Publications

Category: Competition

The Superintendence General of the  Administrative Council for Economic Defense (SG/Cade) recapitulated, in a recent decision concerning a merger control filing, the discussion on which companies should be considered as part of the economic group involved in a transaction, and on the moment the group’s revenues should be accounted for, which are fundamental for the assessment of the reportability of the transaction to CADE.

In the referred case, the transaction would only be subject to mandatory filing with Cade if the revenue of a company that, at the time of  that transaction, had already been the subject of a sale and purchase transaction duly cleared by CADE but with closing still pending on the fulfillment of certain conditions precedent, was to be considered as part of the seller’s economic group.

SG/Cade has expressed in the past that the revenue assessment should consider the composition of the economic group at the moment of the transaction – which the agency has already established as the date of the filing with Cade, which can be carried out at any time before closing – and the revenues of the companies of each economic group in the year before that of the moment of the operation, under the terms of Law 12.529/2011 (the Competition Law).

In  the precedents addressing this subject, SG/Cade held that acquisitions and/or divestitures of companies, even if carried out during  the year the transaction was submitted to Cade, affect the composition of the economic group, expanding or reducing the set of companies whose revenues in the previous year should be considered for the purpose of calculating the revenue of the economic group. It also concluded that the consummation of the previous transaction and the effective transfer of the ownership of the company are not required in order to consider the company as part – or not – of the economic group.

According to SG/Cade’s understanding, the acquired company should be considered as part of the buyer’s economic group and excluded from the seller’s, even if the consummation of the transaction is still pending suspensive conditions (since those are viewed by Cade as mere conditions for the effectiveness of the transaction) and the transfer of ownership has not yet occurred. This would apply both for transactions submitted to Cade (even if Cade’s approval is pending) and for transactions not submitted to the agency.

Cade's justification for this approach was the need to assess the actual impacts of the transaction and to evaluate its risks considering the reality of the market. Assessing a market structure that ignores changes in the companies, which will no longer belong to (or that will soon become part of) a given economic group in the near future, could lead to inaccurate conclusions on the competition concerns arising from the transaction.

A close interaction between the companies’ internal M&A teams and their external legal advisors is, therefore, very important in the assessment of the need to submit a transaction to Cade, ensuring that the economic group definition is properly following Cade’s views. This would help identifying previous transactions that are relevant for the assessment of whether the revenue thresholds are met (which may happen at any time between the signing and closing).

Category: Banking, insurance and finance

The Central Bank of Brazil launched, on March 6 of this year, the pilot project of Real Digital, a sovereign currency, exclusively digital, and issued by the Central Bank of Brazil itself. Digital currencies issued by central banks have usually been called by the name of Central Bank Digital Currencies (CBDC).

One of the objectives of the pilot project, called Project RD, is to test the proposed technologies for the issuance and circulation of the digital currency and to evaluate the impacts and benefits of the creation of the Brazilian CBDC within a controlled environment. The Project RD aims more broadly to impact the end user of the financial system, although the Real Digital is an interbank wholesale product, comparable to bank reserves or settlement accounts, and will not, at least initially, circulate to the retail public.

The RD Project will adopt a model according to which the Central Bank of Brazil will issue the Real Digital, which will basically fulfill, at a preliminary stage, the function of settlement mechanism for digital assets, and these assets will be accessible to retail, issued by financial and payment institutions. Such digital assets will correspond to tokenized versions of bank deposits and balances in payment accounts, analogous to stablecoins, but inserted into a regulatory framework.

This model assumes that it is important to maintain financial intermediation and the leverage and credit generation capacity of the banking system.

A platform based on Distributed Ledger Technology (DLT) will be used in the pilot project that will simulate transactions of issuance, trading, transfer and redemption of predetermined assets. Initially, such assets will be central bank currencies, bank deposits, electronic currencies and federal government bonds. However, there may be an expansion of the assets involved in the test in the future, with preference for financial assets and securities.

The infrastructure will not allow overdraft balances, and the project will not be taken to the production environment, being restricted to simulated transactions. Participation in the project will be limited to a certain number of financial institutions and payment institutions. Other limitations may be imposed to allow for timely implementation of the project.

The RD Project involves the search for solutions to preserve information security and privacy, in order to ensure compliance with the legal requirements applicable to the Brazilian National Financial System.

