By Lucas Euzébio and Layon Lopes*
Today, we will better understand a very relevant topic for foreign clients and partners who seek to understand how foreign investment works in Brazil, in the form of foreign direct investment. We will talk a little how to invest directly in companies in Brazil. Being just a form of foreign investment.
The first step is to understand what is considered foreign direct investment for registry purposes.
According to the legislation in Brazil that deals with the registration of foreign capital in the direct investment modality, direct foreign investment is the purchase of shares in a Brazilian company, with the requirement that the investor not reside in Brazil or have the headquarters of the company that made the investment abroad.
Another very common question is what is not considered direct foreign investment, and investments by investors in the financial and capital markets that constitute investment in a portfolio are not considered.
The Central Bank of Brazil (BCB) provides the registration of foreign direct investment in companies residing in Brazil for investors who intend to stay for a long time and acquire assets outside organized markets, such as the stock market (Ibovespa).
For registration and legal purposes in Brazil, it will be necessary to register the transactions when capital invested in the equity interest of a Brazilian company takes place.
Perfect. But how does this operation record work? Is it the responsibility of the foreign investor? The registration of foreign direct investments is the responsibility of the Brazilian companies that receive the direct investment. The registration being made available by the Central Bank of Brazil (BCB), and may be carried out by the company or its attorneys.
A very relevant point is that the registration has a declaratory nature and there are criteria and amounts for applying fines in case of late or false information being provided, and an administrative process is carried out to investigate the conduct.
The declaratory nature of this record implies the responsibility of the declarants for the veracity and legality of the information provided.
It will only be possible to link a foreign investor to a Brazilian recipient company in the “RDE-IED system” after registering in the CDNR, the national registry of non-residents, which can be done on this link.
It is necessary to carry out this registration before proceeding with foreign direct investment, as the registration is the way that the Central Bank of Brazil (BCB) organizes who is behind the foreign capital that enters Brazil, and is also a requirement for foreigners who want to carry out financial transactions in Brazil.
Anti-money laundering laws and policies for knowing your customer are taken very seriously by the Central Bank of Brazil (BCB), which has a firm and present role, and it is important to formalize all steps from the moment you intend to invest directly in a Brazilian company.
The procedure may seem complex for those who are not used to the legal procedures and culture of the country. Therefore, always look for an expert advice on the subject.
* Layon Lopes is the CEO of Silva | Lopes and Lucas Euzébio is a member of the Silva | Lopes team.