Category: Real estate

In a decision published in REsp 1,937,821 – SP (2020/0012079-1) on March 3, the Superior Court of Justice (STJ) set The Repetitive Topic 1,113 on the basis for calculating the Real Estate Transfer Tax (ITBI). This decision puts an end to an old discussion about what would be the basis for calculating this tax:

• the same assessed value used as a basis for calculating the Urban Land and Property Tax (IPTU);
• the reference value assigned by the municipalities for the purposes of calculating the ITBI exclusively; or
• the actual price of the transaction assigned by the parties.

The ITBI - or Inter Living Transmission Tax (ITIV) – is a tax of municipal jurisdiction that focuses on onerous transfers of property or rights in real estate (with the exception of warranty rights, such as the constitution of mortgages and fiduciary disposals under guarantee) and on the assignment of rights relating to such onerous transfers.

According to article 38 of the National Tax Code (CTN), the calculation basis of the ITBI is the assessed value of properties or rights that are being transferred. This means, for example, that, in real estate acquisitions, the buyer is responsible for paying the ITBI, whose rate ranges from 2% to 5% (depending on the municipality in which the property is located) on the value of the property or right being transmitted.

This rate generally focuses on the value attributed by the city to the property (reference assigned value) or on the price assigned by the parties to the transaction, which is higher between the two values.

In practice, it is common for the value assigned unilaterally and previously by the municipalities to be higher than the price assigned by the parties to the sale and purchase, leading the ITBI to be calculated on a calculation basis greater than the value of the real estate business.

Although the buyer may administratively question the reference assigned value attributed by the city, this does not mean that this administrative review will be admitted by the municipal authorities to recognize that the price negotiated between the parties is the correct value to be used as a basis for calculating the municipal tax.

Moreover, often buyers do not even administratively question the reference value, because this questioning ends up delaying the realization of the real estate business, since the payment of ITBI is a requirement for the drafting of the deed of sale and purchase of the property.

Considering this information, the Supreme Court has fixed the following theses:

• the ITBI calculation basis is the value of the property transmitted under normal market conditions and is not linked to the calculation basis of the IPTU, which cannot even be used as a tax floor;
• the value of the transaction declared by the taxpayer enjoys the presumption that it is consistent with the market value, and that presumption can only be ruled out by the tax administration by the filing of its own administrative proceedings (article 148 of the CTN); and
• the municipality cannot previously arbitrate the ITBI calculation basis based on a reference value established by it unilaterally.

The decision of the STJ rightly recognizes that the prior fixation of a reference assigned value by the municipalities to serve as the basis for calculating the ITBI is illegal. The price of the property negotiated between the parties shall enjoy a presumption of veracity and good faith and shall be regarded as the one that best reflects the selling value of the property or right under normal market conditions.

The STJ also understood that, although the IPTU has as a calculation basis the assessed value of the property, this assessed value attributed by the municipalities and used as the basis for calculating the IPTU should not be confused with the assessed value that will serve as the basis for calculating the ITBI.

It was also decided that the assessed value attributed by the municipalities for the purposes of calculating the IPTU should not be used or as a minimum floor for calculating the ITBI, because the value for disposal under normal market conditions reflects other market criteria besides those evaluated by the municipal agencies to define the assessed value of the IPTU. The definition of the assessed value of the IPTU is done by sampling, leveling down the value of the properties evaluated. Basically, the footage and the location of the property are taken into account.

Other relevant market criteria in the pricing of the property, such as the state of conservation of the property, existing improvements, the supply and demand of real estate in the region, the existence of encumbrances on the property and the commercial conditions of payment of the price, are not taken into account in this definition of the market value of the IPTU and, therefore, this value is inadequate to serve as the basis for calculating the ITBI.

According to the STJ, it will be up to the taxpayer to inform the sale value of the property or right transmitted (value of the real estate transaction) to be used in the calculation of the tax. If it understands that the amount reported by the taxpayer is lower than what would correspond to the actual sale value of the property, the municipality may review this value within five years through the filing of its own administrative process. Therefore, given this new jurisprudence that can be signed by the STJ, it will be essential that the parties of a real estate transaction gather consistent evidence so that, if the value of the business is questioned by the municipal authorities, they have concrete elements to confirm the value attributed to the real estate transaction.

