LexisNexis Company Law Guide 2018-2019 - The second annual complimentary guide to understanding Company Law practices around the world with an ...

 
LexisNexis Company Law Guide 2018-2019 - The second annual complimentary guide to understanding Company Law practices around the world with an ...
The second annual complimentary
guide to understanding Company Law
practices around the world with an
Asia-Pacific focus

LexisNexis         ®

Company Law Guide
2018–2019
LexisNexis Company Law Guide 2018-2019 - The second annual complimentary guide to understanding Company Law practices around the world with an ...
LexisNexis
        ®

Company Law Guide
2018–2019
LexisNexis Company Law Guide 2018-2019 - The second annual complimentary guide to understanding Company Law practices around the world with an ...
Contents

Jurisdictional Q&As

Bangladesh – The Legal Circle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Brazil – Campos Mello Advogados . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Cyprus – Harris Kyriakides LLC                                                                            35

India – Singhania & Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Mauritius – Benoit Chambers                                                                             57

Pakistan – Irfan & Irfan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Ukraine – Redcliffe Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

United Arab Emirates – BSA Ahmed Bin Hezeem & Associates . . . . . . . . . 91

Contents                                                                                                 5
LexisNexis Company Law Guide 2018-2019 - The second annual complimentary guide to understanding Company Law practices around the world with an ...
Jurisdictional Q&As
LexisNexis Company Law Guide 2018-2019 - The second annual complimentary guide to understanding Company Law practices around the world with an ...
Jurisdiction:           Bangladesh
 Firm:    The Legal Circle
 Authors: Masud Khan, N.M. Eftakharul
          Alam Bhuiya, Ahnaf Chowdhury,
          Jarif Ahmed and Nauriin Ahmed

1. What is the general situation for                   the Board of Investment, which facilitates
foreign companies in your jurisdiction?                foreign investment by advising foreign
                                                       investors and assisting them with utilities,
In evaluating the general situation for foreign        land acquisition, etc.;
companies and investors in Bangladesh, it is
                                                    b. BB, Bangladesh’s central bank, which regu-
appropriate to review:
                                                       lates the outward repatriation of capital and
a. the key laws and regulations and the gov-           capital gains; and
   ernment agencies and regulators that play
                                                    c. the Registrar of Joint Stock Companies and
   a key role in the regulatory framework that
                                                       Firms (‘RJSC’), which registers both foreign
   governs foreign companies and investors;
                                                       companies establishing a place of business
   and
                                                       in Bangladesh and foreign-owned locally
b. the various legal forms or options available        incorporated companies.
   to foreign companies and investors under
                                                    The general situation of foreign companies
   such regulatory framework, and the relative
                                                    and investors in Bangladesh concerning the
   advantages and disadvantages of each of
                                                    challenges faced by them and/or the advantages
   such legal forms or options.
                                                    provided to them in Bangladesh is determined
The key laws and regulations that govern foreign    by the legal form in which a foreign company or
companies and investors are:                        investor chooses to establish a place of business
a. the Foreign Exchange Regulations Act             in Bangladesh:
   1947, as amended by the Foreign Exchange         a. foreign companies incorporated outside of
   Regulation (Amendment) Act 2015 (‘FERA’),           Bangladesh registering (a) with BIDA as a
   and the regulations promulgated thereunder          Liaison Office or Branch Office, with a noti-
   by the Bangladesh Bank (‘BB’), the central          fication to BB within 30 days of the BIDA
   bank of Bangladesh, which regulations are           notification, plus (ii) with RJSC as a foreign
   compiled by the BB in the Guidelines for            company under the CA 1994 ss 378 and 379:
   Foreign Exchange Transactions Volume 1 &            in addition to not having a separate legal
   Volume 2 (2009), and updated by BB’s circu-         personality, such foreign companies face a
   lars issued from time to time (collectively,        number of challenges:
   the ‘FX Guidelines’); and
                                                       i.    such registration is for a specific period
b. the Companies Act 1994 of Bangladesh (Act                 and must be renewed upon expiry; and
   No. XVIII of 1994) (‘CA 1994’).
                                                       ii.   their activities are strictly restricted.
The key Bangladeshi government agencies or                   Specifically, if a foreign company
regulatory bodies that impact or regulate foreign            registers itself with BIDA as a Liaison
companies and investors are:                                 Office, it may engage only in market-
a. the Bangladesh Investment Development                     ing and other non-revenue generating
   Authority (‘BIDA’), formerly known as                     activities, which are to be funded only