It is discussed that, for the wide-ranging implementation of Real Digital, it would be necessary to amend the legislation to expand the competence of the Central Bank of Brazil for the issuance of currency in exclusively digital format. Currently, the competence of the Central Bank of Brazil for this purpose is restricted to the issuance of only certain currency formats, under the conditions and limits authorized by the Brazilian National Monetary Council, as provided for in article 10 of Law 4,595/64, accepted by the Federal Constitution as a complementary law.

It is being analyzed in the National Congress the Complementary Law Project 9/22, which proposes to regulate the issuance of the national currency in digital format. This bill includes a ban on the Central Bank of Brazil directly offering credit, banking, payment or financial investment products and services to the consumer, in order to safeguard financial intermediation.

Category: Corporate

The representations and warranties provisions in corporate agreements originate from U.S. law and arise from the duty to disclose, whereby the parties to a deal, in particular the seller, must clearly inform their counterparty on the conditions of the asset or business subject to the transaction.

In Brazilian law this same duty to inform is a consequence of the principle of objective good faith between contracting parties, which is intended to guide contractual relations.

The representations and warranties clauses express the circumstances and the context formed by the factual and legal reality in which the transaction is inserted. Through the representations and warranties, facts, information and/or documents relevant to the deal at hand are revealed. The veracity of the content is also attested to.

These clauses enable the parties to the contract to balance the asymmetry of information between them, allowing a better assessment of the risks and pricing of the asset in a given transaction.

Regarding the origin of the institute of representations and warranties, there is also a difference between the specific concepts of "representations" and "warranties" within the common-law legal system.

Representations are statements that refer to the circumstances that occurred in the past or at the time of the instrumentalization of the respective contract, functioning as guiding premises for the formation of the business.

On the other hand, warranties serve as assertions provided from one party to the other on the existence of facts in relation to which there is no discussion with respect to their subjectivity. Warranties have the purpose, therefore, to remove from the receiving party the burden of determining the veracity of the fact for itself, being the equivalent to a promise to indemnify the other party in case the guaranteed fact proves itself false.

In Brazil, when incorporating the concepts of representations and warranties, no rigorous differentiation was made. In practice, when drafting corporate transaction agreements, it is common for there to be no distinction between what is a representation and what is a warranty, including for the purposes of the obligation to indemnify resulting from any violations to the provisions of these clauses.

An important aspect to consider when drafting representation and warranty clauses is the inclusion of qualifiers. These are criteria added to the text of the representations and warranties that allow for the limitation of liability in relation to a given statement. Among these criteria, the following qualifiers may be highlighted:

• knowledge, to remove responsibility for facts that are not known to the declaring party; and
• materiality, the purpose of which is to limit the content of the information provided to issues that may materially affect the business or represent a material deviation from what has been represented by the party.

Considering that these concepts are naturally subjective, it is interesting to remove as much as possible the subjectivity from the qualifiers through the creation of objective parameters aimed at defining the criteria of materiality and knowledge within the scope of the contract.

It is also important to note how the representations and warranties clauses relate to the other clauses contained in agreements for corporate deals, among which the conditions precedent and indemnification clauses stand out.

The conditions precedent clause establishes the acts and elements that shall be satisfied from the contract’s signature date so that a certain party is obliged to complete the transaction.

It is common to find among the conditions precedent the maintenance of the validity of the representations and warranties presented on the agreement’s execution date, at the time when the closing of the deal occurs. It is also usual that materiality criteria are adopted in this ratification provision of the representations and warranties in order to enable the acceptance of such provision by the selling party.

With regard to the indemnification clause, if after the closing of the transaction the facts and information represented by the parties are not verified in practice or if there is inaccuracy with respect to the data provided, the party responsible for the breach of its representations and warranties shall indemnify the counterparty for any losses suffered due to these breaches.

The option for the indemnification model has a direct impact on the care that the parties should take when drafting the representations and warranties clauses.

Indemnification mechanics that provide for indemnification only for non-compliance with contractual obligations and breach of representations and warranties will require greater attention from the buyer in respect to the amplitude and detail of the representations and warranties.

On the other hand, indemnification mechanics based on the "my watch, your watch" model allow the buyer a lesser degree of concern regarding the seller’s representations and warranties, considering such mechanics provide the buyer with protection in relation to the entire past of the asset in question.

Despite originating in foreign law, the representations and warranties clauses play a vital role in the process of drafting contracts for corporate transactions in Brazil and find support in the Brazilian legal system.