This decision of the STJ, if it remains and becomes final, will directly impact the calculation of the ITBI paid in real estate transactions. The procedures adopted by the municipalities will need to be revised to reflect the understanding set by the Supreme Court, under penalty of illegality of the requirement of ITBI that is in disagreement with the court's decision.

Dissatisfied with the understanding established by the STJ, the municipality of São Paulo filed an appeal in which it defends, through a motion to clarify, the extinction of the process without the resolution of the merits, keeping controversial the topic defined by the STJ as Repetitive. The municipality also argues that, if the case is not extinguished, the decision changes the parameters affixed because it allegedly exceeded the limits of the requests made.

If the appeal of the municipality of São Paulo is not accepted, the understanding defined by the STJ must be applied to existing lawsuits on this controversy and other cases that discuss the same subject in the future, due to the general repercussion of the issue. Taxpayers who have paid ITBI on a calculation basis greater than the actual value of the transaction in the last five years may question them in court to get those amounts back. To recover the largest amount paid in the past, it will be essential that, in these questions, there is concrete evidence that confirms and validates the value of the real estate transaction practiced.

We understand that this decision of the Supreme Court is right, because it definitively removes the ingrained practice adopted by municipalities to use assigned values for the ITBI requirement, without considering the specificities of the actual real estate business carried out by taxpayers.

References:

ITBI - Portal of the City of Belo Horizonte

Law 5,172/66

Municipal decree 55.196/14 SP

Municipal law 1364/88 RJ

WHALER, Aliomar. Brazilian tax law. 12. ed. Rio de Janeiro: Forensics, 2013. 1575 p.

DE MELO, José Eduardo Soares; PAULSEN, Leandro. Federal, State and Municipal Taxes. 9. ed. Porto Alegre: Livraria do Advogado Editora, 2015. 463 p.

Category: Environmental

Oil pollution incidents require a coordinated set of procedures and actions to mitigate their possible impacts, whether on a corporate level or to the ecosystem. For these reasons, such crisis situations are often subject to constant updating of its regulations, in order to impose obligations to minimize their consequences, generate less losses and enable the identification of opportunities for improvement, both for entrepreneurs and the regulatory entities.

Federal Decree 10.950/22, which provides for the National Contingency Plan for Incidents of Oil Pollution in Waters under National Jurisdiction (PNC), was issued to regulate Federal Law 9.966/00, which establishes rules for the prevention, control and supervision of pollution caused by release of oil and other harmful or dangerous substances in waters under national jurisdiction. The recent oil spill incident off the coast of Peru, whose oil spills reached part of the coast of state of Ceará, had an impact on the decision.

Edited as an update of the previous PNC - established by revoked Federal Decree 8.127/13- the new normative instrument establishes responsibilities, sets out organizational structure and defines guidelines, procedures and actions, with the purpose of:

• ensuring the joint and coordinated action of the public and private sectors in measures to respond to oil pollution incidents in waters under national jurisdiction;
• mitigating possible environmental damage; and
• avoiding, as far as possible, damage to public health.

In general, PNC will come into force in cases of major oil pollution incidents, whenever considered of national significance by the Monitoring and Evaluation Group (Grupo de Acompanhamento e Avaliação - "GAA")^[1] and in which individualized actions taken by those directly or indirectly responsible for river or maritime/port structures, as provided for in their respective Individual Emergency Plans, do not prove sufficient to reverse the problem.

In such circumstances, it will be up to the polluter:

• to compensate the public authorities in relation to the goods and services, human resources and materials applied in the exercise of any impact mitigation operation (art. 9, item VI, point (a) of Federal Decree 10.950/22);
• provide immediate communication of such oil pollution incident to the Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA), the state environmental agency responsible for the jurisdiction in which the incident took place and the National Petroleum Agency (ANP) – according to Annex II of Federal Decree 4.136/02; and
• provide situation reports to all authorities indicated in Article 13,^[2] in the form and periodicity established by the GAA or operational coordinator, containing detailed information about the incident, such as the description of its current situation, whether or not the occurrence has already been controlled, discharge volume, volume that can still be discharged, product characteristics, mapping of affected areas, measures adopted and planned, date and time of observation, human resources and materials mobilized, additional resources needed, current location and possible predicted trajectories of the oil slick (art. 15).

