	Social Enterprise Law Surveys
	Brazil
	(Latin America/Caribbean) Firm Demarest Advogados
What jurisdiction(s) do you practice in?	Brazil.
What are the most commonly used types of for-profit corporate organizational forms in your jurisdiction (e.g., corporation, limited liability company, benefit corporation, social purpose corporation, etc.) used by Enterprises operating a trade ...	Brazil has two main possibilities: (a) forming a limited liability quota company (“Limitada”); and (b) forming a corporation (“Sociedade Anônima”) Limitada A Limitada, which resembles a U.S. Limited Liability Company (LLC), is a company in which the characteristics of each of the partners are given considerable weight and mutual trust. A Limitada requires only one partner but all partners have limited liability, and all partners are jointly liable for paying up the subscribed capital stock. All amendments to the company’s articles of association require the approval of seventy-five percent (75%) of the capital. It is important to note, however, that the Limitada is taxed in Brazil on its earnings, whereas a LLC usually is not taxed in the U.S. The Limitada differs from a corporation due to the absence of certain formalities, concerning its creation and lack of publicity for its operation, for example. Most companies currently operating in Brazil and which do not plan to sell securities at the Brazilian stock exchange market are formed as a Limitada. The partners of a Limitada can either be legal entities or individuals, Brazilians or not. Its establishment also requires one manager, who must be a Brazilian resident. A Limitada has only one type of equity interest: quotas, which do not have a “physical existence”, are not represented by stock certificates and, therefore, are transferred through a simple amendment to the Limitada’s articles of association. As a general rule, the Limitada does not need to have a minimum capital stock. A main characteristic of the Limitada is that it must have its capital fully subscribed at the date of its formation, being determined in the Limitada's articles of association the term for paying up such amount (either in cash, credits or assets). The Limitada must have its Articles of Association filed with the Board of Commerce of the State where the company will have its headquarters. Such procedure takes approximately five (5) working days to be completed. Once the Articles of Association are filed and the company obtains its Federal Taxpayer’s Registry (see below), it will be considered as validly existing in Brazil. Sociedade Anônima A Sociedade Anônima, similar to a U.S. corporation, is a company in which decisions are generally taken by majority vote. It is a corporate form usually utilized for ventures capable of gathering concentrations of financial resources from a large number of investors. A Sociedade Anônima may be either publicly held or closed. A publicly held Sociedade Anônima must be registered with the Securities Exchange Commission (“CVM”) in order to enable its stock to be quoted at the stock exchange market. The stock of a closed Sociedade Anônima is not publicly traded. The capital stock of the Sociedade Anônima shall be subscribed by at least two (2) shareholders, Brazilians or foreigners, individuals or legal entities. The capital stock needs not to be fully subscribed immediately and the liability of the shareholders is always limited to the amount of capital subscribed by them. The capital stock may be paid either in cash, credit or assets. The amount equivalent to at least ten percent (10%) of the issue price of the shares subscribed in cash must be paid in and deposited in a bank account in the Bank of Brazil S.A. A Sociedade Anônima needs to have at least two officers who need to be Brazilian residents. Non-resident individuals may be board members. A Sociedade Anônima has as equity interest shares (common, preferred, convertible or founders). It may also issue debentures. Its shares are transferred through annotations to the corporation’s corporate books, which are mandatory for this kind of company. Most of the corporate documents of a Sociedade Anônima, such as its by-laws, minutes of the meetings of shareholders and of the board of officers, annual report, balance sheet and other financial statements must be published in the Official Gazette and in another widely circulated newspaper. a. Enterprises that seek financing from investors and will have multiple owners tend to form corporations. It is certainly possible to work with Brazilian limited liability companies that have many members and investor backing, but it is less standard. The Brazilian regulation provides for more options of financing for corporations, compared to the other profit organizational forms. b. It is most common for Social Enterprises in Brazil to use the form of Non-profit Associations, such as GRAACC. The law regarding the regulation of non-profit associations is found in the Civil Code, article nËš 44. The main difference between non-profit associations and other organizational forms is that the first must develop activities related to culture, social assistance, religion, recreation and others.
Do any of your jurisdiction’s traditional organizational forms require or permit the board or managers to consider, balance or prioritize interests other than shareholder value in decision making? What other interests, if any, are they required...	There are no requirements in Brazilian law surrounding the topics on which a board bases its decisions, although managers have a fiduciary duty with the relevant organizations.
Does your jurisdiction have organizational forms specifically designed for Social Enterprises? If so:a. What type(s) of organizational forms are they?b. How do they materially differ from the most closely analogous traditional organizational ...	No.