Jurisdictional Q&A – Bangladesh                                                                 9
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by inward remittances sent in by the              shareholder. Except where a foreign-owned            to a non-resident, then under a general         2. What are the key laws and regulations
        foreign office (i.e. a Liaison Office is a        company needs to register with BIDA for              exemption specified in Chapter 14 of the FX     that govern company law in your
        cost centre prohibited from engaging              work permits for foreign employees (in               Guidelines, such sale may be consummated        jurisdiction?
        in any commercial or other revenue                which event, the minimum foreign invest-             without BB’s prior approval.
        generating activities). If registered as          ment into the share capital of such company                                                          The primary statute that governs companies
                                                                                                            Regarding the registration requirements under
        a Branch Office, a foreign company                is required to be at least US$ 50,000), foreign                                                      in Bangladesh is the CA 1994. It consists
                                                                                                            the CA 1994, a foreign-owned company is
        may engage solely in the activities               investment into such companies is not                                                                of 404 sections divided into 11 parts which
                                                                                                            registered with the RJSC in substantially the
        necessary to execute its work under a             subject to a minimum amount.                                                                         cover, among others, a company’s constitution
                                                                                                            same manner as a wholly Bangladeshi-owned
        project agreement or other contract as                                                                                                                 and incorporation, share capital, registra-
                                                     Regarding outward remittances of foreign               company. The incorporation procedure com-
        specified in the application with BIDA.                                                                                                                tion, liability of directors, management and
                                                     investment by foreign-owned companies to               mences by obtaining ‘Name Clearance’ from the
        If so specified in its application to                                                                                                                  administration (including all procedures for
                                                     their foreign shareholders, under the FERA s           RJSC for the name of the proposed company.
        BIDA, a foreign company may fund                                                                                                                       administering matters of the board of directors
                                                     5(1) and Chapter 10(31)(a) of the FX Guidelines,       The procedure is complete upon the issuance
        its Branch Office from local revenues                                                                                                                  and shareholders), and winding-up.
                                                     foreign-owned companies may remit via their            of a Certificate of Incorporation by the RJSC.
        earned from its specified contract and,      AD bank dividends to their foreign shareholders        The incorporation procedure for foreign-owned      The CA 1994 also contains 12 schedules of re-
        with prior approval of BIDA and BB,          by applying to their AD bank in the prescribed         companies does not involve anything signif-        gulations and forms which include, among
        repatriate Branch Office profits to the      form. Such outward remittance payments of              icantly different from that of locally owned       others, templates of memorandum and articles
        foreign office.                              dividends may be made freely without any prior         companies, except for the requirement under        of association, requirements of annual financial
b. foreign companies or investors register-          approval of BB.                                        Chapter 9, paragraph 2(b) of the FX Guidelines     statements etc. The CA 1994 Schedule I sets
   ing with the RJSC a locally incorporated                                                                 that foreign exchange brought into an AD bank      out regulations that apply to the management
                                                     Regarding an exit by a foreign investor by
   foreign wholly-owned or partially owned/                                                                 must be first encashed in a proposed com-          of a company limited by shares which can be
                                                     disposal of shares in a foreign-owned company,
   joint venture company limited by shares                                                                  pany account prior to the issuance of shares.      adopted by a company in its articles of associ-
                                                     under the FERA s 13(1)(d) and Chapter 9, par-
   (a ‘foreign-owned company’) under the                                                                    Accordingly, unlike a wholly Bangladeshi           ation, including some mandatory regulations
                                                     agraph 3(B) of FX Guidelines (as amended by
   CA 1994 ss 5 and 6. If such foreign owned                                                                owned company, a foreign-owned company             which cannot be excluded by the articles of
                                                     BB Circular 32 of 31 August 2014):
   company is set up as an industrial venture,                                                              must open a proposed company bank account          association.
                                                     a. if the shares are in a public limited company
   it may register with BIDA to take advantage                                                              in Bangladesh under the proposed company’s         The Companies Rules 2009 (No. 7309G) (‘CR
                                                        listed on either the Dhaka Stock Exchange
   of BIDA’s foreign investment advisory and                                                                name by submitting the Name Clearance              2009’) is also an integral piece of legislation
                                                        (‘DSE’) or the Chittagong Stock Exchange
   facilitation services.                                                                                   Certificate obtained from the RJSC to the bank.    that governs company law in Bangladesh.
                                                        (‘CSE’), the capital and capital gains from
Regarding inward remittances of foreign                                                                     Prior to filing incorporation documents with       The CR 2009 contains Forms relevant to
                                                        the disposal of shares may be remitted
exchange by foreign investors, under the FERA                                                               the RJSC, the foreign investor/shareholder must:   different aspects and stages in the running of
                                                        outward to the foreign investor freely and
s 13(1)(s) and Chapter 9, paragraph 1 of the                                                                a. remit the applicable share capital amount in    a company and in company law proceedings,
                                                        without any prior approval of BB, subject
FX Guidelines, foreign investors are free                                                                      foreign exchange into such account; and         which include, among others, petition for
                                                        to the remitted amount not exceeding the
to invest in a foreign-owned company in                                                                                                                        reduction of capital, notice to creditors, affidavit
                                                        market price of such shares;                        b. thereafter obtain from the AD bank an
Bangladesh, provided that such investments                                                                                                                     by sureties, notice of dividend, and notice of
                                                     b.    if the shares are unlisted shares of a public       encashment certificate evidencing the
are brought in and recorded in an Authorised                                                                                                                   appointment of liquidator.
                                                          limited company or are in a private limited          conversion of such share capital funds in
Dealer (‘AD’) bank. No permission of BB is                                                                     foreign exchange into Bangladesh Taka. At       The Securities and Exchange Ordinance, 1969,
                                                          company, and are sold to a resident of
needed to set up such companies if the foreign                                                                 incorporation, the encashment certificate       the Securities and Exchange Rules 1987 and the
                                                          Bangladesh, then prior approval of BB is
investors use their own funds. If funding of such                                                              must be filed with the RJSC along with          Securities and Exchange Commission Act 1993
                                                          required for the outward remittance of the
foreign-owned companies is by foreign loans,                                                                   the new company’s memorandum and                (‘SECA 1993’) are of particular importance to
                                                          capital and capital gains, subject to such
as per Chapter 15 of the FX Guidelines, such                                                                   articles of association and other prescribed    issuers of securities that are listed on either of
                                                          remittance amount being equal to or less
foreign loans must be:                                                                                         RJSC forms.                                     the two stock exchanges of Bangladesh: the DSE
                                                          than the ‘fair market value’ of the shares
a. registered with, and the interest payments                                                                                                                  and the CSE. These laws regulate the activities of
                                                          as certified by a licensed merchant bank or
   thereunder approved by BIDA; and                                                                                                                            issuers and set out the penalties for violations.
                                                          chartered accountant (whose certificate is
b. funded from institutional lenders, except for          to be submitted with the application made                                                            The Bangladesh Securities and Exchange
   loans with a term of 12 months or less, which          to BB for such prior approval). If the shares                                                        Commission (‘BSEC’), which regulates capital
   may be provided by the foreign investor/               in such foreign-owned company are sold                                                               markets in Bangladesh, also issues various rules,

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orders, notifications and directives from time to      foreign-owned companies registering with          (where the foreign shareholder is a corporate         6. What are the main post-registration
time which have the effect of law and regulate         BIDA as industrial ventures, Bangladesh is in     shareholder) are also required by the RJSC to         reporting requirements for companies
the activities of companies.                           the process of passing legislation to set up a    complete the incorporation.                           in your jurisdiction?
Other laws and regulations that impact company         one-stop service centre at BIDA, under which      The fees for the incorporation of a company are
                                                       BIDA would assist with the incorporation of                                                             The main post-registration reporting require-
law, specifically in regards to the personal liabil-                                                     calculated (in part) on the basis of its authorised
                                                       foreign-owned companies by ensuring the                                                                 ments for companies in Bangladesh are listed
ity of a company’s directors, are the Bankruptcy                                                         share capital. For example, a company with an
                                                       completion of registration with RJSC within                                                             below. The documents are filed with the RJSC
Act of 1997, the Money Laundering Prevention                                                             authorised share capital of Taka 50 million
                                                       48 hours of filing.                                                                                     in its prescribed forms and/or in the forms set
Act 2009 and Negotiable Instruments Act 1881.                                                            would incur the following charges:
                                                                                                                                                               out in the CA 1994 or CR 2009, as applicable:
                                                       5. What are the main registration                 a. registration fee: Taka 76,250;
3. What are the most common types                                                                                                                              a. Form VII (Statutory Report): within a period
of companies in your jurisdiction?                     requirements for companies in your                b. registration filing fee: Taka 2,400;                  of not less than one month and not more
                                                       jurisdiction? What are the fees?                  c. stamp fee for the memorandum and articles             than six months from the date at which the
Private companies limited by shares (‘private                                                               of association: Taka 9,150;                           company is entitled to commence business,
limited companies’) and public companies lim-          The registration of companies commences
                                                                                                         d. fee for certified copies of the memoran-              every company limited by shares and every
ited by shares (‘public limited companies’) are        with the application for Name Clearance to
                                                                                                            dum of association, Form XII and Digital              company limited by guarantee and having
the most common types of companies formed in           the RJSC and obtaining a Name Clearance
                                                                                                            Certificate of Incorporation: Taka 2,220.             a share capital must hold a general meeting
Bangladesh. The CA 1994 s 2(q) defines a private       Certificate from the RJSC. After obtaining a
                                                                                                                                                                  of the members of the company, which is
company as one which by its articles restricts the     Name Clearance Certificate, a company with        The registration costs are subject to change, and
                                                                                                                                                                  defined as a statutory meeting under the
right to transfer its shares, if any, prohibits any    a proposed foreign shareholder must open a        it is very likely that additional administrative
                                                                                                                                                                  CA 1994. The board of directors is required
invitation to the public to subscribe for its shares   bank account in the name of the proposed entity   costs may have to be incurred to complete the
                                                                                                                                                                  to prepare a report which is referred to as a
or debenture, if any, and limits the number of its     and remit the initial share capital (paid-up      incorporation process.
                                                                                                                                                                  statutory report and must forward the report
members to 50 not including persons who are            capital) to the said account and obtain an        Other important registrations for a company              to every member of the company at least 21
in its employment. The CA 1994 s 2(r) defines          encashment certificate issued by the bank.        include:                                                 days before the day on which the statutory
a public company as a company which is not a           The following documents have to be submitted      a. value added tax (‘VAT’) registration under            meeting is to be held;
private company. In addition, an association not       to the RJSC to process the incorporation of the      the VAT Act 1991;                                  b. Form VIII (Special Resolution/Extraor-
for profit under the CA 1994 s 28 and a com-           entity:
                                                                                                         b. depending on the location of the office or            dinary Resolution): a copy of every special
pany limited by guarantee under the CA 1994            a. memorandum and articles of association            place of business, a trade licence from the           and extraordinary resolution must be
s 29 may be formed to engage in not-for-profit
                                                       b. encashment certificate (for foreign-owned         local government authority (union parishad/           printed or typewritten and duly certified
activities.
                                                          companies);                                       pourashava/city corporation office) for the           under the signature of an officer of the
4. How long does it take to set up                     c. Name Clearance Certificate;                       company’s specific type of trade or business;         company and filed with the RJSC within 15
a company in your jurisdiction?                                                                          c. depending on the nature and size of the               days from its passing;
                                                       d. Tax Identification Number (TIN) Certificate;
                                                                                                            business and its premises, building fire           c. Schedule X (Annual Summary of Share
Provided that the memorandum and articles              e. Treasury Challan;
                                                                                                            licences, specific clearances from relevant           Capital and List of Shareholders, Annual
of association have been drafted beforehand            f. Form I (Declaration on registration of            ministries of the government and/or licences          Summary of Directors): under the CA
and are ready for filing with the RJSC and an             company);                                         which involve the handling of particular              1994 s 36(1), a company must file with the
encashment certificate has been received from          g. Form VI (Notice of situation of registered        substances and commodities etc.                       RJSC an annual summary of share capital
the AD bank in the name of the proposed com-              office and of any change therein);                                                                      and list of shareholders within 18 months
                                                                                                         The fees for these registrations vary depending
pany (where it is a fully or partly foreign-owned                                                                                                                 of its incorporation and annually thereaf-
                                                       h. Form IX (Consent of directors to act);         on the location of the office or place of business
company), usually it takes approximately 10–15                                                                                                                    ter. A private company must submit with
                                                       i.   Form X (List of persons consenting to be     as well as the company’s share capital.
working days to incorporate a company in                                                                                                                          the annual return a certificate signed by a
Bangladesh, starting from the Name Clearance                directors); and
                                                                                                                                                                  director or other officer of the company that
application to the issuance of a Certificate of        j.   Form XII (Particulars of Directors, Man-                                                              the company has not issued any invitation
Incorporation.                                              agers, Managing Agents and of any change).                                                            to the public to subscribe for any shares or
There is no official method to fast-track the          Additional identification documents for the                                                                debentures of the company;
incorporation of a company. However, for               foreign shareholder and/or the nominee director

