Essay: Legal Structure And Policies For Business Development In Brazil.

Brief discussion on legal structure

The policy regarding development of business taken by the Brazilian government has created certain negative effects on the foreign investment process. The policies have been taken from legal perspective and an attempt has been made to provide an overview on the legal structure relating to the business (Faúndez, 2016). Relationship between the employees is one of the core factors regarding the business development. The approach of Brazil regarding this matter has been described in this report. Certain legal initiatives have been taken by the government to uproot the corruption and maintain a steady growth regarding the business. All the related provision regarding the Competition Law, Employment Law, Contract Law and Intellectual Property Act have been discussed in this report with intent to describe the legal effect regarding the proposed matter.     

The administrative structure of Brazil is federal republic in nature and a lean towards the civil law can observe in this country. The legislative and judicial provisions help to create ethical relationship in international market and assist to develop the economy of Brazil. In case of expanding the business internationally, good relationship is required irrespective of any country (Graham, 2014). The main objective in this case should maintain a good relationship with the other countries and the nature of relationship should be ethical in nature. In Brazil, the ethics are governing the business principles. The main objective regarding the ethical business study is to maintain a nobility in case of business transaction and create an impressive relation between the business entities. The ethical principles are also help to reduce the illegal activities or the white collar crime with an objective to retain clarity in any transaction.

The legal structure of the business in Brazil allows three aspects regarding the business that can be categorised as follows: strategic approach regarding the structure and feature of the business, processes regarding the taxes and imported goods and the relationship regarding the agency and labour consideration.

In case of expansion of any business, investments play an important role. Investment can be national or international. International investments are sometimes known as foreign investment. Every country needs foreign investment to develop the base of the business and Brazil is not an exception to this rule (Mattei, 2016). The business policies of Brazil are open to the foreign investment but there are certain limitations regarding the investment process or grounds. The limited grounds are the authorised entities of government and can be categorised as follows:

• Financial institutions
• Press and broadcasting services
• Domestic airlines concessions
• Postal services
• Security and transport that are confidential in nature
• Nuclear energy
• Rural land property
• And Border activities.

Foreign investment in Brazil

Foreign investors could not invest their money in the development of the cabotage sector. The term cabotage denotes a place where the foreign aircrafts are kept and collected foreign nationals of a country and work as a transportation object to connect two points of the country. There are certain rules regarding the foreign investment. In case of the direct investment, registration from the Brazilian Central Bank is needed. If the investments are made to develop the base of the capital market, it must get confirmation from the Brazilian Securities Commission. There are certain additional requirements regarding the foreign investment. The foreign investor should appoint a representative regarding the transaction and the representative should be permanent resident of Brazil (Black, De Carvalho, &Sampaio, 2014).

In recent times, certain legal provision has been enacted to govern the foreign investment, all the restriction regarding the foreign investment in the case of health care sector has been abolished, and therefore, the foreign investment is open for the health care sector. There is a possibility to launch new proposals regarding the health care sectors in case of the Brazilian Market.

A close analysis on the incentive policies to the investors revealed that Brazil has offered many opportunities to the investors regarding taxation system. The government on the taxation incentives has taken a strategic approach and additional benefit will be provided to those who invest their money in the infrastructure projects like energy, telecommunication, oil and gas. The government has given certain rebate to the tax free areas and the non-residents get certain facilities who invested their money in capital market. It should be taken into consideration that the dividends are exempted from the income tax.

Two types of business vehicles are being used by the foreign investors in Brazil such as the limited liability companies and the Closely-held company.

The main objective of the Brazilian government is to maintain equality in between the local employees and the foreign employees. The Consolidation of Labour Laws and Brazilian Constitution 1988 govern the rules regarding the same. in Brazil, the employment contracts are usually written in nature, though there is no mandatory provision regarding the written version of the employment contract (Börner et al., 2014). The written framework is a common practice only. The terms of the written contract are making the working conditions formal. Certain essentials are necessary for the proper construction of the contract. The contract type should be written and terms of the contract should be mentioned precisely. There should be certain paragraphs that mention the reasons for appointing the employees. If the work is transferable in nature, it should be mentioned in the contract. The position and remuneration of the employees should clearly be stated in the contract and there shall not be any ambiguity regarding the incentives and possibility of compensation he gets for sustain workplace injury. The conditions for the termination should also been prescribed there.   

