Publications

Category: Digital Law

The Brazilian Data Protection Authority (“ANPD”) published on Wednesday, May 24, the Statement CD / ANPD 1, according to which the processing of personal data of children and adolescents may be carried out based on any of the legal hypotheses provided for in articles 7 and 11 of the Brazilian General Data Protection Law (Federal Law n. 13,709/2018 or “LGPD”).

According to the statement, "the processing of personal data of children and adolescents may be carried out based on the legal hypotheses provided for in article 7 or in article 11 of the Brazilian General Data Protection Law (LGPD), provided that their best interest is observed and prevails, to be evaluated in the specific case, under the terms of article 14 of the Law."

Until this official understanding, there was a controversy over the interpretation of the necessity of the consent defined in article 14, paragraph 1. There were questions as to whether the consent was the only legal hypotheses to support the processing of children's data (under 12 years old) or whether other legal hypotheses of the law (Articles 7 and 11) would also apply to the processing of personal data of children.

The text of Art. 14, §1°, reads as follows: "The processing of personal data of children shall be carried out with the specific and highlighted consent given by at least one of the parents or the legal guardian."

Since the LGPD expressly mentions the need for consent for processing children's data, there was an uncertainty about the possibility of applying the other legal hypotheses. The questioning took place especially in situations in which the practical routine of the companies showed that the risks of processing children’s personal data were small and that it was made for the benefit of the child or adolescent. This is the case, for example, of the inclusion of dependent children for health insurance or for the participation in events at the parent’s company.

The text of the LGPD itself enhances the discussions by indicating an exception provided for in paragraph 3 of the same Article 14. In accordance with this paragraph, personal data of children may be collected without the referred consent of paragraph 1, if there is a need to contact the parents and legal guardians or for the protection of the child. This paragraph also establishes that the personal data of the child may only be collected to be used once and may not be stored or shared with third parties without consent.

The need for consent for these situations causes an undeniable burden for the company that, as data controller, has the duty to collect the consent diligently and to ensure the right of the data subjects to withdraw their consent and store the given consent for accountability purposes (Article 8, paragraph 2, LGPD).

The legislation evaluates the risks that the processing of personal data usually causes in order to define the obligations of companies. Accordingly, the higher the risk, the greater the obligations. Due to that, for example, the legislation distinguishes personal data and sensitive personal data and also defines that data breaches must be informed to the ANPD and to the data subjects since they can cause relevant risks and damages (Article 48, LGPD).

Other public debates also brought this possibility of applying other legal hypotheses to the processing of children’s data, such as Statement 684 of the decision of Civil Law of the Council of Federal Justice, approved in 2022. According to the statement: "Article 14 of Law No. 13,709/2018 (Brazilian General Data Protection Law - LGPD) does not exclude the application of other legal hypotheses, if applicable, taking into account the best interest of the child."

In this context, the new statement of the ANPD is equitable and pursuant to the reality. In addition, the statement reinforces the need for the data controller to be more diligent when evaluating and documenting the best interest of the child and adolescent in the processing activity and electing the appropriate legal hypotheses of articles 7 and 11 of the LGPD.

The statement is binding, especially considering Article 55-J, XX (LGPD), which establishes that the ANPD is responsible for determining the interpretation of the law. All companies must follow the statement’s rules from the date of its publication – May 24, 2023. The companies must, at a minimum:

• re-evaluate their processing activities and data mappings which include personal data of children and adolescents.

• re-evaluate the legal hypotheses for these activities as appropriate and stop using the consent when unnecessary.

• review their privacy policies and agreements, updating the specific sections dedicated to the consents of those data subjects, when applicable.

• evaluate and document the presence of the best interest of children and adolescents for each activity and be prepared to account for the legal hypotheses chosen for data subjects and authorities; and

• maintain the consents collected between the effective date of the law and May 23, 2023, to preserve their liability until the publication of a new statement.

Category: Environmental

The European Union (EU) is not shy in its climate and environmental goals. In 2019, with the approval of the European Green Deal, ambitious targets were set to guide an effective transition to a low-carbon economy, with the group expected to reach carbon neutrality by 2050.

Until recently, however, these targets were unclear on the relationship of EU countries with the rest of the world, especially with countries responsible for exporting products to Europe.