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d. Form XLI (Notice of Alteration in the              g. exploration, extraction and supply of other         a. arms and ammunition and other military            by them’. The limited liability of a company
   Address of the Registered Principal Office            mineral resources;                                     equipment and machinery;                          limited by shares is further emphasised in the
   of the Company): notice of any change in           h. large-scale infrastructure projects (e.g.           b. nuclear power;                                    CA 1994 s 235(iv), dealing with the liability of
   the registered address of a company must be           flyovers, elevated expressways, monorails,                                                               contributories of past and present members on
                                                                                                             c. security printing and minting; and
   given within 21 (twenty-one) days after the           economic zones, inland container depots/                                                                 the winding-up of a company: ‘in the case of
   change to the RJSC;                                                                                       d. forestation and mechanised extraction             a company limited by shares, no contribution
                                                         container freight stations);
                                                                                                                within the boundary of a reserved forest.         shall be required from any member exceeding
e. Balance sheet and profit and loss account:         i.   crude oil refineries (recycling/refining of
   under the CA 1994 s 190, a company must                                                                                                                        the amount, if any, unpaid on the shares in
                                                           lube oil used as fuel);                           8. What is the typical structure
   file with the RJSC copies of its balance sheet                                                                                                                 respect to which he is liable as a present or past
                                                      j.   medium and large industries using natural         of directors (or family management
   and profit and loss account within 30 days                                                                                                                     member’.
                                                           gas/condescend and other minerals as raw          structure) and liability issues
   from the date on which the balance sheet                                                                  or companies in your jurisdiction?
                                                           materials;                                                                                             9. What is the minimum number
   and the profit and loss account are laid
                                                      k. telecommunications services (mobile/cellu-                                                               of directors and shareholders required
   before its annual general meeting.                                                                        Directors, other than directors nominated by
                                                         lar phone services and landlines);                                                                       to set up a company in your jurisdiction?
The above is not an exhaustive list. Other                                                                   corporate shareholders, must own qualifying
                                                                                                                                                                  Are there any requirements that
reporting requirements are triggered in different     l.   satellite channels;                               shares, the number of which can be specified in
                                                                                                                                                                  a director must be a natural person?
situations such as a transfer of shares, return of    m. cargo/passenger aviation;                           the articles of association. Directors nominated
allotment, changes to the board of directors.                                                                by corporate shareholders are not required to        As per the CA 1994 ss 2(q) and 90(1), private
                                                      n. sea-bound ship transport;
Also, public listed companies have certain                                                                   own qualifying shares. Directors must execute        limited companies in Bangladesh are required
                                                      o. ea-ports/deep sea-ports;                            a Form IX: Consent of Director (in a prescribed
additional reporting obligations due to their                                                                                                                     to have a minimum of two directors and two
corporate governance obligations imposed by           p. VoIP/IP telephone; and                              format, as set forth in the Schedules to CA 1994).   shareholders and a maximum of 50 sharehold-
the BSEC.                                             q. industries using heavy minerals accumu-             This executed Form IX must be filed with the         ers. Under the CA 1994 s 90(1), public limited
                                                         lated from the beach.                               RJSC for the directorship to become effective.       companies and private limited companies which
As per the CA 1994, it is not mandatory for a
                                                                                                             Furthermore, a Form XII: Particulars of              are subsidiaries of public limited companies are
company in Bangladesh to have a company               In these sectors, the government reserves the
                                                                                                             Directors, Managers and Managing Agents (in          required to have at least three directors and a
secretary.                                            right to fix the equity ratio for foreign investors/
                                                                                                             a prescribed format, as set forth in the Schedules   minimum of seven shareholders.
                                                      shareholders to local investors/shareholders.
7. Are there any controlling factors or                                                                      to CA 1994) must be executed by the Managing
                                                      The Government has the right to expand or                                                                   Section 90(3) of the CA 1994 expressly states
restrictions on foreign companies in your                                                                    Director and filed with the RJSC. For subsequent
                                                      amend the list as it sees fit. Enterprises in these                                                         that a director must be a natural person.
jurisdiction?                                                                                                appointment of directors (post-incorporation),
                                                      controlled sectors cannot be registered with the
                                                                                                             directors must be appointed at a general meeting     10. What are the requirements on how
                                                      BIDA without prior approval from the relevant
See question 1 in relation to foreign exchange                                                               of the shareholders, provided, however, that         shares are offered in your jurisdiction?
                                                      ministries of the government.
regulations applicable to foreign-owned                                                                      casual vacancies on the board can be filled
companies.                                            In addition to the broader restriction stated by       pursuant to a meeting of the existing board          Private Limited Companies
                                                      above, in some cases, sector-specific legislation      of directors. The CA 1994 allows non-resident
Furthermore, the Industrial Policy 2016 lists a                                                                                                                   Shares may be offered at three different stages:
                                                      also imposes a maximum ceiling for a foreign           and/or foreign individuals to be appointed as
total of 17 of industries designated as ‘controlled
                                                      stake in the licensee entities for some of these       directors of private limited companies.              a. at the time of incorporation: shares may be
industries’:
                                                      controlled industries. Examples include certain                                                                offered to members at incorporation pur-
a. fishing in the deep sea;                                                                                  Under the CA 1994, companies may be formed
                                                      services in the telecommunications sector such                                                                 suant to the memorandum and articles of
                                                                                                             with the liability of shareholders limited by
b. banks/financial institutions in the private        as licences granted for International Gateway                                                                  association. The shares of a private limited
                                                                                                             shares or limited by guarantee (a limited
   sector;                                            (IGW), Interconnection Exchange (ICX) and                                                                      company cannot be offered to members of
                                                                                                             company), or with the liability of shareholders
c. insurance companies in the private sector;         VoIP Service Provider (VSP).                                                                                   the public;
                                                                                                             unlimited (an unlimited company). The CA
d. generation, supply and distribution of power       The government of Bangladesh in the Industrial         1994 s 5(a) defines a company limited by shares      b. transfer of existing shares: shares may be
   in the private sector;                             Policy, 2016 has also listed certain sectors as        as ‘a company limited by shares, that is to say,        offered to new shareholders by transferring
                                                      ‘reserved sectors’ where foreign investment is         a company having the liability of its member            one or more of the shares held by the existing
e. exploration, extraction and supply of natural
                                                      restricted for the purpose of national security        limited by the memorandum to the amount,                shareholders in the manner provided in the
   gas/oil;
                                                      or other reasons:                                      if any, unpaid on the shares respectively held          company’s articles of association. Under the
f. exploration, extraction and supply of coal;                                                                                                                       CA 1994 per Reg 18, Sch 1, an instrument of

