In August 2021, during the Covid-19 pandemic, the Brazilian President passed a law long-awaited by the football teams throughout the country - Law No.14,193/2021, known as the “Lei da Sociedade Anônima de Futebol (SAF)”, or the Football Corporation Law. This law finally allowed football teams to be incorporated as a corporation (SAF – football corporation), bestowed upon specific legal regulations such as corporate governance and specific taxation rules, but most importantly, it facilitated their ability to raise resources to finance their everyday activities. As a corporation, the SAF is also governed, in a subsidiary manner, by the provisions set forth by Law No. 6,404/1976 (Corporation Law) and Law No. 9,615/1998 (Lei Pelé – lays down general rules on the sport). This corporate structure is common in large clubs outside Brazil, for instance, Bayern Munich, which has major sporting companies as shareholders such as Adidas and Allianz.

​Law No. 14,193/2021 establishes the possibility of incorporating a SAF through (i) the transformation of the corporate nature of the football team, which used to be a nonprofit partnership (associação civil), into a corporation (Sociedade por ações); or (ii) the spin-off of the football department and football-related assets maintaining the original legal entity and incorporating a SAF; or (iii) the incorporation of the football corporation for that specific purpose owned by a natural person, legal entity or investment fund.

Structurally, spinning off the football department and football-related assets triggers some obligations, such as the corporation having to issue class “A” common shares that are to be owned by the parent football team or legal entity. As well as the responsibility to protect the parent entity when such class “A” common shares represent at least 10% of the voting rights and the approval of some matters (e.g. to sell any assets) is subject to votes.

​Furthermore, in this scenario, it is worth noting that the parent football team or legal entity does not cease to exist. When a split is carried out, the new SFA will be responsible for all matters related to the administration and professional management of football, and as a general rule, will not be liable for the parent entity's debts. The football team or legal entity can remain as the owner of assets, such as name, brand, and symbol, having the option to eventually transfer them to the SAF, depending on the business model chosen, their financial health, and its governance.

​​Touching upon the financial health of football teams, it is no secret that most of them operating in Brazil today, even the largest ones playing in the most important leagues, suffer from financial difficulties due to mismanagement, inadequate laws, lack of corporate governance rules, and economic instability inherent to Brazil as a nation. To exemplify just how widespread this issue currently is, the twenty most indebted Brazilian football teams have a total debt of BRL 10,2 billion, according to a study released by the consultancy firm Sportsvalue. It was within this economic context that the new law was passed, hoping that the original football team or legal entity pays its creditors through judicial or out-of-court reorganization, under the terms of Law 11,101/05. As another measure to simplify the payment system and create a form of predictability, it will be possible to opt for the execution of assets to pay creditors under a centralized execution system. Settling out of court is also an option, in which a payment plan may be defined by the interested parties differently from the legal execution system.

Another economic benefit of this new law is that, as football teams can now be corporations, they will also be able to make public offerings of their shares, having access to funding through the capital markets (IPOs). We are sure many Brazilian football fanatics are looking forward to being owners of their favorite team.

In order to avoid the new corporations from having the same mismanagement problems, the new law also institutes some requirements when it comes to corporate governance, such as the mandatory establishment of a board of directors and auditors, as well as rules of appointment (e.g. professional players who have a valid employment agreement and members of an executive body of another SAF are not eligible as members of the board of director or auditors.) Moreover, to avoid any conflicts in decision-making, the law establishes that the controlling shareholder of the SAF may not hold a direct or indirect interest in another footballing-focused corporation and that whoever holds shares in more than one SAF losses all voting rights. This protects not only the financial health of the team but also the league as a whole as it prohibits monopolistic practices.

​Finally, the new law also sets forth specific and graduate taxation for the SAF. It unifies, through monthly payments in a single document the following taxes: “IRPJ”, “PIS/Cofins”, “CSLL”, and social security contributions, in a rate that begins at 5% levied upon the club’s monthly income for the first five years, then 4% from the sixth year onwards. This new unified system seeks to provide better predictability of the values owed by the corporations, allowing them to better plan their finances in the long run. The SAF can also receive additional funding in the terms of Law No. 11,438/2006 known as the “Sports Incentive Law” (Lei de Incentivo ao Esporte), which means public investments into the sporting sector as long as these funds are not used to pay for labor debts.

​Overall, the introduction of a corporate structure to football teams in Brazil was long-awaited by the sector and hopefully will help stabilize the financial situation of the footballing industry, become a new way for foreign capital to be invested in Brazil, and for Brazilian football teams to step up as business entities. In sum, the SAF has all the marks for being a strong central pillar in the Brazilian footballing industry.