Are Social Enterprises permitted to be formed and operated as Nonprofits? If so: a. Are Nonprofits that are Social Enterprises treated differently under the law as compared to Nonprofits that are not Social Enterprises, whether from a corporat...	As a practical matter, not all Social Enterprises may form as Nonprofits. Social Enterprises that do organize as Nonprofits enjoy the same tax benefits as other Nonprofits and have the same burdens and restrictions, and there is no lesser reporting or faster formation process for Social Enterprise Nonprofits as compared to other Nonprofits. Where their businesses fall in the category of activity permitted to Nonprofits, it is indeed very prevalent for Social Enterprises to form as Nonprofits (i.e., Nonprofit associations, social organizations, etc.). Assuming Brazilian tax burden is high, it is prevalent to use Nonprofits for Social Enterprises. In this case, the entity should be characterized as follows: (i) a philanthropic, recreational, cultural and scientific institution; (ii) Nonprofit associations that provide the services for which they have been established and make them available to the group of people for which they are intended; or (iii) Nonprofit educational or social assistance institution that provides the services for which it has been instituted and make them available to the population in general, in a complementary character to the activities of the State.
Does your jurisdiction allow for worker-owned Enterprises, such as cooperatives? If so, please describe any material benefits of, and/or restrictions on, using such forms.	Yes, Cooperatives are allowed in Brazil and commonly used for worker-owned Enterprises, especially for rural activity. Cooperatives are societies of persons constituted to enable the economic activity of its members. There are some tax benefits to cooperatives (i.e., exemption of IRPJ and CSLL, which may also be discussed in relation to PIS and COFINS), depending on the activity or act developed (cooperative act). Enterprises that form as Cooperatives may experience difficulties in raising capital and scaling and must abide by additional governance requirements. Further, outside investors are also not incentivized to make large investments since the level of financial investment does not determine control.
Are there unique reporting requirements for Social Enterprises? If there are, please describe them. Please also discuss what government bodies Social Enterprises are required to report to.	If a Social Enterprise decides to form as a Nonprofit or use one of the traditional Enterprise forms, they would not be subject to any additional reporting requirements by virtue of them being a Social Enterprise.
In your jurisdiction, has case law and jurisprudence evolved to address Social Enterprises? If there is meaningful jurisprudence around Social Enterprises, please provide some brief examples.	No. Case law and jurisprudence on Social Enterprises is still incipient in Brazil.
Does your jurisdiction have any ESG requirements for Enterprises generally? If it does, please describe.	It is under discussion by the Brazilian Securities and Exchange Commission (CVM in Portuguese) some amendments to CVM Instruction nº 480 to reduce the cost of compliance and improve the information regime of issuers of securities with the inclusion of information that reflects environmental, social and governance aspects. The CVM considers that the proposed reform has purposes in common with such initiatives in other jurisdictions and that the fact that several regulators are simultaneously adopting similar measures corroborates the importance of the issue. Although reducing the cost of regulatory compliance is the main objective of the reform, it also proposes some new disclosure requirements to meet the growing demand of investors for environmental, social, and governance (ESG) information and align Brazilian regulation with the advances in all developed markets.
Does your jurisdiction have any ESG requirements specifically for Social Enterprises? If it does, please describe.	No.
Does your jurisdiction have any ESG requirements for investors? If it does, please describe.	No.
Are any major investor classes (e.g., pension funds, mutual funds, etc.) required to look at ESG issues when making investment decisions in your jurisdiction? a. If they are, please describe the requirements.b. If they are not, are they permi...	Brazilian Central Bank's Resolution nËš 4,327/2014 defines the framework for creating a Policy for Social and Environmental Responsibility in financial institutions. According to this framework, Brazilian’s financial institutions must provide a set of actions regarding their environmental and social responsibility and a governance structure to implement and monitor the effectiveness of these actions. Such Resolution also establishes that financial institutions should be account for the possibility of expenses due to environmental and social risks caused by them. a. N/A b. & c. No major investor classes are required to look at ESG issues. While investors may be permitted to consider such factors, the state of play is in flux. Many are pushing for increased focus on factors other than profit motive and some guidance has in the past been issued allowing that. That said, there are a number of private funds and large institutional investors that do consider ESG issues when making their investment decisions, and there has been a rise in impact funds that use ESG factors as part of an investment assessment process.