Regarding its organizational structure, PNC’s new regulation aims to overcome some weaknesses that found in Federal Decree 8.127/13, which, in addition to the GAA and the National Authority (Autoridade Nacional), referred to an Executive Committee (Comitê Executivo) and a Support Committee (Comitê de Suporte), both extinguished after Federal Decree 9,759/19. The two support committees were not reestablished by the new decree. However, GAA and National Authority – whose functions will be executed by the Minister of the Environment (Ministério do Meio Ambiente) – were joined by the Integrated Action Network (Rede de Atuação Integrada), which will be composed by representatives of the vast majority of ministries, in addition to the Office of Institutional Security of the Presidency of the Republic (Gabinete de Segurança Institucional da Presidência da República) and the Civil Office (Casa Civil).

Although dealing with issues related to responsibility of action and prevention, reimbursement, costs and plans, Federal Decree 10.950/22 does not regulate any  compensation system for environmental damages resulting from oil pollution, as provided for in international conventions.^[3]

In practice, we are still waiting to acknowledge PNC’s real effectiveness, since the absence of compensation funds that enable an organized, fast and efficient action in coping with crises can lead to an exclusive dependence on individual emergency plans and area plans prepared by private entities.

^[1] GAA will be composed of representatives of Brazilian Navy, Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA) and National Agency for Petroleum, Natural Gas and Biofuels (ANP).

^[2] They are: Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA), state environmental agency of the jurisdiction of the incident, Captaincy of Ports or Fluvial Captaincy of the jurisdiction of the incident and National Agency of Oil, Natural Gas and Biofuels (ANP).

^[3] It is worth remembering that, although it is a signatory to the International Convention on Civil Liability for Damage caused by Oil Pollution of 1969 (CLC 69), Brazil did not adhere to the updated protocol of the Convention on Civil Liability for Damage caused by Oil Pollution of 1992, which provides for an environmental damage compensation fund (IOPC Fund 92).

Category: Digital Law

The euphoria of fan tokens started in 2020/2021, and it possibly will remain on the agenda for a long time.

The trend of fan tokens is not passionate fan thing only. Behind a fan, there may also be a consumer and an investor. This new type of digital assets brought a number of legal risks not yet dimensioned.

The risks vary depending on the type of token fan issued and traded. In the case of fan tokens of member-supporters, which give their purchasers access rights to products or services immediately or at a future date, problems of lack of information may occur. Questions like: what is that fan token for? What benefit does it give the purchaser? What happens if the purchaser is not satisfied with the benefit made available at a future date?

All these issues should be addressed in detail in the terms of use of the platform that publicly offers fan tokens. Many of such initiatives, however, are not sufficiently clear in their terms, which can lead to serious problems in the future.

Even if one informs the public about details of the fan token, risks still exist. The terms of use of the platform that trades fan tokens can be considered adareagreements, not subjecting the the purchaser to many of the clauses expressed there before Brazilian courts. An example is the foreign forum election clause for resolving any conflicts between the token purchaser and its issuer or offeror. This risk can be enhanced if the dispute involves consumer rights.

In addition to the risks associated with the member-supporter tokens, there is a more general risk that may affect the entire category of fan tokens, including so-called solidary tokens. This is the risk of the fan token being associated with a collective investment contract. In this case, the fan token will possibly be subject to Law 6,385/76, which establishes the need for registration with the Brazilian Securities and Exchange Commission (CVM).

A fan token offering may be considered a collective investment contract if it generates, when publicly offered, the right of participation on profits or remuneration, including as a result of the rendering of services, and whose profits derive from the efforts of the entrepreneur or third parties.

Despite this broad definition, the CVM, when analyzing the specific case of Vasco Token – solidary token that represents credit rights in future transactions of some players of the team – has understood that this fan token consisted of a collective investment contract. CVM considered that the participation rights resulting from the commercialization of Vasco Token were so uncertain that it would not be possible to say that the tokens would represent by themselves the right to participate, partnership or remuneration with income coming from the effort of the team or third parties.

Nevertheless, the risk of similar fan tokens fall within the definition of a collective investment contract is considerable. In order to mitigate this risk, every single detail of the fan token offering must be rigorously thought out. Otherwise, the legal problems may be proportional to the passion for the team.

