Opening Foreign Companies in Brazil - Branch and Subsidiary (EN)

Intro

Globalization and economic growth have increasingly encouraged the expansion of foreign companies in Brazil. In this scenario, it is essential that entrepreneurs are aware of the alternatives available to establish a presence in the country: the branch and the subsidiary. In this article, we will discuss the technical aspects comparing the two options, detailing the requirements, steps and procedures for foreign companies to be opened in Brazil, which can be provided through legal advice in the process of opening foreign companies.

1. Branch

A branch office is an extension of the parent company abroad, which has a direct and dependent relationship with the foreign company. The branch does not have its own legal personality, but is an integral part of the parent company. As such, the responsibilities of the branch are assigned directly to the parent company.

1.1 Requirements and procedures for opening a branch in Brazil:

• Brazilian government authorization: The parent company must obtain authorization from the Brazilian government to operate in the country.
• Registration with the Board of Trade: The branch must be registered with the Junta Comercial in the state where it intends to operate. It will be necessary to present documents such as a sworn translation of the foreign company's articles of incorporation, the minutes of the branch's opening decision, and the appointment of the legal representative in Brazil, among others.
• Registration with the CNPJ: The branch must apply for registration with the National Register of Legal Entities (CNPJ) at the Federal Revenue Service.
• Registration with the competent bodies: Depending on the type of activity of the branch, other registrations may be required, such as state and municipal registration, Social Security and Ministry of Labor registration.

2. Subsidiary

The subsidiary is a Brazilian company, with its own legal personality, controlled by a foreign company. In turn, the subsidiary has greater autonomy in relation to the parent company. This is because it has a separate share capital and its own management. As far as the Subsidiary is concerned, the parent company assumes directly the responsibilities of the latter.

2.1 Requirements and procedures for opening a subsidiary in Brazil:

• Incorporation of the company: The subsidiary must be incorporated according to Brazilian law. The articles of incorporation must be prepared by a lawyer and registered with the Board of Trade in the state where it intends to operate.
• Registration at the Junta Comercial: The subsidiary must be registered at the Junta Comercial, submitting documents such as the memorandum of association, the minutes of incorporation, and the appointment of the legal representative in Brazil, among others.
• Registration with the CNPJ: The subsidiary must apply for registration with the National Register of Legal Entities (CNPJ) at the Federal Revenue.
• Registration with the competent entities: As with the subsidiary, the subsidiary must comply with the other mandatory registrations and entries, according to the type of activity.

3. Relevant remarks

3.1 Apostilled Documents

Some documents of companies incorporated abroad will be necessary for the opening procedures in Brazil. However, it is important to emphasize that, for documents from abroad to be valid in Brazil, apostille by a competent local authority is mandatory. Otherwise, the legalization of the original document must be done by a Brazilian consular authority. Apostille and legalization are done either by notarizing the signature on the document or by authenticating the document itself. Apostille is performed when the document's countries of origin and destination are signatories to the Hague Apostille Convention. If one of the countries (of origin or destination of the document) is not a party to the Convention, the document must be legalized.

3.2. Borderland Strip

According to the city where the Brazilian branch or subsidiary is established, if located in one of the municipalities considered by the legislation as "Borderland Strip", these must necessarily meet some conditions. Included among these conditions is the need to be majority controlled by Brazilians. This means that at least 51% (fifty-one percent) of the capital must belong to Brazilian citizens. This measure aims to ensure the security and development of the border region, protecting national sovereignty and the country's strategic interests.

Conclusion

The choice between opening a branch or subsidiary in Brazil depends on the foreign company's objectives and strategies. While the branch offers greater control and dependence in relation to the parent company, the subsidiary provides greater autonomy and flexibility in management. Moreover, it is important to consider additional aspects, such as the apostille of documents and the need to comply with specific rules when located in the Borderland Strip. By taking all these factors into account, foreign companies will be better prepared to make informed decisions and succeed in their operations in Brazil.

If you have any questions about how legal consulting works for opening foreign companies in Brazil, or if you would like to schedule a 30-minute meeting to talk about the subject, we will be glad to help you.