Having a sufficiently developed economy, Brazil has long been a magnet for foreign investors. So, let’s have a look at the key legal requirements potential investors will have to meet to open a business in Brazil, and the main aspects of investment regulation in Brazil.
FIPs (an analogue of PEFs) are the most popular tool for making investment in Brazil. Those planning on setting up a FIP in Brazil should keep in mind that FIPs aren’t deemed legal entities, and, therefore, do not require having a legal personality. It should also be remembered that FIPs must be represented by their managers.
Setting up FIPs in Brazil
FIP managers are required to be legal personalities & apply for a license with Brazil’s Securities Commission. It usually takes up to 2 weeks to get an application reviewed. Under Brazilian law, the articles of association must be properly notarized.
Those interested in setting up a fund in Brazil must provide the following information:
- ID assigned by tax authorities;
- identities of independent auditors;
- offer-related info.
There’s no minimum capital requirement.
Regulation of FIPs in Brazil
CVM, the country’s main financial regulator, is authorized to conduct sweeping audits & inspections of FIPs. Another regulator, called the Capital & Financial Markets Association, is only allowed to regulate its own members. Both organizations are legally obliged to provide all FIP-related information upon request.
Prior to setting up a FIP, potential investors are required to apply for an investment license in Brazil with CVM. No information about investors’ identity or their capital commitments can be disclosed. The sole responsibility for the performance of their fiduciary duties lies with managers of FIPs.
Since FIPs represent funds of a closed-end type, their quotas may not be revoked until their liquidation. Quotas can be amortized only with the approval of quota holders or governor.
If you need to establish a fund in the state of Brazil, you should keep in mind that an FIP manage must be CVM-registered & comply with the organization’s requirements.
According to Brazilian laws, money laundering is considered a criminal offense. Therefore, all those who commit AML crimes may have their licenses revoked, be fined or face criminal charges.
Under current regulations, financial institutions must put in place their own rules enabling them to:
- establish their clients’ identity & a source of their funds;
- monitor potentially fraudulent financial transactions;
- report any suspicious transactions.
Brazil’s Central Bank requires all information pertaining to investors & transactions to be retained for a minimum of five years. Such information should be made available for audit by the authorities.
Setting up a PEF in Brazil requires taking into account a number of things. If you have questions about the topic of the article, you can always get in touch with IQ Decision UK & order a consultation on the regulation of investment funds in South America.