What kinds of philanthropic funding do Social Enterprises in your jurisdiction commonly receive (e.g., grants, charitable investment, traditional investment)?	Social Enterprises receive grants, charitable investments, and traditional investments. The type of funding typically varies based on the Enterprise form that the Social Enterprise chooses. For example, Social Enterprises formed as Nonprofits receive more grants and charitable investments, while Social Enterprises formed as for-profit corporations received more traditional investments.
How prevalent, if at all, are new for-profit impact investments in your jurisdiction (e.g. traditional instruments with impact terms, new investment instruments, aggregation with philanthropic capital, community based funding, etc.)?	For-profit impact investments have been increasing in the United States and parties are becoming more familiar with them. Many prominent investment banks are forming specific impact funds (for example, BTG has recently formed an impact investment fund). A type of funding generally available to Enterprises and especially Social Enterprises are green bonds, social bonds and sustainable bonds. Some examples of this type of funding are: Shares of credit rights investment fund (“FIDC”), Receivables certificates in agribusiness (“CRA”), Receivables certificates in securities (“CRI”), Debentures, Debentures incentivized by infrastructure, Financial bills and promissory
What are the types of government funding and support available to Social Enterprises, if any, available in your jurisdiction (e.g., grants, investments, bonds, and guarantees)? a. How difficult is it for Social Enterprises to obtain government...	There is no special government funding specifically available to Social Enterprises as such. Depending on the Enterprise form and industry, government grants, subsidies, donations, loans, bonds, and guarantees may be available.
Are there any companies that are formed as a Social Enterprise listed on your jurisdiction’s leading securities exchange(s)?	No.
To what extent are publicly traded Enterprises required to disclose ESG related factors in annual reports/public filings in your jurisdiction.	They are not required to disclose ESG factors, though some choose to do so for marketing reasons.
How prevalent, if at all, are impact bonds in your jurisdiction?	Impact bonds are utilized at both the federal level and the state level. The impact bonds are more prevalent at the state level than at the federal level, but overall are not very prevalent.
In your jurisdiction, are there any restrictions on foreign investments or donations that are unique to Social Enterprises (whether incorporated as for profit entities or as Nonprofits)?	No.
Is “crowdfunding” legal in your jurisdiction? Are there rules under applicable securities laws that make it easier for smaller businesses or Social Enterprises to take money from investors that are not sophisticated/accredited/qualified under a...	Crowdfunding is legal, allowing small businesses (annual profit under BRL 10,000,000.00) to solicit investment from the general public. However, it is not used as a tool by most successful enterprises due to restrictions (including a cap on the maximum investment amount) and ongoing reporting obligations.
Are there any tax exemptions that are uniquely available for Social Enterprises? a. Please describe any tax exemptions that are available and whether they are partial or full.b. Are they dependent on the Social Enterprise utilized using a spe...	There are tax exemptions available for Nonprofits generally, but there are no tax exemptions that are uniquely available for Social Enterprises structured using a for-profit organizational form. a. & b. A regular for-profit Enterprise is subject to several taxes, social contributions and social security in Brazil, depending on the activity developed. In relation to Federal taxes, the for-profit Enterprise is subject to Corporate Income Tax (“IRPJ”) and Social Contribution on Net Profit (“CSLL) levied over the taxable/adjusted profit and Social Contributions on Gross Revenue (“PIS and COFINS”), among other. Nonprofit Enterprises may enjoy IRPJ, CSLL and COFINS exemption, although PIS will be levied over the payroll. Besides, the exemption of social security levied on payroll may depend on several requirements. c. Depending on the characteristics of the Nonprofitable Enterprise, tax benefits may vary from tax exemptions to tax immunities. There are requirements to Nonprofitable Enterprises enjoy tax benefits, such as, for example: (i) not distribute any portion of its assets or income, for any reason; (ii) fully apply its resources in Brazil to maintain its institutional objectives; (iii) keep records of their income and expenses in books covered with formalities capable of ensuring their accuracy. The eventual positive result earned by Nonprofit Enterprise should be reinvested in its social purpose.
Are individuals or other organizations able to provide tax deductible donations to for-profit Social Enterprises? If they are, please describe any restrictions applicable to tax deductible donations?	Donations and sponsorships granted to institutions that support cultural and sport activities, as well as institutions that assist children, teenagers, the elderly and people with diseases or disabilities may be tax deductible for legal entities or individuals, if some requirements are observed, such as a maximum percentual to be excluded from the income tax calculation basis. However, such tax benefits may not be applicable to for-profit Social Enterprises. Please note that donations are subject to tax on gifts (“ITCMD”), which may be exempted in certain circumstances, such as Nonprofit educational or social assistance institution that provides the services for which it has been instituted and make them available to the population in general, in a complementary character to the activities of the State.
