Category: Capital markets

On April 27, the Brazilian Securities and Exchange Commission (CVM) issued CVM Instruction 88, which repealed CVM Instruction 588/17 and now regulates the public offering of securities issued by small scale companies, carried out with exemption from registration through an electronic platform for participatory investment.

This fundraising method, already widely used in more advanced markets such as the United Kingdom and the United States, is known as equity crowdfunding or investment crowdfunding, and has gained even more relevance with the prominence gained by the Brazilian startup ecosystem, especially companies whose business is related to technological innovation, which has also contributed to the growth of the national venture capital industry in recent years.

To get an idea, in 2021, according to information from the Distrito platform, the volume of investments in Brazilian startups was US$9.4 billion, an increase of 166% compared to 2020 and 526% compared to 2018. And it does not stop there! Sling Hub, a data intelligence platform about the Latin American startup ecosystem, projected that "if Brazilian startups repeat the same growth shown last year, it is possible that they will close this year 2022 with an invested volume of US$29.4 billion.”

Despite this high flow of capital, Brazilian startups still encounter difficulties in raising funds from the popular economy through capital market transactions, specifically through traditional public offerings of securities, governed by CVM Instructions 400/03, as amended, and 476/09, as amended,^[1] due to the regulatory and operational costs involved.

By creating a specific regulation on crowdfunding investment, CVM Instruction 588/17 gave new contours to this scenario, allowing companies to raise funds in the general market by issuing debt and equity securities (including convertible securities), albeit with important limitations, such as:

• funds raised (maximum amount of funding of R$ 5 million);
• amount of gross annual revenue recorded by the company whose securities are publicly offered (up to R$ 10 million as measured in the fiscal year prior to the public offering of securities); and
• restricted target audience (access to qualified investors and investors whose annual gross revenue or amount of financial investments is greater than R$100,000, in which case the annual investment limit could be increased to up to 10% of the higher of the two amounts).

Even with such restrictions, this type of fundraising has gained traction in recent years. According to information from the CVM, in 2021, approximately R$ 188 million were raised via crowdfunding investment through 114 public crowdfunding offerings. The figure represented a 123% increase in the total transacted in 2020.

In addition, there has been a substantial increase in the number of platforms registered with the agency: 56 in 2021, up from 32 the prior year, which represents a 75% increase. There was also a 139% growth in the number of investors in this type of public offering, which went from 8,275 in 2020 to 19,797 in 2021, denoting the market's appetite for this type of asset.

These factors, combined with the constant demands made by market participants for improvements in the regulation of crowdfunding investments, caused the CVM rush to revise the current rule, which culminated in the issuance of CVM Resolution 88.

In general terms, CVM Resolution 88, which enters into effect on July 1st of this year, brought about important innovations to this type of investment by broadening the spectrum of companies that can conduct offers and investors who can participate in them, as well as conferring additional protections to the investing public.

We highlight below the main changes and developments implemented by CVM Resolution 88:

^[1] At the date of publication of this article, CVM instructions 400 and 476 are under revision by the CVM. A Public Hearing Notice was published aiming at complete amendment and restatement of these rules. For more information, see https://conteudo.cvm.gov.br/audiencias_publicas/ap_sdm/2021/sdm0221.html.

Category: Tax

The Federal Supreme Court (STF) has unanimously decided to consider April 20, 2021, as the starting date for the effects of the decisions handed down in Direct Actions of Unconstitutionality (ADIs) that declared state laws unconstitutional regarding the collection of the Tax on Transmission of Property and Donations (ITCMD) on donations or inheritances from abroad. The date was set by the STF in March of this year when it softened the effects of the decisions.

The ADIs were filed by the Federal Attorney General's Office (PGR) in an action that referred to the decision reached by the STF in early 2021, in the judgment of Extraordinary Appeal (RE) 851.108. At the time, the justices established the theory of general repercussion (Topic 825) according to which, before the Brazilian Congress regulates the collection of ITCMD by means of a complementary law, the states cannot collect the tax from:

• transmissions in which the donor is resident/domiciled abroad; and
• when the deceased had assets, was resident/domiciled, or had his inventory processed abroad.

In view of the judgment of RE 851.108, the PGR filed ADIs with the STF against laws of 23 states plus the Federal District that governed and allowed the collection of ITCMD on donations and inheritances from abroad. The actions questioned laws from Pernambuco, Paraná, Pará, Tocantins, Maranhão, Paraíba, Santa Catarina, Rondônia, Rio Grande do Sul, Rio de Janeiro, Piauí, Alagoas, Acre, São Paulo, Goiás, Espírito Santo, the Federal District, Ceará, Bahia, Amazonas, Amapá, Mato Grosso, Minas Gerais, and Mato Grosso do Sul.^[1]

In the ADIs, the PGR argued that, although the understanding in RE 851.108, established as general repercussion, is mandatory for bodies of the Judiciary, it does not bind the actions of state government agencies while the laws mandating collection of the tax are still in effect. As a result, the bodies of the state treasuries were still obliged to assess taxpayers who failed to pay the ITCMD, even though these assessments could later be cancelled by the courts.

With the judgment of the ADIs, the STF recognized the unconstitutionality of the state laws that were in disagreement with the understanding set forth in RE 851.108 and, thereby, disallowed the tax authorities from charging ITCMD in the aforementioned cases. By softening the effects of the decisions handed down in the ADIs, the STF defined that they are effective as of publication of the judgment on the merits handed down in RE 851.108 (April 20, 2021). Accordingly, since that date, inheritances and donations received from abroad are not subject to payment of ITCMD until the Brazilian Congress issues a complementary law.

It is important to consider that the filing of the ADIs is part of a set of initiatives organized by the Federal Attorney General's Office, which also filed a Direct Action of Unconstitutionality by Omission 67 (ADO 67), to prompt the Brazilian Congress to prepare a complementary law establishing the general rules for levying ITCMD on donations or inheritances from abroad. Once the unconstitutionality of the state laws is recognized, the PGR's goal with ADO 67 is for Congress to be compelled by the STF to issue a law allowing the institution and collection of ITCMD by the states on donations and inheritances from abroad.

Pursuant to article 103, paragraph 2, of the Federal Constitution,^[2] an ADO lies in cases of omission by public authorities to give effect to rules already provided for in the text of the Constitution. If an omission is recognized, it is incumbent on the STF to notify the Legislature for measures to be taken. The Constitution, however, does not establish a deadline for the issuance of a regulatory standard in the event of omission by the Legislative Branch.

ADO 67 was filed under the allegation that the Brazilian Congress failed to make effective the rule contained in article 155, III, of the Federal Constitution, which allows the collection of ITCMD, by the states, on donations and inheritances from abroad, with its implementation regulated by a complementary law.

"Article 155 - It is incumbent on the States and the Federal District to institute taxes on:

I - transmission causa mortis and donation of any goods or rights;
(...)

Paragraph 1. The tax provided for in subsection I:
III - shall have authority for its institution regulated by complementary law:
a) if the donor is domiciled or resident abroad;
b) if the deceased had assets, was a resident or domiciled, or had his inventory processed abroad;"^[3]

The PGR contends that, even 32 years after the promulgation of the Federal Constitution, there is inertia in giving effect to the tax rule provided for in the text of the Constitution. The failure to enact a complementary law ends up preventing the states from demanding the tax, causing losses to the public coffers and to the autonomy of the regional entities of the States.

