Appointing an Agent (Sales Representative) in Brazil

Quick Read:

• Agents under Brazilian law: An agent under Brazilian law is a person or legal entity that brokers commercial deals on a regular basis.
• Mandatory rules: There are court decisions (a minority view) that consider Brazil’s Representatives Law as binding regardless of the parties choosing a foreign law to govern their contracts. Distributorships are more flexible.
• Termination can be costly: The compensation provisions in the Representatives Law require the payment of 1/12 of all commissions paid during the agency relationship as compensation to the agent if the termination is without just cause.
• Agent as employee: Care must be taken to ensure that the agent is not deemed to be an employee as compensation payments can be very high.
• Common mistakes: Principals often neglect to register their trademarks and domain names in Brazil, ignore the effect of transfer pricing rules (in exclusive agency relationships) and do not undertake due diligence on the agent prior to the appointment.
• Have a detailed agreement: Having a detailed agreement will minimise risks and litigation. It is important that the agreement be reviewed by a Brazilian lawyer.

What is an “agent” under Brazilian law?

The most common type of Brazilian agency relationship, which is the focus of this article, is that of “commercial representative” (“representante comercial”). Specific rules apply to real estate agents (brokers) and others, so contact me if you wish further information on these.

The rules applicable to commercial representatives in Brazil differ materially from those in force in most common law countries and to those applicable to distributorships. There are court decisions (although nowadays that is a minority view) that have deemed Brazil’s Representatives Law as mandatory.

An individual or company will be regarded as a “commercial representative” if the individual or company regularly “brokers the making of commercial deals, being an agent for sale or purchase offers”.

An individual or company will be regarded as a “commercial representative” if the individual or company regularly “brokers the making of commercial deals, being an agent for sale or purchase offers”.

If the agency relationship is governed by Brazilian law, have you set aside funds for terminating it without cause?

Brazil’s Representatives Law provides that upon termination of the agency relationship the agents are entitled to 1/12 of all commissions they received throughout the period of the agency relationship as compensation for the termination. Therefore, if an agent received R$1 million per year over 12 years, the agent will be entitled to R$1 million at the time of termination.

The compensation will apply even if the contract is renewed every year, but it will not apply if the agent was terminated for “just cause”. There will be “just cause” for termination where:

• the agent disregards or breaches the material obligations under the agency agreement or obligations relating to it;
• the agent’s acts lead to the commercial discredit of the principal;
• the agent has been convicted for a crime relating to the agent’s reputation and the conviction cannot be appealed; and
• a force majeure event occurs.

Moreover, where the agent’s fees are based on commissions, it is very difficult (or almost impossible) to for them to be reduced. Therefore, agents are entitled to claim the difference between the higher rates and the reduced rates (note, however, that the majority position at the Superior Court of Justice is that claims for this difference should be limited only to the last five years of the agency relationship).

Will the agent be deemed to be your employee?

Courts are likely to treat agents as employees when there is factual evidence that:

• the services are of a personal nature (that is, the court will look at the relationship with the specific individual performing the services);
• the principal exerts control over the agent (there is subordination);
• the agent receives a steady income from the principal; 
• the agent performs services on an ongoing basis; and
• there is no written contract setting out the agency relationship between the parties.

Until very recently, Brazil’s courts would ignore contractual terms under the “supremacy of the facts” doctrine, which led to independent service arrangements being found to be employment relationships. Thankfully, the Federal Supreme Court has been consistently overturning lower courts’ decisions on this point.

Have you obtained a due diligence report before appointing the agent?

Foreign principals often make the mistake of appointing agents based solely on face value, which can prove to be a costly mistake. 

Before appointing any agent, it is recommended that lawyers be retained to prepare a due diligence report on the agent. This report should include the agent, the agent’s company, its directors and shareholders and include:

• a review of the corporate documents from the relevant Company Registries (Boards of Trade) where the agent operates;
• obtaining the federal, state and municipal tax, Social Security and employment litigation-related certificates where the company operates; and
• undertaking state and federal court searches (including the Employment Court hierarchy) and analysing specific cases of concern.

In addition to the due diligence report it is recommended that an analysis be undertaken addressing whether the agent would be ready, willing and able to meet its obligations under the agency agreement from a financial and commercial point of view.

Do you have an agreement customised for the Brazilian legal environment?

Companies with agents around the world frequently have standard contracts that they use to appoint agents in different jurisdictions. Due to Brazil’s particular rules relating to agency relationships, it is important that standard agreements be reviewed by Brazilian lawyers before they are presented to the agent.

Relying on a choice of law and court provision may not be sufficient to the mandatory nature of many Brazilian laws that will apply to the agency relationship.

Thus, having an agreement that considers the intricacies of the Brazilian legal environment goes a long way in minimising the exposure of foreign principals to unwanted risks.

Questions?

Contact me if you would like further information. My firm is ready to assist you.

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Last modified: 25 February 2025