Are there any other tax benefits uniquely available for Social Enterprises? (e.g. deferrals, favorable tax rates, business deductions, etc.)	No.
Does your jurisdiction provide for reciprocal recognition of tax-exempt status that has been granted under the law of any other jurisdictions?	No.
Does your jurisdiction have Regulatory Sandboxes or similar policy frameworks for Social Enterprises? If it does, please describe.	Not exactly. Brazilian main sandbox initiatives are designed for startups related to financial institutions (payment systems), private insurance companies and innovation, led by the Brazilian Central Bank, Susep and CVM.
What government operational support, resources, training or services, are available for small businesses or Social Enterprises?	Despite promoting and enabling innovations, Brazilian regulatory sandboxes do not work as a startup accelerator. In this model, the proposed solution must be mature, operating on a small scale or ready to be placed on the market. More than that, it needs to promote technological innovation that leads to efficiency gains, increased safety and promotes cost reduction. The regulatory sandbox in Brazil aims to encourage new entrants to the market, serving as an additional assessment tool in the authorization process for new entities and technologies. A model favored by traditional banks, who see an opportunity to test new processes and services with regulatory rules made more flexible in terms of the environment.
Are there different compliance requirements for different types of Social Enterprises than for traditional Enterprises? Please provide examples if there are.	Depending on the legal nature of Social Enterprises (for-profit or Nonprofit), annual special reports may be required including information related to the activities developed, expenses and revenues incurred, among others. Some compliance requirements may vary if the Social Enterprise is qualified as a Nonprofit Enterprise and/or receives public investment.
Is there a dedicated government agency or department that oversees Social Enterprises? If there is, please describe its mandate and effectiveness.	No.
Is there a different bankruptcy system available for Social Enterprises?	No.
What are the average time and filing fees to form an Enterprise in your jurisdiction?	Depending on the current processing times and whether the documents are filed online, in person, or by mail, it can take a couple of days to form a legal entity in Brazil.
What government or third-party certifications or accreditations, if any, are available for Social Enterprises that allow for access to benefits e.g. funding, beneficial tax status, etc.? Please provide examples and briefly describe them as well...	Certifications may guarantee tax exemptions (i.e., ITCMD and social security), depending on the legal nature and activity of the Social Enterprise. Besides, certifications may favor public investments or help bolster the Social Enterprise’s social impact claims and provide potential investors and stakeholders with additional information to accurately assess the social impact that the Enterprise makes. There is no specific certification for ESG purposes. ESG criteria may be applied for capital market purposes, considering sustainable bonds, transition bonds, social bonds.
Please describe whether, in your opinion, startups and other entrepreneurial Enterprises generally can easily form and flourish in your jurisdiction.	Yes, since although incipient Brazilian legislation and market is getting more and more regardful to the current needs of entrepreneurship and incorporation processes are fast, cheap and simple.
Please describe whether, in your opinion, Social Enterprises, in particular, can easily form and flourish in your jurisdiction.	One hard issue many Social Enterprises face is the simple choice of whether to be a for-profit or Nonprofit, particularly as there is no form of Nonprofit that is modified to accommodate Social Enterprises.
Please describe whether in your opinion there are any laws that are obstructive to the formation of Social Enterprises (i.e. that actively disfavor or penalize, or otherwise discourage their formation) in your jurisdiction (for example, are Soc...	In the general corporate form, directors and officers must use their powers in the best interests of the company and shareholders. While they are not prevented from considering other interests, such as the environment or the larger community, it would be better were they more easily able to consider those interests.
In your jurisdiction, are there any major fraud concerns or defects due to corruption or fraud that should be addressed? If there are, please briefly discuss the concerns or defects.	No.
What changes to the law do you think would be most beneficial to enabling Social Enterprises to flourish in your jurisdiction?	1. Providing tax benefits to Social Enterprises utilizing for-profit Enterprise forms. 2. Expanding the scope of permitted activity for nonprofits regardless of activity (even if the nonprofits for certain activities did not have all tax benefits of other nonprofits).
What changes to the law do you think would be most beneficial to enhancing the social and environmental responsibility of Enterprises generally (whether or not Social Enterprises)?	Creating and implementing a uniform set of standards for ESG policies and reporting of public companies would make it easier for investors and consumers to compare and evaluate which enterprises are in fact doing good in the world, which would drive companies to perform better. The transparency of such information should be considered a legal obligation to be followed.

