Foreign companies that decide to start an operation in Brazil as those who have an interest in acting as shareholders or investors in Brazil, need to keep in mind that the processes of administration and legal representation of companies in Brazilian territory must be made through the legislation rules.
The definition of both positions (administrator and legal representation) is an important topic that needs to be discussed in the constitution and structuring of the company because both must be maintained permanently. In addition to being under challenging scenarios of Brazilian market and responsibilities that can affect the daily life and all development of the company.
In Brazil, what is a Legal Administrator
The person responsible for the legal administration – who does not necessarily need to be one of the partners of the company – has the capacity to execute the management and direct the interests of the company within the proposed segment.
The legal administrator is defined in the constitution of the social contract, legally specifying who is the owner of the company’s management, the autonomy that will be given to the individual, in addition to the rights and responsibilities that this person will possess when assuming the position.
What is the Legal Representative
In this case, the company’s partners appoint someone to answer about the issues necessary for the company’s existence. For example, acting as responsible for the company’s bureaucratic concerns with public agencies; trials, and other acts of this nature, in addition to acting with a perspective aligned with the interests of the company.
Given the characteristics of each of the positions, it is worth remembering that the same person can simultaneously assume the two assignments. However, the appropriate performance for each position should be done through the practice of different competencies in the company.
We will now analyze the information mentioned above in relation to the scenario of foreign companies seeking to be doing business in Brazil.
How should foreign companies operate in order to the law in Brazil?
Brazilian legislation requires the existence of representation because foreign partners – who can be individuals or legal entities – need to be represented by someone able to perform the necessary acts before the federal, state, and municipal public authorities.
And this person is the legal representative, individual necessarily resident of Brazil, and could be Brazilian or foreign (with visa and documentation) – who will have the legal power to, for example, request documents, issue signatures, etc.
The legal representative may have his responsibility extended to several areas (such as criminal accountability and civil liability, etc.), a factor that demands extensive knowledge about the fiscal, economic and administrative scenario of the company, in order to avoid possible failures due to lack of knowledge and the individual is not questioned civilly and criminally.
It is important, however, that even with a high degree of responsibility for the performance of various sectors and areas of the company, the legal representative cannot carry out certain actions without consulting the partners in advance.
This is a limiting factor that guarantees security to the group of members and prevents the occurrence of situations and developments contrary to the interests and wills of the organization.
The legal administrator is responsible, as said, for deciding, defining, and implementing the company’s strategies. Like the representative, the person who assumes the legal administration must also reside in Brazil, been a Brazilian or foreign holder of visa and regulated documentation.
In the case of the legal administrator, there are different scenarios and ways of exercising this position according to the type of company and the corporate model (such as what occurs in a limited company (LLC), corporation, and simple company companies, for example).
Therefore, the Brazilian Civil Code determines general rules that might be applied in case of gaps in the administrative practices established concurrently.
In a Limited Company business, management may occur with one or more persons (who may or not be part of the company). However, it is essential that the duties of the administrator are designated in the social contract, because the responsibility of the individual, within the contractual limits, will be observed according to the rules of the simple society. That is: if the administrator – even with immunity from liability for his actions – is beyond the limits of the social contract, the responsibility will be based on him.
In a corporation, there is a separation between the board and board sectors – the latter being defined by shareholders. In this category of company, the responsibility of the administrator is also limited, and there may be accountability, for example, for debts arising on behalf of the company by an individual or jointly.
When choosing the characters that will assume these positions, confidence is a very thoughtful factor, because the company must rely on the person (or company) designated to support the development of activities in Brazil, following the interests of the corporation.
Though, most foreign companies choose to select companies that already operate for these positions, possessing expertise, trust, and recognition by the market.
Besides trust, the proximity that the people (or companies) in question have with the directors, leaders, and managers is also decisive when choosing the administrator and the legal representative, because communication and relationship provide security for the partners. Not only, in relation to how positions will be exercised on a day-to-day level (based on the established dialogue and the performance of business activities aimed at the appropriate and expected performance).
To the factors mentioned, there is also the need for and the designated company to be able to receive citations, execute the representation of the corporation in public agencies and also in legal proceedings.