It is also worth pointing out that there are initiatives from the House of Representatives to issue the aforementioned complementary law. The Complementary Law Bill (PLP) 363/13, presented on December 2, 2013, by Representative Erika Kokay (PT/DF), was the first to propose to regulate the institution and collection of the scenario for the ITCMD provided for in subsection III of paragraph 1 of article 155 of the Constitution. The bill was approved in 2017 by the Finance and Taxation and Constitution, Justice, and Citizenship committees. Since then, the text awaits consideration by the full House. Aside from this, with the return of the topic to the tax agenda, in 2021 we had the submission of two new bill on the subject, PLP 67/21, authored by congressman Ricardo Barros (PP/PR), and PLP 37/21, authored by congressman Hilton Rocha (MDB/MA). Currently, the two bills are attached to PLP 363/13 in the House of Representatives.

Although the STF has softened the effects of the decision to allow the tax authorities to collect the tax in relation to triggering events that occurred up to April 20, 2021 (except in cases of lawsuits filed before this date), the decision leaves no doubt that as of this milestone there is no collection of ITCMD on donations and inheritances from abroad in the Brazilian tax system.

Thus, residents abroad are in an opportune situation to donate assets to residents in Brazil, either regular donations or donations in the form of advance of an inheritance. In particular, it is a very advantageous time to carry out succession planning, acceleration the transmission of assets, including through the institution of a usufruct. Asset reorganization in this context can involve real estate assets, shareholdings, etc.

Furthermore, we believe that the moves towards regulating the tax are tending towards intensifying, especially considering the budget crisis in the states, such that the momentary opening for ITCMD-free donations may soon come to an end.

^[1] ADI 6.817, ADI 6.818, ADI 6.819, ADI 6.820, ADI 6.821, ADI 6.822, ADI 6.823, ADI 6.824, ADI 6.825, ADI 6.826, ADI 6.827, ADI 6.828, ADI 6.829, ADI 6.830, ADI 6.831, ADI 6.832, ADI 6.833, ADI 6.834, ADI 6.835, ADI 6.836, ADI 6.837, ADI 6.838, ADI 6.839, and ADI 6.840, respectively.

^[2]  Article 103. The following may file direct actions of unconstitutionality and declaratory actions of constitutionality:

VI - the Attorney General of Brazil;

Paragraph 2. Once the unconstitutionality by omission of a measure to make a constitutional rule effective is declared, the competent Power shall be notified to adopt the measures necessary and, in the case of an administrative body, to do so within thirty days.

^[3] Emphasis added

Category: Tax

Companies have challenged in court the obligation to pay social security contributions (employer's, third-party, and Environmental Labor Risk - RAT) on amounts paid to minor apprentices, considering the peculiar nature of this labor relationship.

Following the constitutional guideline, the Apprenticeship Law (Law 10,097/00) is a strategic and relevant measure for the integration of young people into the labor market, which contributes to the prevention of child labor. The hiring of minor apprentices is a mandatory requirement dealt with in article 429 of the Consolidated Labor Laws^[1] and article 51 of Decree 9,579/18, which imposes a duty on establishments to employ the equivalent of 5% to 15% of workers whose jobs require professional training.

The apprenticeship contract is a special labor contract set out in writing for a fixed term of up to two years, signed with young people over 14 years of age and under 24 years of age, as provided for in article 428 of the Consolidated Labor Laws and article 45 of Decree 9,579/18.

According to the tax authorities, young apprentices are linked to the General Social Security Regime (RGPS) as a compulsorily insured person, which justifies the requirement of social security contributions. This interpretation is supported by article 6, II, of RFB Normative Instruction 971/09^[2] and article 8, II, of INSS/PRES Normative Instruction 77/15,^[3] which classified young apprentices as compulsorily insured persons under the RGPS.

However, considering the peculiarity of this relationship, the companies contend that minor apprentices are optionally insured under the terms of articles 14 of Law 8,212/91^[4] and 13 of Law 8,213/91^[5], such that social security contributions are not necessarily due on their remuneration.

This understanding is supported by Decree 9,579/18, which removes apprenticeship contracts from the employment relationship by establishing that failure to comply with the legal and regulatory provisions would result in the nullity of the contract and the establishment of an employment relationship directly with the responsible employer.

It is worth pointing out that Decree-Law 2,318/86, when dealing with the sources of Social Security funding and the hiring of minors at companies, prohibited linking to social security minors between 12 and 18 years of age who attend school and work four hours a day.

Recent decisions handed down by the 3rd Federal Court of Santo André and the 9th Federal Court of Manaus have established that social security contributions should not be levied on the remuneration of minor apprentices. These decisions were based on the non-employment nature of the apprenticeship contract and on the effectiveness of Decree-Law 2,318/86, which rules out the levying of social security contributions.

Given this scenario, we believe that the issue of the minor apprentice is not yet mature in the case law and, due to the resistance of the tax authorities, material debates are likely to occur in the coming years.

^[1] Article 429. Establishments of any kind are obliged to employ and enroll in courses of the Brazilian Apprenticeship Services a number of apprentices equivalent to a minimum of five percent and a maximum of fifteen percent of the workers existing in each establishment, whose jobs require professional training.

^[2] Article 6. The following must contribute as an insured employee: (...)

II - apprentices, older than fourteen (14) and younger than twenty-four (24) years old, except for the disabled, to whom the maximum age limit does not apply, as provided for in article 428 of the Consolidated Labor Laws (CLT), approved by Decree-Law No. 5,452, of May 1, 1943, as amended by Law No. 11,180, of September 23, 2005; (...)

^[3] Article 8. The following are insured persons in the employee category, as per subsection I of article 9 of the Social Security Regulation, approved by Decree No. 3,048, of May 6, 1999: (...)

II - apprentices, fourteen to twenty-four (24) years old, subject to the methodical professional training of the trade in which they works, observing that hiring may be done by the company where the apprenticeship will take place or by non-profit entities, whose objective is to assist adolescents and provide professional education, in compliance with the requirements of Law No. 10,097, of December 19, 2000, and Law No. 11,180, of September 23, 2005; (...)

^[4] Article 14. An optionally insured is any individual over fourteen (14) years of age who joins the General Social Security Regime, by means of a contribution, as provided for in article 21, as long as it is not included in the provisions of article 12.

^[5] Article 13. An optionally insured is any individual over fourteen (14) years of age who joins the General Social Security Regime, by means of a contribution, as long as he is not included in the provisions of article 11.

Category: Tax

In response to the great expectation of taxpayers on the topic, the Brazilian Federal Revenue Service (RFB) and the Attorney General of the Brazilian Treasury (PGFN) issued, on May 3, 2022, Notice 09/22, which deals with the settlement of tax debts arising from tax amortization of goodwill under the legal regime prior to the Law 12,973/14.

This is a settlement in tax litigation of a material and widespread legal controversy. Debts under administrative or judicial discussion, registered or not as outstanding debt, involving legal controversies resulting from:

• Tax use of goodwill amortization expenses resulting from the acquisition of an ownership interest, limited to merger, consolidation, and spin-off transactions that took place by December 31, 2017, whose ownership interest was acquired by December 31, 2014; and
• Addition of the respective goodwill amortization expenses in the determination of the Social Contribution on Net Income (CSLL) calculation basis.

Taxpayers that opt for settlement must indicate all the debts related to the same legal controversy, in addition to:

• Presenting irrevocable and irreversible admission of debts, withdrawing from administrative or judicial litigation; and
• Waiving claims of the rights on which the litigation is based.

Adhesion may be formalized between May 2, 2022, and July 29, 2022, by 7 pm, through the portal e-CAC, if the debt is linked to the RFB, or through the portal Regularize if the debt is linked to the PGFN.

The taxpayer must expressly consent to the sending of communications and summonses to its electronic tax domicile, since all summonses will be served electronically.

The payment can be made within up to five years, applying the Selic rate for adjustment for inflation of the installments. The discounts granted will be applied over the principal, fine, interest, and charges, calculated on a regressive basis, depending on the number of installments.

