Page 101 - InvestmentGuideBrasilEng

OR Legal ‘Foreign capital’ is defined by Brazilian law as any assets, machinery or
OR
K F
equipment entering Brazil from abroad, without any initial expendi-
L L W W OR OR N N K F T T Definition ture of foreign currency, that are intended for the production of goods
and services. Foreign capital is further defined as financial or monetary
resources entering Brazil to be used in economic activities. In both cas-
A
A
es, the foreign capital must belong to individuals or legal entities resid-
LE LE G G A A M M E E SM E E IL IL ing, domiciled or headquartered outside Brazil.
SM
Foreign capital in Brazil will be treated on an equal footing with
NVE
F F R R I 4 I NVE B B R R A A Z Z domestic capital, unless the investment falls within one of the small
number of exceptions detailed below.
I I N N

FOREIGN DIRECT

INVESTMENT (FDI)

FOREIGN For electronic declaratory registration purposes tors. No special rules apply to them, although FDI

(RDE-IED ), FDI is defined as a permanent owner-
remains restricted in the sensitive and strategic sec-
1
tors referred to below.
ship interest in companies in Brazil, held by a non-
resident investor (individual or legal entity) resid-
The Brazilian Central Bank (BACEN ) has the
2
CAPITAL ing, domiciled or headquartered abroad, through authority to approve M&A deals in Brazil, with the
3
Council for Economic Defence (CADE ) also play-
the ownership of shares or quotas representing
ing a role to assess the implications of a proposed
the equity of Brazilian companies, as well as the
allocated capital of branches or subsidiaries of
M&A deal on market competition.
CADE defines dominant market share as con-
foreign companies authorized to operate in Brazil.
In practice, FDI may be divided into two types: trol by one company of 20% or more of a given
equity capital and intercompany loans. market segment and it adopted a new antitrust
Equity capital is the inflow of funds for goods, framework in 2012 designed to accelerate deci-
currency conversions in foreign direct investment, sion-making on antitrust matters.
The following section relates to the entry of including the amounts allocated to privatization To improve M&A regulations in Brazil, in No-
capital into Brazil for the purposes of produc- programs, related to a purchase/subscription/ vember 2012 the Brazilian Mergers and Acquisitions
tive investment only. capital increase, for all or part of the share capital Committee (M&A Committee) was created. This
For investors seeking information in how of companies established in Brazil. was inspired by the Panel on Takeovers and Merg-
to invest in Brazil’s financial market, please Intercompany loans are the loans granted by a ers, a non-statutory body that administers the Code
visit www.portaldoinvestidor.gov.br, as well parent company based abroad to its subsidiaries, on Takeovers and Mergers in the City of London.
as the following guide produced by the Bra- branches or affiliates established in Brazil. FDIs The Brazilian M&A Committee’s proposal is
zilian Central Bank: http://www4.bcb.gov.br/ are the investments made in startups or acquisi- based almost entirely on self-regulation and in-
pec/Gci/ingl/Non-resident_Investors_Guide_ tions of stakes from domestic companies. tends to be a new kind of corporate governance
BEST.pdf It is worth mentioning that Brazilian law allows quality seal for M&A transactions involving com-
for mergers and acquisitions (M&A) by foreign inves- panies that have decided to abide by its rules.
1 Acronym in Portuguese. 2 Acronym in Portuguese.
3 Acronym in Portuguese.
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