The change in laws on the organization and operation of companies provided for in the new Law 14,195, published in the Official Gazette of August 26, 2021, originated by Provisional Measure 1.040/2021, can greatly benefit the performance of companies in the Brazilian market. Also known as the “business environment PM”, it is particularly favorable from a corporate and capital market point of view.
The optimization of rules was initially proposed by the Executive Branch on March 30 and received 252 amendments. Voted and approved on June 23 by the Chamber of Deputies, MP 1040 also received 111 new increments by the senators.
The congressmen gave the text a wording that will greatly simplify the Brazilian business scenario. Attacking the bureaucracy problem, as the new law does, brings direct gains to business: with less unnecessary complexities, more time and energy for companies to focus on activities that generate value.
For example, with the adoption of the CNPJ as the single register of companies – replacing the municipal and state registrations – it will be possible to register simple companies in the Commercial Boards and to open companies on the internet.
In addition, the new law will bring invaluable advances for the development of new businesses and technologies in the country. The adoption of plural voting in corporations and the possibility of issuing debentures by limited liability companies are among the main changes. Although, at first sight, they are technical novelties, these changes make it much easier for smaller companies or at the beginning of their activities to access the resources they need to grow.
The first item is a mechanism already incorporated in countries such as the United States, United Kingdom, Hong Kong and Singapore, and which could be an important instrument for companies, especially startups, to go public on the Brazilian stock exchange, instead of on the outside. Recently, brands such as XP, Stone and PagSeguro, issued shares in the United States with the adoption of the mechanism known as “superON”, which allows the adoption of common shares with individual voting rights and shares with plural voting rights.
This tool, already widespread in other countries and adopted by large companies such as Google, LinkedIn and Facebook, for example, allows the founders of a company to receive resources through the entry of new investors, without necessarily giving up the power of control. This mechanism is subject, however, to limitations of time and number of votes per share.
As already widely discussed in the legislative houses, this change in legislation is necessary to make the Brazilian capital market more dynamic. Especially to avoid this being passed over by companies looking to make their initial listing of shares, but needing to maintain share control.
Another important innovation, the possibility of issuing debt securities to publicly-held companies under the limited partnership regime. Under the denomination of commercial notes, it will give companies the option of capitalizing in the private sector, and will formally include them in the capital market. It is an alternative to traditional bank financing.
These and other changes adopted by Law 14.195/2021 should make Brazil significantly increase its position in the ranking Doing Business, from the World Bank, leading, perhaps, the country to enter, for the first time, the group of the 100 most competitive countries in the world.
It is worth noting that this movement is very much in line with the recently sanctioned Legal Framework for Startups, which brings important advances in terms of fostering the business environment and increasing the supply of capital for innovative entrepreneurship. Thus, it encourages gains by reducing bureaucracy and protecting investors.
* Débora Trovões Cabral is a senior associate at Dias Carneiro Advogados
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