Initially, it is necessary to pay 5% of the tax debt without reductions, which can be divided into five successive monthly installments. The discount percentages will be applied to the remaining balance due, according to the number of installments chosen, after total settlement of the down payment, as shown in the table below:

In cases of deposits linked to the debt subject to the transaction, adherence to the transaction will result in automatic conversion of the deposits into income in favor of the Federal Government. Thus, the discounts provided above will be applied only to the remaining balance.

Moreover, adhesion to the settlement does not entail release of the encumbrances resulting from the pledging of assets, tax preventive measures, and collateral presented administratively or judicially. This collateral can only be withdrawn when the settlement agreement has been fully discharged and provided that there are no other debts registered as Outstanding Federal Debt (DAU).

Among the obligations that must be fulfilled by the taxpayer are the following:

• Be subject to the understanding given by the tax authorities in relation to the theory that is at issue in the settlement, including in relation to future taxable events or those not yet consummated;
• Maintain good tax standing with the FGTS; and
• Bring into good standing all debts that may be entered in the DAU or that become due after the formalization of the settlement agreement within 90 days from the date of entry.

The public notice also establishes the scenarios for terminating the settlement, such as not paying in full the down payment, failing to pay three consecutive or six alternating installments, and failing to pay two installments, with the others paid.

Termination will entail, among other measures, resumption of the collection of debts, with authorization to foreclose on the collateral presented. The taxpayer will be prohibited from entering into any settlement for a period of two years, even if related to different debts.

Before adhesion, it is recommended that one analyze the company's situation individually, not only to consider the peculiarities of the concrete case, but also the global effects of the strategy, evaluating the impacts on the discussion of goodwill itself in the legal regime prior to Law 12,973/14.

Category: Crisis management

The laws and regulations on ventures with environmental impact, such as tailings and waste dams resulting from extractive and industrial activity, has undergone constant evolution over the years, especially because of the events involving these structures. In this document, we analyze the main rules that deal with the subject, including specific laws of the State of Minas Gerais, and highlight measures to be adopted by companies in order to comply with the new regulations.

Click on the button below to download the material with the outlook for the State of Minas Gerais on the topic. To access the ebook with the national outlook, click here.

Category: Intellectual property

Publication of the PTO is an important source for assess risks and indicate appropriate mitigating recommendations in business operations involving trademarks

In this article, we present a selection of some understandings contained in the decisions presented in the Collection of Decisions of the 2nd Administrative Instance,^[1] a publication focused on brand issues, launched by the National Institute of Industrial Property (INPI) in December 2021.

The collection compiles the technical opinions of the last 20 years used as a basis for decisions of appeals and administrative nullity proceedings (PAN), brought in trademark registrations. In it we find the interpretation of the 2nd administrative instance on the legislation in force at the time and the final understanding in paradigmatic cases.

As a caveat in the edition, the understandings of the compiled decisions are subject to the change, with future effectiveness, by the General Coordination of Appeals and Administrative Processes of Nullity or by the administrative body itself.

Highlights of the collection

The text presents some decisions on the license of the trademark sign, which covers the lawfulness of the trademark sign as a whole. The understanding that "the graphic representation of official or public monument can be registered as a trademark, provided that sufficiently stylized"^[2] is an example.

Applications for registration of trademarks whose designs are referred to official or public monuments, such as the Statue of Liberty, could not be registered, pursuant to Article 124( I) of the Intellectual Property Act ( LPI ) (Law 9.279/96). This provision provides that a sign required as a mark will not be registerable when it comes to reproduction of official, public, national or international monuments, as well as their respective designations or imitations.

However, in accordance with the criteria established by the INPI'sTrademark Manual (Trademark Manual) in the analysis of similar matter, can be registered the sufficiently stylized marks, whose traces used differentiate it from the original monument.

Also, in regard to Article 124, I of the LPI, another understanding established was that "the recognition of a listed heritage building does not prevent the registration of its denomination as a trademark by a third party",^[3] which is in accordance with the jurisprudential understanding of the Superior Court of Justice (STJ) that this recognition is an act of civil life for the protection of cultural heritage. It does not, therefore, have any effect on the commercial sphere, including in relation to the registration of trademarks.

The collection brings decisions about the distinctiveness of the trademark sign. There are understandings such as that "it is unregistrable the marcary set that has as main element term considered unregistrable, even if required in mixed form of presentation, which does not confer sufficient distinctiveness to the set".^[4] In such cases, it is necessary to verify that the brand has sufficient differences that do not relate it to an existing product/service.

Even if they are mixed, trademarks that do not have relevant fantasy elements in the marcary set to make them distinct or graphic representations sufficient to characterize the distinctiveness of the unregistrable nominative element are in disagreement with Article 124, item VI, of the LPI. Therefore, they cannot be registered.

In relation to the veracity of the trademark sign, it was decided that "it is unregistrable as a mark the derivative term of geographical indication that induces the perception of commercial establishment, by configuring false indication as to the quality of the product/service indicated".^[5]

For example, marks that reference a particular location, such as the Champagne region in France, cannot be registered. The word "Champagne", in this case, is registered in the PTO as a geographical indication, designates the origin of wines and sparkling wines from that region in France. Its registration, therefore, is prohibited according to::

• Article 124, items IX and X of the LPI, which seal, the registration of a geographical indication trademark or the use of a sign that improperly induces geographical indication; and
• understanding signed in NOTE/INPI/PRESIDENCY/CGREC/COREM/No. 01/2018, that terms derived from geographical indication, as in the present case, cannot be registered either.

In addition, Article 182 of the LPI determines that "the use of the geographical indication is restricted to producers and service providers established in that location, and it is also required, in relation to designations of origin, the fulfillment of quality requirements".

The granting of the registration of the mark, in this case, could also infringe the consumer's right by misleading him by linking the marketed product to those effectively protected by the geographical indication, with specific fame and quality.

On the availability of the trademark sign, the collection brought the understanding that "the descriptive expression of the marked product/service associated with the geographical name indicative of the place of origin or provision of the product/service can be registered as a mark".^[6]

This is because, according to the consolidated understanding of the PTO, these marks have less protection under Article 124, item XIX, of the LPI, because they have a low degree of distinctiveness, being considered "evocative/suggestive trademarks". They should live with other similar trademarks, if there is a minimum degree of difference between them.

As the trademarks in question are composed of common elements in a given segment, which are considered unregistrable individually, they require distinctive elements between them, such as the association with the name of the city of provision of that service, provided that it is actually provided in the indicated locality.

Another understanding also related to the availability of the trademark sign is that "a term whose meaning does not maintain an immediate/direct relationship with the products or services indicated is registrable as a trademark, observing the non-exclusivity to the use of the term in its real meaning”.^[7]

For example, a restaurant may use as a trademark the name of a specific food, with the caveat that this record does not exclude from the common property the rights to use that particular word as an identifier of the food by competitors.

In such cases, the trademark must have a mediate relationship with the services provided, not focusing on the rule provided for in Article 124, item VI of the LPI, which seeks to maintain the public domain on terms commonly used to identify products and services, to avoid monopoly and to ensure free competition.

Also, in relation to the availability of the trademark sign, it was decided by the "possibility of registering a similar or identical trademark in an equal or related market segment on behalf of companies belonging to the same economic group."^[8]

In the case, trademarks cannot imitate a figurative element of a previous trademark, owned by a third party, which is not the case where it has been demonstrated that the trademark sign indicated as an impediment belonged to the company of the same economic group as the applicant for registration.

If there is no evidence of unfair competition in the specific case, it is understood that there is the possibility of registering a similar or identical trademark, in the same market segment, on behalf of companies of the same economic group, subsidiaries or controlling companies. The express authorization by the company holding the previous registration, in this case, is dispensable, provided that the provision of Article 124 of the LPI is respected, which prevents there being two or more marks for the same product or service.

