Date of reorganisation

Can a corporate reorganisation be backdated or deemed to have already taken place, for example from the start of the financial year?

It is not possible for a corporate reorganisation to be backdated or deemed to have already taken place. The corporate reorganisations are performed based on an appraisal report prepared by three technical experts or a specialised firm, and such report must be as up to date as possible in order to reflect the conditions under which the transaction will be carried out.

The company that has part or all of its assets absorbed by another as a result of a corporate reorganisation must draw up a special balance sheet for the purposes of the transaction, ideally within 30 days of the date of the event.


What documentation is required in a corporate reorganisation?

It depends of the type of corporate reorganisation and the company’s­ corporate type. The most common documents required in connection with mergers, amalgamations and spin-offs are:

  • the protocol of the transaction and justification, which must detail and specify the terms, conditions, premises, reasoning and rules that are the basis of the corporate reorganisation, including the appointment of experts to prepare the appraisal report of the assets and the indication of which assets will be transferred and the equity contribution;
  • the appraisal report, which must be drawn up and signed by either three experts or a specialised firm, and describe the totality of the assets to be transferred with the identification of the respective net equity value and the indication of the consequences thereof. The appraisal report is prepared to evaluate either:
    • the net equity of the merged entity (in a merger);
    • the net equity of the portion of an entity that will be spun-off (in a spin-off); or
    • the net equity of the entities involved (in an amalgamation), based on balance sheets drawn up for this specific purpose;
  • the minutes of the relevant shareholders’ or partners’ meetings to approve the protocol and justification, appraisal report, the transaction itself, its consequences to the relevant companies’ structure, as well as the practice of any acts and the signature of any documents that are deemed necessary to complete such transaction; and
  • amendments to the articles of association or to the by-laws to reflect the changes in the companies’ structure in view of the transaction. For instance, such corporate act can approve the increase or decrease of the surviving entity’s capital stock, the enlargement of its corporate purposes or changes in the management structure, as the case may be, as a result of a merger or an amalgamation. Also, in the event of a spin-off, both entities (the spun-off entity and the one that will receive all or part of the assets) shall have their articles of association or by-laws amended in connection with the changes caused by the transaction.

In the case of a transformation of corporate type, after the approval of the transaction, the relevant equity holders must execute and file the corporate documents to implement the new structure of the company - either a partners’ meeting to approve the adoption of by-laws (in the event of a transformation from a limited liability company into a corporation) or a shareholders’ general meeting to approve the adoption of the articles of association (in the case of a transformation of a corporation into a limited liability company).

Other documents and requirements may be applicable, depending on the transaction and companies involved.

Representations, warranties and indemnities

Should representations, warranties or indemnities be given by the parties in a corporate reorganisation?

The Brazilian law does not provide for a compulsory requirement for the entities involved to provide representations, warranties or indemnities in corporate reorganisations.

Nonetheless, considering that in corporate reorganisations the surviving entity succeeds the previously existing one in all rights and obligations, it is advisable to have a comprehensive understanding of what the transaction will include (for instance, civil, labour, tax contingencies, lawsuits or debts). This can be accomplished through due diligence or accurate contractual provisions.

Assets versus going concern

Does it make any difference whether assets or a business as a going concern are transferred?

Yes, there are some differences where assets or a business as a going concern are transferred. The transfer of an asset is accomplished through a private instrument, while the latter is transferred by an instrument providing for the succession of an establishment, requiring prior authorisation by the Brazilian Federal Revenue.

The transferor and, mainly, the transferee of an asset transfer, must be aware that all the required licences for the activities to be developed in connection with such asset must be obtained from the competent authorities to enable the adequate operations. In the case of a succession of establishments (ie, business as a going concern), the relevant licences may accompany either the business or the establishment where the activities are developed.

Types of entity

Explain any differences between public, private, government or non-profit entities to consider when undertaking a corporate reorganisation.

Before considering the corporate reorganisation aspects themselves, it is helpful to clarify some differences between non-profit and profitable entities in Brazil.

In accordance with the applicable law, a non-profit entity shall be formed mandatorily under the corporate form of an association and must remain so, not being allowed to be converted into a company per se. The corporate documents related to the formation, the structure and any corporate reorganisation with regard to the associations shall be filed before the civil registry of legal entities.

On the other hand, companies shall have their documents filed before the relevant board of commerce.

Regarding business companies, the most common corporate types in Brazil are corporations and limited liability companies, which have some considerable differences.

To exemplify these differences, while limited liability companies are mainly regulated by the Brazilian Civil Code and have more flexible management and cost-efficient structures, corporations are mainly ruled by the Corporations Law, have a more complex management structure and have stricter and more costly corporate governance rules (eg, the relevant corporate acts intended to produce effects on third parties must be published in widely circulated newspapers).

Also, in Brazil, corporations may be closed or publicly held. Regarding the latter, the rules of the CVM apply and any process of transfer of control of a publicly held entity must be previously approved by the CVM.

One important difference between such types of corporations are the restrictions and required documents for their effectiveness. The Corporations Law and, mainly, CVM Instruction No. 565/2015, determine that publicly held corporations must observe measures as to the disclosure of certain information, measures that closely held corporations are not required to observe.

Post-reorganisation steps

Do any filings or other post-reorganisation steps need to be taken after the corporate reorganisation takes place?

After the signing of the relevant corporate documents, they must be filed before the relevant board of commerce or registry of titles and documents, as the case may be, of the company’s relevant jurisdiction. Depending on the state of Brazil involved in the transaction, the updating of the companies’ registry before the Brazilian Federal Revenue (CNPJ/MF) may be jointly accomplished.

Afterwards, the managers of the surviving entity must proceed with the other relevant registries’ updates before the applicable federal, state or municipal authorities in which the companies are registered (eg, state revenue, municipalities, the Brazilian Central Bank, treasury departments, environmental and sanitary agencies, CVM, SUSEP, ANAC), and notify the tax authorities accordingly through the filing of the respective taxes or tax statements.