Next January 11th, an amendment to the Brazilian Civil Code will come into effect, allowing the incorporation of an Individual Limited Liability Company.
From a worldwide perspective, the so-called Limited Liability Individual Company is not really a new concept, as the laws of a number of countries, including France, Spain and Italy already foresee companies of this legal nature. It is being introduced into the Brazilian Legal System with the intent of bringing the law closer to the reality of Brazilian companies.
Up until now, since limited liability companies could only be incorporated with at least two quotaholders, entrepreneurs often had a hard time determining who the other quotaholder of the company should be. As a consequence, relatives, spouses and even employees were frequently obliged to figure as a quotaholder, often against their will.
From January onwards, this problem will be solved, since individuals and companies will be able to incorporate wholly-owned Brazilian Individual Limited Liability Companies.
Provided certain requirements are met, such as a minimum paid in registered capital of a 100 Brazilian minimum wages (about US$ 31,500 at today’s exchange rate) and subject to the same rules applicable to Limited Liability Companies, an individual or legal entity may incorporate a Brazilian Individual Limited Liability Company.
Although not clearly stated in the law, a reasonable interpretation of its provisions would allow foreign individuals and legal entities to hold title to 100% of the Brazilian Limited Liability Individual Company’s quotas.
It is also important to note that already existing Brazilian Corporations (“Sociedades Anônimas”) and limited Liability Companies (Limitadas) are permitted to transform themselves into this new form of company by means of the concentration of all shares/quotas in the hands of a sole quotaholder.
Among other things, the amendment to the Civil Code is expected to reduce maintenance costs of Brazilian Companies, thereby facilitating the incorporation of new businesses.
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