Changes to the registration rules for foreign direct investment in Brazil

July 2017 | EXPERT BRIEFING | FOREIGN INVESTMENT

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In times of crisis, there are a number of ways to stimulate growth, and foreign direct investment (FDI) stands out among them.

In order to cope with the situation, the Brazil Central Bank (BCB) established new rules that changed and diversified the procedures for information records of FDI in Brazilian companies.

The first change to take into consideration concerns the entry of a direct investment into national companies. Brazilian legislation and regulation demand that all foreign investment in Brazil, regardless of its form, must be registered with the BCB registration of foreign capital, which is done via the Electronic Declaratory Registration System (RDE), at the BCB’s information system, Sisbacen.

Both Resolution 4.533/16 and Circular 3.814/16 diversified the means of registration, which now can be done in two different ways: automatic and declaratory.

The registration of foreign capital will be done automatically when derived from: (i) currency influx; (ii) conversion into foreign direct investment; (iii) transfers between modalities; (iv) international conference of stocks; or (v) remittance abroad of profits and dividends, interest on capital and return on capital.

Differently, registration shall be declaratory when derived from: (i) entry of good for means of capitalisation in the receiving company; (ii) corporate reorganisations in which at least one of the companies has a share of foreign capital registered in BCB; (iii) exchange of equity interest in the country; (iv) corporate equity conference; (v) reinvestment in the receiving company; or (vi) distribution of profits and dividends, payment of interest on shareholders’ equity, sale of interest, restitution of capital and net assets resulting from liquidation that are used for reapplication in other receiving companies in the country or that are used in payments in the country or directly abroad.

Besides, according to the changes, companies based in the country receiving FDI should keep their economic and financial information revised, and the updates should take place within 30 days of an event that changes the shareholding of the foreign investor; and annually until 31 March, compared to the base date of 31 December of the previous year for companies receiving FDI, whose assets and shareholders’ equity are less than $80.4m.

On the other hand, companies receiving FDI, whose assets or net worth are equal to or greater than R$250m, must update their economic and financial information four times a year: (i) up to 30 June, in relation to the base date of 31 March of each year; (ii) up to 30 September, in relation to the base date of 30 June of each year; (iii) up to 31 December in relation to the base date of 30 September of each year; and (iv) up to 31 March, in relation to the base date of 31 December.

To sum up, the next deadline for companies receiving FDI to register their information is 31 March 2017. Failure to send information, or delay or presenting incorrect or false data, may lead to BCB imposing fines of up to $80,000.

Finally, important alterations were also made to the possibility of mandates, in the form of individuals and legal entities, to include, consult and update the electronic declaratory records of FDI in the country. These records will be maintained in BCB for a minimum of five years from the date of closure of the commitments.

Helder Fonseca is a lawyer and Amanda Pedrosa is an intern at GVM | Guimarães & Vieira de Mello Advogados. Mr Fonseca can be contacted on + 55 (31) 3264 2400 or by email: hfonseca@gvmadvogados.com.br.

Helder Fonseca and Amanda Pedrosa

GVM | Guimarães & Vieira de Mello Advogados