On March 29, 2021, Provisional Measure No. 1,040 (“PM of the Business Environment”) was issued, with the objective of improving the business environment in Brazil and raising Brazil’s position, by 18 to 20 positions, in the World Bank’s Doing Business ranking, which assesses the ease of doing business in 191 countries. Currently, Brazil occupies the 124th position.
The PM of the Business Environment establishes rules to facilitate and reduce the bureaucracy of opening a company, protecting minority shareholders, and facilitating foreign trade, among other challenges.
The main changes provided for in the PM of the Business Environment are:
Facilitation of the opening of companies
- Providing users, free of charge, in-person and online, with information, guidelines, and instruments that allow prior research on the registration or enrollment steps, change and termination of business individuals and legal entities, as well as licensing and operating authorizations, in order to provide the user with clarity as to the required documentation and viability of location, of business name, registration, licensing or enrollment;
- Risk assessment of activities, valid for all members of the National Network for the Simplification of Registration and Legalization of Companies and Businesses (“Rede Nacional para a Simplificação do Registro e da Legalização de Empresas e Negócios” – “Redesim”), to be observed in the absence of a specific state, district, or municipal legislation. In cases where the risk level of the activity is considered to be medium, the business license and other licenses will be issued automatically, without human analysis, through the system responsible for the integration of the registration bodies and entities, under the terms established in the resolution of the Redesim Management Committee (created by the PM of the Business Environment); and
- Unification in the National Taxpayer’s Registry (“Cadastro Nacional de Pessoa Jurídica” – “CNPJ”) of federal, state, and municipal tax registrations. The registration will be centralized in a single CNPJ and the Federal Public Treasury will exchange tax registration information with the respective federal entities.
Protection of Minority Shareholders
Amendments to the text of Law No. 6,404/1976 (Brazilian Corporation Law – “LSA”), in order to ensure greater protection for minority shareholders, such as:
- Expansion of the competence of the General Shareholders’ Meetings to deliberate on disposals and contributions of significant assets, as well as the execution of transactions with related parties according to materiality criteria of the Brazilian Securities and Exchange Commission (“CVM”);
- The advance notice period for the first call of the General Shareholders’ Meeting will be of 30 days, and the CVM may postpone the date of the General Shareholders’ Meeting for up to 30 days if relevant documents are not disclosed to shareholders;
- Prohibition, in publicly-held companies, of the accumulation of the position of President of the Board of Directors and the position of Chief Executive Officer or main executive of the company;
- Possibility of provision in the Bylaws of participation in the Council of employee representatives, together with the union entities that represent them; and
- Mandatory participation of independent Directors in the Board of Directors of publicly-held companies, under the terms and deadlines defined by the CVM.
Foreign Trade Facilitation
- In the area of foreign trade, the PM of the Business Environment brings provisions that (i) aim to curb abusive government practices in the licensing of imported and exported goods, and (ii) formalize the operation of the Single Foreign Trade Portal;
- Concerning the licensing of imported and exported goods, the PM of the Business Environment prohibits the refusal of import licenses on the grounds that the price charged would be below a minimum price fixed by a government agency. It also prohibits the requirement of an import or export license by a government agency without basis in an express normative rule; and
- The PM of the Business Environment formalizes, at a legal level, the operation of the Single Foreign Trade Portal, which has been implemented by the Government to process import and export operations in a simpler and faster way. All bodies involved in the customs clearance of imported and exported goods must use this electronic system, no longer requiring the presentation of documents and information by other means.
Other Additional Measures
- Authorizes the creation of the Integrated Asset Recovery System (“Sistema Integrado de Recuperação de Ativos” – “SIRA”), to be managed by the Attorneys General Office of the National Treasury, to facilitate the identification and location of assets and debtors and the constriction and disposal of assets;
- Permission for Professional Councils to carry out administrative collection measures, such as inclusion in defaulters’ registries, preventing the debt from growing and being judicialized;
- Removal of a barrier that provides that translators can only operate in the states where they are registered, allowing public translators and interpreters to operate throughout the country; and
- In the execution of constructions for the extension of aerial distribution lines under the responsibility of the utilities concessionaire or authorized entity of the public electricity distribution service, the license or authorization to carry out constructions on public roads, when required, and when there is no deadline established by the local government entity, will be issued by the competent public agency within 5 business days. In the event that there is no decision by the competent body after the end of this period, the utilities concessionaire or authorized entity of the public electricity distribution service will be authorized to carry out the constructions under the conditions established in the application submitted, subject to the applicable legislation.
Please note that this PM of the Business Environment, as with any provisional measure, must be considered by the National Congress within 60 days, extendable once, for an equal period otherwise, it will lose its effectiveness. Nevertheless, please note that such provisional measure takes effect immediately, even though it has yet to be considered by the two Houses of the National Congress.
Demarest’s Corporate Law and International Trade and Customs teams are closely monitoring these developments, and are available for any further information on this and other matters.