factual and economic recipient of the products and services made available, and the supplier being the one who offers the products and services.
Still, it is important to mention that as mentioned earlier, advertising is guided by the governing principles of advertising activity, that is, it has as its primary principle that of objective good faith, since it has the function of seeking harmony in consumer relations, and the others such as trust, identification, loyalty and bonding as the guiding principles of advertising.
In order to better understand advertising activity, illicit advertising should be characterized, which refers to advertising that causes damage or that offends the consumer in any way, highlighting abusive and misleading advertising, according to the Consumer Protection Code.
Abusive advertising refers to the vulnerability of the consumer, who is induced to behave in a way that harms or that offends moral values; and misleading advertising is totally or partially false advertising, which compels the consumer to make a mistake at the time of purchase.
Digital influencers are celebrities of the digital world who stand out on the internet, and have skill in the art of reaching followers, given that they are opinion makers and responsible for influencing the behavior and mentality of their followers, based on a strong link of trust and credibility.
In this way, companies began to invest the advertising of their brands in hiring influencers, in order to create content that promoted their products or services. Through the advancement and diffusion of the internet, the digital environment has allowed new forms of interaction, becoming the main means of communication and information storage of humanity.
In this way, the main means of conveying information and disseminating products or services is through social networks; thus, digital influencers use these means to reach their audience and induce them to purchase a particular product or service.
Thus, it was concluded what is the responsibility of digital influencers before the Consumer Protection Code, before the advertisements that can cause some damage to their followers, attributing to digital influencers objective responsibility of reparation before consumers, that is, that does not depend on the characterization and proof of guilt, due to the indication of products or services, since they have very high power of influence on their followers or consumers.
Thus, the influencer must answer for the damage caused, since advertising is served directly, through him and his social networks, due to the power of persuasion exercised over his followers and the economic advantage received to advertise a certain product or service.
Yasmin Khairalla. Lawyer, graduated in law with emphasis in private law, from Pontifícia Universidade Católica de Campinas (2022), enrolled in the Brazilian Bar Association, São Paulo Section (OAB/SP) (2022), lawyer in the litigation department at TM Associados
Trade Dress
Trade Dress is the set of image that identifies the brand, product or service generating recognition from the general public, not limited to packaging, label, etc., but the sum of all elements.
The expression “Trade Dress” appeared in mid-1946 in the United States, where the first discussions about industrial property and its right to register began, and there was even its own legislation that deals with the regulation and protection of this set of image.
For example: when we think of the “Fanta” line of soft drinks, we are automatically referred to the shape of its bottle; or when we imagine the “Havan” chain of stores, we remember the distinctive architecture and the glamorous statue of Liberty. However, these characteristics are not the brand itself, nor can they be patented or registered, but they are fundamental for identification and individualization of the brand or product.
Although there is this relevance to the market, Trade Dress has no legal protection, since there is no specific norm in the legal system that makes express mention of the Institute, although some elements are subject to registration (trademark, industrial design, etc.), registration as a Trade Dress is not possible.
Following this understanding, because there is still no regulatory body for this visual identity as a whole, the violation of Trade Dress in Brazil is more common than we imagine, such as the case of “Uai in Box”, which was accused of violating the Trade Dress of the Chinese food fast-food chain “China in Box”, which in addition to the similarity in name the first used the identical packaging to the second.
Currently, the Superior Court of Justice (“STJ”) has signed an understanding that it must be analyzed case by case in order to grant protection to Trade Dress or not. This protection is given by equating these characterizing elements with the trademark, patent and Industrial Design Institute.
Thus, trade Dress violation occurs when a diverse brand/product imitates the distinctive elements of the visual identity of another brand/product, with the aim of obtaining an illicit advantage over the consumer, affecting the free initiative of competition.
Therefore, the exercise of business activity must be based on loyalty, transparency and based on good faith. The individual has the freedom to exercise any activity, except in cases where the law prohibits, competition being the irrefutable practice in the exercise of business activity.
Thus, the violation of Trade Dress, in Brazil, for not having its own typification and for being understood as an act that hurts loyalty, transparency and good faith , is understood and punished as unfair competition.
Finally, there is a good chance that this protection will change soon through the creation of specific legislation to deal with Trade Dress, but the discussion is still uncertain.
What we have left, for now, is to wait for the changes made in the legislation in order to protect something more comprehensive than just the trademark, patent and Industrial Design.
Pedro Anselmo Boaventura-graduated in law, from Centro Universitário Padre Anchieta (2021). Postgraduate in Civil and Business Law from Faculdade Damásio De Jesus. Paralegal of the advisory Department of TM Associados.