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transfer of shares (namely, Form 117) must      together for an accurate and comprehensive           obligation to the shareholders, audit committee,     (non-repatriable). Also, a foreign national can
     be executed by both the transferor and the      understanding of the labour law regime.              reporting obligations of the audit committee,        become a permanent resident by investing a
     transferee. The transferor remains the holder   An important point to note regarding the             external/statutory auditors, duties of chief         minimum of US$ 75,000 (non-repatriable).
     of the share until the name of the transferee   application of the LA 2006 and LR 2015 is that       financial officer and chief executive officer and
     is entered in the register of members.                                                               reporting and compliance obligation of the           14. When is a company subject to tax
                                                     the provisions of both LA 2006 and LR 2015 are
     Furthermore, an affidavit must also be                                                               Guidelines.                                          in your jurisdiction? What are the main
                                                     applicable to employees who fall within the defi-
     executed by the transferor confirming the                                                                                                                 taxes that may apply to companies in
                                                     nition of a ‘worker’ as defined in the LA 2006.      In addition to the above the corporate legal
     said transfer and duly notarised before a                                                                                                                 your jurisdiction?
                                                     The LA 2006 s 2(65), as amended in 2013, defines     framework in Bangladesh consists of various
     recognised Notary Public of Bangladesh;         ‘worker’ as including all employees except for       statutes, namely, CA 1994, Securities and            In Bangladesh, as per the ITO 1984 s 75, it is
c. return of allotment: under the CA 1994 s          those engaged in a managerial, administrative        Exchange Commission Ordinance, 1969, SECA            mandatory for all companies incorporated in
   151, where a company having a share capital       [or supervisory] capacity’. The Bangladesh High      1993, Bangladesh Bank Order, 1972, Bank              Bangladesh to obtain an e-TIN (Electronic Tax
   makes any allotment of its shares, it is          Court has defined ‘worker’ broadly by holding        Companies Act 1991, Financial Institutions           Identification Number) from the National Board
   required to file a duly completed Form XV         that a manager etc. may be deemed a non-worker       Act 1993, Bankruptcy Act 1997, and the Foreign       of Revenue (‘NBR’) and to file a tax return on
   with the RJSC.                                    only if he or she has the power to make hiring       Exchange Regulation Act 1947, which impose           the later date of six months from the end of the
                                                     and/or firing decisions over employees under his     certain corporate governance obligations as          accounting year or 15 July of the particular year.
Public Limited Companies
                                                     or her management.                                   well. Corporate governance in Bangladesh is          Such filing may be accompanied by an audited
Shares may be offered to members of the public                                                            mainly regulated by RJSC, BSEC and BB.
                                                     Any employee who falls outside the ambit of                                                               financial statement, computation of total
pursuant to:
                                                     the term ‘worker’ is a ‘non-worker’. The terms                                                            income with a supporting schedule and other
a. a prospectus registered with the RJSC under                                                            13. Does establishing a company in
                                                     of employment of a non-worker are governed                                                                supporting documents. The filing date can be
   the CA 1994 s 38; or                                                                                   your jurisdiction grant any kind of
                                                     solely by the contract of employment between                                                              extended upon application for up to two months
                                                                                                          residency rights? Are there any conditions
b. a statement in lieu of a prospectus registered    the non-worker and the employer.                                                                          at first occasion and can be further extended for
                                                                                                          that in order to receive these residency
   with the RJSC under the CA 1994 s 141.            In addition, the Contract Act of 1872 s 27 may                                                            another two months.
                                                                                                          rights (if applicable) one must partner
If the public limited company is not already         be referred to in that it renders void restrictive   or establish a joint venture with a local            The main taxes that may apply to companies
listed on a stock exchange in Bangladesh, an         covenants that seek to restrain employees from       (e.g. a citizen of your jurisdiction)?               in Bangladesh are corporate taxes and VAT. At
application must be made to the BSEC to make         seeking employment with a competing employer                                                              present, the rate of corporate tax of a non-listed
an initial public offering (IPO) of the company’s    after their employment has ended with the cur-       In establishing a foreign-owned company in           company is 35% of a company’s total income
shares. The company would have to comply with        rent employer.                                       Bangladesh, a foreign investor is not automat-       in a year. The rate of VAT usually depends on
the BSEC regulations on making an IPO and the        Furthermore, companies operating in an export        ically granted residency rights. However, a          the respective HS Code (an internationally
applicable listing regulations of the respective     processing zone are subject to the Bangladesh        prospective foreign investor may obtain a mul-       standardised system of names and numbers to
stock exchange.                                      Export Processing Zones Authority Act 1980           tiple-entry three-year investor visa by applying     classify traded products) of the products and/or
                                                     and the rules and regulations of the Bangladesh      for such investor visa with BIDA. Such investor      services provided by the company. However, the
11. What are the key laws and regulations                                                                 visa allows for entry into and short-term stay       most common rate of VAT in Bangladesh is 15%.
                                                     Export Processing Zones Authority.
on employment in your jurisdiction that                                                                   in Bangladesh for the visa holder, but does not
companies should be aware of? Are there              12. What is the nature of the                        allow for such investor visa holder to work and      15. How does the competition law in your
any aspects of employment law that are               corporate governance regime in effect                earn a salary in Bangladesh. If a foreign investor   jurisdiction regulate companies?
heavily regulated?                                   in your jurisdiction? What agencies or               wishes to reside in Bangladesh as an employee
                                                                                                                                                               The Competition Act 2012 (‘Comp Act’) was
                                                     government bodies regulate corporate                 of the investee foreign-owned company, then
The primary statute that governs employment                                                                                                                    promulgated to monitor the market and protect
                                                     governance?                                          subject to a minimum amount of foreign capital
and labour matters in Bangladesh is the Labour                                                                                                                 the end consumers of products and services.
                                                                                                          and number of local employees, she/he may be
Act 2006 (‘LA 2006’). The Labour Rules, 2015         The SEC by notification dated 7 August 2012                                                               It mandates the creation of the Bangladesh
                                                                                                          eligible for and be granted a work permit to
(‘LR 2015’) was enacted pursuant to the LA           issued certain corporate governance condi-                                                                Competition Commission (‘BCC’) which is
                                                                                                          work/reside in and earn a salary in Bangladesh.
2006 s 351. It sets out in more detail the matters   tions and guidelines on public listed companies                                                           vested with the power of overseeing the market
covered in the LA 2006 and provides greater                                                               A foreign national may become citizen of             and taking necessary measures against unscru-
                                                     (“Guideline”). The Guideline imposes con-
clarity and specificity on certain aspects of the                                                         Bangladesh by investing a minimum of US$             pulous business practices and organisations.
                                                     ditions regarding board size, appointment of
LA 2006. The LA 2006 and LR 2015 must be read                                                             500,000 in Bangladesh or by transferring US$
                                                     Independent Directors, Director’s reporting
                                                                                                          1,000,000 to any recognized financial institution