Developments in recent months have dispelled any mystery or doubt on the matter. Countries that export to the EU will have to comply with rigorous sustainability rules to continue accessing the European market. Among these rules, the ones with the greatest potential effect for Brazilian exporters are the related to combating deforestation and to customs taxation of carbon.

Carbon taxation will be implemented  by the Carbon Border Adjustment Mechanism (CBAM), established by Regulation 2023/956 of the European Parliament. Companies exporting products with large carbon footprints will have to purchase CBAM certificates to cover the emissions embodied in their products. As such, the mechanism’s  operation will be similar and complementary to the European Emission Trading System  (EU ETS).

Although the CBAM will only come into full force in 2026, in October this year, the mechanism will be applied on an initial basis, for select exports to Europe, notably: steel, iron, aluminum, electricity, fertilizers and cement.

With this, Brazilian exporters will have to consider the CBAM customs tariff as a new cost incorporated into exports.

The regulation aimed at fighting deforestation, recently approved by the European Council,^[1] aims to bar trade and consumption in the EU of products responsible for generating deforestation in their countries of origin.

The regulation will affect exporters of the following raw materials: palm oil, cattle, soy, coffee, cocoa, wood, and rubber, as well as any product that is fed (mainly considered the raising of animals with soy-based feed) or derived from these raw materials, such as beef, leather, chocolate, wooden furniture and printed paper products, among others.

The direct implication is that companies exporting the abovementioned products will need to create a due diligence process for their supply chain in order to ensure that the final product does not originate from deforested land, as well as demonstrate compliance with existing human rights standards.

The expectation is that the norm will come into effect as early as next year.

Although it is not possible, at this moment, to predict the impacts of the European Green Deal on foreign trade, it is perceived that the European Union more and more asserts itself as a powerful agent in defense of sustainability, imposing goals not only for itself but also for other nations with whom the group relates.

It is clear that compliance with the standards of the European Green Deal represents a challenge for the national market. The new regulations, however, also create opportunities for Brazilian entrepreneurs to effectively engage in the sustainability agenda and, with adequate dedication and investment, emerge as important agents for sustainability in international trade.

^[1] For more information, we suggest visiting  the European Commission's website page.

Category: Capital markets

On May 11, the Brazilian Securities and Exchange Commission (CVM) issued CVM Resolution 182, which amends current regulation on issuing Brazilian Depositary Receipts (BDR). BDRs comprise securities issued in Brazil, backed by underlying assets issued abroad by a foreign or Brazilian issuer of either shares,  deposit certificates (CDA), or debt instruments,.

On the same date, CVM issued CVM Resolution 183, which amended CVM resolutions 80 and 160. Such resolutions provide the basis for the regulation of public offerings  and issuer registration before the CVM.

CVM resolutions 182 and 183 enter into force on June 1st and primarily alter the rules regarding categorization of foreign issuers before the CVM and the requirements for obtaining registration for foreign issuers, as a mandatory step for the issuance of Level II and III BDRs.

In order to issue BDRs, foreign-based issuers must meet the following standards:

• exist as a legal entity;
• shareholder liability limited to the issuing price of subscribed or acquired shares;
• issued securities traded on regulated exchange;
• subjection to oversight of regulating body;
• delegated management, subject to a collegiate board or similar body; and
• shareholder rights regarding voting and dividends, with certain allowed limitations and differentiations given types and classes of shares.

Under previous regulation, in order to obtain registration as a foreign issuer, in addition to having foreign headquarters, issuers were subject to having less than 50% of assets and revenues in Brazil.

Under current regulation, solely the requirement for foreign headquarters was kept, and the CVM has provided three alternatives under which foreign issuers may base their request for registration in Brazil as an issuer of securities:

• foreign issuers’ shares must trade on a stock exchange headquartered abroad, in a country that has either entered into a cooperation agreement with the CVM, or is a signatory to the multilateral memorandum of the International Organization of Securities Commissions (IOSCO). In addition, the stock exchange must be classified as a recognized market; or

• prove status asa foreign issuer for more than 18 months and, in the previous 18 months, prove uninterrupted maintenance of at least 10% of shares in circulation and an average daily trading volume equal to or greater than R$ 10 million; or

• headquarters located in a country whose local supervising authority has signed a specific agreement with the CVM encompassing bilateral cooperation, exchange of information and effectiveness of inspection and supervision measures, including those referring to issuers of securities based in such jurisdiction.