It is therefore critical to identify, in each transaction, the relevant representations and warranties to be provided by the counterparty, making adaptations as appropriate, to provide additional protection against any contingencies that may arise following the completion of the deal.

Category: Digital Law

Last February 27, the Brazilian National Data Protection Authority (ANPD) issued a Resolution providing for administrative sanctions in cases of personal data protection violations. The fines - which had not yet been applied in Brazil - will be all over the news from now on.

According to the Brazilian General Data Protection Regulation Act (LGPD), fines are limited to a maximum of 2% of the revenue generate by the company or its corporate group in the previous fiscal year, excluding taxes and capped at 50 million BRL per violation. The act provides for other types of administrative sanctions, which can range from a warning to a partial or total ban on exercising activities related to data processing, depending on the classification of the infraction (light, medium, serious).

Reputational damage is another sanction – an unwritten one – that causes great concern to companies. No organization would like to have its name associated with an infraction which could undermine consumer confidence in the brand's products and services. In the information society, prevention has never been so important.

In this sense, it pays to have developed - and maintained - a proper personal data governance plan in an organization. It should be noted that ANPD inspections may require copies of relevant documents to evaluate personal data processing activities. The Authority may also access facilities, equipment, applications, systems, tools, technological resources, data and information of a technical, operational and other relevant nature, regardless of whether these are under possession of the company or of a third party. Inspections will clarify whether the organization's compliance program is generic and limited in scope, or whether it was tailored to the business and comprehensive, as is recommended.

Furthermore, the ANPD regulation confers special importance to training on personal data protection and cybersecurity. This initiative must involve all employees, suppliers, partners, and other stakeholders. Moreover, it is known that real achievements are reached through a change in culture; the mere advent of a law or regulation does not, by itself, change people's behavior and the organization's operational processes. That is why the emphasis on training, courses, workshops, etc. is so necessary. Not surprisingly, the ANPD expressly suggests "to the regulated agents to carry out training and courses". In fact, non-compliance with this guideline is considered an aggravating circumstance for the purposes of calculating the administrative sanction.

With an inspection at the gates, it is important to clarify that this procedure may occur at the initiative of the ANPD itself, as a result of either periodic inspection programs, or in a coordinated manner with other public agencies and entities, such as CVM, BACEN, CADE, SENACON (respectively, equivalents of the SEC, Central Bank, Antitrust authority and the Bureau of Consumer Protection) among others, or in cooperation with the personal data protection authorities of other countries.

The Sentencing Regulation informs that in order to define the sanction, authorities will take into consideration whether or not the offender displayed the following:

• good faith;
• cooperation with authorities;
• reiterated and proven adoption of internal mechanisms and procedures capable of minimizing the damage, aimed at the safe and adequate treatment of data, in accordance with the LGPD;
• adoption of a policy of governance and best practices;
• prompt adoption of corrective measures.

As can be seen from the criteria mentioned above, the application of a fine in a procedure is beset by considerations of the offender's behavior, prevention and reaction. In other words, it hinges on:

• behaving properly (good faith and cooperation)
• preventing violations through consistent, planned work (adoption mechanisms to reduce damages) and the elaboration of rules and internal processes that assure comprehensive compliance with personal data protection law. These are to be established and implemented by data processing agents through the adoption of best practices and governance rules, as per LGPD, Art. 50, header and § 1º or through a privacy governance program, as per LGPD, Art. 50, header and § 2º (adoption of best practices and governance policy)
• reacting, by responding promptly and assertively to incidents and irregularities found (prompt adoption of corrective measures)

As for the calculation of the fines, the Sentencing Regulation presents a specific methodology for applying the sanction. The calculation is based on a base rate, which will take into account the percentage of the violator's revenues, ranging from 0.08% to 0.15%, when the violation is light; from 0.13% to 0.5% of revenues when the violation is medium; and from 0.45% to 1.50% of revenues when the violation is serious. In addition, for the calculation of the base rate, the level of damage caused by the infraction will also be taken into account.

Levels of damage are divided into four categories.

The first category, of zero value, corresponds to violations that cause no damage or only cause damage with insignificant impacts, which derive from predictable or ordinary situations and do not justify the need for compensation.

The second category, of value level 1, corresponds to violations causing injury or offense to the rights or interests of a small number of holders, with limited material or moral impact, which can be reversed or compensated relatively easily.

