Mergers and Acquisitions (M & A) are regular operations in Brazil. Corporation Law and Federal Law for Limited Liability Companies regulate the procedures for mergers, consolidations, spin-off, acquisitions and incorporations.
Definitions of mergers and acquisitions. Merger is an operation whereby one or more corporations are absorbed by another, which succeeds to all their rights and obligations. Consolidation is an operation whereby two or more corporations unite to form a new corporation, which shall succeed them in all their rights and obligations. Spin-off is an operation whereby a corporation transfers part of its assets and liabilities to one or more corporations already in existence or formed for this purpose. The divided corporation is extinguished if all its assets and liabilities are transferred or its capital being divided if the transfer is only in part. Acquisition is the operation by which the acquiring company purchases part or all of the shares of the target company by means of a transfer of shares registered in the target company’s corporate books or resolutions. Incorporation is the operation of forming a new company in Brazil, according to Brazilian corporate legislation.
Get information through legal and auditing assistance.
When considering a merger or acquisition operation in Brazil, we strongly recommendable that you get legal and auditing assistance to study the target company, to negotiate and to draft a letter of intentions and applicable contracts, to ensure that Brazilian legal requirements are observed
Assessing the liabilities of the target company is important as it affect the purchasing price in the transaction. Legislations in Brazil, especially tax, labor and environmental are very complex and burdensome and lawsuits involving such matters in Brazil may produce a severe impact in the decision making process. Reliable local support is therefore recommended.
Negotiating with Brazilian companies
More than 70% of Brazilian companies are family-owned and managed by their owners. Only in larger companies there are professional executives. Negotiations in Brazil never follow a standard pattern and normally vary on a case-by-case basis, certainly when the owners conduct negotiations. Lawyers usually assist in the operation. Contracts in Brazil are on a less formal basis than the extensive, signed agreements used in the United States.
It is important to emphasize that the jurisdiction and governing law for
business transactions in Brazil are regulated by the Introductory Law to the
Civil Code, the Civil Code and the Code of Civil Procedure, all of which are
federal laws and applicable throughout the country. Reliable local support is
therefore recommended. Through our associates, Great Start can give you all
the research, advice and execution for Mergers and Acquisitions in Brazil.