16         LexisNexis® Company Law Guide 2018–2019                                                        Jurisdictional Q&A – Bangladesh                                                                17
LexisNexis Company Law Guide 2018-2019 - The second annual complimentary guide to understanding Company Law practices around the world with an ...
The Comp Act s 16 restricts organisations and       Convention, if a copyright work is registered in   as stated in the respective provisions. Moreover,     21. Are there any features regarding
groups from abusing their dominant position.        one member country, it will have protection in     under the ITO 1984 paragraph 33 of Part A             company law in your jurisdiction
‘Dominant position’ is defined as a position of     all member countries of the Berne Convention.      of the Sixth Sch, as amended by Bangladesh            or in Asia that you wish to highlight?
strength which is enjoyed by an organisation                                                           Income Tax Paripatra (Circular) 2015 and Fin-
in the relevant market by creating a monopoly       17. Does your jurisdiction have laws               ance Act 2016, there is a tax exemption on any        In Bangladesh, a minimum of two shareholders
situation. However, the Comp Act did not spec-      or regulations that govern data privacy?           income derived from the business of software          are required to incorporate a company, whereas
ify the precise limit beyond which an act would                                                        development information technology, informa-          in many countries, a single shareholder can
                                                    Bangladesh does not have any specific law that                                                           incorporate a company and is free to hold 100%
be treated as anti-competitive. Also, the Comp                                                         tion technology enabled services and nationwide
                                                    governs personal information or data privacy.                                                            of the shares of the company. Furthermore,
Act remains silent on the issues which the BCC                                                         telecommunication transmission network up to
                                                    However, the following statues may be noted in                                                           Bangladesh law does not provide for any pass-
must take into account in order to determine a                                                         30 June 2024.
                                                    relation to their regulation of data privacy:                                                            through companies such as LLCs as is available
relevant market.                                                                                       Moreover, double taxation can be avoided in
                                                    a. the Information and Communication                                                                     in certain jurisdictions. Finally, the following
It is to be noted that although the BCC was                                                            most cases as Bangladesh benefits from many
                                                       Technology Act 2006 provides relief against                                                           provisions of the CA 1994 may be noted:
established under the Comp Act it has not                                                              bilateral investment agreements with other
                                                       computer hacking and unauthorised access                                                              a. section 106 provides that a shareholder-di-
become effective yet, for many practical reasons,                                                      countries.
                                                       of data;                                                                                                 rector may be removed only at a duly called
in respect of overseeing market practices and
implementing the provisions of the Comp Act.        b. the Right to Information Act 2006 prohibits     19. What is the law on corporate                         extraordinary general meeting, having a
                                                       disclosure of any information which would       insolvency in your jurisdiction?                         valid quorum and upon the affirmative vote
16. What are the main intellectual                     harm an individual’s privacy or personal                                                                 of three-quarters of the shareholders present
property rights companies should be                    life;                                           The primary statues on corporate insolvency in           at such meeting. This provision does not
aware of in your jurisdiction?                                                                         Bangladesh are the Bankruptcy Act 1997 and               apply to nominee directors appointed by
                                                    c. the LA 2006 imposes criminal sanctions on
                                                                                                       the CA 1994 ss 234–344.                                  corporate shareholders, who as per a provi-
                                                       employees by way of penalty for wrongful
The main intellectual property rights com-                                                                                                                      sion that should be inserted in the articles of
                                                       disclosure of an employer’s confidential        20. Have there been any recent proposals
panies should be aware of in Bangladesh are                                                                                                                     association may be appointed and removed
                                                       information or trade secrets;                   for reforms or regulatory changes
trademarks, patents and copyrights. Intellectual                                                                                                                at the sole discretion of the appointing
property such as industrial design does not         d. the Constitution of Bangladesh provides         that will impact company law in your
                                                                                                                                                                shareholder; and
play a significant part, and very few cases have       protection of privacy in general terms: the     jurisdiction?
                                                       right to the privacy of one’s correspondence                                                          b. section 85(1) contains provisions as to
reached the Supreme Court of Bangladesh or
                                                       and other means of communication is             The CA 1994 has been considered for amend-               meetings and votes which are to have effect
have been reported.
                                                       declared as a fundamental right of a citizen    ment for a number of years. In this regard, the          notwithstanding any provision in the
In Bangladesh, an applicant can apply for trade-                                                       Ministry of Commerce has published the draft             articles of association, and section 85(2)
                                                       of Bangladesh.
mark or patent registration at the Department                                                          Companies Act 2013 for comments, but it has              contains provisions which are to have effect
of Patent, Design and Trademark under the           Additionally, BB issued a guideline in 2015 to
                                                                                                       not yet been implemented and there is no con-            in so far as the articles of association do not
Ministry of Industries.                             ensure information, communication and tech-
                                                                                                       firmation as to when this bill will be passed as an      make provision in that behalf.
                                                    nology security in the financial sector.
An application for copyright registration is to                                                        Act. We will have to wait and see what changes
be submitted at the Copyright Office under the      18. Are there any incentives to attract            this Act will bring and the impact it will have
Ministry of Cultural Affairs.                       foreign companies to your jurisdiction?            in Bangladesh.
It takes around two years to register a trademark
or a patent and around 4–6 months to register       See question 1 in regards to the repatriation of
a copyright, provided that there is no objection    dividends and capital/capital gains to foreign
from the registrar or any opposing party.           shareholders of a foreign-owned company.
Bangladesh is a member of the international         There are also tax incentives for foreign compa-
treaty, Paris Convention for the Protection         nies, as provided for in the ITO 1984 ss 44–47.
of Industrial Property, along with 176 other        For instance, under the ITO 1984 ss 46A, 46B
countries. Bangladesh is also a member of the       and 46C, there are tax exemptions for the busi-
international treaty, Berne Convention, along       ness of industrial undertaking and of physical
with 172 other countries. As per the Berne          infrastructure facilities for a number of years