Further regulatory alterations comprise additional disclosure requirements for investment entities – as defined by accounting standards – when such entities issue Level I sponsored BDRs.

With respect to BDR offerings, changes promoted in CVM Resolution 160 refer to:

• registration rites of BDR offerings; and
• removal of restrictions on the secondary asset trading of subsequent offerings of Level I and II sponsored BDRs backed by shares and initial offerings of sponsored BDRs backed by debt instruments, notwithstanding specific rules set forth by CVM Resolution 182.

For simplification purposes, we have systemized the available regimes for offerings involving BDRs. Regarding the qualification of the accessed investors, the following offerings must also observe the same restrictions imposed on the initial public offering of the underlying securities of the BDRs:

Alterations promoted by CVM Resolutions 182 and 183 are relevant towards the expansion of possibilities and access of foreign issuers to BDRs, without compromising investor protection.

Category: Labor and employment

After a new extension of the production date for labor lawsuit events, the new version of the eSocial Guidance Manual has set July 1st of this year as the new deadline for the information related to these events.

All final and unappealable decisions handed down in labor lawsuits and decisions approving settlement calculations from July 1, 2023 onwards, as well as in-court settlements and agreements entered into by the Pre-Conciliation Commission (CCP) or the Interunion Conciliation Center (Ninter) after this date must be reported through eSocial event S-2500.

In parallel, the Federal Revenue Service promulgated Normative Instruction 2,139/23, published on March 31st of this year, in which it defined that delivery of the DCFTWeb will be mandatory as of July of 2023 for social security and social contributions arising from conviction or ratification decisions issued by the Labor Courts.

Thus, although the date for the events to go into production has not yet been disclosed, the information regarding social security and social contributions arising from decisions or settlements entered into in the labor sphere must be sent as of July of 2023.

Category: Labor and employment

Law 14,193/21, which regulates the Soccer Corporation (SAF) - also known as the SAF Law - was enacted in October of 2021. Since then, some clubs, such as Botafogo, Cruzeiro, Vasco da Gama, América-MG, and, more recently, Clube Atlético Mineiro, have joined this institute.

But, after all, what is SAF?

This is the migration of soccer clubs from a non-profit civil association to specific corporations, governed according to the characteristics and principles of the SAF Law, in the club-company model.

The corporate structure of these companies gives clubs the means to restructure their debts, professionalize their management, and raise new sources of revenue, including by issuing financial instruments or even bringing in future investors (shareholders).

SAF also has a differentiated tax system, structured to accommodate the operational and administrative particularities that involve the sports business.

Ways to form an SAF

Article 2 of the SAF Law provides that a Soccer Corporation may be formed:

• by transformation - in which the nature of the club is changed from a non-profit association to an SAF. In this case, all members become shareholders in a company;
• by spin-off - which is a transaction in which a legal entity - in this case, the club - separates part of its assets and transfers them to one or more companies, either incorporated or already existing. In this case, at least a part of the members also become a shareholder of the company; and
• at the initiative of an individual or legal entity or an investment fund - in this case, a new company is formed, which will operate in the soccer business, and there is not necessarily a relationship between this new company (the SAF) and the soccer club from which it originates.

In addition to these three forms, the law establishes, separately in its article 3, that an SAF may be formed by means of a drop down. This form of organization, the most used, is also supported by article 27, paragraph 2, of Law 9,615/98 (Pelé Law).

The drop down has been the form of organization most used by clubs. In this case, the club will be the shareholder of an SAF and will show the subscribed shares on its balance sheet, which will be posted against the write-off, that is, the contribution of the equity transferred to the SAF. There is, in principle, no loss, reduction, or increase in equity. There is only an exchange of positions to reflect the substitution of various assets for shares.

The most appropriate way to form an SAF will depend, fundamentally, on a review of the current structure of each club and the structure that is desired.

Is authorization of the players necessary?

In article 2, the SAF Law regulates the rules for the types of SAF formation. It provides - in particular in paragraph 1 - that the SAF will succeed the club in the following cases:

• in all relations with governing bodies (Fifa, federations, etc.) and with soccer professionals; and
• in the sports rights and status that the club has at the time the SAF is formed, provided that the formation takes place in the form of a transformation (subsection I) or a spin-off (subsection II).