About the expiry of trademark registration, the collection brought some understandings, such as that there are "legitimacy of the bankrupt estate to request expiry provided that it regularly represented by the liquidator".^[9]

In order to grant the application for expiry of the trademark registration,, it is necessary to prove the applicant's legitimate interest, as provided for in the Trademark Manual.

The discussion – treated in THE NOTE/INPI/PRESIDENCY/CGREC/No. 20/2011 – involved the legitimacy of the application of the bankrupt estate, which was already in the condition of bankrupt estate at the time of the application and was the holder of a registration application that was paused due to the expiry of the registration.

It is understood that the bankrupt mass has a legitimate interest in requesting expiry of the trademark registration, if it is duly represented by the liquidator (currently judicial administrator). This is because the bankrupt estate is constituted at the time of the bankruptcy of the company, encompassing all its assets, which are now represented by the judicial administrator.

The collection also brought the understanding that the "copyright is a legitimate interest for an application for expiry of a conflicting trademark registration."^[10]

Even if the application for the expiry of a particular trademark is made by an applicant who has not requested registration or registration of that mark in the PTO, the legitimate interest for the application is configured, where it is established that the applicant is the copyright owner – if, for example, applicable to a work or character, in which the right of protection in the face of the conflicting mark is appropriate, in accordance with Article 18 of the Law 9610/98.

There are also compiled decisions on procedural matters, including the one establishing that "the guarantee of priority care for the elderly does not apply to the legal entity, even if it has elderly people in its corporate structure."^[11]

It was established that the priority care provided for in the Statute of the Elderly can only be granted when the application for registration or registration of trademark is under the ownership of an individual over 60 years, also reiterating the understanding of the Specialized Attorney of the PTO, through the OPINION / INPI / PROC / DIRAD No. 14/08. The justification is the fact that legal entities have personality and assets different from those of the partner, not applying to them rights and guarantees inherent to human persons.

The collection is extremely relevant for knowledge, analysis, and debate about the understandings of the 2nd Administrative Instance of the PTO involving trademark registrations and applications, by all interested parties, such as holders, third parties, lawyers, industrial property agents and examiners.

The decisions compiled are also important for assessing risks and indicating appropriate mitigating recommendations in trade operations involving trademarks. These recommendations should be compatible with the current and consolidated positioning of the PTO in order to avoid losses or delays for the parties and their operations.

^[2] Process 827661746; Decision to appeal against the rejection published in the Industrial Property Journal (RPI) no. 2263 of 20/05/2014.

^[3] Processes 828293015 and 828293007; PAN Decision published in RPI No. 2334 of 29/09/2015.

^[4] Process 824936841; Decision to appeal against the rejection published in RPI 2215 of 18/06/2013.

^[5] Process 900326760; Merit requirement published in RPI 2457, 02/06/2018.

^[6] Process 823723240; PAN Decision published in RPI 2128, 10/18/2011.

^[7] Process 819091243; Decision to appeal against the rejection of a trademark registration application published in RPI 1876 of 19/12/2006.

^[9] Process 006924611; Merit requirement published in RPI 2120, of 08/23/2011.

^[10] Process 817641866; Decision to appeal against the rejection of an application for expiry published in RPI 2123, 13/09/2011.

^[11] Process 823870790; Decision to apply for priority examination communicated to the applicant pursuant to Article 226(II) of the LPI.

Category: Tax

Complementary Law 192/22 regulated the iCMS single-phase incidence regime on fuels, provided for in Article 155 paragraph 2^nd, XII, ‘h’ of the Federal Constitution, among other measures. The single-phase regime shall be applicable to the following fuels:

• Gasoline and ethanol anhydrous fuel;
• diesel and biodiesel; and
• liquefied petroleum gas, including natural gas derivatives.

Under the single-phase regime, the ICMS on these fuels will be charged only once on the supply chain. It shall be collected by producers (including those who produce fuels in a residual manner, fuel formulators by mechanical mixing, petrochemical plants, oil refineries and other establishments treated as producers), at the time of the exit of the products from their establishment, or by importers at the customs clearance of the product.

The complementary law also states that the rates under such regime will be Ad Rem, that is, they will be specific nominal values per unit of measure of the product and should be fixed through deliberation of the states and the Federal District within the definitions of the National Council of Treasury Policy (Confaz).

The rates should be uniform in the national territory, however it can be differentiated by product.  The first amendment will have to comply with a minimum period of 12 months after its fixation and at least six months for subsequent adjustments.

The definition of the initial rates and their adjustments should observe estimates of fuel price developments. The goal is to avoid the proportional increase of its load in the formation of the final price to the consumer.

Specifically for diesel, a transitional rule has been established until 31 December 2022 or until the single-phase fuel rate is set. During that period, the tax calculation basis for tax substitution purposes would correspond to the moving average of the average prices to the final consumer in the 60 months preceding its fixing. The single-phase tax rate for diesel was established  by the ICMS  Agreement 16 of March 24, 2022.

The allocation of the tax levied under Complementary Law 192/22 will depend on the type of fuel (derived from oil or not) and on its recipient (taxpayer of ICMS or not), and shall be due:

• to the state where the consumption occurs, in transactions with petroleum-derived fuels;
• to the states of origin and destination, in interstate transactions between taxpayers, with non-petroleum fuels, dividing in the same proportionality used for transactions with other goods; and
• to the state of origin, in interstate operations for non-taxpayers of ICMS with non-petroleum fuels.

The complementary law also establishes compensation mechanisms between the states and the Federal District, such as clearing house or other instruments, with attributions related to the funds collected as a result of the single-phase incidence of the ICMS. It also establishes the possibility of assigning responsibility for withholding and collecting ICMS to tax taxpayers or to depositories of any security.

The granting of tax incentives on transactions with fuels subject to the single-phase regime will also depend on the edition of the ICMS Agreement by the states under Confaz.

The law reduced to zero, until December 31, 2022, the PIS and COFINS rates on the gross revenue of producers and importers arising from the sale of diesel oil and its subsidiary products, biodiesel and liquefied petroleum gas, derived from oil and natural gas, and aviation kerosene.

The same treatment was granted to the PIS-import and COFINS-import rates levied on import transactions with the same products mentioned above.

Complementary Law 192/22 also suspended the effects of the financial and budgetary adequacy rules provided for in Complementary Law 101/00 and Law 14,194/21, in relation to ICMS, CIDE-Fuels, PIS, COFINS and other contributions to social security.

Access the article of  the ICMS Agreement 16/22, which disciplined the single-phase incidence of ICMS for diesel oil.

Category: Tax

The ICMS Agreement 16/22, published in the Official Gazette on March 25, regulated the single-phase incidence of ICMS for diesel oil, establishing the following rates in the transactions with the product:

The amount of ICMS due will be the result of multiplying the above rate by the volume of fuel consumed in each federated unit.

The ICMS Agreement 16/22 also granted to the states an authorization to use tax burden equalization factors per liter of fuel, applicable to the outputs with diesel oil, even if mixed, destined to their respective territories.

The tax burden equalization factor for each state is provided for in Annex II of the ICMS Agreement and may not be higher than the value of the difference determined between the new Ad Rem rate and the effective tax burden in force on the date of publication of the agreement.

In practical terms, the equalization factor reduces the tax burden of ICMS in transactions with diesel oil depending on the recipient state, maintaining a tax burden similar to the one applicable when complementary law 192/22 was published.

In the case of subsequent interstate transactions, equalization factors of the recipient and origin states should be compared, with the following implications:

Both the Ad Rem rate as the tax burden equalization factors will be in force for a minimum period of 12 months from the date of publication of the agreement.

