Brazilian Federal Law 14.195/21 (known as the “Business Environment Law”) was enacted to streamline and diminish bureaucracy in Brazil's business environment. This regulation stems from the conversion of Provisional Measure No. 1.040/2021 into law, with the objective of elevating Brazil's standing in the World Bank's "Doing Business" ranking.

This regulation permits non-resident foreigners to hold management positions in limited liability companies and corporations in Brazil.

Before the enactment of such Law, only residents in Brazil were eligible to occupy these management roles, with the exception of board non-resident members, who already needed to appoint a legal representative domiciled in Brazil. The updated legislation now expands this authorization to encompass officers in corporations and/or directors in limited liability companies.

The Business Environment Law brought the amendment to Article 146, paragraph 2 of Corporate Law (Law No 6404/76) to eliminate the residency requirement for corporation’s officers in Brazil. Instead, the aforementioned article sets forth that a foreign officer must appoint a local legal representative in Brazil empowered to receive legal summons and notification for three years following the conclusion of their management term. This initiative seeks to streamline the inflow of foreign capital and enhance the involvement of international companies in the Brazilian market by reducing bureaucratic processes.

Concerning to limited liability companies, the regulation came into effect under Normative Ruling No. 112/2022 of the Business Registration Manual (issued by National Department of Business Registration and Integration - DREI). This regulation, aligned with the recent legislative amendments, implemented a modification to DREI Normative Ruling No. 81. DREI revised the provisions concerning the foreign residency of the director in the limited company, converting the previous legal restriction into a clear regulatory endorsement.

Therefore, in order to the appointment of a non-resident officer/director be deemed valid, it is essential to address the practical challenges faced by companies, embracing the innovation introduced by the Business Environment Law:

In order to legally appoint a non-resident officer/director in Brazil, it is mandatory that the non-resident to be enrolled with the Individual Taxpayer’s Register (CPF). The CPF serves as an essential identification document for individuals engaging in financial or commercial activities in Brazil, encompassing corporate management liabilities. Non-residents may be enrolled with the CPF through a Brazilian diplomatic office abroad, by authorizing a legal representative, or at the Brazilian Federal Revenue Service Agency. Upon their enrollment with the CPF, the non-resident officers/director are able to fulfill the fiscal requirements and tax duties essential for the lawful performance of their title in the country.

As previously mentioned, it is necessary to draft a power of attorney appointing a local legal representative to receive summons and notices for a period of up to three (3) years following the termination of the foreign executive’s term of office. This provision is intended to ensure the company’s compliance with legal provisions in the non-resident’s absence, guaranteeing proper receipt and handling of any notifications or summons throughout the entire foreign management period and an additional transition period after the end of the term of office.

To be valid in Brazil, the power of attorney must be notarized and apostilled or consularized in the country of residence of the foreign executive. Following this authentication process, the power of attorney should be officially registered with the notary office in Brazil and subsequently with the Brazilian Commercial Registry. This process is crucial for establishing the document’s authenticity and efficacy before Brazilian authorities and agencies, thereby confirming the legal standing of the non-resident executive’s representation.

Considering the legislative update brought by the Business Environment Law and its impacts on the procedures governing the management of companies by non-residents in Brazil, notably progress have been achieved in streamlining the Brazilian business environment. The authorization to appoint a non-resident director in limited liability companies and a non-resident officer in corporations reflects a more globally attuned and inclusive framework. This development is anticipated not only to draw increased foreign investment but also to enhance operational efficiency and modernize business practices, thereby fostering Brazilian’s economic growth and bolstering its competitiveness on the international market.