Doing business in Brazil

Jase ChoenniGlobal Business Development DirectorTMF Group

Joe DiLandroDirector of Sales, North AmericaComputershare Governance Services

June 19 & 26, 2013

Doing Business in BrazilGlobal Risks in Entity Management

Webinar Series: China, India & Brazil

› Doing Business in Brazil, June 19 @ 1 pm EDT› Doing Business in Brazil, June 26 @ 1 pm GMT

› Register at cgs.computershare.com

› Doing Business in China & Doing Business in India webinars› Now on Computershare YouTube channel

Doing Business in Brazil: Global Risks in Entity Management

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http://www.youtube.com/playlist?list=PLBE02D28DC66F89A8

Today’s Agenda

› Welcome to Doing Business in China, India & Brazil webinars› Register at cgs.computershare.com

› Why Brazil?

› Business Culture in Brazil

› Company Set-up, Compliance & Incorporating in Brazil

› Obligated Registrations

› Practical Realities

› Managing Compliance Concerns

› Questions & Comments


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Speaker Profiles

Jase Choenni, Global Business Development Director, TMF Group› Based in Sao Paolo, responsible for all sales development in Brazil as well as

cross border relationships globally› Has been with TMF Group for just over a year› Previously at multinational companies including Procter & Gamble, ING, TNT,

L’Oreal› Speaks Portuguese, Spanish, English, Dutch, French and German

Joe DiLandro, Director of Sales, CGS, North America› Leads team responsible for marketing of compliance suite of governance

products: global entity management, corporate board portals, and SEC filings software

› Governance engagements at hundreds of Fortune 1000 companies


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Brazil: Country Overview

› Brazil is a Federal Republic with 26 states› Country capital is Brasilia, but the main cities for doing

business are Sao Paulo and Rio de Janeiro› Brazil is a Civil Law country› The federal government is divided into 3 powers:

Executive, Legislative and Judicial, as well as the 26 States. States also have municipalities, which add up to 5,566 -- called Cadastro na Prefeitura Municipal, this makes Brazil a highly complicated country for local compliance

› A regular business has to comply with all the 3 stages of the government administration and other national country agencies

› Portuguese is essential for the local compliance filings› Brazil has a mixture of highly educated work force and

low cost workforce depending on the type of business to develop

› 70% of Brazil’s population is Catholic. Religion is an important concern for Brazilians

› Currency: Brazilian Real (country does not allow bank accounts in other currency)Doing Business in Brazil: Global Risks in Entity Management

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› Brazil is the second largest global destination in terms of FDI value and fifth in terms of FDI projects

› Brazil attracted $67 BN in FDI in 2011 and $65.3 BN in 2012

› The number of FDI projects in the country increased by 39% in 2011 to a record 507, creating an estimated 161,166 jobs

Why Brazil?

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FDI in Brazil


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World Cup & Olympics Impact

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Business Culture in Brazil

'Custo Brasil' or the 'Brazil Cost'. This term refers to the very real extra costs of doing business in Brazil — legal and bureaucratic complications, excessive taxation, inflation etc. Due to this 'Custo Brasil', it is important to work closely with local corporate compliance office.

Key things to remember:› Punctuality is a variable commodity in Brazil› Relationships come first, second and third in Brazil› Stress long-term commitment to Brazil and your Brazilian contacts› The use of emotion in communication should be seen as a sign of

enthusiasm and emphasis rather than as anger or loss of control› Value verbal communication› Understand the local business landscape


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Company Set-up and Compliance

› Establishing a company in Brazil has a very broad legislation regarding the types of company procedures and deadlines for starting a business

› The two most common types of company are:a) Sociedade Limitada (LTDA)/Limited Liability Companyb) Sociedade Anônima (SA)/Corporation

› The main difference between these two types of society's responsibility for the company's share capital as at LTDA responsibility of each member is limited to the amount of their participation (shares), provided that capital is fully paid. In the SA, the liability of shareholders is always according to value of their shares

› Besides the responsibility of differentiation, the process of opening a LTDA is relatively fast, inexpensive, and why the vast majority of companies choose to set up a LTDA


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Incorporating a Legal Entity in Brazil

1. Preparation of a “PoA” where by the foreign partners empowers a Brazilian resident to legally represent it before Brazilian authorities