The seriousness rises to a third level, of value level 2, which corresponds to violation affecting diffuse, collective or individual rights or interests that, given the circumstances of the case, generate impacts on the holders of a material or moral nature that cannot be easily reversed or compensated.

Finally, the degree of the most serious damage is reached, of value level 3, corresponding to an offense to diffuse, collective or individual rights or interests has an irreversible or difficult to reverse, causing, among the impacts of material or moral order, aspects of discrimination, violation to physical integrity, to the right to image and reputation, financial fraud or misuse of identity.

The degree of damage is a factor in the mathematical operation contained in the Regulation, therefore its definition and respective level will be very relevant for the values resulting from this equation, which will also have the infraction's classification, and its respective percentage of the infractor's revenues as a portion to be considered.

After the definition of the base rate, in a second stage of sentencing, the incident taxes are considered, subtracting them from revenue, which will lead to the so-called base amount of the fine. Aggravating and mitigating circumstances will then be considered (third stage), to reach the final sanction to be imposed.

In cases where there is an advantage gained, and this can be reckoned, there is a fourth stage in the sentencing, in which authorities verify whether the resulting fine is at least double the amount of the advantage gained. If the amount of the fine is lower than this threshold, an adjustment will be made so that the final amount of the fine is twice the amount of the advantage obtained from the violation.

The following are considered aggravating circumstances: recidivism and failure to comply with an orientation measure or a corrective measure not complied with during the inspection process or the preparatory procedure that preceded the administrative sanctioning process.

In cases of recidivism, the base amount fined will be increased by 5% in cases of general recidivism, and 10% in cases of specific recidivism, up to the limit of 20% to 40%, respectively. The commission of a violation by the same violator is considered generic, regardless of the legal or regulatory provision, and the repetition of the violation under the same legal or regulatory provision is considered specific. In both cases, for the purpose of applying recidivism, the period of 5 years between the date of becoming res judicata of the previous administrative sanctioning process and the date of the new infraction is counted.

Non-compliance with guidelines and preventive measures during inspection or preparatory proceedings that preceded the administrative sanctioning process will be considered as an aggravating factor. There is an increase of 20% for each measure not complied with, up to the limit of 80%. ANPD orientation measures include:

(i.) the preparation and availability of best practices guides and document templates to be used by treatment agents,

(ii.) the suggestion to regulated agents of training and courses,

(iii.) the preparation and availability of compliance self-assessment and risk assessment tools to be used by treatment agents,

(iv.) the recognition and disclosure of the rules of best practices and governance,

(v.) the recommendation:

a) of the use of technical standards that facilitate the control by the holders of their personal data;

b) of the implementation of the Privacy Governance Program; and,

c) the observance of codes of conduct and best practices established by certification bodies or other responsible entities.

In cases of non-compliance with corrective measures - that is, those determined by the ANPD with the purpose of correcting the violation and bringing the violator back into full compliance with the LGPD and the regulations issued by the ANPD - the increase on the amount of the base fine will be of 30% for each measure, up to the limit of 90%.

If there is more than one aggravating circumstance in a given case, e.g. recidivism of the violator and also non-compliance with the orientation measure, the percentages relating to each portion must be added.

As for the mitigating factors, the base amount fined will be reduced by 75% to 30% in cases where the infringement is ceased. The reduction will be of 75% when the infringement is ceased before the preparatory proceedings are initiated by the ANPD; of 50% when it occurs after the preparatory proceedings are initiated and until the sanctioning administrative proceeding is initiated; and of 30% if it occurs after the sanctioning administrative proceeding is initiated and until the first instance decision is rendered in the sanctioning administrative proceeding. It is important to note that in the cases mentioned above, the cessation of the violation resulting from the mere compliance with an administrative or judicial determination will not be considered a mitigating factor.

It is also considered as mitigating factor, with a 20% reduction, for the offender to have implemented a best practices and governance policy, or to have repeatedly and demonstrably adopted internal mechanisms and procedures capable of minimizing the damages to the data subjects, aimed at the safe and adequate treatment of data. However, in order to be considered a mitigating factor, this must have occurred before the first instance ruling is rendered in the administrative sanctioning proceeding.

When the offender proves the implementation of measures capable of reverting or mitigating the effects of the violation on the affected holders of personal data, there will be a 20% reduction, provided that this has occurred prior to the initiation of preparatory proceedings or administrative proceedings for sanctions by the ANPD. There will be  a 10% reduction when such implementation has occurred after the opening of the preparatory proceeding and before the opening of the sanctioning administrative proceeding. The adoption of measures by the offender as a result of the mere compliance with an administrative or judicial determination will not be considered as a mitigating factor.

