The Business Environment Law, issued on August 26, 2021 (Law No. 14.195/21), among other changes, extinguished the rule set forth in article 126 of the Brazilian Corporations Law that required that officers of Brazilian corporations should be resident in the country, (access our newsletter on this matter here).
However, considering that there is no specific provision about this matter in the Brazilian Civil Code, applicable to limited liability companies, it was unclear if non-residents in Brazil could be elected as officers.
Such doubt was cleared by the Normative Instruction No. 112 issued by the National Department of Business Registration and Integration – DREI on January 20, 2022 (“IN DREI 112/2022”).
Article 5 of the Normative Instruction amended the Limited Liability Company Registration Manual (Exhibit IV to DREI Normative Instruction No. 81/20) and expressly admitted the election of officers of limited liability companies which are not resident in Brazil.
As an additional requirement, non-resident officers must grant a power of attorney to a representative living in Brazil, with powers to receive notices, services of process and summons in legal lawsuits or administrative proceedings, which must be valid for at least three years after the end of such officer’s term of office. This requirement already existed for members of Board of Directors of Brazilian corporations living abroad and is now extended to all types of non-resident directors (officers and board members).
By allowing the election of non-resident individuals as officers of limited liability companies, a precedent is created that may impact other similar situations, such as the requirements for the election of portfolio managers of asset management companies, an activity regulated by Resolution No. 21 of the Brazilian Securities and Exchange Commission (“CVM”), issued on February 25, 2021 (“CVM Resolution No. 21/2021”).
Currently, in accordance with art. 3, I of CVM Resolution No. 21/2021, the officers responsible for portfolio management must necessarily be domiciled in Brazil. However, considering the recent changes brought by the Business Environment Law and DREI IN 112/2022, there is a possibility that CVM recognizes non-resident officers to be appointed for such roles in case such individuals have a professional domicile in Brazil.
In addition to the innovation brought by the above-mentioned rules, the increasing adoption of remote work by the companies, especially due to the COVID-19 pandemic, may stimulate CVM to consider changing the current wording of CVM Resolution No. 21/2021, allowing the register with CVM of officers responsible for portfolio management who are not resident in Brazil and their appointment for such role.
Our team is available to provide any further clarification or information, as well as to advise you with the necessary steps for the fulfillment of the acts described above.
This newsletter was prepared exclusively for our clients and contains summarized information and shall not be considered as a legal opinion. Specific doubts and clarifications regarding such information should be addressed directly to our office.
Asset Management; Corporate and M&A
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March 2022