18        LexisNexis® Company Law Guide 2018–2019                                                      Jurisdictional Q&A – Bangladesh                                                                 19
Jurisdiction:            Brazil
                                                                         Firm:       Campos Mello Advogados
                                                                         Authors:    Fabiano Gallo, Carolina
                                                                         		          Marcondes Sant’Angelo,
                                                                         		          Rafaella Chiachio and
                                                                         		          Adriana Kupper Pagés

                                                                        1. What is the general situation for                 of laws to regulate several legal fields. With
                                                                        foreign companies in your jurisdiction?              respect to company law, the relevant provisions
                                                                        (For example, common presence, difficulty            are found essentially in the following statutes
                                                                        to setup, restrictive system, open                   and regulations:
                                                                        and welcoming jurisdiction?)
                                                                                                                             2.1 Brazilian Civil Code
                                                                        As one of the largest economies in the world,        Implemented by Federal Law No. 10,406 of
                                                                        Brazil is a well-known destination for foreign       January 10, 2002, as amended (“Brazilian Civil
                                                                        investors. The overall stability of the market,      Code”), the Brazilian Civil Code sets out specific
                                                                        combined with a growing domestic demand              guidelines regarding various types of business
                                                                        for infrastructure, goods and services, provide      organizations, including private limited liability
                                                                        foreign companies interested in doing business       companies and non-profit legal entities (associa-
                                                                        in Brazil with strong and diverse investment         tions, foundations and cooperatives).
                                                                        opportunities.
                                                                                                                             2.2 Corporations Law
                                                                        Commonly referred to as an open jurisdiction,
 About the Authors:                                                                                                          Federal Law No. 6,404 of December 15, 1976, as
                                                                        Brazil welcomes foreign investment. As such,
                                                                                                                             amended (“Corporations Law”), applies specif-
 Masud Khan                           W: www.legalcirclebd.com          there are no general restrictions on foreign
                                                                                                                             ically to legal entities incorporated in the form
 Senior Partner, The Legal Circle     A: The High Tower (9th floor)     ownership, except in certain specific sectors
                                                                                                                             of stock corporations and regulates the forma-
 E: masud@legalcirclebd.com              9 Mohakhali C /A, Dhaka 1212   (for further details regarding such restrictions,
                                                                                                                             tion, organization and dissolution processes
                                         Bangladesh                     please refer to section 7 below).
                                                                                                                             related to such entities. The Corporations Law
                                      T: +88 02 5881 4311               As in many other jurisdictions, foreign com-
 N.M. Eftakharul Alam Bhuiya                                                                                                 may also be applied in a subsidiary manner to
 Senior Associate, The Legal Circle                                     panies wishing to invest in Brazil may choose        limited liability companies, if the shareholders
                                                                        from a range of entry options the one that is        so decide in the relevant articles of association.
 E: eftakhar@legalcirclebd.com
                                                                        most suitable to the intended business model
                                                                        (which should be assessed on a case-by-case          2.3 Specific Regulations
 Ahnaf Chowdhury                                                        basis). Although indirect entry options are          1. Rules Enacted by Brazilian Securities and
 Associate, The Legal Circle                                            available (e.g. execution of agreements with sales      Exchange Commission (“CVM”)
 E: ahnaf@legalcirclebd.com                                             agents and distributors), foreign investors usu-     Publicly-held corporations are also subject to
                                                                        ally prefer to establish a direct and permanent      specific regulations issued by the CVM.
 Jarif Ahmed                                                            presence by means of a subsidiary.
                                                                                                                             2. Rules Enacted by the Brazilian Stock
 Associate, The Legal Circle
                                                                        2. What are the key laws and                            Exchange (BM&F Bovespa)
 E: jarif@legalcirclebd.com
                                                                        regulations that govern company law                  The BM&F Bovespa has created differentiated
                                                                        in your jurisdiction?                                listing segments, with rules setting out cor-
 Nauriin Ahmed                                                                                                               porate governance practices and transparency
 Associate, The Legal Circle                                            The Brazilian system is based on the civil law       requirements in addition to those already
 E: nauriin@legalcirclebd.com                                           tradition and, as such, relies on codified sets