If the ANPD finds the offender to have cooperated and acted in good faith, this will also be considered a mitigating factor, leading to a fine reduction of 5%. In case there is more than one mitigating factor, following the same rationale of the aggravating circumstances, the percentages should be added up in benefit of the offender.

The payment of the fine, once imposed by the ANPD, after due process, must be paid within 20 business days from the official acknowledgement of the ruling. An exception is made for small treatment agents, who will have a term twice as long for payment. In cases of arrears, a default penalty interest and a late payment fee of 0.33% will apply.

The ANPD ruling may be appealed; however, if an offender expressly waives this right, it will be entitled to a 25% reduction in the amount of the fine imposed. In turn, if an appeal is filed and granted, the amount of the fine paid will be refunded, adjusted by the Brazilian base interest rate (Selic rate).

In conclusion, it is vital is it to stay alert and apply knowledge derived from the rules of inspection and sentencing. This can be achieved by working with specialists in data protection, privacy and cybersecurity, either as your internal team and/or as third parties, in order to plan the governance of your company in a proper and up-to-date fashion.

Category: Agribusiness

Published in early January by the Ministry of Agriculture and Livestock (Mapa), the Brazilian Institute of the Environment and Renewable Natural Resources (Ibama) and the National Health Surveillance Agency (Anvisa), Joint Ordinance 737 submits to public consultation a proposal to regulate the procedures to be adopted for the distribution of pending proceedings for registration of equivalent technical products, premixes and formulated products of pesticides and related products.

As a mechanism for social participation, the objective of the public consultation is to receive suggestions and proposals to give greater effectiveness to the registration proceedings of products that are pending consideration by the agencies and have been initiated by October 8, 2021. The deadline for the public consultation is 60 days and ends in early March 2023.

The proposal presented is another attempt to speed up the analysis of proceedings of this nature that await procedural protocol in the registration bodies. According to industry data, the analysis of applications for pesticide registration can take up to ten years, if we consider the applications for new products and active ingredients not yet approved.

Under the proposal, the analysis of registration applications should consider the same active ingredients – which must necessarily be identical – of a product for each group of 20 proceedings, giving greater speed to the registration process for this set of products. The proposal indicates as the main process of the group the one who is in the first position of the analysis queue.

Another measure provided for by the ordinance is to make it possible for the application for registration of a new product to benefit from the most advanced stage of a product reanalysis proceeding already registered, provided that the products have identical active ingredients. In such cases, the new application proceeding will follow its own procedure, and the applicant will need to present the documents provided for in the annexes of the joint ordinance: the declaration of assignment of studies and the comparative table.

By means of the declaration of assignment, the legal representatives of the company holding a certain product already registered in the process of reanalysis and of the one whose application for registration will be filed declare, in consensus, that they allow the assignment of the dossier of information and studies already produced by the competent bodies.

To subsidize the declaration, the applicant must fill out the comparative table that indicates the numbers of the proceedings, in the three bodies, of the product to be registered and of the one with the dossier already complete.

The measure aims to avoid the double issuance of opinions by the competent bodies during the assessment of the different applications for registration.

Suggestions and contributions can be made through the Monitoring System of Normative Acts (Sisnam), of the Secretariat of Agricultural Defense (SDA).

After the deadline for the public consultation, the contributions will be analyzed by a technical group coordinated by the General Coordination of Pesticides and Related Products, with representation of the other competent bodies for the registration of pesticides.

Category: Tax

Provisional Presidential Decree 1,152 (“MP 1,152/22”), published on December 28, 2022, introduced the new Brazilian transfer pricing policy, in line with the guidelines of the Organization for Economic Cooperation and Development (OECD) and the arm's length principle (Article 2).^[1] The objective of this policy is to enable Brazil's accession to the OECD, in addition to attracting foreign investments.

Currently, the conversion of MP 1,152/22 is being analyzed by the National Congress, which already has 107 requests for parliamentary amendments on several of its provisions. According to Article 62, §§ 3 and 7^[2], of the Constitution, the conversion process must be completed within 60 days, extendable only once for the same period, under penalty of loss of efficacy of the provisional decree.