Category: Digital Law

Economists and law professionals seek to find a method to understand the exact value of goods or services. Economics works with complex mathematical formulas to calculate the value. In law, we try to use the analogy with leading cases to achieve the same outcome.

What none of the methods has been able to establish exactly is the value of the feeling of a fan or an enthusiast. Despite the difficulties that this task involves, technology has been addressing this issue, even if imperfectly.

In the era of the dissemination of blockchain, it is possible not only to measure fans´feelings, but also to market them in the form of Tokens. This innovation has been called fan token, which mean several things. Fan tokens are blockchain based digital assets that are usually traded in economic segments bustling with feelings linked to fans – the passion for a team, the desire for victory etc.

Big football, basketball and motorsport teams have already issued their own fan tokens to raise funds and create engagement between the brand and their fans and enthusiasts.

Two types of fan tokens are very common in the market and, so far, the Brazilian legal scenario has been very receptive to this innovation.

The first of fan tokens resembles a kind of partner-supporter portfolio, very similar to the socio-supporter programs widespread in the country in the last decade. This type of fan token is a kind of utility token and has no specific regulation. Its name derives precisely from the "utilities" conferred on the owner of the asset.

Through the acquisition of fan tokens, a person may receive specific benefits, proportional to the amount of tokens. One type of benefit may be, for example, the right to vote on issues of "low governance" of the team, such as the choice of the color of the uniform of the team or the mascot. Another common benefit is the right of access to preferred seats in matches played by the team or, also, the right to discounts on products and services offered by the brand.

A second type of fan token, less known, but no less interesting, is the so-called solidary tokens. These assets confer future rights to their owners in the event a team “sells” a particular player.

Generally, the team that markets the players rights receives a percentage of the transfer amount based on an arrangement called "solidarity mechanism". The team can take advantage of this benefit and issue and market fan tokens which, at a future and uncertain date, will give their purchasers the right to receive a portion of the receivables. The Brazilian Securities and Exchange Commission (CVM) analyzed the specific case of Club de Regatas Vasco da Gama. CVM has understood that fan tokens like this (solidary tokens) shall not be deemed securites – and are therefore not under their regulatory perimeter.

There is a growing possibility that other types of tokens that attribute different benefits to their purchasers be issued and traded in the future. The evolution of this market is growing at a fast pace. From the legal perspective, it is necessary to follow the complex – and creative – legal arrangements that involve the commercialization new type of asset.

Category: Tax

The Superior Chamber of the Court of Taxes and Fees of the State of São Paulo (TIT) judged, in the thematic session held on March 24, appeals that deal with the cancellation of ICMS credits arising from the acquisition of taxpayer goods from the Manaus Free Zone, which enjoys benefit granted by the state of Amazonas.

Complementary Law 24/75 provides that ICMS tax benefits can only be granted by states after approval of an agreement by the National Council for Business Policy (Confaz). The only exception is provided for in Article 15 of Complementary Law 24/75, which establishes: "The provisions of this Law does not apply to industries installed or that come to settle in the Manaus Free Zone, being forbidden to the other Units of the Federation determine the exclusion of tax incentive, premium or stimulus granted by the State of Amazonas".

Prevailed in the TIT, however, the position that the benefits granted by the state of Amazonas to taxpayers located in the Manaus Free Trade Zone need to have approval of agreement by Confaz. Thus, according to the court, the state of São Paulo would not be obliged to admit the credit bookkeeping of ICMS highlighted in the tax documents of purchase of goods, if the manufacturer enjoys benefit granted by the state of Amazonas and there is no payment of the tax at the origin.

We understand that the court conferred the mentioned provision too restrictive interpretation, which does not agree with the rule and legal regime applicable to the Manaus Free Trade Zone. There are, therefore, solid legal arguments to defend a position contrary to the court's decision.

Category: Labor and employment

Interministerial Ordinance MTP/MS 17, published on April 1, 2022, amends Annex I of Joint Ordinance 20/2020, again updating the measures to be observed to prevent, control, and mitigate the risks of covid-19 transmission in work environments.