20      LexisNexis® Company Law Guide 2018–2019                         Jurisdictional Q&A – Brazil                                                                    21
established under Brazilian corporate legis-          3.2 Sociedade Anonima                                Considering that the EIRELI was only recently        e. For both Limitada and S.A.: registration of
lation. The adherence to the listing segments         Corporations are governed by the Corporations        introduced in the Brazilian legal framework,            the foreign shareholder(s) and the Brazilian
better advertises the company’s efforts to            Law, which provides a more sophisticated legal       its structure is not consolidated in practice           company with the Brazilian Central Bank,
improve its relationship with its investors and       regime for corporate activities, management          and is still being verified and tested by registry      so as to enable the inflow and outflow of
increases the potential for asset value appreci-      and shareholders’ relations, corporate govern-       authorities and courts. For this reason, we will        funds among such persons (such as equity
ation. This adherence is voluntary and must be        ance structures, decision-making processes,          focus on the following sections on the analysis         contributions and payment of profits and
approved by the BM&F Bovespa.                         transparency and disclosure obligations, and         of Limitada and S.A.                                    dividends);
                                                      conflict resolution procedures. This corporate                                                            f. Only for S.A.: publication of the Brazilian
3. What are the most common types                                                                          4. How long does it take to set up
                                                      entity is more appropriate for a co-owned equity                                                             company incorporation acts in the press and
of companies in your jurisdiction?                                                                         a company in your jurisdiction?
                                                      structure, such as joint ventures, as well as for                                                            registration of a copy of such publication
                                                                                                           (For example, it could be as fast as X
Brazilian law provides for several corporate          the participation of various kinds of stakehold-                                                             with the Board of Trade;
                                                                                                           amount of time, average setup time
forms, of which the most important and widely         ers, such as financing entities or holders of debt                                                        g. Only for S.A.: opening of the Brazilian
                                                                                                           and then as slow as Y amount of time
used are:                                             instruments.                                                                                                 company’s shares and corporate books, as
                                                                                                           based on your experience – are there
a. limited liability companies (“Limitada” or         A corporation can be held either publicly or         any mechanisms to fast track setup?)                    required by the Corporations Law;
   “Ltda.”); and                                      privately. As a general rule, a publicly held                                                             h. For both Limitada and S.A.: indication to the
                                                      corporation has its securities traded on the         The process for setting up a company in Brazil          Brazilian Federal Revenue of the Brazilian
b. stock corporations (“Sociedade Anonima”
                                                      stock exchange and/or on the over-the-counter        involves the following main steps:                      company’s and shareholders’ ultimate ben-
   or “S.A.”).
                                                      market. A publicly-held corporation, as well as      a. For both Limitada and S.A.: granting of              eficiaries, defined as the individual(s) who
Corporations and limited liability companies          each public placement of securities made by it,         powers-of-attorney for representation of             ultimately hold(s) a significant control or
afford equal protection to their equity holders by    must be registered with the CVM.                        the foreign shareholder(s) in Brazil (under          influence over the entity(ies); and
limiting their liability to the capital stock they
                                                      3.3 Other corporate forms                               Brazilian law all foreign investors (entities     i.   For both Limitada and S.A.: Brazilian enti-
subscribed. Therefore, corporations and limited
                                                                                                              or individuals) must indicate an individual            ties must also obtain additional enrolments
liability companies always entail limited liability   In addition to corporations and limited liability
                                                                                                              resident in Brazil as their representative for         with tax, social security and regulatory
as a general rule.                                    companies, another type of limited liability
                                                                                                              both corporate and tax purposes); provide a            authorities at federal, state, and municipal
                                                      company named “EIRELI” was recently regu-
3.1 Limitada                                                                                                  copy of shareholder(s)’ articles of incorpo-           levels (for further details, please refer to
                                                      lated by the Brazilian Civil Code and is worth
Limited liability companies are governed by                                                                   ration or equivalent instrument (statement/            section 5 below).
                                                      mentioning. Please refer to item 3.3.1 below.
the Brazilian Civil Code. In case of omissions                                                                affidavit), as well as a copy of the passport
                                                      Other company forms have not been accepted                                                                The Brazilian company is considered legally
and depending on the language of the com-                                                                     of shareholder(s)’ legal representative. As
                                                      in practice, especially because most of them                                                              existing upon completion of item (d) above,
pany’s articles of association, the rules under                                                               a general rule, such documents must go
                                                      provide for unlimited shareholder liability.                                                              which usually takes between 30 to 90 days,
the Brazilian Civil Code relating to limited                                                                  through applicable notarization and apos-
                                                                                                                                                                depending on the efficiency of the foreign share-
liability companies may be supplemented by            3.3.1 EIRELI                                            tille proceedings;
                                                                                                                                                                holder(s) to provide the necessary documents
the rules in the Brazilian Civil Code relating        The EIRELI is a type of limited liability company    b. For both Limitada and S.A.: registration of       and information to incorporate the company,
to the sociedade simples (a corporate type also       which is incorporated by only one individual            the foreign shareholder(s) with the Brazilian     as well as of the government bodies in charge of
established by the Brazilian Civil Code) or by        or legal entity (a national or foreigner), in the       Federal Revenue;                                  analyzing the application documents.
the Corporations Law.                                 capacity of sole-owner of the totality of the        c. Only for S.A.: deposit, in cash, of 10% of the
The limited liability company structure is usu-       company’s corporate capital. In general, the            company’s corporate capital in an interim         5. What are the main registration
ally recommended for companies that envisage          same rules governing the Limitada also apply            bank account opened on behalf of the              requirements for companies in your
a simple governance structure. The legislation        to the EIRELI, with the following exceptions:           Brazilian company in Banco do Brasil S.A;         jurisdiction? What are the fees?
grants these types of companies more freedom          a. the corporate capital of the EIRELI shall be      d. For both Limitada and S.A.: preparing,            After registration of the company with the
to organize their internal structure and deci-           equivalent to at least one hundred minimum           filing and registering the Brazilian company      Board of Trade, additional forms must be
sion-making process, as well as a lower grade of         wages; and                                           incorporation acts (articles of association or    filed with tax, social security and regulatory
transparency and disclosure obligations. That is                                                              by-laws, as the case may be) with the Board
                                                      b. each individual or legal entity can incorpo-                                                           authorities at federal, state, and municipal
why these corporate entities are mostly used in                                                               of Trade and obtaining the enrolment of
                                                         rate only one EIRELI.                                                                                  levels, vis-à-vis the location, business type, and
wholly owned companies.                                                                                       the Brazilian company with the Brazilian
                                                                                                              Federal Revenue;

22        LexisNexis® Company Law Guide 2018–2019                                                          Jurisdictional Q&A – Brazil                                                                    23
Annual meeting                                              the Brazilian Central Bank, through the
                                                  Her experience is focused in corporate law,          An annual meeting of shareholders must be held              SISBACEN.
                                                  corporate governance, M&A and private                within four months following the end of each       b. On an annual basis:
                                                  equity transactions, foreign investment and          corporate year to:                                    i.    Brazilian companies that do not meet
                                                  commercial contracts. Her experience also            a. Limitadas: (i) review management accounts                the criteria indicated in (a.i) above must
                                                  encompasses planning and structuring of                 and deliberate on the balance sheet and                  inform their updated corporate struc-
                                                  business transactions and corporate activ-              the economic result; and (ii) deliberate on              ture to the Brazilian Central Bank on
                                                  ities in different sectors of the economy,              managers election, as the case may be; and               an annual basis; and
                                                  legal advice and coordination of corporate
                                                                                                       b. S.A.s: (i) review management accounts and          ii.   A foreign capital annual census must
                                                  reorganization projects and joint ventures,
                                                                                                          examine, discuss and vote on the financial               be completed by Brazilian companies
                                                  as well as legal assistance with day-to-day
                                                                                                          statements; (ii) decide on the uses to which             receiving foreign investment whenever
                                                  corporate issues.
                                                                                                          the net profits of the corporate year should             they have, on the preceding year (i)
                                                  Before joining Campos Mello Advogados                   be put and on the distribution of dividends;             direct foreign investment (in equity) in
                                                  in 2014, Carolina was a senior associate at             and (iii) elect the officers and the members             any amount, and, simultaneously, net
                                                  Pereira Neto Macedo Advogados, being part               of the audit committee, if any.                          equity equal to, or greater than, US$
                                                  of the corporate and contracts team in São                                                                       100,000,000.00 (one hundred million);
                                                                                                       S.As must have their financial statements
                                                  Paulo. She also worked in other recognized                                                                       or (ii) outstanding balance of short-
                                                                                                       audited by an auditor registered before the
   Carolina Marcondes                             law firms in São Paulo, starting her career
                                                                                                       CVM and published in a commercial newspa-                   term foreign accounts receivable (i.e.,
   Sant’Angelo                                    as a trainee at Machado Meyer Advogados                                                                          due within 360 days) equal to, or greater
                                                                                                       per and in the Official Gazette, for purposes of
   Partner, Campos Mello Advogados                back in 2002.                                                                                                    than, US$ 10,000,000.00 (ten million).
                                                                                                       registering the annual resolution with the Board
                                                  Among her clients are Brazilian and foreign          of Trade. Limited liability companies consid-      c. Every five years:
   Carolina Marcondes Sant’Angelo is a partner    companies in the sectors of retail, technol-         ered as “large entities” for the purposes of Law      i.    a foreign capital five-year census must
   in Campos Mello Advogados’ Corporate           ogy, food and beverage and industrial goods          No. 11.638/2007 may also be required to pre-                be completed by Brazilian companies
   practice, based in São Paulo.                  and services.                                        pare their financial statements in accordance               receiving foreign investment whenever
                                                                                                       with the Corporations Law, and have such finan-             they have, on the preceding reference
                                                                                                       cial statements audited by an external auditor              year (i) direct foreign investment (in
                                                                                                       and published.                                              equity) in any amount; or (ii) out-
activities to be conducted by the company. The       for example, environmental licenses and/
main registrations requirements are:                 or specific authorizations from regulatory        Reporting to Brazilian Central Bank                         standing balance of short-term foreign
                                                     agencies.                                                                                                     accounts receivable (i.e. due within 360
a. enrolment with Brazilian Federal Revenue                                                            All direct foreign investments must be regis-
                                                                                                                                                                   days) equal to, or greater than, US$
   (CNPJ);                                        Costs and fees vary according to each registra-      tered in the Electronic Declaratory Registry
                                                                                                                                                                   1,000,000.00 (one million).
b. enrolment with State and Municipal tax         tion and/or government body involved, but they       for Foreign Direct Investments (RDE-IED) of
   authorities, if so required according to       usually refer to governmental fees and expenses      the Brazilian Central Bank, through a specific     Additional reports
   the specific activities conducted by the       incurred with public notaries, translators, attor-   online system named SISBACEN.                      Periodic filings regarding the compliance with
   company;                                       neys, brokers and external paralegals.               In addition, Brazilian companies with direct       tax and labor obligations are also required,
c. registration before the National Social                                                             foreign investment must comply with the fol-       depending on the business type and activities
                                                  6. What are the main post-registration
   Security Institute (INSS);                                                                          lowing reporting requirements to the Brazilian     conducted by the company.
                                                  reporting requirements for companies
                                                                                                       Central Bank:
d. registration before the Severance Pay Fund     in your jurisdiction? (For example, annual                                                              7. Are there any controlling factors or
   (FGTS);                                        reporting requirements: what to file, to             a. On a quarterly basis:
                                                                                                                                                          restrictions on foreign companies in your
e. obtainment of the operating license with the   whom, is a company secretary required?)                 i.   Brazilian companies with direct foreign    jurisdiction?
   Municipality; and                                                                                           investment that have net worth or
                                                  The main post-registration reporting require-                total assets equal or higher than BRL      Brazil is an open jurisdiction for foreign invest-
f. obtainment of the necessary permits to         ments for companies in Brazil are as follows:                250,000,000.00 (two hundred and fifty      ment. As such, there are no general restrictions
   operate the company according to its
                                                                                                               million), must submit information          on foreign ownership, except in certain specific
   corporate purpose, which may include,
                                                                                                               regarding their financial statements to    sectors.

