Six things you should know when considering an appointment as a director of a Brazilian company



Especially when composed by members with diverse cultural backgrounds, a company’s board of directors may be a fascinating source of naïve realism – the human tendency to believe that we see the world around us objectively and that people who disagree with us must be uninformed, irrational or biased – or ‘false negative’ situations in which a director (or a group of directors) fails to notice or give appropriate consideration to a risk or other relevant issue due to imperfect assumptions or cognitive biases. What is fascinating for a social psychologist, however, often means trouble for the person sitting on the board.

At best, failure to review assumptions about a role and what is expected from a director in a foreign company, and to take into account applicable laws, regulations and corporate governance practices can compromise your ability to perform your duties effectively in the best interest of the company and its shareholders; at worst, it can expose you to personal liability and other sanctions.

When considering an appointment as a director of a Brazilian company, it should not be assumed that familiar, home jurisdiction laws, regulations and corporate governance practices automatically apply to the new role. Below are six things that should be done from the outset.

Make sure that the corporate paperwork is in order

To be appointed as a director of a Brazilian company depends on shareholder approval, which must follow the formalities set forth in the Brazilian Corporation Law and, if the company is publicly traded on the local market, applicable regulations issued by Brazil’s securities exchange commission (Comissão de Valores Mobiliários (CVM)). A review of a company’s shareholders agreement, if any, should also be performed, as they may contain provisions on director appointment rights and specific contractual requirements in addition to applicable laws and regulations. A director appointment made without observing a shareholders’ agreement may be void depending on the circumstances.

Even if shareholder approval is secured, a director will only be invested upon signing a term of investiture (termo de posse) that the company should prepare in accordance with Brazilian Corporation Law. Time should be taken to review this document, if necessary with the assistance of local counsel. Although it consists typically of a straightforward statement in standard legalese, the term of investiture may contain representations that refer to statutory requirements in Brazil. Therefore, it should not be subscribed to without an understanding of its content and implications.

Moreover, a non-resident is required to appoint a Brazilian resident as attorney-in-fact, with powers to be served in connection with company-related litigation in Brazil. This role is typically played by a local attorney or accountant, who may charge a fee for taking on the responsibility and/or ask for indemnity or insurance protection. The power-of-attorney must be valid for at least three years after the end of the director’s mandate.

Review visa requirements well in advance of travelling to Brazil for board meetings

Brazil requires foreign nationals to carry a valid passport issued by their country of origin when travelling to Brazil for any purpose (an exception is in force for most South American countries, in which case the Brazilian immigration authorities will accept an official identity document instead of a passport.) Since non-executive directors of Brazilian companies do not need to reside in Brazil, there is no need to apply for a permanent visa to accept a director appointment or, once appointed and invested, to travel to Brazil to attend board meetings. If compensation is expected to be received from the Brazilian company, however, local counsel should be consulted because filing for a permanent visa may be required or advisable.

The above notwithstanding, a temporary business visa is required unless the non-resident director comes from a visa exempt country and plans to stay in Brazil for a short length (typically up to 90 days). Brazil’s list of visa exempt countries is based on a reciprocal visa policy and currently contains 90 jurisdictions, including most South American and European countries.

Whenever a visa is required, it must be obtained in advance of travel from the Brazilian Embassy or consulate nearest to one’s place of residence. Brazilian immigration authorities do not issue visas at the airport and will refuse entry into Brazil to any foreign national that does not carry a valid visa (unless that person comes from a visa exempt country and plans to stay in Brazil for a short length).

Understand your tax status in Brazil and related obligations, if any

Unless the non-resident director expects to receive compensation payable by the company in Brazil or holds equity in the company, including in the context of a stock option plan or other form of equity incentive, that person will not be required to obtain a Brazilian taxpayer number (Cadastro de Pessoas Físicas or CPF) or to make any tax filings or pay any taxes in Brazil, assuming of course that such person does not reside and has no source of income in Brazil.

If someone expects to be compensated by a company in Brazil, including in the form of equity, they will need to obtain a CPF number from the Brazilian federal tax authority (Receita Federal). Moreover, if equity is acquired in the company in the context of a stock option plan or otherwise, the equity position is considered a foreign equity investment in Brazil and, as such, is subject to registration with the online system of Brazil’s Central Bank (Sisbacen). Therefore, the company must take the requisite steps to register with Sisbacen and keep it updated.