Planning, Compliance and ESG
End cycles, close doors, end chapters. A new year is a good opportunity to start over! Jump 7 ripples, wear white clothes, eat lentils, toast with champagne, eat grapes … plan!
New Year’s traditions invite people to reflect on the year that has passed and also to set goals/objectives for the year that is about to begin.
The human being needs new beginnings, whether at the end of a task, a day, a week, a month, a year. We have to “make peace” with our immediate past, to move forward. Our dependence on restarts has Daily implications, which we observe in various behaviors, such as at the beginning of a diet (no one starts a diet if not on Monday), habituality of exercise, among others.
With companies it is no different, so the beginning of the year is marked by meetings to present the objectives of the year and the planning to achieve them. This presentation at the beginning of the year is the “top of the iceberg”, the visible part, of a constant and essential work of “thinking about the future”!
Setting goals and structuring small tasks to achieve them is not an easy task, it needs the entrepreneur to know not only techniques for setting goals and planning, but to really know your company and its future (mission, vision and values are also essential), which includes: Team, customers, market, competitors and finance.
“If you know the enemy and know yourself, you need not fear the outcome of a hundred battles. If you know yourself but do not know the enemy, for every victory you win you will also suffer a defeat. If you know neither the enemy nor yourself, you will lose all battles.”Sun Tzu. The Art of War.
In addition to giving direction to the social exercise of companies, the goals have a very interesting point in common: they are all measurable. There is no point in setting an immeasurable goal, it is like jumping waves and asking for money (money does not come, I have already tried), we need work and strategies for the efficient use of the resource time!
When we bring this concept to companies, in some (more structured) the task is easier, now for others (with little professionalization, such as family businesses) it is an impossible mission if the executives have not done their homework.
Homework requires transparency, good financial health, engagement and legal compliance. The first 3 will only be solid and reliable if the latter is up to date, since compliance is ensuring that business practices are in accordance with internal statutes and regulations, as well as laws in general.
Legal compliance or, for those who like foreignness, “compliance”, since the Brazilian corruption scandal in 2015 (watch the movie “The Laundry”), continues on the agenda in the most diverse companies, both to improve corporate governance rules and to monitor how companies have acted in favor of social objectives (such as ESG – Environment, Social and Governance).
The concern with the social and environmental impact of companies is the size that the World Economic Forum launched at the 2020 Annual Meeting in Davos, a guide to metrics based on ESG values, reinforced practice in the following 2 (two) years.
The adoption of ESG practices has proven positive to attract investment, generate value for consumers and positive impact on workers, for this reason these practices have been included in business planning and should remain so for the next few years. The implementation of ESG practices is not a one-off, it takes a continuous effort. It’s like exercising, don’t just do it once!
The inclusion of ESG practices in business planning occurs through the effective implementation of measures concerned with its three pillars, namely:
Environmental compliance: company actions focused on the environment (here it is not only pollutant reduction, but also: concern with recycling, clean energy, conscious use of Natural Resources);
Social compliance: the organization’s attitude towards social factors such as: inclusion and diversity, Labor Relations, healthy work environment;
Governance compliance: independence and diversity of the board of directors, adequate remuneration policy, transparency, ethics, anti-corruption practices, data protection and Privacy.
Finally, although tempting for inclusion in the plan of goals and objectives of 2023, ESG practices must be effective, Greenwashing (having a different discourse from the practice), in addition to destroying credibility, can generate boycott campaigns, in addition to being considered as misleading propaganda.
Leonardo Theon de Moraes-lawyer, graduated in law, with emphasis in business law, from Universidade Presbiteriana Mackenzie (2012), enrolled in the Brazilian Bar Association, São Paulo Section (OAB/SP) (2012). Postgraduate and Specialist IN Business Law from the São Paulo Law School of the Getúlio Vargas Foundation (2014), Master in political and Economic Law from the Mackenzie Presbyterian University (2017), author of books and articles, Lecturer, University professor and member of the São Paulo Lawyers Association (AASP). Founding partner of TM Associados.
Civil liability of digital influencers
The current world is surrounded by new forms of advertising and propaganda, and with the advancement of the internet and the influence of social networks, we are faced with a new essential character for the vast majority of advertising of this new generation: digital influencers.
These people, in their vast majority, are creators of content for the internet, actors, models or people known by the media, in which large companies come to see their large numbers, engagement and followers of these social networks as a real machine to boost sales.
However, according to the Consumer Protection Code, a new problem arises that we need to face: what is the responsibility of these characters, digital influencers, when the consumer is injured in any way?