24       LexisNexis® Company Law Guide 2018–2019                                                       Jurisdictional Q&A – Brazil                                                                  25
The Brazilian Federal Constitution provides for      state, being the latter, as a general rule, its major-
the following limitations:                           ity shareholder).                                                                                          Gallo practices in different areas of law, with
a. Foreign equity ownership of Brazilian             Officers and board members are jointly referred                                                            special emphasis in corporate, mergers and
   journalistic and broadcasting companies is        to as managers under the Corporations Law.                                                                 acquisitions, listed companies and corporate
   limited to 30%;                                   In general, management structure, composition,                                                             governance, foreign investment, energy and
b. Foreign equity ownership of aviation com-         functions and responsibilities are determined                                                              infrastructure.
   panies is limited to 20%; and                     by the Corporations Law and the company’s                                                                  Before joining Campos Mello, Gallo was
                                                     bylaws.                                                                                                    a partner in Tozzini Freire Advogados,
c. Nuclear power can only be exploited by the
   Brazilian government.                             The board of directors is generally responsible                                                            co-heading the Corporate and Oil and Gas
                                                     for the strategic direction of the company. The                                                            practice in Rio de Janeiro. He also worked for
8. What is the typical structure                     board is a deliberative body only and does not                                                             Telecom Italia Group as Legal Director and
of directors (or family management                   have executive functions. The board members                                                                General Secretary of TIM Participações S.A.
structure) and liability issues                      do not have specific titles. However, the board                                                            Among his clients are Brazilian and foreign
for companies in your jurisdiction?                  must have a chairman, chosen from among the                                                                companies in the sectors of industrial goods
                                                     board members.                                                                                             and services, energy and infrastructure,
The typical management structure of Brazilian
                                                     The board of executive officers is incumbent                                                               defense and security, food and beverage,
companies varies according to the type of busi-
                                                     upon the corporation’s representation before                                                               telecommunications, healthcare and retail.
ness entity incorporated.
                                                     third parties and the performance of all acts               Fabiano Gallo
8.1. Limitada                                        necessary for the exercise of the corporation’s             Partner, Campos Mello Advogados
The Brazilian Civil Code does not establish          activities. Although officers are not required
a formal management structure for limited            to have a specific designation, it is common                Fabiano Gallo is a senior partner in Campos
liability companies. Similarly, the existence of a   for companies to designate their officers in the            Mello Advogados Corporate and Energy
board in a limited liability company, although       bylaws (for example, as chief executive officer             practices, based in São Paulo.
possible, is not expressly provided for, since the   (CEO) and chief financial officer (CFO)). An
board is only regulated by the Corporations Law.     exception is made for publicly held companies
                                                     that are required to have an investors’ relations
The Limitada’s management is carried out by                                                                   shareholders, who can be individuals or legal     b. Transferring quotas: quotaholders may
                                                     officer with specific functions.
one or more officers (or managers) resident                                                                   entities, whether residents in Brazil or not.        transfer their quotas to third parties, subject
in Brazil, who may be, but do not have to be,        A corporation must have at least two officers                                                                 to the approval of other quotaholders rep-
                                                                                                              The incorporation and ownership by a single
shareholders. Their appointment is made by           and, if there is a board, three directors.                                                                    resenting 75% of the company’s corporate
                                                                                                              shareholder is allowed for S.A.s, provided that
the shareholders, who may attribute a specific       Generally, up to one-third of the board mem-                                                                  capital. Any transfer of quotas is subject
                                                                                                              such shareholder is a Brazilian company.
designation to them. The managers’ functions         bers can also serve as officers. Directors may                                                                to the execution of an amendment to the
and responsibilities are set out in the applica-     be nationals or foreigners, resident in Brazil           9.2 Minimum number of Directors                      Company’s articles of association;
ble legislation and the company’s articles of        or abroad. Officers must be Brazilian residents          Please refer to question 8 above.                 c. Issuing new quotas: quotaholders of
association.                                         (nationals or foreigners).
                                                                                                                                                                   Limitadas have a preemptive right to
                                                                                                              10. What are the requirements on how
8.2. Sociedade Anonima                               9. What is the minimum number
                                                                                                                                                                   subscribe new quotas of the company pro-
                                                                                                              shares are offered in your jurisdiction?
                                                     of directors and shareholders required
                                                                                                                                                                   portionally to their respective participation
Under the Corporations Law, the management
                                                     to set up a company in your jurisdiction?
                                                                                                                                                                   in the company’s corporate capital. New
powers are vested in the company’s officers and                                                               10.1. Limitada
                                                     Are there any requirements that
                                                                                                                                                                   quotas may only be issued if the company’s
the board of directors, or only the officers. The                                                             a. General structure: The corporate capital
                                                     a director must be a natural person?
                                                                                                                                                                   original corporate capital has been fully paid
existence of a board of directors is mandatory                                                                   of Limitadas is divided into quotas, which        up; and
only for publicly held companies, companies                                                                      must have an assigned par value. Company’s
with authorized capital and mixed capital            9.1 Minimum number of Shareholders                                                                         d. Public offer: Limitadas are not allowed to
                                                                                                                 subscribed capital and ownership of quotas
companies (that is, companies whose corporate                                                                                                                      make public offerings.
                                                     As a general rule, Limitadas and S.As must                  must be duly ref lected in the articles of
capital is held both by private parties and the      be incorporated and held by, at least, two                  association;

26        LexisNexis® Company Law Guide 2018–2019                                                             Jurisdictional Q&A – Brazil                                                                 27
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