Social Enterprise Law Surveys

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What jurisdiction(s) do you practice in?

Brazil.

What are the most commonly used types of for-profit corporate organizational forms in your jurisdiction (e.g., corporation, limited liability company, benefit corporation, social purpose corporation, etc.) used by Enterprises operating a trade ...

Brazil has two main possibilities: (a) forming a limited liability quota company (“Limitada”); and (b) forming a corporation (“Sociedade Anônima”)

Limitada

A Limitada, which resembles a U.S. Limited Liability Company (LLC), is a company in which the characteristics of each of the partners are given considerable weight and mutual trust. A Limitada requires only one partner but all partners have limited liability, and all partners are jointly liable for paying up the subscribed capital stock. All amendments to the company’s articles of association require the approval of seventy-five percent (75%) of the capital. It is important to note, however, that the Limitada is taxed in Brazil on its earnings, whereas a LLC usually is not taxed in the U.S.
The Limitada differs from a corporation due to the absence of certain formalities, concerning its creation and lack of publicity for its operation, for example. Most companies currently operating in Brazil and which do not plan to sell securities at the Brazilian stock exchange market are formed as a Limitada.
The partners of a Limitada can either be legal entities or individuals, Brazilians or not. Its establishment also requires one manager, who must be a Brazilian resident.
A Limitada has only one type of equity interest: quotas, which do not have a “physical existence”, are not represented by stock certificates and, therefore, are transferred through a simple amendment to the Limitada’s articles of association.
As a general rule, the Limitada does not need to have a minimum capital stock. A main characteristic of the Limitada is that it must have its capital fully subscribed at the date of its formation, being determined in the Limitada's articles of association the term for paying up such amount (either in cash, credits or assets).
The Limitada must have its Articles of Association filed with the Board of Commerce of the State where the company will have its headquarters. Such procedure takes approximately five (5) working days to be completed. Once the Articles of Association are filed and the company obtains its Federal Taxpayer’s Registry (see below), it will be considered as validly existing in Brazil.

Sociedade Anônima

A Sociedade Anônima, similar to a U.S. corporation, is a company in which decisions are generally taken by majority vote. It is a corporate form usually utilized for ventures capable of gathering concentrations of financial resources from a large number of investors.
A Sociedade Anônima may be either publicly held or closed. A publicly held Sociedade Anônima must be registered with the Securities Exchange Commission (“CVM”) in order to enable its stock to be quoted at the stock exchange market. The stock of a closed Sociedade Anônima is not publicly traded.
The capital stock of the Sociedade Anônima shall be subscribed by at least two (2) shareholders, Brazilians or foreigners, individuals or legal entities. The capital stock needs not to be fully subscribed immediately and the liability of the shareholders is always limited to the amount of capital subscribed by them. The capital stock may be paid either in cash, credit or assets. The amount equivalent to at least ten percent (10%) of the issue price of the shares subscribed in cash must be paid in and deposited in a bank account in the Bank of Brazil S.A.
A Sociedade Anônima needs to have at least two officers who need to be Brazilian residents. Non-resident individuals may be board members.
A Sociedade Anônima has as equity interest shares (common, preferred, convertible or founders). It may also issue debentures. Its shares are transferred through annotations to the corporation’s corporate books, which are mandatory for this kind of company.
Most of the corporate documents of a Sociedade Anônima, such as its by-laws, minutes of the meetings of shareholders and of the board of officers, annual report, balance sheet and other financial statements must be published in the Official Gazette and in another widely circulated newspaper.

a. Enterprises that seek financing from investors and will have multiple owners tend to form corporations. It is certainly possible to work with Brazilian limited liability companies that have many members and investor backing, but it is less standard. The Brazilian regulation provides for more options of financing for corporations, compared to the other profit organizational forms.

b. It is most common for Social Enterprises in Brazil to use the form of Non-profit Associations, such as GRAACC. The law regarding the regulation of non-profit associations is found in the Civil Code, article nËš 44. The main difference between non-profit associations and other organizational forms is that the first must develop activities related to culture, social assistance, religion, recreation and others.

Do any of your jurisdiction’s traditional organizational forms require or permit the board or managers to consider, balance or prioritize interests other than shareholder value in decision making? What other interests, if any, are they required...

There are no requirements in Brazilian law surrounding the topics on which a board bases its decisions, although managers have a fiduciary duty with the relevant organizations.

Does your jurisdiction have organizational forms specifically designed for Social Enterprises? If so:a. What type(s) of organizational forms are they?b. How do they materially differ from the most closely analogous traditional organizational ...

No.