In this article we will explain what is the responsibility of digital influencers in front of advertisements that cause some damage to their followers, who eventually become consumers of the product.
First of all, one should understand the civil liability present in the Civil Code, characterized by the legal notion of liability that presupposes someone’s harmful activity, which violates a pre-existing legal norm, subordinating the consequences of the act practiced.
That is, according to the Civil Code, when an attitude of someone, who violates a legal norm, causes damage to others, there is an obligation to repair this damage, due to legal liability.
Thus, civil liability originates from the aggression to an extremely particular interest, in which it subjects the offender to restore the thing to its previous state, or, if he cannot, to payment in the form of pecuniary compensation in return.
It is worth mentioning that responsibility has its assumptions, which are: human conduct; damage or injury; and causation. That is, it is not enough just to have had the consumer’s loss, it is necessary that it is proven that the act of the influencer, for example, is related to the damage caused.
Civil liability is divided into subjective and objective civil liability, so that the subjective is the result of a damage caused due to a culpable or intentional act, while the objective is characterized by the non-need for the characterization of guilt.
Advertising is guided by the consumer relationship, which is made up of the figure of consumers and suppliers, with the consumer being the final factual and economic recipient of the products and services made available, and the supplier being the one who offers the products and services.
Still, it is important to mention that as mentioned earlier, advertising is guided by the governing principles of advertising activity, that is, it has as its primary principle that of objective good faith, since it has the function of seeking harmony in consumer relations, and the others such as trust, identification, loyalty and bonding as the guiding principles of advertising.
In order to better understand advertising activity, illicit advertising should be characterized, which refers to advertising that causes damage or that offends the consumer in any way, highlighting abusive and misleading advertising, according to the Consumer Protection Code.
Abusive advertising refers to the vulnerability of the consumer, who is induced to behave in a way that harms or that offends moral values; and misleading advertising is totally or partially false advertising, which compels the consumer to make a mistake at the time of purchase.
Digital influencers are celebrities of the digital world who stand out on the internet, and have skill in the art of reaching followers, given that they are opinion makers and responsible for influencing the behavior and mentality of their followers, based on a strong link of trust and credibility.
In this way, companies began to invest the advertising of their brands in hiring influencers, in order to create content that promoted their products or services. Through the advancement and diffusion of the internet, the digital environment has allowed new forms of interaction, becoming the main means of communication and information storage of humanity.
In this way, the main means of conveying information and disseminating products or services is through social networks; thus, digital influencers use these means to reach their audience and induce them to purchase a particular product or service.
Thus, it was concluded what is the responsibility of digital influencers before the Consumer Protection Code, before the advertisements that can cause some damage to their followers, attributing to digital influencers objective responsibility of reparation before consumers, that is, that does not depend on the characterization and proof of guilt, due to the indication of products or services, since they have very high power of influence on their followers or consumers.
Thus, the influencer must answer for the damage caused, since advertising is served directly, through him and his social networks, due to the power of persuasion exercised over his followers and the economic advantage received to advertise a certain product or service.
Yasmin Khairalla. Lawyer, graduated in law with emphasis in private law, from Pontifícia Universidade Católica de Campinas (2022), enrolled in the Brazilian Bar Association, São Paulo Section (OAB/SP) (2022), lawyer in the litigation department at TM Associados
“Non-compete” -the need for restrictive interpretation of the non-competition clause
Recognized as a moral and loyalty obligation, the non-competition or non-compete clause, in general, restricts the performance of the parties to a contract so that one does not carry out activity considered competitive to the other. This clause is commonly used in purchase and sale of shares (M&A), in which it aims to protect and maintain the financial and operational viability of the business, and can be applied in various market segments and in different situations.
In such purchases and sales of shares, for example, it has become quite common to oppose the non-compete clause, restricting, by means of it, by the will of the parties, competing activities between the seller and the buyer for a certain period of time and in a certain segment, thus reducing the risk that the investment of this operation is not satisfactory to the parties due to possible competition.
Although they seem simple, non-compete clauses have requirements for their validity, such as: predetermined duration, delimitation of territory and activity. In addition to these requirements, the non – compete clauses are also accompanied by an arbitrated indemnity in sufficient amount to compensate the individual for the period in which they are prevented from acting as a result of it, being recognized by the doctrine as a moral and loyalty obligation, thus pricing the non-competition of these partners, who cease to integrate the corporate framework and are prevented from acting in the market.
