Document Type

Article

Disciplines

International Law

Abstract

Foreign companies active in Brazil may choose to incorporate under Law No. 6.404,1 which governs the incorporation and operation of the sociedade anbnima, a widespread corporate form. Law 6.404 generally replaces the prior law governing sociedades anbnimas, Decree Law No. 2.627 of 1940,2 although certain provisions of the older law which define the civil status of foreign companies and regulate their operation in Brazil remain intact. Once incorporated under Law No. 6.404, a company is considered to be Brazilian.

The sociedade anbnima historically was a limited liability company that was granted monopoly commerce privileges. This concept has given way to a modern, modular, company form which is appropriate for undertakings not necessarily dependent on the grant of economic privilege by the government. Nevertheless, when foreign interests are involved,' the direct interest of the government in preserving its resources and in securing its borders is still formidable.

In the modern company, alternative theories of company control, either control by stockholders or control by management,4 may complicate the determination of what is national interest and what is foreign interest. The applicability of domestic or foreign law to dispute settlement, for example, is based partially on determinations of controlling corporate interests, and partly on the governmental interest in the location of the company's headquarters. The determination of controlling interest often becomes a legal issue. The new constitution includes reference to this confusion by creating a constitutional distinction between the Brazilian company and "the Brazilian company of national capital."' The significance of this distinction will have to be tested in the courts before it becomes clear. Functions of territoriality also are evident in the authority of the government to tax and in the jurisdiction of the courts over foreign companies.

Although non-Brazilians may be investors in Brazilian companies, creators of Brazilian companies, or guests operating companies of their own, the legal consequences accompanying each choice differ. This article defines the foreign company in relation to the national company and focuses on the significant differences in the legal effects in the areas of tax, jurisdiction and choice of law of a company's choosing to maintain a foreign corporate structure or choosing to operate as a Brazilian company under the law governing sociedades anbnimas, Law No. 6.404.

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