Taxation law and incentives

In case of Brazil, the collective bargaining agreements are also applicable in certain circumstances. Two types of permits are given to the national and foreign employees such as the temporary and permanent. However, the termination program is quite negative in nature because the employer has the right to terminate the employees without showing any reasonable cause to them. However, the employment law has promised certain benefit to the terminated employees with an intention to protect their interest. If an employee got terminated from his post on misconduct, the employer will terminate him after issuing a notice. The employees who are terminated from their post without any cause, they will get certain compensation regarding the same. however, termination is illegal if the employee is suffering from some physical problems like pregnancy and work related accidents.

There are certain taxes imposed on the visa granted to the national and foreign employees. The permanent visa holders are considered as a citizen of Brazil and the temporary visa holders are considered as paid employees or get an opportunity to stay in Brazil for a period of 183 consecutive days per annum. A Brazilian government has to pay taxes for getting proper services. The taxing process is different in case of the employers. The payroll percentage is 20% for the employers of company and 22.5% in case of the financial institution.

In case of Brazil, there are certain rules and statute implemented to ensure clarity regarding the business. the enlisted legislations can be categorised as follows;

In Brazil, the commercial law, agency contract, contract between government and international firms, sale contract, lease contract, employment contract, work and technology contract and suppliers’ contract govern the company related matters. Therefore, it can be stated that the principal Act regarding the Brazilian business is the Contract Act. All the provisions will be applied on the company once it got registered from the Federal Revenue Office. The Brazilian Civil Code is governing the general provisions of the above named contractual subjects. Certain specific statutes govern other contracts.

There are certain requirements present to define the enforceability of the contractual provisions. The parties should be competent to enter into the contract, there must be certain lawful scopes and the terms of the contract should not be illegal in nature. These are considered as the primary rule regarding the contract. There are certain secondary rules too that are depended on the character of the contract. the Brazilian Legislation gives an ample of opportunity to the parties to enter into the contract as per their own wish and within the legal parlance and the principle of free will are maintained in this case. In case the terms of the contract are contradictory in nature or it is impossible to enforce the same, the contract becomes void in nature. It is important to retain a balance in between the two contracting parties. It is required that all the conditions to the contract must be beneficiary to both the contracting parties. It is not required that one party could get plenty of opportunities by the terms and the other party get less. The most important part in contract is that the provisions of the contract should not go against the law and the mutual agreement between the parties should follow legal terms with an intention to legalise the matter. In a case where any one of the parties to the contract is foreigner, the foreign rules will apply to the contract and therefore, in case of Brazil, there is no specific governing rule (Börner et al., 2014).

Employment laws

It has been mentioned under Article 224 of Brazilian Civil Code that if the employment contract has been written in foreign language, it is necessary to translate the same in Portuguese for the application of Brazilian rules. They are also important to have certain legal effect. The Brazilian Consumer Code is governing the relationship between the consumers. Certain voidable principles are being stated under the provision of Article 51 of the Code. The rules are prevent, exempt, or reduce the seller’s or suppliers' liability for defects of any kind in goods/services or imply a renouncement or a waiver (by the consumer) of relevant rights. According to the clauses, "in consumer relations between supplier and corporate-entity consumers, the amount of indemnity may be limited in justifiable situations".

The Brazilian law has described the Agent as commercial representative and the duties of agent is to work for the promotion of particular product, looking for the customers, proposal to negotiate and forward the proposals to the seller with whom contractual relationship can be established. It is the duty of the agent to provide facilities to the product and arrange training programmes to structuralise the commercial transactions. The agreement is needed to be registered and plays an important part regarding the warranty coverage service. In case of termination of agency, the Brazilian government needed to placed the event in the territory of Brazil for the implementation of the national laws. The commercial representatives are required to make an indemnified payment in case of termination from their post and the process will be reversed in case of termination without cause.

There are certain differences between the agent and distributor. The supplier governs the activities of the agent, whereas only the suppliers govern certain activities of the distributors. Agent does not take any title regarding the goods, but the distributors get credit for the purchase and sell of the goods. There is a provision that the agents may not handle the products of other suppliers. However, a distributor can handle the product of different suppliers. The agents do not use their own capital in course of their business, but a distributor is using their own capital. The agents should bear no risk if the payment fails. The distributor has to bear financial loss regarding the non-payment.

In Brazil, the provisions on intellectual property are applying in case of every type of related cases. It does not apply on industrial cases only (Mundi, 2016). The important and commonly used intellectual properties are copyrights, trademarks, patents and designs. The problems on intellectual properties are governed by the parliamentary commission and followed the federal law of Brazil. A small discussion on the intellectual properties is to be given as follows:

Contract law

The following creations are come under the sphere of Brazil- Novel, arts and certain industrial applications. Additionally, it can be stated that the practical matters and the industrial instruments can come under the purview of patents. Any structure or shape that is inventory in nature can have the right of patent. The right regarding patent helps to develop the structural object.   