It is important to note that there are several types of no – compete clauses. The most common is concerned with restricting the performance of directors and/or controllers of companies, for a period of time, within a certain segment, providing that they will not be able to act in businesses similar to that divested and/or that they were part of.
A practical example would be the purchase of a company creating urban mobility applications. The controller and / or programming director of the application and all its intelligence knows the entire programming system of this, its strengths and its points that could be improved, in addition to having market knowledge. It would not be fair that this controller and/or director, a month after the purchase of this company, went to work for its largest competitor or engaged in an identical project.
However, despite the competitive restriction, for the validity of the clause, as mentioned above, in addition to specifying the activity and time, the non-competition clause must provide for sufficient compensation to compensate the individual for the period in which they are prevented from acting as a result of said clause.
There is also the possibility of the institution of non-compete clauses for the restriction of the practice of certain activities between legal entities and/or companies linked to them. It is a widespread practice between the parties, that is, the parties expressly stipulate the restriction that must occur.
This concern, present in every non-competition clause, in expressly delimiting the details of the restriction, occurs because these end up directly restricting free competition[1] and free initiative[2], both constitutionally established principles.Thus, it is necessary that the non-compete clauses be interpreted in a restrictive manner, due to reasonable concern of a possible “expansion” in its interpretation, imposing restrictions on those who have committed themselves through it that are not expressly mentioned in the agreement.
In this way, it is understood that the application and interpretation of these clauses must always be restrictive, not least because the clauses will always be interpreted in favor of constitutional freedoms (free initiative and free competition), and the parties cannot be obliged not to undertake or not to compete beyond the limits expressly agreed therein.
The Brazilian courts have already moved towards a peaceful understanding in this regard, analyzing cautiously what were the limits agreed between the parties, so that the non-compete clauses are not interpreted extensively, but restrictively and only pay attention to what was agreed and the way it was agreed, thus respecting the constitutional principles already mentioned.
A judgment that is worth mentioning is from 1911, from the Court of Justice of the state of São Paulo, in which the bad faith of a merchant who after the sale of his store to a third party, established with him that he could not have the installation of another store on Consolação Street was discussed. However, the merchant installed a new store on a street close to that mentioned.
The court understood that there was no bad faith of this merchant, who initially sold his store, since the parties freely restricted the territory in what would be the “Forbidden Zone” of the new store facility, and the terms were clear: on Consolation Street. Since at the time a greater restriction was not made (a radius counting from Rua da Consolação, for example), the merchant who felt injured could not charge for something not expressly provided for in the contract once agreed.
Thus, the non-compete clause must always be interpreted in a restrictive manner, taking into account what is expressly agreed between the parties and in respect of the principle of Pacta Sunt Servanda.
Giovanna Luz Carlos-lawyer, graduated in law, from Centro Universitário Padre Anchieta (2019), enrolled in the Brazilian Bar Association, São Paulo Section (OAB/SP) (2020). Postgraduate in Civil Procedure from Faculdade Damásio De Jesus. Lawyer and Administrative Coordinator of TM Associados.
Leonardo Theon de Moraes-lawyer, graduated in law, with emphasis in business law, from Universidade Presbiteriana Mackenzie (2012), enrolled in the Brazilian Bar Association, São Paulo Section (OAB/SP) (2012). Postgraduate and Specialist IN Business Law from the São Paulo School of Law of the Getúlio Vargas Foundation (2014), Master in political and Economic Law from the Mackenzie Presbyterian University (2017), author of books and articles, lecturer, Professor in undergraduate, MBA and Executive Education at FIPECAFI and member of the São Paulo Lawyers Association (AASP). Founding partner of TM Associados.
<[1] the principle of free competition, which is described in Article 170, item IV of the Federal Constitution of 1988, comes to complement the idea of Free initiative, that is, this principle will ensure competitiveness in the market, guaranteeing equal rights for all, and thus allowing anyone to explore any commercial activity, except for any legal impediments.
[2] Free Will and freedom in the choice of an economic activity, as well as the freedom to choose the means by which one intends to achieve this economic activity.
Corporate Compliance – a perpetuity tool for companies
Many err in thinking that corporate compliance is only a necessary initiative for large companies and focused, only and only, on anti-corruption strategies. In reality, in the current corporate environment, especially when entering into new partnerships and hiring, compliance is a mandatory and fundamental resource.
Legal compliance or, for those who like foreignness, compliance, since the Brazilian corruption scandal in 2015 (watch the movie “The Laundry”), continues on the agenda in the most diverse companies, both to improve corporate governance rules and to monitor how companies have acted in favor of social objectives (such as ESG – Environment, Social and Governance).