The SAF Law, on this second point, may give rise to a small regulatory inconsistency. In a literal interpretation, if not formed by transformation or spin-off of the club (but formed by asset drop down, for example), an SAF would have to "start over" in soccer, losing the club's original sporting status. In addition, to be able to perform, it would need to seek the express authorization of the players and other professionals of the club, as consideration for their respective employment contracts.

In the context of a transformation, however, nothing is changed regarding the contractual situation of players and other sports professionals. After all, a simple change in the status of the legal entity with which the respective professional maintains an employment relationship is not a sufficient element to legitimize any opposition - if, of course, the other applicable contractual conditions remain unchanged. The contractual relationship remains strictly the same.

The SAF Law, therefore, in paragraph 1 of article 2, only follows the essential corporate principles of Brazilian private law. In this manner, all contracts signed with the players will be maintained when the club is transformed into an SAF.

In the case of incorporation through spin-off of the club (followed by the formation of an SAF from the spun-off assets), there is no need for authorization from the players; transfer of the employment contracts to the SAF is mandatory. This is due to the corporate logic of the spin-off, besides, of course, the express provision in paragraph 1 of article 2 of the SAF Law.

When setting up an SAF by drop down, there will be a new registration of the players with the CBF and a new CNPJ of the employer. Therefore, a new contract will be made. Consequently, the players' signatures will be required.

This, however, should not be seen as requiring players' authorization for the assignment of contracts, but merely as a legal and documentary formality. It would even be possible to find abuse of rights by the professionals who oppose, without just and concrete reasons, assignment of their contracts to the SAFs of the clubs to which they are linked.

The same logic of incorporation by spin-off should therefore be followed without difficulty in the case of incorporation of an SAF by drop down, despite the lack of legal clarity. There is no reason to impose different requirements for the transfer of employment contracts to SAFs based solely on the legal form chosen to organize them.

What is the difference between a club forming its SAF from the spin-off of its soccer assets and another club choosing to form an SAF via contribution of assets - including player contracts?

Is there anything to justify not requiring the players' consent in the first situation, but requiring it in the second?

Clarifying a few facts can help answer these questions.

Initially, it is important to understand how the term "spin-off" should be understood in the legal text analyzed. In our view, the SAF Law employed the broad (not the technical corporate) sense of the word, in order to encompass both the corporate split itself and the separation of assets - to subsequently assign the assets to the SAF (drop down).

It makes no sense to create any kind of sporting distinction between SAFs and clubs just because of the legal format chosen for their organization, especially when all the club's creditor rights are preserved - as occurs in drop down transactions - and when the other options for organization may lead to incorrect or even undesired results - such as making, in the case of transformation or spin-off, the club members (and not the club itself) members of the SAF.

It can, therefore, be interpreted that the legislator, when expressly establishing the forms of organization of an SAF in article 2 and listing the spin-off in subsection II, also considered drop downs. If this understanding prevails, it is easy to conclude that there would be no need for the players' authorization to transfer their contracts if the SAF is set up by means of a drop down.

Guaranteeing this formal right to players could prevent clubs from formatting the most appropriate legal structure to organize their SAFs. In addition, it would make possible actions aimed at taking undue advantage of the club during this process.

In the original wording of the SAF Law (when it was still a draft bill), the structure provided for in subsection II of article 2 was precisely a drop down. Only then was the drop down moved to the article 3, which opened space for inclusion of spin-offs in subsection II (which, it is worth emphasizing, was not contemplated in the original bill).

After this change in the text, however, the wording was not updated in paragraph 1 of article 2. Thus, the express reference to article 3 is no longer made.

In the original wording of the law, therefore, in its paragraph 1, the same consequences now clearly placed on transformation and spin-off were also reserved for drop downs.

It is difficult to know the reasons why the text of the SAF Law failed to make express reference to drop downs when it imposed automatic transfer of club employment contracts to SAFs. It seems clear, however, that the legislator's idea has always been to equate the concepts for this specific purpose.

Many of those directly involved with the legislative process of the SAF Law recognize that the provisions for spin-offs (paragraphs 1 and 2 of article 2) should also be applied, even if by analogy, to drop downs, there being no technical or legal reasons to do otherwise,^[1] a position with which we agree.

Thus far, we have no evidence of cases of players and sports professionals who refused to assign their contracts to SAFs.