Brazil adopts an extensive examination system regarding patent applications. The INPI (the National Institute of Industrial Property) has all the power to examine the application submitted before him. The main objective of the applications is to comply with the official as well as common requirements and intrinsic unpatented. An assessment is necessary to confirm that the application for patent is not a part of any state’s official arts.  Certain compensations are also provided in cases where the patent rights have been violated. The right-holder are given the rights to file complain to secure his patent right. Managerial actions in the National Institute of Industrial Property are obtainable to combat patent applications or annul patents. Infringement complaints can file in state courts and cancellation complaints in federal courts. There are certain provisions defining the claims of right-holders such as injunction search and seize order and damages. Criminal sanctions are depending on the velocity of the case. Any person can protect his creation for twenty years under the parameters of patent from the date of filing. The terms of protection shall not be given less than seven years.

Trademarks are another form of intellectual property right. It should be kept in mind that the rights under the must not similar to another trademark. Similar trademarks can create perplexity regarding the same goods. The legislation also provides certain cryptogram that is evocative, broad, fraudulent, unlawful or divergent to public order and morality in these cases cannot be recorded as trademarks. Brazil adopts a significant assessment regarding trademark registrations. It is the duty of INPI to take care of the examination and following things are required in this case: all formal requirements must be complied, internal registration and contradictions with other trademarks. Security for unregistered trademarks may be accessible under unjust rivalry rules have been decided at the Paris Convention provisions regarding well-known trademarks.

The real owner of the registered trademark can force the authority of trademark. The owner of an unregistered trademark can exercise the same rights. Organizational proceedings in INPI can be applied to contest trademark request or cancel the registrations. Not all the Brazilian courts are enjoying similar power regarding the violation of trademark. Infringement or allegation for violation can be brought in State courts whereas termination proceedings are filed before federal courts. The claim of the right seekers can be categorized as injunction on the creation, orders for search and seizure, infringement orders on the products in case of violation and damages. Certain criminal provisions are also applied depending on the velocity and effectiveness of the case.

Unlike patent provision, the validity of the trademark is ten years from the date of registration. However, in this case, the protection can be extended up to unlimited period on request of the owner.

The industrial design ought to provide the main object with a typical ocular pattern, which is new and must be original. It is required that the design is not an imitation of others and there should be certain possibilities to make the design.   

The registration proceeding regarding the Industrial design is similar to the other intellectual properties. An application should be filed before INPI or the National Institute of Industrial Property. Brazil has adopted a non-examination system regarding industrial design submission. Submission will follow the formal requirements and the authority to check the authenticity is only given to the INPI. It has been mentioned under the provision that important examination should be made on the request of applicant (Engle, 2014). 

The right-holder has the right to file cases if the rights regarding the registered designs are being violated. Annulment of the provision regarding the registration is a punishable offence and administrative proceedings can be taken against the wrongdoer. The State courts have the power to deal with the violation proceedings and terminating process are dealt by the Federal courts. If the allegations made by the right-holder are proved, he can made certain prayers such as order of injunction and also claim for damage. If the acts of the wrongdoer attract certain criminal provision, fine and imprisonment can also be imposed.

In case of unregistered designs, rules on unfair competition will apply. In certain circumstances, provision of Copyright law will also apply. In case of unregistered designs, the right-holder may get certain remedies. The provision of Unfair Competition Law will be imposed in these cases. The rights of the holders are similar to the other rights promised by the intellectual property. However, no specific time is being mentioned in this case. The terms of the validity can be extended up to 70 years or more.

The rules are quite soft in Brazil regarding the Copyright protection. If the right-holder wants to register their name, they can do it by the help of other institutions. However, it is depending on the nature of the copyright object. In this case also, the right-holder can claim or infringement if violation regarding his creation can be made by others. He can make an application to destruct the violence copies and damages can also be given to the right-holder if the allegations are proved. Criminal provision can also be charged on the wrongdoer. The copyright licenses are not renewable in nature.

Except these above-mentioned rights, certain other rights are also come under the purview of intellectual property Act such as integrated circuits, business secrets and confidential documents.