Are Social Enterprises permitted to be formed and operated as Nonprofits? If so: a. Are Nonprofits that are Social Enterprises treated differently under the law as compared to Nonprofits that are not Social Enterprises, whether from a corporat...

As a practical matter, not all Social Enterprises may form as Nonprofits. Social Enterprises that do organize as Nonprofits enjoy the same tax benefits as other Nonprofits and have the same burdens and restrictions, and there is no lesser reporting or faster formation process for Social Enterprise Nonprofits as compared to other Nonprofits. Where their businesses fall in the category of activity permitted to Nonprofits, it is indeed very prevalent for Social Enterprises to form as Nonprofits (i.e., Nonprofit associations, social organizations, etc.).

Assuming Brazilian tax burden is high, it is prevalent to use Nonprofits for Social Enterprises. In this case, the entity should be characterized as follows: (i) a philanthropic, recreational, cultural and scientific institution; (ii) Nonprofit associations that provide the services for which they have been established and make them available to the group of people for which they are intended; or (iii) Nonprofit educational or social assistance institution that provides the services for which it has been instituted and make them available to the population in general, in a complementary character to the activities of the State.

Does your jurisdiction allow for worker-owned Enterprises, such as cooperatives? If so, please describe any material benefits of, and/or restrictions on, using such forms.

Yes, Cooperatives are allowed in Brazil and commonly used for worker-owned Enterprises, especially for rural activity. Cooperatives are societies of persons constituted to enable the economic activity of its members. There are some tax benefits to cooperatives (i.e., exemption of IRPJ and CSLL, which may also be discussed in relation to PIS and COFINS), depending on the activity or act developed (cooperative act).

Enterprises that form as Cooperatives may experience difficulties in raising capital and scaling and must abide by additional governance requirements. Further, outside investors are also not incentivized to make large investments since the level of financial investment does not determine control.

Are there unique reporting requirements for Social Enterprises? If there are, please describe them. Please also discuss what government bodies Social Enterprises are required to report to.

If a Social Enterprise decides to form as a Nonprofit or use one of the traditional Enterprise forms, they would not be subject to any additional reporting requirements by virtue of them being a Social Enterprise.

In your jurisdiction, has case law and jurisprudence evolved to address Social Enterprises? If there is meaningful jurisprudence around Social Enterprises, please provide some brief examples.

No. Case law and jurisprudence on Social Enterprises is still incipient in Brazil.

Does your jurisdiction have any ESG requirements for Enterprises generally? If it does, please describe.

It is under discussion by the Brazilian Securities and Exchange Commission (CVM in Portuguese) some amendments to CVM Instruction nº 480 to reduce the cost of compliance and improve the information regime of issuers of securities with the inclusion of information that reflects environmental, social and governance aspects. The CVM considers that the proposed reform has purposes in common with such initiatives in other jurisdictions and that the fact that several regulators are simultaneously adopting similar measures corroborates the importance of the issue.

Although reducing the cost of regulatory compliance is the main objective of the reform, it also proposes some new disclosure requirements to meet the growing demand of investors for environmental, social, and governance (ESG) information and align Brazilian regulation with the advances in all developed markets.

Does your jurisdiction have any ESG requirements specifically for Social Enterprises? If it does, please describe.

No.

Does your jurisdiction have any ESG requirements for investors? If it does, please describe.

No.

Are any major investor classes (e.g., pension funds, mutual funds, etc.) required to look at ESG issues when making investment decisions in your jurisdiction? a. If they are, please describe the requirements.b. If they are not, are they permi...

Brazilian Central Bank's Resolution nËš 4,327/2014 defines the framework for creating a Policy for Social and Environmental Responsibility in financial institutions. According to this framework, Brazilian’s financial institutions must provide a set of actions regarding their environmental and social responsibility and a governance structure to implement and monitor the effectiveness of these actions. Such Resolution also establishes that financial institutions should be account for the possibility of expenses due to environmental and social risks caused by them.

a. N/A

b. & c. No major investor classes are required to look at ESG issues. While investors may be permitted to consider such factors, the state of play is in flux. Many are pushing for increased focus on factors other than profit motive and some guidance has in the past been issued allowing that.

That said, there are a number of private funds and large institutional investors that do consider ESG issues when making their investment decisions, and there has been a rise in impact funds that use ESG factors as part of an investment assessment process.

What kinds of philanthropic funding do Social Enterprises in your jurisdiction commonly receive (e.g., grants, charitable investment, traditional investment)?

