One of the major hurdles for investors looking to enter the Brazilian market is no longer: non-residents (Brazilians or foreigners) can now be appointed as executive directors of Brazilian corporations (sociedades anônimas).
For the director to take up the position they must appoint a Brazilian resident to hold their power of attorney with the powers to:
- be served with legal proceedings against him or her arising under corporate laws; and
- (for public companies) be served with legal proceedings and notifications relating to administrative proceedings filed by Brazil’s Securities Exchange Commission.
The attorney’s appointment must be for the full term of the directorship, plus an additional three years.
Until Law 14,195/2021 came into force, only permanent residents were allowed to hold executive directorships. However, in yet another positive step towards improving Brazil’s business environment, Deputy Kim Kataguiri proposed the amendment for the following reasons:
“[We] intend to amend the Corporations Law to remove the requirement that the management bodies being residents [of Brazil]. Such requirement no longer makes any sense, considering the technology and communications that we have available, which allow people to carry out their duties anywhere in the world”.
Although the Corporations Law has been changed, it will take some months until the boards of trade (companies registries or “junta comerciais”) adapt their internal rules and, especially, banks start accepting that non-resident directors control the corporations’ bank accounts.
Brazil’s legal framework continues to improve, with this being another step towards taking Brazil closer to becoming an OECD member.
Last modified: October 5, 2021