The provision of Tort Law is applicable on the civil wrong and a person will be eligible to make a claim under the Tort Law if he sustained injury by other person. The provisions of Tort law in Brazil provide a fertile ground in comparative law. In case of Tort law, no criminal punishment can be imposed. The plaintiff will get compensation for the injury sustained by him by the wrongful acts of others. The penalty for tortuous acts involves restoring the injured party financially. It is the discretionary power of the court to order the wrongdoer to do or not to do any acts. Such provisions will be applied in the case of trespassing, defamation or slander.

The tortuous acts in Brazil can be divided into five parts:

• Intentional tort
• Negligence tort
• Strict liability tort
• Contractual tort
• And Commercial tort.

When a person commits a wrong with an objective to harm the interest of others, it will be regarded as the intentional tort. When a party fails to show the type of care, a reasonable person would adopt in the same position and a grievance causes from the action or inaction, it will be regarded as the negligent tort. There are five elements required to demonstrate a negligence case such as:

• Every defendant has a duty of logical care.
• Defendant does not act in rational way to express care.
• Plaintiff sustained certain monetary loss for the wrongful action of the defendant.
• The injury must cause concrete damages.
• And other causes regarding the inaction of the defendants.

Where an act is alike to negligence, tortuous liability will be imposed on the defendant and he will be liable for damage. Such act will come under the purview of strict liability.

The conception of Contractual liability can be detected if the following requirements are fulfilled:

• The delinquency should be willful and/or negligent in nature.
• There should be sufficient evidence regarding the damage caused.
• There should be connection between the wrongful act and the damage and the impact of the same can be taken into consideration.

Indemnification is not excluded from tortuous liability but the scope of the same is limited. It applies on the following:

• Losses that are arising directly and immediately from the contractual breach of contract;
• Profits that could have been reasonably earned if the contractual breach had not occurred.
• Moral damages are included in this case.

In case of contract, if any of the parties breach the terms of the contract and the outcome of the same affected the other party that will fall under the provision of the Moral damages. The nature of the damage should be direct and there is no place empty for the indirect or punitive damage.  

The IT contracts can also come under the purview of intellectual property rights. If any attempt has been made to exclude a party from his legal rights, the attempt should be void in nature. The attempt can be defined as software imperfections, defects or any violation regarding the rules of copyright.  

The last part of Brazilian Tort is Commercial torts. Brazilian courts are normally accepting restriction of accountability provisions in case of Commercial Contracts to be valid and enforceable, which is asserting as follows:

• The nature of the contracting parties is legal and both of them have limitation regarding their work.
• These limitations should be rational and should be treated as disclaimer.
• There should be a justification for the drawback and there is consideration or a decrease in costs in return for the limitation.
• Damages should not cause by a high level of carelessness or stubborn misconduct. A proof regarding the damage is enough.
• The limitation does not infringe Brazilian public policy rules.

There is no particular base of reasonable limitation. It is depending on the fact of every case. Court may order to trim down the financial reward in accordance with the provision of the Civil Code if any inconsistency found regarding the negligent act.

It is the discretionary power of the parties to deliver consent over the rate of penalty. The penalty provision includes the incomplete presentation or any breach regarding the terms of the contract. The provision of contractual tort can be implemented as follows:

• The parties should deliver their consent on the liquidated damages before the breach of contract takes place or at the time of signing the contract.
• Liquidated damages cannot be obtained in case of coercion or undue influences. However, if the parties are agreed expressly regarding the liquidation process, compensation can be provided.  
• The amount of the Liquidated damages should not overflow the contract price.
• The courts  are imposed with the power to condense the amount that are opted to pay to the non-breaching parties if there is an express provision made by the parties regarding the rate of the damage.

It is the duty of the parties to spell out the agreement on the liquidated damages and it should also to be mentioned that such clause does not make any restriction regarding the claim of extra indemnification for damages derived from a breach of the agreement or contract. If the damages exceeds, there would be certain possibility to convalesce supplementary indemnification obtained from the breaching party (Advagados, et al., 2017).

Conclusion:

It can, therefore be stated that the above-noted provisions are signify the nature and legal behavior of a business. It has been observed that the rules of Brazil regarding the foreign investment are quite wide and an attempt has been taken by the statute of Brazil to maintain an ethical notion regarding the performance of business. Principle of equality among the national and international employees has also been established. A brief discussion has been made regarding the Contract law, Employment law and Tort law. To sum up all the provisions, it can be said that the legal provisions including the tax liabilities of Brazil are quite noble. However, certain amendments are needed to eradicate the loopholes that are engraved under the corporate system of Brazil.

Reference

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