Social Enterprises receive grants, charitable investments, and traditional investments. The type of funding typically varies based on the Enterprise form that the Social Enterprise chooses. For example, Social Enterprises formed as Nonprofits receive more grants and charitable investments, while Social Enterprises formed as for-profit corporations received more traditional investments.

How prevalent, if at all, are new for-profit impact investments in your jurisdiction (e.g. traditional instruments with impact terms, new investment instruments, aggregation with philanthropic capital, community based funding, etc.)?

For-profit impact investments have been increasing in the United States and parties are becoming more familiar with them. Many prominent investment banks are forming specific impact funds (for example, BTG has recently formed an impact investment fund).

A type of funding generally available to Enterprises and especially Social Enterprises are green bonds, social bonds and sustainable bonds. Some examples of this type of funding are:

Shares of credit rights investment fund (“FIDC”),
Receivables certificates in agribusiness (“CRA”),
Receivables certificates in securities (“CRI”),
Debentures,
Debentures incentivized by infrastructure,
Financial bills and promissory

What are the types of government funding and support available to Social Enterprises, if any, available in your jurisdiction (e.g., grants, investments, bonds, and guarantees)? a. How difficult is it for Social Enterprises to obtain government...

There is no special government funding specifically available to Social Enterprises as such. Depending on the Enterprise form and industry, government grants, subsidies, donations, loans, bonds, and guarantees may be available.

Are there any companies that are formed as a Social Enterprise listed on your jurisdiction’s leading securities exchange(s)?

No.

To what extent are publicly traded Enterprises required to disclose ESG related factors in annual reports/public filings in your jurisdiction.

They are not required to disclose ESG factors, though some choose to do so for marketing reasons.

How prevalent, if at all, are impact bonds in your jurisdiction?

Impact bonds are utilized at both the federal level and the state level. The impact bonds are more prevalent at the state level than at the federal level, but overall are not very prevalent.

In your jurisdiction, are there any restrictions on foreign investments or donations that are unique to Social Enterprises (whether incorporated as for profit entities or as Nonprofits)?

No.

Is “crowdfunding” legal in your jurisdiction? Are there rules under applicable securities laws that make it easier for smaller businesses or Social Enterprises to take money from investors that are not sophisticated/accredited/qualified under a...

Crowdfunding is legal, allowing small businesses (annual profit under BRL 10,000,000.00) to solicit investment from the general public. However, it is not used as a tool by most successful enterprises due to restrictions (including a cap on the maximum investment amount) and ongoing reporting obligations.

Are there any tax exemptions that are uniquely available for Social Enterprises? a. Please describe any tax exemptions that are available and whether they are partial or full.b. Are they dependent on the Social Enterprise utilized using a spe...

There are tax exemptions available for Nonprofits generally, but there are no tax exemptions that are uniquely available for Social Enterprises structured using a for-profit organizational form.

a. & b. A regular for-profit Enterprise is subject to several taxes, social contributions and social security in Brazil, depending on the activity developed. In relation to Federal taxes, the for-profit Enterprise is subject to Corporate Income Tax (“IRPJ”) and Social Contribution on Net Profit (“CSLL) levied over the taxable/adjusted profit and Social Contributions on Gross Revenue (“PIS and COFINS”), among other. Nonprofit Enterprises may enjoy IRPJ, CSLL and COFINS exemption, although PIS will be levied over the payroll. Besides, the exemption of social security levied on payroll may depend on several requirements.

c. Depending on the characteristics of the Nonprofitable Enterprise, tax benefits may vary from tax exemptions to tax immunities. There are requirements to Nonprofitable Enterprises enjoy tax benefits, such as, for example: (i) not distribute any portion of its assets or income, for any reason; (ii) fully apply its resources in Brazil to maintain its institutional objectives; (iii) keep records of their income and expenses in books covered with formalities capable of ensuring their accuracy. The eventual positive result earned by Nonprofit Enterprise should be reinvested in its social purpose.

Are individuals or other organizations able to provide tax deductible donations to for-profit Social Enterprises? If they are, please describe any restrictions applicable to tax deductible donations?

Donations and sponsorships granted to institutions that support cultural and sport activities, as well as institutions that assist children, teenagers, the elderly and people with diseases or disabilities may be tax deductible for legal entities or individuals, if some requirements are observed, such as a maximum percentual to be excluded from the income tax calculation basis. However, such tax benefits may not be applicable to for-profit Social Enterprises. Please note that donations are subject to tax on gifts (“ITCMD”), which may be exempted in certain circumstances, such as Nonprofit educational or social assistance institution that provides the services for which it has been instituted and make them available to the population in general, in a complementary character to the activities of the State.

