Legal Representative in Brazil Overview

Incorporating companies in Brazil is a straightforward process, although the incorporation by foreign shareholders and establishing subsidiaries from foreign entities bring some additional complexities. The commonly used types of companies in Brazil are corporations (“sociedades anônimas”) and limited liability companies (“sociedades limitadas”). Both limit the liability of their shareholders.

Regardless of the type of entity, all Brazilian companies require the appointment of a legal representative, who must be a natural person with residence in Brazil. As this is not common in North America or Australia, it can be a new concept for many looking to do business in Brazil. 

What is a Legal Representative?

The legal representative is the person accountable for representing the company in various legal acts during its operation, such as being served with subpoenas or notices from government authorities. From a more practical standpoint, the legal representative often needs to have powers to sign on behalf of the foreign partners, solve issues related to the business, respond in a legal capacity, and receive summons on behalf of the company overseas.

When is a Legal Representative Needed?

Brazilian law requires that every company must always have a designated legal representative, who is a resident in Brazil, and cannot operate without one. There are two main forms of legal representation which are required: the legal representation of foreign shareholders and the legal representation of the legal entity that is incorporated in Brazil.

• Legal Representative of Foreign Shareholders – For a company with foreign partners to be registered in Brazil, each foreign shareholder must grant a power of attorney to a legal representative in Brazil. This legal representative will represent the foreign shareholder before the Brazilian tax authorities and the Central Bank.
• Legal Representative of a Company – For a company to be incorporated in Brazil, it needs a legal representative, also known as a local director. Similar to the foreign shareholder’s legal representative, this legal representative must be an individual, Brazilian or foreign, residing in Brazil. If the individual is a foreign national, the person must have a permanent visa.

In both cases, the legal representative must be an individual, Brazilian or foreign, residing in Brazil. If the individual is a foreign national, the person must have a permanent visa.

Who can act as a Legal Representative?

Any person over 18 years old and a permanent resident of Brazil can act in this role. A legal entity cannot become a legal representative as it must be an individual.

What Liability does the Legal Representative have?

The legal representative’s liability is an exception, not the rule of the Brazilian legal system. However, all legal representatives may be held civilly or criminally liable in certain situations, such as if they exceed the scope of their designated powers or commit perjury or fraud. The legal representative must comply with the provisions of the company’s bylaws and must act in the best interest of the company. If this does not happen, shareholders may remove the legal representative and, depending on the severity, may claim for indemnification.

In addition, the legal representative may be held liable to third parties for the companies’ activities. For example, the legal representative may be personally held responsible for any tax and labor non-compliance.

Practical Aspects of the Legal Representative Role

Beyond just the legal aspects that the legal representative is liable for, the role also has some practical considerations that are important to consider. In a nutshell, since a legal representative performs a vital role in a company and can undertake several obligations on the company’s behalf, the legal representative may be needed for most of the company’s day-to-day activities.

Some examples include – 

• When opening a bank account, the bank will evaluate creditworthiness of the legal representative, particularly when opening a company for a foreign shareholder that has no credit history in Brazil. 
• The legal representative is needed for most day-to-day requirements such as contracting internet and phone services, signing employment contracts, registering with different government offices, signing tender documents, etc.

Conclusion 

Legal representation in Brazil is a crucial aspect of doing business in the country. Understanding the requirements and responsibilities of legal representatives is essential for foreign investors and business owners. Foreign companies with entities in Brazil often do not have complete oversight of all day-to-day activities that are taking place on the ground, particularly in the beginning stages of entering the market. It is important to have a trustworthy legal representative who can only not provide oversight but can also help companies navigate the practical and legal aspects of operating in Brazil.

Ax Legal helps industrial technology, engineering, and service companies to navigate the legal and commercial aspects of operating their business in Latin America. With deep knowledge of the industrial and natural resource sectors, we provide actionable and practical advice to help streamline our clients’ entries into Latin America, improve how they operate in the region, and to protect their interests.

Over the years, our team of legal and commercial advisors have developed a track record of working with companies of all sizes from Australia, Canada, the U.S., and Europe. The one common factor that connects our clients is that they are leaders in their field, providing innovative technologies and services to the industrial sectors.

To better understand how we can support you in the Region, please contact Cody Mcfarlane at cmm@ax.legal