Compliance is ensuring that business practices are in accordance with internal statutes and regulations, as well as laws in general. Thus, business compliance is an important tool to combat illegalities within companies, preventing legal and financial risks for the organization.
With an efficient compliance program, it is possible to protect the company from possible sanctions, lawsuits and reputational damage. In addition, the implementation of compliance policies can help increase transparency and business ethics, improving the trust of customers, employees, suppliers and investors in the company.
Still, a structured compliance extends to practically all areas and sectors of the company, because we have as ‘basic’ types of compliance: contractual compliance, labor compliance, tax compliance, data protection compliance and environmental compliance.
Each of these types is aimed at ensuring that the company complies with the norms, laws and regulations applicable to each of the areas. For example, contractual compliance aims to ensure that the company strictly complies with the clauses and conditions of the contracts it enters into with employees, suppliers, customers and other business partners.
Compliance thus ensures that the company complies with the obligations it has committed to its business partners and, in addition, protects itself from any problems and complications that may arise throughout this business relationship.
Meanwhile, tax compliance aims to ensure that the company complies with tax obligations while avoiding fines and penalties. Compliance in data protection, on the other hand, aims to guarantee the security and privacy of the data of customers and employees that are treated, thus avoiding possible data leaks, security incidents and the application of sanctions by the National Data Protection Authority (ANPD).
Environmental compliance aims to ensure that the company complies with environmental laws and regulations, avoiding damage to the environment and possible fines and sanctions. Currently also applied in ESG (Environmental, Social and Governance) programs, environmental compliance has gained a lot of relevance and has become a requirement within companies, charged not only by the national and international market, but also by a large part of society, that is, by its own customers.
And finally, we can talk about labor compliance, which aims to ensure that the company is complying with all the laws and regulations provided for in labor legislation, providing a safe environment for its employees and, especially, protecting itself from high convictions in any lawsuits and inspections by the competent bodies.
In summary, corporate compliance, carried out in a structured way, covering all areas of the company, is essential to ensure the transparency, integrity and sustainability of the company’s business.
Thus, to ensure the perpetuity of business, enable the capture of investments and the conquest of great partners and more and more customers, we have business compliance no longer as a choice, but rather as a must for companies that want to perpetuate themselves in the business world.
With planning, regulation, transparency and access to information, it is possible to create an efficient business compliance program and keep the company healthy and prosperous within the current market.
Marina Sampaio Costa-lawyer, graduated in law, from Centro Universitário Padre Anchieta (2018), enrolled in the Brazilian Bar Association, São Paulo Section (2019). Postgraduate in Business Law from Faculdade Legale, postgraduate in corporate law and Compliance from Escola Paulista de Direito (EPD), author of articles. Lawyer and Operations Coordinator at TM Associados.
Leonardo Theon de Moraes-lawyer, graduated in law, with emphasis in business law, from Universidade Presbiteriana Mackenzie (2012), enrolled in the Brazilian Bar Association, São Paulo Section (OAB/SP) (2012). Postgraduate and Specialist IN Business Law from the São Paulo School of Law of the Getúlio Vargas Foundation (2014), Master in political and Economic Law from the Mackenzie Presbyterian University (2017), author of books and articles, lecturer, Professor in undergraduate, MBA and Executive Education at FIPECAFI and member of the São Paulo Lawyers Association (AASP). Founding partner of TM Associados.
The participation of a foreigner in a limited company in Brazil
Brazil has been a popular destination for foreign investment, and many entrepreneurs have an interest in establishing companies in the country[1]. In this context, the following question arises: Can a foreigner participate in a society in Brazil?
Yeah! A foreigner can participate in a company in Brazil and in this article we will point out the necessary steps for the Constitution or entry of a foreigner as a partner in a limited company (LTDA) in Brazil, let’s go:
This power of attorney must: (i) have the signature of the foreigner notarized in Brazil or (ii) be notarized (by a notary located in another country) and consularized (recognized by a Brazilian consulate in the same country in which it was notarized), after the power of attorney must be registered in a notary’s office in Brazil and in the commercial Board of the state headquarters of the company that the foreigner will be part of. We emphasize that Brazil is a signatory to The Hague Convention, so for documents notarized in other countries that are also signatories, it is enough for the notary to issue the document with the Apostille of The Hague Convention and consularization will not be necessary, however the other steps provided in item (ii) will continue to be necessary.
In addition to legal procedures, the foreigner should also be aware of some limitations when it comes to investing in Brazil. For example, there are restrictions in certain sectors, such as mining services, hydropower, and telecommunications.