2. Sworn translation and notarization of the “PoA” at a Brazilian Notary’s Office

3. Obtainment of the Federal Taxpayer Identification Number (CNPJ card) of the foreign partners

4. The preparation of the Articles of Incorporation of the Company and filing it in the Trade Board

5. Obtainment of the Federal Taxpayer Identification Number (CNPJ card) of the Brazilian Company

6. Registration with the National Institute of Social Security “INSS”7. Registration with the state authorities for the purpose of collecting

the Tax on Distribution of goods and services “ICMS” and obtainment of the Municipal Taxpayer Identification for the purposes of collecting the Municipal Tax on Services “ISS”


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Legal Representation in Brazil

› Highly sensitive role› Obligated to have a local director› Obligated to have a person sign on behalf of the foreign

shareholders (Board of Trade and Federal Council)› Must be permanent resident› High responsibility and liability› Huge increase in outsourcing› Experience in signing is essential to ensure compliance› Rotation, bilingual and law context desirable


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Registration Type

Limited Liability Company Corporation

1. Board of Trade or Civil Registry of Legal EntitiesEstimated Registration Time: 10 days

1. Survey with the Trade Board to check up on the existence of entities with the same commercial names.2. Preparation of the Articles of Incorporation of the Company and filing3. Registration of the Minutes Books (of the Partners and Administrators)*If Simples, the Articles of Association is registered before the Civil Registry of Legal Entities * All the amendments of the Brazilian company must be filed and registered before the competent authority (Board of Trade or Civil Registry of Legal Entities)

Although the corporations must register other three (3) books:(i) Registered Share Register Book;(ii) Share Transfer Book;And(iii) Attendance Book

2. Brazilian Public NotaryEstimated Registration Time: 30 days

1.Elaboration of a power of attorney which the foreign partners empowers a Brazilian resident to legally represent it before Brazilian authorities;2. Sworn translation and notarization of the POA at a Brazilian Notary’s Office3. If the company will have foreign shareholders, it is required to register Foreigner Company and nominate a Brazilian resident to legally represent it before Brazilian Authorities

Idem

3. Federal Revenue ServiceEstimated Registration Time: 15 days

1. Obtainment of the Federal Taxpayer Identification Number (CNPJ card) of the Brazilian company and the foreign partners;2. Insert and keep updated the complete qualification of the Company (name of partners, address, corporate purpose and capital, name of the administrator(s), etc)

Idem


Obligated Registrations

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Registration Type Limited Liability Company Corporation

4. State AuthoritiesEstimated Registration Time: 10 days

1. Registration with the state authorities for the purpose of collecting the Tax on Distribution of goods and services “ICMS”2. Insert and keep updated the complete qualification of the Company (name of partners, address, corporate purpose and capital, name of the administrator(s), etc)

Idem

5. Employee’s Dismissal FundEstimated Registration Time: 10 days

Registration with the Employee’s Dismissal Fund – “FGTS”, Ministry of labor

Idem

6. Municipal Tax AuthoritiesEstimated Registration Time: 10 days* The obtainment of the Municipal Taxpayer Identification depends on filing the Municipal Real State Tax (IPTU) of the property the company is located at before the City Hall

1. Obtainment of the Municipal Taxpayer Identification for the purposes of collecting the Municipal Tax on Services “ISS”;2. Obtainment of the Municipal operating license; and3. Obtainment of the inspection certificate issued by the Fire Department

Idem

7. National Institute of Social SecurityEstimated Registration Time: 5 days

Registration with the National Institute of Social Security “INSS”

Idem

8. Brazilian Central BankEstimated Registration Time: 15 day*It depends on the remittance of the capital by the foreign partners

The foreign partners and the Brazilian Company which is recipient of the foreign investment must obtain a number from the electronic declaratory registry of direct foreign investment (RDE-IED)

Idem



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Registration Type Limited Liability Company Corporation

9. Clearance Certificates*To attest the good health of the Company. Must be kept updated and issued from time to time

• Overdue Federal Liabilities Certificate;• Government Severance Indemnity Fund (FGTS);• Clearance issued by the National Institute of Social

Security (INSS);• Certificate from Tax and Civil Distributor;• Certificate issued by the Labor Court;• Civil Distributor Certificate of Bankruptcy;• Certificate issued by Protest Officers (among others)

Idem

10. Digital certificate issued by the Federal Revenue Service (e-CNPJ or e-CPF)

In order to be authorized by local authorities where the entity is established to issue the electronic invoices, also to check all the pending issues related to the company.