The ancillary obligations arising from the provisions of the agreement will still be regulated by means of a SINIEF  Adjustment to be published by Confaz.

The ICMS Agreement 16/22 entered into force on March 25, 2022 (date of its publication), producing effect as from July 1^st, 2022.

To learn more about the single-phase ICMS regime, see the article on Complementary Law  192/22.

Category: Environmental

In order to improve the regulation on solid waste management and recycling in the country, two federal decrees published on April 14 established the National Solid Waste Plan (Planares) and the Recycling Credit Certificate (Recicla+) as a mechanism to incentive recycling and reverse logistics.

Federal Decree 11,043/22 instrumentalized Article 15 of Federal Law 12,305/10 (National Solid Waste Policy - PNRS), which sets the minimum content for Planares, to be prepared by the Federal Government, under the coordination of the Ministry of the Environment (MMA).

The decree enacted predicts the ways for creation of Planares, which determines, at national level, the strategy to implement legal provisions, principles, objectives and guidelines of the PNRS in the next 20 years.

Planares was prepared by the MMA by means of a cooperation agreement with the Brazilian Association of Public Cleaning and Special Waste Companies (Abrelpe), after contributions obtained at several public hearings and a public consultation, from July to November 2020.^[1]

To formulate Planares guidelines, the main source of data used was the Diagnosis of Urban Solid Waste Management, from 2010 to 2018, from the National Information System on Sanitation/Solid Waste (SNIS-RS), as well as information obtained from Abrelpe, the National Information System on Solid Waste Management (Sinir) and the Brazilian Institute of Geography and Statistics (IBGE).

Planares presents the diagnosis of the situation of solid waste in Brazil, followed by a proposition of scenarios, including national, international and macroeconomic trends. The plan should be updated every four years.

Among the provisions of Planares, the following targets stand out with respect to Urban Solid Waste (RSU), Civil Construction Waste (CCR) and Health Services Waste (RSS):

• Increase the economic and financial sustainability of waste management by municipalities;
• Increase the management capacity of municipalities;
• Eliminate inappropriate final disposal practices and shut down controlled dumps and landfills by 2024;
• Reduce the amount of waste sent to environmentally appropriate final disposal, through recovery of recyclable materials, biological treatment and energy recovery, with a recovery target of 48.1% of the total mass of RSU by 2040;
• Promote social inclusion and economic emancipation of collectors of reusable and recyclable materials, with the formalization of 95% of contracts executed by and between municipalities and waste collectors and cooperatives by 2040;
• Increase the recovery of the dry fraction of RSUs, from the current 3% to 20% in relation to the total mass, as well as increase to 50% the packaging recycling under the reverse logistics system by 2040;
• Increase recycling of the organic fraction of RSU, with recovery of 13.5% by 2040;
• Increase the recovery and energy use of RSU biogas to more than 60% by 2040;
• Increase recovery and energy utilization through heat treatment of RSU, with installed power capacity of 994 MW by 2040;
• Increase RCC recycling up to 25% by 2040; and
• Increase the environmentally appropriate final destination of RSS, so that all municipalities make adequate destination by 2040.

In addition to the recycling and reverse logistics goals and strategies outlined under Planares, Federal Decree 11,044/22 was enacted, establishing the Recycling Credit Certificate, Recicla+.

Recicla+ has as main objectives to:

• improve the implementation and operationalization of infrastructure and logistics in the sector;
• provide scale gains in recycling;
• promote the use of solid waste and its direction for energy recovery or the appropriate production chain;
• stimulate the development and consumption of recyclable products and inputs with smaller environmental impact; and
• match interests between the economic and social agents involved in the chain.

According to data released,^[2] it is estimated that the certificate can generate a potential investment of about R$ 14 billion per year in the recycling sector, increasing the income of waste collectors and all those involved in the reverse logistics chain, in addition to increasing the recycling rate of dry waste in the country and reducing recycling costs for companies subject to reverse logistics targets, as provided for in Art. 33 of the PNRS.

Recicla+ represents a recycling credit – issued by waste collectors cooperatives, consortium, private companies, civil society organizations, municipalities – corresponding to the verified amount of recyclable material destined for recycling or energy recovery. The certificate may be purchased by manufacturers, importers, distributors and traders for the purpose of proving compliance with their reverse logistics targets.

The issuance and acquisition of Recicla+ is voluntary, individualized and must be accomplished based in the Certificate of Final Destination (CDF), issued on the basis of the Waste Transport Manifest (MTR) and electronic invoices of the products/packaging trading operations that have returned for recycling or energy recovery.

The registration of the interested agents and the issuance of Recicla+ will be fulfilled in Sinir by the management entities authorized to operate the reverse logistics systems in a collective model.

The entire process must undergo prior approval of electronic invoices, carried out by an independent auditor hired by the managing body, to prove the veracity, authenticity, uniqueness and additionality of information related to the recycling of products and packaging.

Companies that do not adhere to the collective model of reverse logistics system through a management entity should set up their own structure to operationalize the system – including hiring an independent auditor for the approval of documents – and report the results to MMA.

With the institution of Planares and creation of Recicla+, the idea was to improve the management of solid waste in a proper, transparent and efficient way in the country, reducing the costs of companies subject to reverse logistics and providing income gain to others involved in the chain in benefit of higher waste recycling and preservation of the environment.

It is worth monitoring how public agents and the private sector will adhere to Planares’s strategies and goals and what incentives will be given to the use of Recicla+.

^[1] MMA website - Public hearings on the National Solid Waste Plan run through the regions of the country. Access on 04.20.2022

^[2] MMA website - Federal Government launches Recycling Credit Certificate - Recicla+. Access on 04.20.2022.

Category: M&A and private equity

Violations of the instruction currently revoked by CVM Resolution 44 were related to the non-disclosure of material fact notices

In April, 2022, the board of the Brazilian Securities and Exchange Commission (CVM) ruled over four proposals^[1] of settlement agreements arising from the non-disclosure of material notices and the negotiation with shares of publicly-held companies pending the disclosure of material fact notices. In all cases, the CVM’s board followed the favorable recommendation of the Committee for Settlement Agreements (CTC) on the proposals’ acceptance, with the consequential assumption, by the proponents, of monetary obligations ranging from R$ 21,132.00 to R$ 597,134.01, according to the case.

In the negotiation of the proposals, the following circumstances were taken into account when assessing the monetary obligation to be assumed by each proponent in its respective proceeding:

The Settlement Agreement is a legal statute provided for in RCVM 45 as an alternative method for the termination of CVM’s administrative proceedings. It can be proposed both in the pre-sanctioning phase and after the presentation of the term of indictment by the CVM.

According to article 81 of RCVM 45, "the execution of the Settlement Agreement does not imply confession as to the matter of fact, nor in recognition of the unlawful conduct examined". For this reason, it is not uncommon for this statute to be used as a defense strategy, since its legal effect is to terminate administrative demands before the CVM without the imposition of any official negative background on the proponents.

Despite the wide use in administrative proceedings, the settlement agreements as a method to close cases before the CVM implies that the proponent takes on obligations, which, in general, are of a monetary nature. Where appropriate, these obligations may also be linked to educational measures related to the capital markets, depending on the infringement investigated. Whatever the case, the proponent must always undertake to cease the practice of acts considered unlawful and correct irregularities, including by means of indemnification.

During the proceedings for the execution of a settlement agreement, the specialized federal prosecutor's office issues an opinion on the existence of legal impediments to the acceptance of the proposed settlement, the CTC negotiates the conditions of the proposal to be submitted to the CVM board and, finally, the CVM directors analyze, on a definitive basis, whether the execution of the settlement meets the objective desired by the applicable legislation, resolving on the acceptance or rejection of the proposal.