Thus, once regulatory procedures have been overcome, with the economic growth of Brazil, the creation of a limited company can be an excellent option for foreigners looking to start a business in the country.
Sabrina de Melo-Bachelor of laws from Centro Universitário Padre Anchieta (2022). Paralegal Advisory Department at TM Associates.
Leonardo Theon de Moraes-lawyer, graduated in law, with emphasis in business law, from Universidade Presbiteriana Mackenzie (2012), enrolled in the Brazilian Bar Association, São Paulo Section (OAB/SP) (2012). Postgraduate and Specialist IN Business Law from the São Paulo School of Law of the Getúlio Vargas Foundation (2014), Master in political and Economic Law from the Mackenzie Presbyterian University (2017), author of books and articles, lecturer, Professor in undergraduate, MBA and Executive Education at FIPECAFI and member of the São Paulo Lawyers Association (AASP). Founding partner of TM Associados.
[1] https://www.cnnbrasil.com.br/economia/em-recorde-36-empresas-estrangeiras-solicitaram-instalacao-no-brasil-em-2021/
Foreigner participation in limited liability companies in Brazil
Brazil has been a popular destination for foreign investment, and many entrepreneurs are interested in establishing companies in the country[1]. In this context, the following question arises: can a foreigner participate in a company in Brazil?
Yes! A foreigner can participate in a company in Brazil, and in this article, we will outline the necessary steps for a foreigner to form or join a limited liability company (LTDA) in Brazil. Let’s get started:
This power of attorney must: (i) have the foreigner’s signature notarized in Brazil or (ii) be notarized (by a notary located in another country) and consularized (recognized by a Brazilian consulate in the same country where it was notarized). After that, the power of attorney must be registered with a notary’s office in Brazil and with the Commercial Registry of the state where the company to which the foreigner will be a member is headquartered. We emphasize that Brazil is a signatory to the Hague Convention, so for documents notarized in other countries that are also signatories, the notary simply issues the document with the Hague Convention Apostille, and consularization will not be necessary. However, the other steps set out in item (ii) will still be required.
In addition to legal procedures, foreigners should also be aware of certain limitations when it comes to investing in Brazil. For example, there are restrictions in certain sectors, such as mining services, hydropower, and telecommunications.
Therefore, once regulatory procedures are overcome, with Brazil’s economic growth, creating a limited liability company can be an excellent option for foreigners looking to start a business in the country.
Sabrina de Melo – Bachelor of Laws from Padre Anchieta University Center (2022). Paralegal in the Advisory Department at TM Associados.
Leonardo Theon de Moraes – Attorney, graduated in law, with an emphasis on business law, from Mackenzie Presbyterian University (2012), registered with the Brazilian Bar Association, São Paulo Section (OAB/SP) (2012). Postgraduate and Specialist in Business Law from the São Paulo Law School of the Getúlio Vargas Foundation (2014), Master’s in Political and Economic Law from Mackenzie Presbyterian University (2017), author of books and articles, speaker, professor in undergraduate, MBA, and Executive Education programs at FIPECAFI, and member of the São Paulo Lawyers Association (AASP). Founding partner of TM Associados.
[1] https://www.cnnbrasil.com.br/economia/em-recorde-36-empresas-estrangeiras-solicitaram-instalacao-no-brasil-em-2021/
Family Crimes
Typically caused by mismanagement or linked to factors external to the company, such as the 2008 crisis and the current crisis affecting Brazil, so-called economic, financial, and asset crises can lead to companies becoming delinquent or, in more severe cases, insolvent.
Insolvency is characterized not only when liabilities exceed the company’s assets, but also when the company lacks the capacity to generate sufficient cash to honor its commitments. These crises are defined in Articles 748 to 750 of the Code of Civil Procedure.
When identified and prolonged, these crises can render companies unable to carry out their activities, in which case Brazilian business owners may seek judicial reorganization or bankruptcy.
In this regard, Law No. 11,101 of 2005 addresses the procedures adopted in out-of-court and judicial reorganization processes, bankruptcy, and the crimes known as bankruptcy crimes, which are primarily committed when fraudulent activity is identified that aims to harm the creditors of a company undergoing judicial reorganization or bankruptcy.
Bankruptcy crimes are classified and divided into:
– Fraud against creditors:
Fraud against creditors is defined in Article 168 of Law No. 11,101/2005 and consists of the practice of a fraudulent act to obtain an undue advantage for oneself or others, resulting in losses for creditors.