Among the main changes the following may be highlighted:

• possibility of dispensing with the use of a protective mask in work environments where, by decision of the federal entity where the company is located, the use of protective mask equipment is not mandatory in closed environments (click here to read our article with more information on the subject);
• updating the concept of contacts of confirmed cases and including the possibility of not withdrawing from on-site activities if the contact is fully vaccinated;
• exclusion of the concept of close contact of a suspected case;
• no obligation to keep a record of suspected cases;
• exclusion of the requirement to refer suspected cases to the organization's medical clinic for evaluation and follow-up;
• exclusion of the requirement to adopt specific procedures for workers to avoid touching surfaces with high frequency of contact;
• exclusion of the requirement to increase the frequency of cleaning and sanitizing procedures for sanitary facilities and changing rooms, as well as for points of frequent contact.

The table below shows the main concepts and changes:

The other measures remain in place and must be fully observed by companies to reduce the risks of transmission and contagion among workers.

Note below the main measures provided for by the ordinance, as updated:

Guidance, prevention, control, and mitigation measures

- Obligation to adopt the measures necessary to prevent, control, and mitigate the risks of transmission of covid-19 in work environments. Measures should include:

• Prevention measures in work environments, in common areas such as cafeterias, bathrooms, changing rooms, rest areas, and in the transportation of workers, when provided by the employer;

• Early identification and removal of workers with signs and symptoms compatible with covid-19;

• Procedures for workers to report, including remotely, signs or symptoms compatible with covid-19 or possible contact with a confirmed case of covid-19; and

• Hand sanitation instructions and respiratory etiquette; and

• Dissemination/clarifications of the forms of infection, signs, symptoms, and care needed to reduce transmission in the work environment and community.

- The organization should extend this information to outsourced workers and workers from other organizations who frequent the facility.

Conduct to be adopted in confirmed, suspected, and confirmed contact cases

- Immediately remove from in-person work activities workers with confirmed cases, suspected, cases and confirmed cases of close contact with covid-19 for a period of ten days.

As the beginning of the leave period the following should be considered:

• for confirmed cases, the day after the onset of symptoms or the collection of the molecular method test (RT-PCR or RT-LAMP) or antigen test;
• for suspected cases, the day after the day of symptom onset;
• for close contacts, the last day of contact with the confirmed case.

The period of leave may be reduced to seven days in the following cases:

• Confirmed: as long as they have been fever-free for 24 hours, without the use of anti-fever medication, and with remission of respiratory signs and symptoms.
• Close contacts: provided that testing by the molecular method (RT-PCR or RT-LAMP) or antigen testing is performed from the fifth day after contact, if the test result is negative. This is not mandatory if the contact is fully vaccinated.
• Suspected: as long as they have been fever-free for 24 hours, without the use of anti-fever medication, and with remission of respiratory signs and symptoms.

- Guidance to workers on leave regarding the need to remain at their place of residence, with pay maintained during the period of leave.

- Communication channels for workers to report the appearance of compatible signs or symptoms, as well as contact with confirmed or suspected covid-19 cases.

- Gathering of information on contacts, activities, workplace, and common areas frequented by the workers with covid-19.

- Up-to-date record keeping with the following information:

• Workers by age group;

• Workers with clinical conditions at risk for developing complications related to more severe covid-19 conditions (specification of the disease not permitted, preserving confidentiality). The following are considered clinical conditions at risk for the development of covid-19 complications: severe or decompensated heart diseases (heart failure, stroke, revascularization, arrhythmia, decompensated hypertension); severe or decompensated pneumopathies (oxygen-dependence, carriers of moderate/severe asthma, chronic obstructive pulmonary disease - COPD); the immunosuppressed; chronic renal patients at an advanced stage (grades 3, 4 and 5); diabetics, according to clinical judgment, and high-risk pregnancies.

• Confirmed cases;

• Workers on leave who had close contacts; and

• Measures taken to adapt work environments to prevent covid-19.

- When the activities of a certain sector or of the establishment itself are shutdown as a result of covid-19, the following procedures must be adopted before the activities return:

• ensure the adoption of prevention measures provided for in the annex to the ordinance and the correction of situations that may have caused the contamination of workers in the work environments;
• sanitizing and disinfecting the workplace, common areas, vehicles used;

• enhance communication to workers; and

• strengthen worker monitoring to ensure the removal of confirmed cases, suspected cases, and close contacts of confirmed cases of covid-19.

Hygiene and cleaning of the environments

- Disinfecting and cleaning workplaces whenever a worker is assigned to occupy another's workplace.