As described in the table above, in the presentation of the settlement agreement proposal and, mainly, during its negotiation with the CTC, the circumstances involved in the case are considered as a guidance for the CTC's recommendation to accept, suggest improvement or reject the proposal.

In the analysis of such circumstances, Article 86 of SCVM 45 provides that "the opportunity and convenience in executing the settlement, the nature and seriousness of the offences under the proceedings, the background of the accused or investigated or the good faith collaboration of those defendants, and the effective possibility of punishment in the present case" be considered.

Except for the standard followed by the CTC in previous negotiations in similar cases – an assessment that depends on the conduct under analysis in each case – the circumstances that usually operate in favor of negotiating less serious monetary obligations to proponents are:

• good track record of the proponent evidenced by the absence of other ongoing or completed proceedings or investigations;
• presentation of the proposal in the pre-sanctioning phase, which represents procedural efficiency for the public administration;
• conduct occurred prior to Law 13.506/17 enforceability, which altered the guidelines of CVM sanctioning activities;
• the low harm of the conduct according to Annex 63 to the RCVM 45; and
• the reduced scope of the losses generated by the investigated conduct, among other circumstances.

Also in the context of the negotiation of monetary obligations, in the assessment of the proposals highlighted above, the CTC recommended the improvement of the initial proposals after having considered the circumstances of the case. Thus, it also aimed to establish a monetary obligation that is related to the conduct under analysis, in order to inhibit similar behaviors in the future.

As a matter of fact, it is possible to note that the CTC usually analyzes whether the monetary obligation is equivalent, at least, to the amount of the injury caused and/or advantage taken by the agent. In those cases where the value of injury or advantage is not significant, CTC can also find grounds in:

• the percentage of deviation from the expected parameter;
• in the traded volume of the asset; and/or
• multiples (usually three times) of the injury and/or advantage of the injury.

Some data on the execution of settlement agreements by CVM over the years can be found in the Capital Market Observatory, a data mapping sponsored by a Brazilian association, which found, for example, in the records between 25/01/2000 and 26/03/2019, the existence of 601 cases with settlement agreement proposals, from which 351 were executed even if partially.

Of this total, more than 90% resulted in the assumption of monetary obligations. In addition, non-disclosure conducts generally lead the ranking of proceeding closed via settlement agreement, appearing in more than 70% of cases.^[6]

For the cases highlighted herein, whose conducts were, in summary, related to violations of ICVM 358 (revoked by RCVM 44), the identification of the agent as tipper which obtains inside information from the source – or tippee – that obtains the information by other means, including by exchanging information with the tipper - was considered to negotiate the assumed monetary obligations.

Hence, in order to negotiate a settlement agreement proposal with the CTC, it is necessary to take into account that the CVM will find grounds on specific circumstances of the investigated conduct, such as similar precedents and the elements specific to the alleged infringement, as well as in general circumstances weighted in all cases, regardless of the infringement, such as the agent's background, the procedural phase, the injury of the conduct, magnitude and scope of the advantage and/or injury, among others.

Considering the relevance of the statute and its consequences for the sanctioning proceedings, the detailed strategic analysis of the convenience of submitting the proposal and a careful study of the conditions to be offered are essential to ensure greater legal certainty and better chances of success in its acceptance at the end.

^[1] CVM PAS SEI 19957.0002923/2017-81 (ruled 05 De Abril, 2022), PA CVM SEI 19957.004542/2020-32 (ruled on April 5, 2022), CVM PA SEI 19957.000157/2021-05 (ruled on April 5, 2022) and PA SEI 19957.006367/2021-07 (ruled on April 12, 2022).

^[2] Equivalent to the advantage obtained by the proponent indexed to monetary adjustment.

^[3] Article 86 - In the decision of the proposal, the board must consider, among other elements, the opportunity and convenience of the settlement, the nature and severity of the offenses subject to the process, the track record of the accused or investigated or the good faith collaboration of these, and the effective possibility of punishment, in the specific case.

^[4] Equivalent to three times the value of the advantage taken by the proponent according to the defense.

^[5] See note 3 above.

^[6] For more information, please visit: Capital Market Observatory.

Category: Environmental

With the purpose of advancing the agenda of environmental regularization in all Brazilian biomes and ensure compliance with the Brazilian Forest Code, the Ministry of Agriculture, Livestock and Supply (Ministério da Agricultura, Pecuária e Abastecimento), published on March 29, 2022, the Federal Decree 11015/22, which establishes the National Plan for Environmental Regularization of Rural Properties (RegularizAgro) and its Managing Committee.

RegularizAgro aims to develop a government action plan that includes the Federal Government and the States and develops through:

• proposal of measures to comply with the principles and guidelines of environmental regularization in rural properties and possessions;
• coordination of public and public-private strategies and actions aimed at environmental regularization of rural properties;
• guidance of government action to carry out the regularization of rural properties, in compliance with the obligations provided for in the Forestry Code;
• articulation of efforts, at the federal, state, district and municipal levels, of a political, strategic, normative and technological nature, in order to ensure the necessary institutional and organizational alignment between the public agencies responsible for the implementation of the Environmental Regularization Program (Programa de Regularização Ambiental - PRA) at the state and district levels of rural properties; and
• promotion of actions aimed at the environmental recovery of rural properties, without losing the productive aspects of the areas, in compliance with the legislation and in articulation with all federal entities.

One of the objectives of the plan is "to promote and improve the integration of information systems and databases that enhance the application of the Rural Environmental Registry (Cadastro Ambiental Rural – CAR) in the context of land use planning, territorial management for the sustainable development of Brazilian agriculture and its interface with other public policies". It is also intended to improve the processes of environmental regularization with  inclusion of information in the National System of Rural Environmental Registry (Sistema Nacional de Cadastro Ambiental Rural - Sicar).

RegularizAgro was regulated shortly before the 10th anniversary of the Forestry Code (Law 12651/12), which, among several innovations, created the Rural Environmental Register (CAR).

The CAR is the national and mandatory electronic public register of rural properties. It aims to integrate environmental information of rural properties and possessions, as well as to establish a database for control, monitoring, environmental and economic planning and combating deforestation.

For CAR enrollment, the owner or possessor has to submit information of the rural property, such as:

• identification of the owner or holder of the rural property;
• evidence of ownership or possession; and
• presentation of the plan and descriptive memorial for the area, which shall encompass "the location of the remnants of native vegetation, protected areas, restricted use areas, consolidated areas and the location of the Legal Reserve", if any, according to Art. 29 of the Forestry

Enrollment in CAR must be executed through an electronic system in the applicable state agency in which the rural property is located. After this stage, those responsible for areas with environmental liabilities originated by the suppression of native vegetation carried out until July 22, 2008 in Permanent Preservation Area (Área de Preservação Permanente -"APP”), Restricted Use Areas and Legal Reserve (Áreas de Uso Restrito e Reserva Legal) may opt to adhere the PRA.

Creation of the Managing Committee

Decree 11015/22 also establishes for incorporation of managing committee that, among other assignments, should develop and approve strategies, goals, monitoring indicators and deadlines of RegularizAgro, as well as contribute to the success of public and public-private initiatives aimed at environmental regularization.

The committee shall be composed of:

• two members of the Ministry of Agriculture, Livestock and Supply (one from the Brazilian Forest Service (Serviço Florestal Brasileiro – SFB) and another from the Secretariat of Agricultural Policy);
• a member of the National Institute of Colonization and Agrarian Reform (Instituto Nacional de Colonização e Reforma Agrária - Incra);
• a member of the Ministry of the Environment (Ministério do Meio Ambiente);
• a member of Empresa Brasileira de Pesquisa Agropecuária (Embrapa);
• a member of the National Council of Secretaries of State for Agriculture (Conselho Nacional dos Secretários de Estado de Agricultura - Conseagri); and
• a member of the Brazilian Association of State Environmental Entities (Associação Brasileira de Entidades Estaduais de Meio Ambiente - Abema).

