Legal Insights From Brazil to Start Your Week
What you will be reading in this issue:
1. Private Credit | Understanding the Brazilian Receivables Fund ‘FIDC Fornecedor e Cliente’
2. M&A | The Shareholders’ Agreement in Brazilian M&As as a Facilitator in Equity Sale Process
3. Tax | Tax Opportunity: Accelerated Depreciation Provides Financial Relief for Brazilian Companies in 2024
4. Conflict Resolution | Brazilian Supreme Court Bans Gambling Advertising for Minors and Restricts the Use of Social Benefits
5. Labor | Is Shorter Working Hours the Future? Analysis of the PEC and its Impact on Brazilian Companies
1. Private Credit | Understanding the Brazilian Receivables Fund ‘FIDC Fornecedor e Cliente’
The Brazilian Receivables Fund, known as “Fundo de Investimento em Direitos Creditórios – FIDC”, can be an attractive vehicle for economic groups that have a volume of receivables payable to suppliers and from clients in Brazil, aiming at capturing “marginal gains”.
Nicknamed as “Supplier” and “Client” FIDC, this type of fund allows the economic group’s holding company or controlling shareholder to set up the fund to advance receivables to suppliers and from clients, with tax advantages for the fund, controlling shareholders, and the operating company.
2. M&A | The Shareholders’ Agreement in Brazilian M&As as a Facilitator in Equity Sale Process
Shareholders’ agreement in Brazilian M&As is essential for a company, especially when there are concerns about corporate governance, succession and even interest in the future sale of shares.
Especially in relation to the sale of equity interests, we highlight two points of attention that demonstrate the need for the document to exist.
- Valuations’ Improvement. When the partners of a company begin a process of partial or total sale of the company, it is essential that its corporate structure is organized, thus avoiding any friction with future buyers, affecting the final sale price.
- No Conflict for Sale. Another point of extreme sensitivity deals with the possibility/obligation to sell the stake, mainly to minority shareholders and also when there is a dispersed shareholding. In these cases, the need for drag along (obligation to sell) and tag along (guarantee of sale under the same conditions) clauses are essential, as they avoid discussions that bring delay and insecurity, which can often end up making a deal unviable.
The Agreement is, therefore, a safe and confidential instrument in which partners can dispose of their interests in an unrestricted manner, bringing more security and certainty for partners, and transparency for potential buyers.
3. Tax | Tax Opportunity: Accelerated Depreciation Provides Financial Relief for Brazilian Companies in 2024
Brazilian companies in productive sectors now have access to a new tax incentive designed to boost investments in the modernization and renewal of equipment.
The measure, regulated by Decree No. 12,175/2024 and established under Law No. 14,871/2024, introduces differentiated accelerated depreciation rates for new machinery, equipment, devices, and instruments, offering significant tax deductions.
The goal is to encourage the acquisition of assets classified as fixed assets, enabling tax reductions for companies taxed under the actual profit regime.
To take advantage of the benefit, companies must comply with tax and labor obligations and be in good standing. The eligibility process requires documentary evidence of the acquisition of fixed assets to be submitted to the Brazilian Federal Revenue Service.
4. Dispute Resolution | Brazilian Supreme Court Bans Gambling Advertising for Minors and Restricts the Use of Social Benefits
In a landmark decision, rendered in the context of Direct Actions of Unconstitutionality (ADIs) 7721 and 7723, the Brazilian Supreme Federal Court (STF) ordered the immediate application of precautionary measures that impose significant restrictions on fixed-odds betting advertising in Brazil.
The decision, issued by Minister Luiz Fux, aims to protect children, adolescents, and beneficiaries of social programs from the harmful effects of advertising and gambling.
The new rules, which follow the guidelines of the Brazilian Code of Self-Regulation of Advertising (CONAR), determine the immediate application of the terms of Ordinance No. 1.231/2024, strictly prohibiting gambling advertising in places frequented by minors under 18 years of age and in media with a child audience. In addition, the use of images of children and adolescents in gambling advertising campaigns is strictly prohibited.
The STF’s decision represents an important step in the regulation of the gambling market in Brazil and demonstrates the Judiciary’s concern with protecting society from the risks associated with this practice.
5. Labor | Is Shorter Working Hours the Future? Analysis of the PEC and its Impact on Brazilian Companies
The Brazilian media and social networks were flooded with news about the PEC that proposes the end of the 6×1 work shift.
With enough signatures to be filed in the Chamber of Deputies, this proposed amendment to the Constitution aims to change item XIII of art. 7 of the Federal Constitution, aiming to establish a maximum working day of 8 hours and 36 hours per week, distributed over a 4-day work week.
The discussion about reducing the working day has been gaining ground internationally. Several countries have been experimenting with shorter working hours to assess the impacts on productivity, workers’ health and adaptation to the demands of the new generation. This global trend reflects a new approach to work that values quality of life while monitoring financial results.
But will it be feasible to implement the end of the 6×1 working day in Brazil through a constitutional amendment? The Minister of Labor, Luiz Marinho, himself suggested that this issue could be addressed through collective agreements and conventions, preserving the flexibility needed for sectors that demand different schedules.
Work hour flexibility can address current demands, but it must be balanced with the practicalities of productive sectors, ensuring that Brazil keeps pace with global trends without compromising business performance or job retention.
We must be ready to explore the best alternatives for work models that benefit both businesses and employees, always aiming to balance talent attraction and retention, workplace quality and safety, and productivity with financial health.