Brazil

Traders who wish to invest in the Brazilian market can take advantage of the benefits that Brazilian law provides for agency and distribution contracts.

Article 710 of the Brazilian Civil Code defines an agency contract as that contract by which a natural or legal person undertakes, for a consideration (“retribuiçao”) to carry out certain business, in a certain area, with a character of habituality; in favor and on behalf of a third party, without hierarchical subordination. Brazilian law stipulates that the agency contract must necessarily be in writing. In addition, è the authentication of signatures at the local conservatory by the entrepreneur is advisable. This fulfillment, while not necessary for the agency contract to be effective, guarantees the foreign investor, at a modest expense, from any possible future action to disavow the signatures.

The law provides that the activity of commercial agent can be entrusted to both natural and legal persons, whether they are Brazilian or foreign nationals. Despite this possibility, it seems evident how it is convenient to appoint a Brazilian agent given the interpersonal nature of the work activity, as well as the greater command of the language and business customs that a native possesses.

REQUISITES NECESSARY THAT THE AGENCY CONTRACT MUST CONTAIN

As for the typical contents of the agency contract, in addition to the written form, it must necessarily contain the following:

• duration of the contract;
• indication of the area of the’
activity;
• covenant, or not, of exclusivityà;
• existence, or not, of guarantees;
• the agent’
remuneration.

It should also be pointed out that the so-called star del credere clause (whereby the agent receives the commission only in the event that the buyer has actually paid the goods to the contractor) is not è considered permissible by the Brazilian Ordinance. In the event of termination of the contract with the principal, Brazilian law provides in favor of the agent the right to’indemnity. If the agency contract is terminated without just cause, the’indemnity’may not be less than the sum equivalent to’8.3% of the total commissions accrued by the’agent.

Article 710 of the Brazilian Civil Code defines the distribution contract as an agency contract, by virtue of which the agent has the material availability of the products to be marketed. In the absence of specific regulation, Brazilian Jurisprudence extends the’application of agency law to the distribution contract.

Businessmen interested in entering into an Agency or Distribution relationship in Brazil are required to specify which law applies to the contract.

It should also be noted that, the parties may refer the resolution of any contractual disputes to an arbitrator, through the inclusion of a specific arbitration clause, by virtue of the fact that Brazil has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The franchise contract, also called the “franquia” contract, è remarkably widespread in the Brazilian market.

First of all, it should be noted that in Brazil the franchise contract è is expressly regulated by Law No. 8955/94. It follows that the entrepreneur who, decides to invest in Brazil through the franchise contract, is assured of being protected by express provisions of the law. According to the aforementioned law, the franchise contract è defined as the instrument by which “the franchisee assigns to the franchisor the right to use for commercial purposes its trademark or sign, associated with the right to exclusive or semi-exclusive distribution of products and services, and, possibly, also the right to the’use of technology of the’facility and the’administration of the store or operational system created or in the possession of the franchisor, in exchange for direct or indirect remuneration, without the characterization of clerical constraints”.

As a rule, as is the case in most countries of the world, prior to the conclusion of the franchise agreement, the franchisor will necessarily have to submit to the franchisee a pre-contractual proposal, containing all the necessary information so that the latter has full knowledge of the business formula used in the past and currently promoted by the franchisor. In this regard, the franchisor will have to make available to the franchisee, among others, the following information:

• the company's history and legal form;
• its financial statements;
• the’
existence, if any, of pending court cases related to existing franchise contracts;
• a complete description of the’business that the franchisor intends to conduct etc.

When drafting the franchise agreement, it is advisable to specify the’amount of royalties, the delimitation of the territory in which the franchisor will be able to operate, as well as the causes for termination of the contract. It is also advisable for the entrepreneur to register the franchise contract with Instituto Nacional da Propriedade Industrial (INPI), thus being able to ensure greater protection, also with respect to third parties.

In addition, it should be emphasized that, in order to invest through the tool of franchising, è a minimum investment of US$50,00.00 is required, legally reported at the Central Bank of Brazil (BACEN).

Constituting a new companyà in Brazil è a simple and fast operation. The’body in charge of the process è the “Junta Comercial”, a governmental body present in the capital of each state.

Naturally, è it is advisable that before opening a company in the country, the entrepreneur seek the specialized advice of a Lawyer, which will enable him/her to make a more informed choice about the form of the company and, above all, the tax regime to be adopted, which is more advantageous and suitable for his/her needs.

Keep in mind that the supply of skilled labor in Brazil is still scarce, as the country does not have a sufficient number of specialized professionals. Therefore, è it is advisable for the entrepreneur to turn to appropriate specialized agencies for the recruitment of skilled workers.