Hand hygiene and respiratory etiquette

- Guidance to employees to engage in frequent hand sanitizing, with the provision of resources for this purpose near work stations, including water, liquid soap, disposable paper towels, and a trash can (with no manual contact to open) or adequate hand sanitizer, such as 70% alcohol, and guidance on not sharing towels or products for personal use.

- Guidance on not sharing towels and personal use products.

- Workers should be instructed to avoid touching their mouths, noses, eyes, and faces with their hands, and to practice respiratory etiquette, such as using disposable handkerchiefs for nasal hygiene, covering nose and mouth when sneezing or coughing, and cleaning their hands after sneezing or coughing.

- Participation by the SESMT and Cipa in the prevention actions implemented by the organization.

Social distancing

- Adoption of measures to increase distancing and decrease personal contact between workers and the external public.

- Minimum distance of one meter between workers and between workers and the public. If physical separation of at least one meter cannot be adopted to reduce the risk of transmission between workers, customers, users, contractors, and visitors, one must:

• for activities conducted at fixed workstations, maintain the use of surgical or cloth masks and adopt waterproof partitions or provide face shields or goggles; and
• for the remaining activities, maintain the use of surgical or cloth masks, observing the cases of exception on the mandatory use of masks.

- Adoption of measures to limit the occupation of elevators, stairways, and restricted environments, including sanitary facilities and changing rooms.

- Demarcation and reorganization of places and spaces for queues and waiting with at least one meter between people.

Personal Protective Equipment (PPE) and other protective equipment

- Guidance to employees on the use, cleaning, disposal, and replacement of masks and other protective equipment, as well as their limitations in protecting against covid-19.

- The organization's medical service professionals, if any, should receive PPE or other protective equipment, according to the risks, including respiratory protection type PFF2 (N95) mask, in accordance with the guidelines and regulations of the Ministry of Labor and Social Security and the Ministry of Health.

Click here to read our article on the supply and use of masks.

Ventilation of workplaces and common areas

- Priority should be given to natural ventilation in workplaces or the adoption of measures to increase as much as possible the number of exchanges of air in enclosures, bringing clean air from outside and avoiding the recirculation of conditioned air.

- When a split air conditioning system is used, it is recommended that the doors and windows be kept open or that an air renewal system be added, subject to technical or operational feasibility.

- The ventilation systems installed must be kept in operation during business hours.

Risk groups

- Surgical masks or masks of type PFF2 (N95) or equivalent must be provided for workers aged 60 years or older or who have clinical conditions at risk for developing complications of covid-19, when telecommuting or remote work is not adopted at the employer's discretion, except in localities where, by decision of the federal entity where the company is located, it is not mandatory to use protective mask equipment indoors

Common areas of the company

- For the common areas, Ordinance 20/2020, as amended, established a series of obligations and recommendations to be followed by employers, ranging from the cafeterias to the transport offered to workers.

Cafeterias

- It is forbidden to share glasses, plates, and cutlery without sanitization.

- Self-service should be avoided or, when it cannot be avoided, control measures should be implemented, such as:

• Conditions for hand sanitization before eating or provision of disposable gloves;
• sanitation or frequent change of shared kitchen utensils, such as ladles, handles, and spoons; and

• installation of food protector over self-service structures.

- Provide the frequent cleaning and sanitation of tables, benches, and chairs surfaces, as well as adopt in the cafeterias minimum spacing of one meter between people, with marking and demarcation of spaces in the row and at the tables. When the front or side distance is not observed, a physical barrier must be used on tables at least one and one half meters above the ground.

- Distribution of workers into different time slots at meal places.

- Delivery of set of sanitized utensils, individually packaged.

- Inclined jet drinkers should be adapted in such a way that it is only possible to drink water using a disposable cup or individual container.

Locker rooms

- Avoid crowding of workers at the entrance, exit, and during the use of locker rooms.

- Direct workers to maintain a distance of one meter from each other while using the facilities.

- Guide workers on the order of removal of clothing and equipment, so that the last protective equipment to be removed is the mask.

- Availability of sink with water and liquid soap, as well as disposable towels or sanitizer dispensers suitable for hands, such as 70% alcohol, at the entrance and exit of the locker rooms.

