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2.1. Main Formation Requirements

Formation of a Corporation

The incorporation of a Corporation requires, at first, an inaugural meeting of the prospective shareholders to approve its bylaws, define the corporation’s core activities, elect the management, and confirm the capital and the distribution of its shares (subscription list).

The incorporation of a Brazilian company normally implies the subscription of all the shares by at least two individuals or legal entities that would be the founders, and the payment of at least 10% of the issue price of the shares subscribed in cash – unless the legislation requires a higher percentage – and the deposit of that cash in a bank within five days of  receipt. The deposit will be release when the corporation is registered by the Board of Trade, or after six months if no registration is made. Thus, the corporation will be formally incorporated by private subscription and may have its securities publicly traded.

Corporations cannot be initially incorporated as publicly-held companies. It shall be incorporated by private subscription and apply for listing after operating. The incorporation by private subscription and further transformation in a publicly-held corporation requires: (i) registration of the corporation as publicly-held corporation with the Brazilian Securities Commission – CVM; (ii) registration of the proposed issuance of the shares for trading with the CVM; (iii) intermediation of a financial institution for issuance of trading of shares.

After the corporate capital is subscribed, the founders should call a general meeting to request an appraisal of any assets contributed by shareholder as payment of subscribed capital and approve the incorporation. Then, the shareholders should elect the members of the management bodies.

The existence of a corporation is acquired when its bylaws are filed at the Board of Trade, its bylaws and minute’s meetings are both published in a widespread newspaper and in the Official Gazette.

All shares are nominative and may be issued with or without par value. The issue of common shares with no par value does not preclude the issue of one or more classes of preferred shares with a par value. However, when common shares are assigned with a par value, all classes of shares must have the same par value. The shares of a publicly held corporation may not be issued at a price below their assigned par value and the minimum value established by the CVM.

The corporation’s capital comprises common and preferred shares. Privileges, such as priority entitlement to dividends, reimbursement of capital with or without premiums, and restrictions should be attached to preferred shares, according to the bylaws. Corporations may issue debentures that afford credit rights to their holders in accordance with the terms of the debenture deed and debenture certificate.

Formation of a Limited Liability Company or a Partnership

A limited-liability company, an individual limited-liability company and all partnerships are incorporated by signing the articles of association. The articles of association shall provide the governing provisions on voting rights, management powers, core activities, and transfer of quotas. Such articles of association and further amendments must be filed with the Board of Trade.

No deposit and no minimum capital requirement is necessary for the incorporation of a limited-liability company, however, the individual limited-liability company shall have a minimum corporate capital of at least 100 times the Brazilian minimum wage.

There is no time limit for paying the capital of a limited-liability company, but its articles of association shall provide the term during which this must be done. In contrast, the individual limited-liability company should have its corporate capital fully paid up at the time of incorporation.

As previously mentioned, the limited-liability company shall have at least two quota holders. Its capital comprises quotas of equal or unequal value, as specified in the articles of association, which will also state the amount of quotas held by each quota holder.

The management place will be stipulated in its bylaws of in the articles of association and shall be where the major decisions are taken by the board of directors. The company’s director may be resident outside Brazil, as long as their decisions are made in the country.