On March 29, 2023, the President of the Bureau of the National Congress issued Ruling No. 16, which extends the validity of MP 1,152/22 for 60 days, so that the term ends on June 1^st, 2023.

Despite the uncertainty, political indicators point so far to the conversion of the provisional decree, even with some amendments. The conversion is already submitted to the approval of the Plenary of the Chamber of Deputies and, subsequently, shall be submitted to the approval of the Senate.

Because of this context, the Federal Revenue of Brazil (RFB) has already informed that the regulation of the new transfer pricing policy will occur only after the completion of the conversion process.

However, due to the alignment with the OECD model, it is expected that the experience of other jurisdictions that already adopted this standard will be an important reference for the delimitation of the controlled transaction, the selection of the most appropriate method, and the preparation of documentation, observing the particularities of the Brazilian perspective on the business.

Still, Article 48 of MP 1,152/22^[3] determines that the new transfer pricing policy will take effect from January 2024, considering the non-retroactive legislation and the complexity of the policy.

However, taxpayers may opt for the application of the new policy for the current calendar year, through an irrevocable option formulated from September 2023 (Article 46 of MP 1,152/22 and Articles 2 and 3 of Normative Instruction RFB 2,132/23).^[4]

Another relevant issue of the provisional decree refers to business restructuring when it results in the transfer of benefits and/or losses between related parties. It is treated by Article 27 of MP 1,152/22.^[5]

This rule aims to capture, essentially, the transfers of gains and losses between entities of the same economic group caused by business restructuring. As a legislative innovation not yet mandatory, we understand it to be an especially propitious time for businesses to be reassessed and reorganized without the aforementioned tax burden.

^[1] "Article 2. For the purpose of determining the tax base following the paragraph of Article 1, the terms and conditions of a controlled transaction shall be established in accordance with those that would be established between unrelated parties in comparable transactions."

^[2] "Article 62. In important and urgent cases, the President of the Republic may adopt provisional decrees with the force of law and shall submit them to the National Congress immediately. [...]

• 3 - With the exception of the provisions mentioned in paragraphs 11 and 12, provisional presidential decrees shall lose effectiveness from the day of their issuance if they are not converted into law within a period of sixty days, which may be extended once for an identical period under the terms of paragraph 7, and the National Congress shall issue a legislative decree to regulate the legal relations arising therefrom. [...]
• 7 - If the voting of a provisional presidential decree is not concluded in both Houses of the National Congress within sixty days as of its date of publication, its period of effectiveness may be extended once for an identical period."

^[3] "Article 48. This Provisional presidential decree takes effect on January 1^st, 2024.

Paragraph. To taxpayers who make the option provided for in Article 46, the following shall apply, as of January 1^st, 2023:

I - Articles 1 to 45; and

II - the repeals provided for in Article 47.

^[4] "Article 2. The option referred to in Article 1 shall be formalized in the period from September 1^st to 30, 2023, through:

I - opening a digital process through the Portal of the Virtual Service Center (e-CAC Portal); and

II - annexation of the option term contained in the Annex.

• 1 - In the event of the start of the activity or the emergence of a new legal entity due to merger or spin-off in the period from September to December of the calendar year 2023, the option referred to in the caput shall be formalized in the 1^st (first) month of activity.
• 2 - In the case of extinction of the legal entity in the period from January to August of the calendar year 2023, the option referred to in the caput shall be formalized in the month of extinction.

Article 3. The option made pursuant to Article 2 shall be irrevocable and will entail, as of January 1, 2023, compliance with the provisions of Articles 1 to 45 and the effects of Article 47, all of Provisional Presidential Decree No. 1,152, 2022."

^[5] "Article 27. Business restructurings are changes in commercial or financial relations between related parties that result in the transfer of potential profit or benefits or losses to any of the parties and that would be remunerated if they were made between unrelated parties in accordance with the principle provided for in Article 2.

• 1 - The potential profit referred to in the caput comprises the expected profits or losses associated with the transfer of functions, assets, risks, or business opportunities.
• 2 - The restructurings referred to in the caput include hypotheses in which the potential profit is transferred to a related party because of the renegotiation or termination of commercial or financial relations with unrelated parties.
• 3 - To determine the compensation for the benefit obtained or for the loss suffered by any of the parties of the transaction, the following shall be considered:

I - the costs incurred by the transferring entity because of the restructuring; and

II - the transfer of potential profit.

• 4 The compensation for the transfer of the potential profit shall consider the value that the transferred items have together."