– Misleading:
Misleading is defined in Article 171, Caput, of Law 11.101/2005, and consists of withholding or omitting information, as well as providing false information in the bankruptcy proceedings, in order to mislead the Court, the Public Prosecutor’s Office, Creditors, or the judicial administrator to obtain any advantage over them.
– Favoring Creditors:
Favoring Creditors is defined in Article 172 of Law 11.101/2005, and consists of the diversion of assets to benefit one or more creditors, causing harm to others.
– Illegal Activity:
Illegal Activity is defined in Article 176 of Law 11.101/2005, and consists of performing tasks or performing functions for which one is not qualified or is incapacitated by a court order.
– Failure to Provide Mandatory Accounting Documents:
Failure to provide accounting documents is covered by Article 178 of Law 11.101/2005 and consists of failing to prepare, record, or authenticate the company’s mandatory accounting records.
Bankruptcy crimes, in addition to being punishable by fines, are punishable by detention and even imprisonment.
Law 11.101/2005, in its Article 181, defines the consequences of a conviction for a bankruptcy crime, which are:
Disqualification from engaging in business activities;
Disqualification from holding a position or role on the board of directors, executive board, or management of companies subject to the Bankruptcy and Judicial Reorganization Law;
The inability to manage a company by mandate or through business management. These effects are not automatic and must be specified in the sentencing ruling, lasting up to 5 (five) years from the end of the sentence served by the convicted offender.
Although these practices may seem far-fetched from the law, bankruptcy crimes are very common among struggling companies, such as those that end up favoring one creditor over another in order to maintain their operations.
In these cases, when a company begins to make decisions about prioritizing one payment over another, among other things, the golden tip is to seek specialized consulting to help navigate the crisis, so as not to miss the timing of a possible recovery, for example, or even to avoid committing bankruptcy.
For a better understanding of bankruptcy and judicial reorganization, see the article: https://tmassociados.com.br/falencia-e-recuperacao-judicial-quais-sao-as-principais-diferencas/
Leonardo Theon de Moraes – Attorney, graduated in law, with an emphasis on business law, from Mackenzie Presbyterian University (2012), registered with the Brazilian Bar Association, São Paulo Section (OAB/SP) (2012). He holds a postgraduate degree and a specialist degree in business law from the Getúlio Vargas Foundation São Paulo School of Law (2014), a master’s degree in political and economic law from Mackenzie Presbyterian University (2017). He is the author of books and articles, a speaker, a university professor, and a member of the São Paulo Bar Association (AASP). He is a founding partner of TM Associados.
Pedro Anselmo Boaventura – Graduated in law from Padre Anchieta University Center (2021). Postgraduate student in Civil and Business Law at Damásio de Jesus College. Paralegal in the Advisory Department of TM Associados.
Recovery of ICMS amounts under Simples Nacional
Companies subject to the Simples Nacional (National Simple Tax Regime) that carry out manufacturing operations on behalf of third parties have an excellent tax opportunity.
Manufacturing on behalf of third parties occurs when a company sends raw materials or semi-finished products to another company, which will then perform a transformation or processing process before returning the finished product. In this process, the company that performs the transformation is called the manufacturing company, and the company that sends the raw materials is called the ordering company.
It is important to note that manufacturing on behalf of third parties should not be confused with manufacturing to order; they are distinct types of manufacturing, as provided by tax legislation.
In manufacturing on behalf of third parties, the raw materials are supplied by the ordering company, with the manufacturing company being responsible only for the labor. On the other hand, in manufacturing to order, the manufacturing company is responsible for both the supply of the raw materials and the labor, and ICMS is due in this case.
Regarding third-party manufacturing, São Paulo State legislation provides that the ICMS (Tax on Goods and Services) will be paid by the ordering party, not the manufacturer.
However, manufacturers are typically under the Simples Nacional (Simples Nacional) system and end up paying the full tax rate, including the ICMS itself. This is due to the fact that under the Simples Nacional (Simples Nacional) calculation system, taxpayers pay a single tax rate based on their revenue, which covers the following taxes: IRPJ (Income Tax), CSLL (Social Contribution on Net Income), PIS (Social Contribution on Net Income), COFINS (Social Contribution on Net Income), CPP (Consumer Tax on Goods and Services), ICMS (Social Contribution on Net Income), ISS (Social Contribution on Net Income), and IPI (Social Contribution on Net Income).
However, manufacturers are not required to pay ICMS. The State of São Paulo has even issued responses to inquiries regarding the interpretation of tax legislation that favor the non-payment of ICMS in third-party manufacturing.
Therefore, manufacturers have the option of excluding ICMS from the Simples Nacional tax rate and recovering the tax unduly paid over the past five years. The estimated tax savings correspond to one-third of the Simples Nacional tax rate due during the fiscal year.