Are there any other tax benefits uniquely available for Social Enterprises? (e.g. deferrals, favorable tax rates, business deductions, etc.)

No.

Does your jurisdiction provide for reciprocal recognition of tax-exempt status that has been granted under the law of any other jurisdictions?

No.

Does your jurisdiction have Regulatory Sandboxes or similar policy frameworks for Social Enterprises? If it does, please describe.

Not exactly. Brazilian main sandbox initiatives are designed for startups related to financial institutions (payment systems), private insurance companies and innovation, led by the Brazilian Central Bank, Susep and CVM.

What government operational support, resources, training or services, are available for small businesses or Social Enterprises?

Despite promoting and enabling innovations, Brazilian regulatory sandboxes do not work as a startup accelerator. In this model, the proposed solution must be mature, operating on a small scale or ready to be placed on the market. More than that, it needs to promote technological innovation that leads to efficiency gains, increased safety and promotes cost reduction.

The regulatory sandbox in Brazil aims to encourage new entrants to the market, serving as an additional assessment tool in the authorization process for new entities and technologies. A model favored by traditional banks, who see an opportunity to test new processes and services with regulatory rules made more flexible in terms of the environment.

Are there different compliance requirements for different types of Social Enterprises than for traditional Enterprises? Please provide examples if there are.

Depending on the legal nature of Social Enterprises (for-profit or Nonprofit), annual special reports may be required including information related to the activities developed, expenses and revenues incurred, among others. Some compliance requirements may vary if the Social Enterprise is qualified as a Nonprofit Enterprise and/or receives public investment.

Is there a dedicated government agency or department that oversees Social Enterprises? If there is, please describe its mandate and effectiveness.

No.

Is there a different bankruptcy system available for Social Enterprises?

No.

What are the average time and filing fees to form an Enterprise in your jurisdiction?

Depending on the current processing times and whether the documents are filed online, in person, or by mail, it can take a couple of days to form a legal entity in Brazil.

What government or third-party certifications or accreditations, if any, are available for Social Enterprises that allow for access to benefits e.g. funding, beneficial tax status, etc.? Please provide examples and briefly describe them as well...

Certifications may guarantee tax exemptions (i.e., ITCMD and social security), depending on the legal nature and activity of the Social Enterprise. Besides, certifications may favor public investments or help bolster the Social Enterprise’s social impact claims and provide potential investors and stakeholders with additional information to accurately assess the social impact that the Enterprise makes.

There is no specific certification for ESG purposes. ESG criteria may be applied for capital market purposes, considering sustainable bonds, transition bonds, social bonds.

Please describe whether, in your opinion, startups and other entrepreneurial Enterprises generally can easily form and flourish in your jurisdiction.

Yes, since although incipient Brazilian legislation and market is getting more and more regardful to the current needs of entrepreneurship and incorporation processes are fast, cheap and simple.

Please describe whether, in your opinion, Social Enterprises, in particular, can easily form and flourish in your jurisdiction.

One hard issue many Social Enterprises face is the simple choice of whether to be a for-profit or Nonprofit, particularly as there is no form of Nonprofit that is modified to accommodate Social Enterprises.

Please describe whether in your opinion there are any laws that are obstructive to the formation of Social Enterprises (i.e. that actively disfavor or penalize, or otherwise discourage their formation) in your jurisdiction (for example, are Soc...

In the general corporate form, directors and officers must use their powers in the best interests of the company and shareholders. While they are not prevented from considering other interests, such as the environment or the larger community, it would be better were they more easily able to consider those interests.

In your jurisdiction, are there any major fraud concerns or defects due to corruption or fraud that should be addressed? If there are, please briefly discuss the concerns or defects.

No.

What changes to the law do you think would be most beneficial to enabling Social Enterprises to flourish in your jurisdiction?

1. Providing tax benefits to Social Enterprises utilizing for-profit Enterprise forms.

2. Expanding the scope of permitted activity for nonprofits regardless of activity (even if the nonprofits for certain activities did not have all tax benefits of other nonprofits).

What changes to the law do you think would be most beneficial to enhancing the social and environmental responsibility of Enterprises generally (whether or not Social Enterprises)?

Creating and implementing a uniform set of standards for ESG policies and reporting of public companies would make it easier for investors and consumers to compare and evaluate which enterprises are in fact doing good in the world, which would drive companies to perform better.

The transparency of such information should be considered a legal obligation to be followed.

Social Enterprise Law Surveys

Brazil

Social Enterprise Law Surveys

Brazil

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