Each entity has up to 30 days from the publication of the decree to indicate its representatives.

The decree allows agreements, cooperation arrangements and adjustments to be signed with administrative entities and with private entities and international organizations.

It will be important to closely monitor the implementation of RegularizAgro, especially to assess the impact of the current diversity of systems adopted for registration in the CAR. The Forestry Code provides that the enrollment of rural property in the CAR should be carried out preferably in the municipal or state environmental agency and, currently, there are several systems in operation.

Information released by the Ministry of Agriculture, Livestock and Supply in January 2021 demonstrate, for example, that five states had their own electronic systems for registration in CAR: Bahia, Espírito Santo, Mato Grosso do Sul, São Paulo and Tocantins. Six states use applications developed within the federal level, but with their own database: Acre, Mato Grosso, Minas Gerais, Pará, Rio Grande do Sul and Rondônia. The other states used Sicar applications and information technology infrastructure provided by the SFB and the Ministry of Environment.

With RegularizAgro, it is expected easier and more efficient interaction between entities of the Public Administration (federal, state and municipal). This could enhance the effectiveness of the regularization of rural lands in the country and contribute to an increase in actions to protect native vegetation and other protected areas.

After the appointment of the members of the managing committee and the technical chambers of specific subjects to fulfill the purposes of RegularizAgro, the Ministry of Agriculture, Livestock and Supply has 180 days to present the results of the project. After this period, complements and new guidelines on the subject may be issued.

Category: Real estate

Between 2020 and 2021, the increase in the dollar rate, tied to the high demand for commodities, triggered a significant rise in the General Market Price Index (IGP-M), usually used as an indexer to correct the values of lease agreements.

The increase in the IGP-M (which closed 2021 with 17.81% and accumulated, in May of the same year, a positive variation of 37.04% in 12 months) established a crisis in lease relations and evidenced a problem: the absence of an index that effectively reflects the variations in agreements.

The IGP-M is an index directly affected by the situation of the foreign market and does not have any relationship with the cost of housing in its calculation. For this reason, with the increased reality of the country recorded in the years 2020 and 2021, lessors and lessees began to renegotiate how to correct the values of the contracts.

One of the widely used solutions has been the replacement of the IGP-M by the  Amplified Consumer Price Index (IPCA), which is based on the "inflation of a set of products and services marketed in retail, referring to the personal consumption of households" and which, therefore, also has no direct relationship with variations in the real estate market.

There is, then, an unstable scenario, since both the IGP-M and the IPCA are indices intended for other purposes and do not reflect the changes in the real estate market.

With the proposal to "fill a gap in national statistics" in the niche of lease agreements, the Getúlio Vargas Foundation (FGV) created, on January 11, 2022, a calculation-based index that specifically considers the rental variations, the Residential Rent Variation Index (Ivar). Reported on a monthly basis, the index is part of the fixed calendar of indexes published and calculated by the institution.

To create Ivar, FGV searched for partnerships with real estate management companies, in order to collect data on the values of new agreements and adjustments of existing ones, as well as information on the characteristics of each property. It is important to note that Ivar was designed primarily with the objective of creating an index based on effective agreements data, and not, for example, on rental offer ads.

In its methodology, Ivar applies the weighted average of the data obtained from about ten thousand residential property leases in force in four Brazilian capitals: São Paulo, Rio de Janeiro, Belo Horizonte and Porto Alegre. The expectation is that more cities will be added to the calculation of the index so that it more accurately reflects the situation of the country.

The index also sought to monitor the advances of these lease agreements in the last three years, including both extraordinary variations and pandemic periods, as well as ordinary variations, which commonly result from leases, such as contractual adjustment. In January 2021, the index recorded an increase of 1.86%, while in February 2021, the accumulated change in 12 months was 2.92%.

It is a revolutionary index, which promises to solve the main point of conflict in lease relations and ensure greater predictability in the agreement relationship. However, we understand that there is a long way to go for Ivar to be incorporated by the real estate market, especially in relation to the expansion of the data used for its calculation.

According to a survey conducted in 2018 by the Brazilian Institute of Geography and Statistics (IBGE), Brazil has approximately 12.9 million properties rented for residential purposes. A base composed of ten thousand contracts, located in four capitals, therefore, is not enough to consolidate an index that aims to solve a problem of leases throughout the Brazilian territory.

In addition, Ivar has also limited  nature of the occupation of the property. The index seeks to analyze only variations in residential leases and does not apply to agreements for commercial purposes. In fact, FGV does not yet have robust information about this rental segment. We emphasize that there are no legal impediments to adopt Ivar also in commercial relations, but, as the index is composed today, it will not reflect the reality of these leases and will not be able to resolve the existing controversy.

The moment, therefore, is for caution. It is important to wait for the index to be consolidated and with sufficient data to more fully reflect the real estate reality of Brazil.

Category: Competition

Pursuant to Ordinance 104/22, issued in March 2022, the Brazilian antitrust agency (Cade), updated the Predatory Pricing Analysis Guidelines, published in 2002. Predatory pricing – often mistaken for dumping – is the conduct to sell goods or provide services unjustifiably below the cost price.

Cade has investigated several cases on predatory pricing without, however, convicting any company since the entry into force of Law No. 8.884/94, which preceded the current Brazilian Antitrust Law (Law No. 12.529/11).

Carrying out a predatory pricing investigation is an extremely complex task because simply selling below cost price does not constitute an antitrust violation. According to Cade's precedents, proof that there was a reduction of cost prices for a certain period is insufficient to conclude that there was unlawful predatory pricing. It is necessary to prove that the company charged prices below the average variable cost, aiming to eliminate its competitors to increase the referred prices at a later stage. Then, the company would be able to recover its initial losses in a much less competitive market and make profits similar to those of a monopolist.

The ordinance aims to guide the economic analysis and reduce Cade’s investigation costs. According to the guidelines, Cade shall observe the following steps, successively:

• definition of the relevant market;
• structure of such market and entry conditions;
• supply conditions of the investigated company and its production capacity;
• that company's financial capability to withstand short-term losses, by its own or through third parties; and
• comparison between price and cost.

In the last stage, the most complex of all, the guidelines suggest that the production costs – total average cost (total cost divided by the number of goods produced) and average variable cost (total variable cost divided by the number of goods produced) – be analyzed.

When the price is equal to or higher than the average total cost of production, the practice shall not be deemed as predatory pricing. If the price is between the total average cost and the average variable cost, it is possible that the company practiced predatory pricing. In this case, Cade analyzes the demand and supply conditions (for example, whether there was a sudden demand contraction in the industry or excess capacity) that could justify the practice. After assessing all the steps, if price is lower than the average variable cost, Cade understands that there was unlawful predatory pricing.

In practice, the guidelines of the new ordinance are not expected to necessarily promote convictions for predatory prices because the average variable cost analysis is difficult to apply. In Brazil and abroad, there are even discussions on the use of other methodologies to identify the existence of this type of antitrust violation. For instance, the analysis of structural preconditions that may suggest a rational predatory conduct and the use of concepts of game theory, with the analysis of asymmetric information as a central factor for the discussion of economic rationality.

Category: Real estate

Published in the Official Gazette on March 9, 2022, Law 14,309/22 amended the Civil Code to allow conversion of condominium meetings into permanent sessions (paragraphs 1, 2, and 3, of article 1,353, Civil Code) and allow the convening, holding, and resolution of any type of meeting by electronic or hybrid form (article 1,354-A).

The legal permission for virtual condominium meetings was already a trend since the enactment of Law 13,777/18, which included in the Civil Code the normative provision (article 1,358-Q, VIII), whereby, when a condominium adopts the multi-ownership system, its bylaws must provide for the "holding of non-presence meetings, including by electronic means."