Idem

11. Integrated Foreign TradeSystem (Siscomex)(Term - 6 months)

In case the company imports and exports goods Idem

12. Authorization issued bythe Sanitation

Permitted issued by the Health Authorization/Sanitation License

Idem



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Time To Comply

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Time To Comply

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Annual Company Compliance

1. Keeping and maintaining the statutory registers and the official minute book2. Preparing and filing with the local Board of Trade Registry in each appropriate

state, the resolution of the Quota holders approving the annual Financial Statements

Outside the annual scope of service: The annual Foreign Investment registry filingCompanies which are in receipt of foreign investment are required to make an annual update of their economic-financial data for the base date of December 31 of the previous year, in the Central Bank of Brazil Information System (SISBACEN).

To be update corporate changes:› The registrations with the Employee’s Dismissal Fund (“FGTS”), › the obtainment of the Federal, State and Municipal Taxpayer Identification, › the registration with the National Institute of Social Security (“INSS”) › the registration with the Brazilian Central Bank


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Some Practical Realities

› Van der Lande industries won 2 bids to handle luggage at key airports

› Ossa Spain won bid to build tunnels for Brazilian government

› Qelp won LATAM contract with Telefonica coordinated from Brazil

› Polycom totally professionalized their streams in Brazil

› Many smaller set up of companies testing the market

› Outsourcing payroll of the employees new trend


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Practical Support

How TMF could help you in Brazil:› Incorporating a company› Legal representation (both local director and shareholder

signing)› Accounting, Reporting & Tax Compliance› Payroll & Benefits› Statutory Registers› Opening a bank account


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Subsidiary Governance & Compliance

How do you manage the Compliance Risks?

› Is there professional firm assigned?

› Are local rules being followed?

› Entity setup in accordance with founding documents?

› Are filings being managed?

› When have entities been reviewed?


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Risks & Concerns: How Are They Managed?

Compliance Risk Concerns

Formation Is there a formal workflow approval process?

Organisational Notification Who else needs to know?

Board Details/Formation Who needs to understand this?

Jurisdictional Rules Does the organisation understand what is required?

Necessary Filings Are there penalties, requirements to consider?

Registered Capital How is this managed?

Intellectual Property Protection How do you confirm these are protected?

Ongoing Maintenance Can you verify entity information is accurate?


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Approval Process In Brazil

CatherineA GEMS

approver for all legal entities

Reviews the Formation Request

Approves or

Rejects the

Request for the legal entity

AdamA GEMS updater of data held for

Indian legal entities

Forms the legal

entity and submits

the Request

How does the organisation Approve Formations?


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Verifying Data Accuracy: Ongoing Maintenance

How do you ensure Ongoing Compliance?


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Compliance Module

Do you know the entity is in Good Standing?› Is the entity in

compliance with international jurisdictional rules?

› Have you completed necessary filings?

› Is the entity in compliance with the by-laws?

› Does it have a complete data record?


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Benefits of a Compliance Dashboard

› Continious audits using self-defined parameters

› Conduct validity checks› Compliance monitoring

› Detect and resolve issues in time› Integrated Notification Manager & Task-

Manager

› Enforce compliance standards › Flexible user screens, report-wizards,

integration of business processes

Audit

Detect & Edit

Implement

Security(Risk

Management)

Govern(Corporate Governanc

e)

Transparency


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What Other Information Needs to Be Shared?

GEMS Global Entity Management

System

LegalDepartment

FinanceDepartment

ComplianceManagement

BankingDepartment

Auditors

TaxDepartment

InvestorsRelations

Entity Management

Trade Marks Department

Who needs current information within a company?


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Webinar Series: China, India & Brazil

› Doing Business in Brazil, June 26 @ 1 pm GMT› Register at cgs.computershare.com

› Doing Business in China & Doing Business in India webinars› Now on Computershare YouTube channel


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Questions & Comments

Thank you for joining us. What questions do you have?

› Joe DiLandroComputershare Governance [email protected]

› Jase ChoenniTMF [email protected]

Watch for this webinar on www.youtube.com/computershare


http://www.youtube.com/playlist?list=PLBE02D28DC66F89A8

Doing business in Brazil

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