The topic is current, and it is important that an analysis be done of each transaction. Despite the general position advocated here, specific situations may call for a different approach, especially in simulation cases where establishment of the SAF serves illegitimately to transfer players between sports institutions.

By observing the best practices and complying with the criteria and requirements of the legislation, with personalized evaluation of the impacts, it is possible to ensure greater legal security for all the parties involved.

Machado Meyer Advogados will continue to monitor the evolution of the matter and its potential developments. Keep up with our publications by subscribing to our newsletter.

^[1] See MONTEIRO DE CASTRO, Rodrigo R. (Coord.). Comentários à Lei da Sociedade Anônima do Futebol [“Comments on the Soccer Corporations Law”]. Law No. 14,193/2021. São Paulo: Quartier Latin, 2021. Pg. 96: "Paragraph 2 is composed of 7 subsections that regulate situations related to spin-offs. Although silent, all of them should be extended, by analogy, to the modality consisting of the organization, by the club, of the SAF (drop down). The application is necessary because this manner of organization is inserted, expressly, in the system created by Law 14,193/21 and cannot be considered as a foreign element divorced from its content. The integration occurs because of the structural approximation between the organization of the SAF and the spin-off - in both cases there will be a transfer of the club's assets to another person - while this will not occur in transformation or in organization at the initiative of an individual or legal entity or investment fund."

Category: Labor and employment

In the judgment of a motion for clarification in Extraordinary Appeal 999.435, which occurred in April, the STF established that the requirement of prior labor union intervention applies only to layoffs that occur after publication of the minutes of the judgment on the merits of the case - June 14, 2022.

Layoffs or collective dismissals occurs when a company dismisses a considerable number of employees at the same time or in a short period of time, with the same motivation - which usually derives from financial necessity, unrelated to the performance of the employees.

Up to 2017, layoffs were not formally regulated in legislation. In 2016, an extraordinary appeal was filed to debate the mandatory collective bargaining requirement for layoffs of workers imposed by the Superior Labor Court (TST).

The case law has always faced heated debates on the subject. On the one hand, there were those who contended that the legal system does not provide any support for differentiated treatment between individual and collective dismissals; on the other hand, there were those who contended for the need for prior authorization from the labor union of employees in the category for the layoffs or even execution of a collective bargaining agreement to effect such a dismissal.

Extraordinary Appeal 999.435 was filed in a case regarding the dismissal of more than 4,000 employees of Empresa Brasileira de Aeronáutica S.A. (Embraer) which occurred in 2009. The TST decision that established, for future cases, the need for prior collective bargaining for layoffs was questioned.

According to the appellant companies, by establishing a condition for layoffs, the TST assigned to the Labor Courts the obligation to rule on a matter that the Federal Constitution restricted to supplementary law. Among the arguments of the appeal is the allegation that the decision would threaten the survival of companies in crisis, with undue interference in management power and affront to the principle of free enterprise.

As of 2017, with the enactment of the labor reform, the Consolidated Labor Laws (CLT) now states that "individual, collective, or group dismissals are equivalent for all purposes, without the need for prior authorization from a labor union or execution of a collective bargaining agreement." In other words, the legislation now expressly states that there is no need for prior authorization from the labor union for layoffs.

In view of this provision, the Federal Supreme Court (STF) decided that the prior authorization of the labor union entity would not be necessary, but clarified that prior negotiation would be required. According to the Court, this requirement would open up the possibility of "sitting at the negotiating table." The company could state its reasons for the layoff and, on the other hand, the labor union could speak on behalf of the workers. Prior negotiation is not to be confused, however, with prior authorization for dismissal, but is only a measure to stimulate dialogue.

Justice Dias Toffoli clarified, in this same sense, that it would not be a matter of a request for authorization from the labor union for the layoff, but of involving it in a collective process for the maintenance of jobs. He also discussed that the participation of labor unions in situations of possible layoffs could help to find alternative solutions that would contribute to the recovery and growth of the economy, besides valuing human labor.

The STF decided, by majority opinion, that the prior participation of labor unions in cases of layoffs is essential, not to be confused with the need for authorization. It established the following theory of general repercussion: "Prior labor union intervention is an essential procedural requirement for mass dismissal or layoffs of workers that cannot be confused with prior authorization by the labor union entity or execution of a collective bargaining agreement.

When ruling last April 25 on the motions for clarification filed by the parties, the STF softened the effects of the above decision.