In the same vein, virtual meetings were exceptionally allowed until October 30, 2020, by Law 14,010/20, which instituted transitional and emergency rules for the regulation of private law legal relations due to the covid-19 pandemic. After the end of the period, however, there was no longer any legal support for this possibility, unless expressly provided for in the condominium agreement.

The legislative innovation changed the scenario and opened the definitive possibility of holding virtual or hybrid meetings, as long as these modalities are not prohibited by the condominium’s agreement and the condominium's owners are guaranteed the right to speak, debate, and vote, maintaining an environment in which all participants can participate, even if virtually.

Once the electronic or hybrid form of holding the meeting is adopted, the condominium must include this information in the call notice, in addition to providing instructions for access, taking the floor, and collecting votes.

For the purpose of conducting the meeting, the documents pertinent to the agenda may be made available to the participants in physical or electronic form. The minutes must also be drawn up electronically, but only after all the votes have been summed up and made public, at which point the meeting shall be adjourned.

Just like in-person meetings, virtual or hybrid meetings must observe the minimum legal and contractual quorums for calls to order and resolutions.

Joint owners may decide to include complementary rules concerning electronic meetings in the bylaws, upon approval by a simple majority in a meeting called for this purpose. On this issue, a source of inspiration is DREI Normative Instruction 79/20which brings in great rules for operation digital meetings, possibly usable by condominiums.

The long-awaited legislative change is the possibility of converting the meeting into a permanent session when the resolution requires a special quorum provided by law or agreement and this quorum is not reached. This is what happens, for example, in the case of resolutions to change the agreements, which require approval of 2/3 of the joint owners' votes, or to change the use of common areas, when unanimous approval by the joint owners is required.

For this to be possible, the following requirements are necessary, cumulatively:

• the majority of those present decide on conversion;
• the date and time of the follow-up session, which may not exceed 60 days, are indicated;
• those present and the absent units are summoned in the manner provided for in the agreement;
• the partial minutes are drawn up and sent to all unit owners, present and absent;
• on the appointed day and time, the deliberations continue, in the same minutes that were partially drafted.

The votes given in the first session will be registered, without the need for the owners to appear again to confirm them. If they are present at the next meeting, the owners can request that their votes be changed.

The permanent session may be extended as many times as necessary, provided that the meeting is completed within 90 days.

Long awaited, these innovations accompany the evolution of society and come at a good time to allow owners and purchasers of autonomous units in condominiums with access to technology and the world wide web to actively participate in the deliberations of the meetings, even if at a distance. In addition, the changes provide condominium building managers with more tools and legal security to conduct their work.

Category: Tax

The majority of the justices of the Federal Supreme Court (STF) dismissed Direct Action for Unconstitutionality (ADI) 4980, following the opinion of the reporting justice, Nunes Marques. The score was eight votes for dismissal of the action against one vote for partial dismissal, cast by Justice Alexandre de Moraes. Justice Dias Toffoli was absent and Justice Roberto Barroso recused himself.

In the lawsuit, the Federal Attorney General questioned the constitutionality of article 83 of Law 9,430/96, as amended by Law 12,350/10, specifically in the part in which the provision establishes the need to wait for a final decision in the administrative sphere before sending a tax representation for criminal purposes to the Public Prosecutor's Office (MP), with respect to the crimes of social security embezzlement.

The reporting judge found that the order to wait for the end of the administrative proceeding before the tax auditor sends the representation with criminal purposes to the Public Prosecutor's Office fulfills the principle of reasonableness, since the measure avoids unnecessarily activating a criminal prosecution, considering that the tax credit can be extinguished either by payment, by adherence to the installment plan, or by the taxpayer's victory in the administrative pathway.

For him, the rule of article 83 of Law 9,430/96 does not offer any risk to the assets of the social security system, and much less mitigates the actions of the Public Prosecutor's Office, because the statute of limitations does not run while the claim is being litigated in the administrative sphere and its enforceability is suspended.

In addition, the reporting judge pointed out that the STF, in ADI 1751, had already defined that article 83 of Law 9,430/96 is directed to the tax authorities and does not interfere with the actions of the Public Prosecutor's Office.

Justices André Mendonça, Edson Fachin, Rosa Weber, Cármen Lúcia, Ricardo Lewandowski, Gilmar Mendes, and Luiz Fux followed the reporting judge.

The divergence was opened by Justice Alexandre de Moraes, who voted for partial dismissal of the case, believing that social security embezzlement is a formal crime and that, therefore, for a prima facie case would not be necessary for there to be a final tax assessment by the administrative authorities.

Moraes made several comments on the risks of tax evasion in Brazil and about the weaknesses of Brazilian legislation in this regard. For him, it should be interpreted in accordance with the Federal Constitution, without reducing the text, to define that there is no need to exhaust the administrative instances in relation to formal crimes.

Thus, ADI 4980 was dismissed, leaving unchanged the rule that prevents the Federal Revenue Service of Brazil from sending tax representations for criminal purposes to the MPF with respect to crimes of social security embezzlement before the end of the administrative litigation.

Category: Litigation

In a decade marked by the proliferation of sustainable investments, the Green Rural Product Note (CPR) emerges as a potential source of financing for the Brazilian agricultural sector. It is an instrument that aims to raise financial resources to maintain farming operations and, at the same time, preserve biodiversity.

Recently, Law 8,929/94 (CPR Law) has undergone several changes through Law 13,986/20 (Agro Law). Among them, the inclusion of subsection II in paragraph 2 of article 1, which allowed the issuance of CPRs "related to the conservation of native forests and their respective biomes and to the management of native forests in the scope of the public forest concession program, or obtained from other forestry activities that may be defined by the Executive Branch as environmentally sustainable,” an operation recently regulated by Decree 10,828/21.

With the changes, the possibility arises for rural producers to be paid for an activity that they already perform in strict compliance with the law, namely maintenance and conservation of native forest, as is the case of legal reserves,^[1] and receive an incentive to expand this activity, which will help mitigate the environmental damage often attributed to rural production. Furthermore, the measure will contribute to improving the image of Brazilian agribusiness in the domestic and foreign market, which is often blamed for deforestation.

From a financing standpoint, there is no lack of interest in the application and diffusion of the instrument. Companies that, by force of their activity, release harmful gases into the environment will be able to use a mechanism capable of guaranteeing the carbon credits necessary to compensate for the damage they cause, regardless of whether they operate in Brazilian territory.

A factor that contributes and serves as an incentive for the diffusion of the document is the National Policy of Payments for Environmental Services (Law 14,119/21). This standard reinforces the more sustainable approach to the environmental issue and creates the perfect scenario for new investments in the sector, when added to the commitments made by Brazil at the recent COP 26, such as the pact to reduce methanol gas emissions by 30% by 2030 and the declaration to restore and protect the world's forests, which includes the Brazilian Amazon, with estimated investments of US$ 19.2 billion.

There are still issues to be overcome to popularize the security, such as who will be responsible for certifying the instrument, how the commitments signed will be monitored, the role of government institutions in their validation, and how the Brazilian carbon credit market will be regulated, among other issues.

Despite all this vagueness, there is no sign of stopping anyone who already wants to take advantage of the changes implemented. Environmental conservation, through the use of crop/product monitoring techniques known to the market, can be a conditioning factor or even a guarantee for the issuance of a traditional CPR. Those who see the changes implemented in the New Agribusiness Law as an opportunity for new business are already ahead of the curve to take advantage of the benefits provided by these legal innovations. With the Green CPR they can obtain financing and, at the same time, invest in sustainability, something that is currently very well regarded by the market.

^[1] Law 12,651/12, article 12.