Raphael O. F. de Toledo Piza holds a Master’s degree in Accounting and Actuarial Sciences from the Pontifical Catholic University of São Paulo, a degree in Economics from IBMEC São Paulo (Insper), and a degree in Law from Mackenzie Presbyterian University. He has ten years of experience in the tax field, including stints at traditional law firms and large audit firms (the Big Four).
Beatriz Giansante Moquiute, attorney, graduated in law with a concentration in tax law from Mackenzie Presbyterian University (2021), and is a registered attorney with the Brazilian Bar Association, Section 9 São Paulo (OAB/SP) (2022). She is currently pursuing a postgraduate degree in Tax Law from the Pontifical Catholic University of Rio Grande do Sul. She is a lawyer in the Tax Department at TM Associados.
To the ‘ buyer’s remorse Purchases on The point of view of the Consumer
With the growing popularity of online shopping, it has become increasingly more important to discuss is the ‘buyer’s remorse’ for the purchases made over the internet, among other cases, the purchase of out-of-business (such as, in addition to the internet, over the telephone). Being on the right of retraction is regulated by the Consumer protection Code, in its article 49[1].
The right of retraction is to the right of the consumer to withdraw from a purchase of a product or a service without a statement of reasons, within 7 days of your receipt of the product, or the signing of the contract. This right does not apply to purchases made from outside of the premises, such as in-stores and telesales.
In the case of online shopping, and the deadline for exercising of the right of retraction begins to run from the date of receipt of the product. The user is advised to get in touch with the supplier to inform you of the cancellation, the supplier shall have the duty to take back the product and make the refund of the purchase price paid by the customer, including shipping and handling.
However, it is important to point out that it is the ‘ buyer’s remorse is not applicable to any other situations. There are some exceptions that are set out in the Consumer Code, such as, for example, the services provided to you immediately after the engagement and the products are perishable.
Another important issue is the ability of the supplier to require the returned product is in perfect condition. Of the Consumer Code provides that the consumer is able to test the product, but must return it to us in the same condition in which you received it. Therefore, if the product has been damaged or used improperly by the customer, the supplier is entitled to refuse to accept the return.
The other important thing to remember is that it is the ‘buyer’s remorse’ is not the same as that of the law of return. The swap is an agreement between the consumer and the supplier for the replacement of the product, in the case of addiction[2], a fact[3] or a defect to[4]. the right of the repentance, that is, the ability to withdraw from the purchase without having to justify the reason and without which the product or service to any type of addiction, or the defect.
For this reason, it is important that the consumer be aware of the time limit set by law. Once seen, in the case of the supplier, to refuse to make a refund or accept a return of a product, the customer may turn to the consumer protection agencies, such as the one You have, or even seek legal advice to ensure that your rights are.
In the end, the right of retraction is an important tool for the protection of the consumer, primarily in online shopping, in which the consumer has not had the opportunity to see the product in person before you make a purchase. Therefore, the provider should be aware of their legal requirements, and to guarantee to the consumer the full realization of this right, thus contributing to a consumer that is fair, and balanced.
Leonardo Theon in Paris as well as in Europe, with a degree in law, with an emphasis in business law from the University Presbyterian Mackenzie (2012), which was registered at the Ordem dos Advogados do Brasil, São Paulo (OAB/SP) (2012). A post-graduate degree and an Expert in Corporate Law from the Law School of São Paulo da Fundação Getulio Vargas (2014) Master’s degree in Law and Political economics, Universidade Presbiteriana Mackenzie, brazil (2017), the author of many books and papers, keynote speaker, college professor, and member of the bar Association of São Paulo (AASP), the Chairman of the State committee of the Business Law of the FEDERAMINAS. A founding member of the TM is Associated with it.
Peter Will Report a doctorate in law at Centro Universitário Padre Anchieta (2021). Master degree in Civil and Corporate Law from the Faculty Damasio de Jesus. A lawyer for the Department of the Litigation in the TM Associated with it.
[1] Art. 49. The customer may withdraw from the contract within a period of 7 days from the date of its signature, or the act of receiving the product or service that the procurement for the supply of goods and services occurs off the premises, especially on the phone or at your home.
[2]it covers the flaws, apparent and easy-to-finding-hidden-and the products that are not in line with the rules for the manufacture, distribution, or display
[3] it in the event of damaging, as a whole, that is to say, as a synonym for the damage
[4]a product that is defective when it does not provide security in accordance with the characteristics of a normal thing.