Transport offered by the employer for commuting between home and work

- Implementation of procedures for reporting, identifying, and removal of workers with symptoms before boarding, thus preventing the entry of symptomatic persons or close contacts of confirmed cases of covid-19 in the vehicle.

- Obligation to wear protective masks when boarding workers and use during the trip.

- Guidance to workers to avoid crowding when embarking and disembarking transport, with the implementation of measures to ensure a minimum distance of one meter between each person.

- Compliance with the maximum passenger capacity, limited to the number of seats in the vehicle.

- Maintenance of natural ventilation inside vehicles and, where the use of the air conditioning system is necessary, recirculation of air should be avoided.

- Seats and other surfaces in the vehicle most frequently touched by workers should be sanitized regularly.

- Record keeping of the workers who use the transportation, listed by vehicle and trip.

Category: Labor and employment

MTP/MS Interministerial Ordinance 17, published on April 1, amended Annex I of Joint Ordinance 20/20 to update the measures to be observed to prevent, control, and mitigate the risks of covid-19 transmission in work environments.

Among the main changes, we highlight the possibility of releasing the use of a protective mask in work environments where, by decision of the federal entity (state or municipality) where the company is located, the use of a protective mask is not mandatory in closed places.

With this change in the federal rule, it becomes possible for companies to stop requiring the use of masks by employees on their premises in states and municipalities that have local regulations that do not require the use of masks indoors.

Depending on local legislation, however, maintenance of masks in work environments may still be required. Below we look at the possible scenarios based on the new rules:

• If there is a local legislation that expressly releases the use of masks indoors, the employer can waive the requirement that its employees wear masks in the workplace in the respective locality.

• If the state/municipality has not released the use of mask in closed environments, the employer must follow the rules for mask use in closed environments defined by the state/municipality, observing the most restrictive rule.

• If the state/municipality issues a rule mandating that the measures established by federal ordinances must be followed or is silent about the release of the use of masks in closed places, the employer must follow the rules of Joint Ordinance 20/20, as amended by Interministerial Ordinance MTP/MS 17. Therefore, the use of masks should be required in shared environments or those in which there is contact with other employees or the public, when the health alert level in the state is at levels 3 or 4 in the preceding epidemiological week, according to the publication "Risk Assessment in the Covid-19 Scenario", in the Section "Epidemiological Status of Covid-19 by State and Regions/Brazil", available at the website of the Ministry of Health.

It should be noted that, regardless of whether local or federal legislation lifts the requirement to wear masks indoors, the employer may, at its sole discretion, continue to require employees to wear masks on its premises if it deems it necessary.

Interministerial Ordinance MTP/MS 17 goes into effect on the date of its publication (April 1st).

Category: M&A and private equity

Individuals and legal entities resident, domiciled or with headquarters in Brazil, as provided for in tax law, must report to the Central Bank of Brazil the assets and amounts held by them outside the country. The reporting is mandatory to those holding assets abroad amounting to or exceeding the equivalent of US$1 million on December 31, 2021. The assets and rights include corporate interests in companies, fixed-income securities, shares, real properties, deposits, loans investments, among others.

Furthermore, the individuals and legal entities mentioned above must also report quarterly to the Central Bank of Brazil the assets held abroad on March 31, June 30 and September 30 of each year, if the total value of such assets amounts to or exceeds the equivalent of US$100 million.

The report referring to December 31, 2021, must be delivered by means of the Brazilian Capital Abroad (CBE) reporting form on the Central Bank of Brazil website (www.bcb.gov.br), from February 15 through April 5, 2022, at 6 PM.

The manual containing detailed information about the reporting content and requirements is also available on the Central Bank of Brazil website.

The late delivery of the declaration, as well as the lack of reporting, or the submission of false, inaccurate or incomplete information, subjects the violator to a fine of up to R$250,000 imposed by the Central Bank of Brazil.

(CMN Resolution 4,841/20, CMN Resolution 3,854/10, BCB Circular 3,624/13, as amended, and Resolution BCB 131/21).

Category: Banking, insurance and finance

The audiovisual market, formerly dominated by record labels and producers and, more recently, also by streaming, has drawn the attention of institutional investors, generally focused on other sectors and segments. The predictability of royalties and revenue flow has attracted alternative asset investment firms and even traditional private equity firms, such as KKR, Pimco and Blackstone. In partnership with expert consultants, these players seek a range of intellectual property assets, including music catalogs, books, movies and even video games to add to their portfolios.^[1]

In case of music catalogues, singers and other copyright owners see several benefits and opportunities in these operations. For example, some seek to remake revenue stemming from the cancellation of shows during the pandemic years, while others intend to structure the transmission of their already consolidated assets and avoid disputes between heirs.

