Economic Freedom Act and Sole Partner Limited Liability Companies

On September 20, 2019, Federal Law No. 13,874 was published, which established the Bill of Economic Freedom Rights (“Economic Freedom Act”), converting Provisional Measure No. 881, of April 30, 2019, into law.

In view of the principles of incentive to private initiative and the free market, combined with the proposal of minimal state intervention in the conducting of business activities, the Economic Freedom Act introduces legislative changes aiming to reduce bureaucracy in the processes of incorporation and operation of business companies. One of the main changes is to allow the existence of limited liability companies with a single partner (“Sole Partner Limited Liability Company”), thus amending the Brazilian Civil Code.

Limited Liability Companies may be incorporated with a single partner, while existing Limited Liability Companies may be converted into Sole Partner Limited Liability Companies. In addition, it is important to note that there is no impediment for a foreign legal entity to be the sole partner of a Sole Partner Limited Liability Company, subject to the specific limitations already imposed by the legislation.

If a Limited Liability Company wishes to operate with a single partner, such company shall be “converted” into a Sole Partner Limited Liability Company and its Articles of Association must be amended, however the company will continue to operate under the same Federal Taxpayer’s Registry (CNPJ).

Finally, it is important to emphasize that the Sole Partner Limited Liability Company and the Individual Limited Liability Company (“EIRELI”) are distinct legal forms, whereby, among other provisions, in the first type of company, there is no requirement to pay a minimum capital stock in the act of its incorporation, which is the case of EIRELI.  

Our Corporate Law team is available for any further clarification on this matter.