Legal entities may now own EIRELI in Brazil

Up to now, only individuals could be owners of Individual Limited Liability Company (EIRELI) in Brazil. However, as of May 2017, legal entities may also hold EIRELIs, as provided in item 1.2 of Annex V of Normative Instruction 38/2017 of the Department of Business Registration and Integration (DREI), published on 3 March 2017, and which will enter into force on 2 May 2017.

It is worth remembering that EIRELI is a type of limited liability company that, unlike other corporate types, does not require two partners for its existence, but only one owner. In its constitution, it is necessary to pay minimum capital of 100 (one hundred) times the national minimum wage, which represents a minimum capital of R$ 93,700.00 (article 980-A of the Brazilian Civil Code – Law 10,406/2002).

This is a very positive change for the domestic and foreign corporate sector, as it expands the range of business types that companies can use for their enterprises in Brazil. In addition, those limited companies that had/have a second minority partner only to comply with the legal requirement of duplicity of partners, will be able to become EIRELIs, with the exclusion of the minority partner, thus reducing bureaucratic costs and unnecessary legal risks.

EIRELI can be used as a type of holding company in complex corporate structures, to enable corporate and succession planning.

Foreign multinationals will also be able to take advantage of the novelty in their investments in Brazil, by instituting EIRELIs owned by them or by transforming their Brazilian subsidiaries into EIRELIs, which will certainly reduce costs with solicitors, among other bureaucratic inconveniences.

The full text of this normative instruction can be accessed at: http://drei.smpe.gov.br/.

AUTHOR: Cintia BusseAutor .

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