Even in this case, however, assuming that an individual does not reside and has no other source of income in Brazil, one can benefit from an exemption of tax obligations in Brazil, provided that they notify the Brazilian authorities of their place of tax residence. Local tax and immigration counsel should also be sought in this regard.

Understand your fiduciary duty to the company – and comply

From the date of someone’s investiture as a director, that person will owe a fiduciary duty to the Brazilian company. Although this rule is broadly recognised across different jurisdictions as a key tenet of corporate governance and corporate law, it should be understood that under Brazilian law a director owes a duty of loyalty first and foremost to the company, irrespective of which shareholder or group of shareholders was responsible for the director’s appointment.

In case of a breach of fiduciary duty, a director may be personally liable under Brazilian law to the company and other affected parties. If the company is publicly traded, one may also be subject to fines and other administrative sanctions that CVM may impose. To avoid personal liability as a director, independent judgment should exercised to ensure that one is alert to situations of potential conflict of interests in the context of board meetings and other company-related interactions.

Fiduciary duty to a Brazilian company applies even if the person concerned is a constituent director of a sponsor shareholder, that is, even if they are an officer, employee or agent of a shareholder that was responsible for that person’s appointment according to a shareholders’ agreement. This means that constituent directors should also be cautious when dealing with confidential information that they receive in their capacity as directors of the Brazilian company. If a sponsor shareholder expects to receive non-public information about a company that has been disclosed to someone in their capacity as a director, this should be expressly authorised by the company’s bylaws or the shareholders agreement to protect that director from potential personal liability.

This kind of issue is particularly sensitive if the company is publicly traded, in which case both the person concerned and their sponsor shareholder should be mindful of insider trading prohibition and other relevant considerations under Brazilian law, including the risk of potential criminal liability. It is also advisable to check if the company has appropriate disclosure and securities trading policies, in addition to a code of conduct and an effective programme of ethics and compliance, and make sure that content is reviewed and understood, and obligations complied with.

Check if the company has D&O insurance in place

During the past decade, it has become increasingly common for Brazilian companies to contract liability insurance for directors and officers (D&O insurance), especially in the case of publicly traded companies. Subject to the scrutiny of Brazil’s insurance authority (Superintendência de Seguros Privados, or SUSEP), the typical D&O insurance policy should protect directors and officers against allegations of wrongful conduct when acting as company executives. A perception of greater corporate accountability in Brazil, in particular in relation to bribery, money laundering and related wrongdoings, has led to an increased demand for this product. The local market matures as a growing number of cases reach the Brazilian courts and test different aspects of applicable laws and regulations.

When considering a director appointment, it is in the interests of the candidate to check if the company has appropriate D&O insurance in place. The candidate should feel comfortable asking for the opportunity to consult with the company’s counsel or insurance adviser to understand the key terms and conditions of the policy, in particular the extension of the coverage (types of claims, expenses and legal fees), limits of liability and exclusions. Bear in mind that there is no such thing as 100 percent immunity – for example, Brazil’s Superior Court of Justice (Superior Tribunal de Justiça, or STJ) recently denied insurance coverage in case of fraud or wilful misconduct against the company or the market (the leading case dealt with insider trading).

Beware the dispute resolution clause

In contrast to what is found in the US and other jurisdictions, Brazilian law allows companies to provide in their bylaws for arbitration as the method for resolving corporate disputes, including not only disputes among shareholders, but also between shareholders and the company and between the company and directors or officers. For companies that have or intend to have their stock traded on the main segment of the BM&FBovespa stock exchange (Novo Mercado), recourse to arbitration is not only permitted, it is actually a requirement for listing.

Another thing a candidate should do when considering a director appointment is to check if the dispute resolution clause contained in the bylaws of the company (and the shareholders agreement, if applicable) provides for arbitration. If it does, then the company’s counsel should be consulted so that the practical implications are understood, considering that more often than not arbitration is costlier than litigation in court and usually does not contemplate appeals.

It would be an exaggeration to conclude that the board of directors of a Brazilian company is a minefield where someone should fear to tread. But it would be foolish to rush in without getting appropriate counsel from the outset on local laws, regulations and corporate governance practices.


Marcos C. Ludwig is a senior counsel at Veirano Advogados. He can be contacted on +55 21 3824 4747 or by email:

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Marcos C. Ludwig

Veirano Advogados

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