The frenzy for copyright investments should be no different in Brazil. The Brazilian recording industry, which already had annual revenues worth more than US$ 1 billion in the 1990s, has been recovering and remains the largest recording production in Latin America.^[2]

According to a report by the International Federation of the Phonographic Industry (IFPI), income from music produced in Brazil increased by 24.5% in 2020 alone – with a total of US$ 306.4 million generated. There was a significant growth in the reproduction of songs on streaming in the region.^[3]

In Brazil, the copyrights of lyrics and songs is protected by Law 9,610/98, which guarantees the author moral and property rights over his/her creations. Moral rights are personal and inalienable, while property rights may be licensed or disposed of to third parties, not unlike other forms of ownership. Legal protection is granted automatically, from the moment of creation of the protected work, and is independent of registration in a public agency.

For the exploitation of such rights and in order to receive royalties and other revenues, in addition to the possibility of licensing or assignment of copyright directly by the author or the new rightholder (for example, a record label that acquired the artist's property rights), it is market practice to link the artist or rightholder to a collective management association and the registration of his repertoire in that association.

Collective management associations act as agents of a group of artists and are centralized in the Central Office of Collection and Distribution (Ecad). Ecad is the main actor in collective copyright management, in charge of managing the payment of royalties. Users (such as streaming platforms, radio and TV stations, marketing producers, among others) report the execution of songs on their communication channels and make the respective payments to Ecad monthly, in case of continuous use, or eventual, as shows and events take place. Ecad, in turn, distributes the payments between authors, interpreters, record companies and other parties that have property rights over the work.

In the case of streaming platforms (currently the largest players in the market),^[4] Ecad has specific contracts with them^[5] whereby the platform undertakes to send Ecad a report detailing the songs played by its users. Such report is then processed by Ecad to confirm the royalty amounts to be paid by the platform. Once Ecad receives the royalty payments, it passes along to the holders of the property rights, whether artists or third parties to whom such rights have been transferred. The streaming platforms have made the receivables chain safer, but also contribute to reducing piracy and provide information and data on the potential profitability of these assets.

Investors considering copyright investments in Brazil should do a preliminary due diligence to confirm the ownership of rights (since copyrights in Brazil arise automatically and not from enrollment or record – as it is the case of real estate, patents or trademarks), and the status of the catalog of songs and the artist’s enrollment with collective management associations, as well as any disputes involving the artist or his musical catalog – especially those related to plagiarism or piracy.

It is also necessary to consider aspects related to the artist himself who owns the copyright, such as the involvement in illegal acts and/or with incidents that may compromise his image and reputation, since such actions may affect the distribution of his work and the collection of royalties. Investors should demand that the artist to give assurance about his past conduct and undertake to comply with applicable laws and indemnify investors for losses to which it gives cause. These provisions are rather common in M&A deals and do not differ substantially from contractual clauses and other provisions adopted by institutional investors in other investment deals.

The structuring of the investment is flexible and can occur through investment funds in credit rights or even with the creation of specific purpose companies focused on the management of copyright or with financing based on such rights. Once in the portfolio, the property rights themselves can be guaranteed in full, or even partially, for example, through the assignment of their receivables flow.

Despite the relevance of the Brazilian phonographic market and the growing wave of streaming in the region, which makes musical assets more attractive, this type of investment is still scarce in Brazil and should appeal to a large part of investors seeking alternative investments.

Other references:

https://www.privateequityinternational.com/why-music-rights-strike-a-positive-note/

https://www3.ecad.org.br/associacoes/Paginas/default.aspx

^[1] Asset manager Pimco joins song copyright investment frenzy. Available in: https://www.ft.com/content/01f54a76-24eb-4f5f-935b-c5f68389360f Accessed February 2022; KKR, Blackstone strike billion-dollar deals for music rights.  Available in: https://www.privatedebtinvestor.com/kkr-blackstone-strike-billion-dollar-deals-for-music-rights/ Accessed February 2022.

^[2]  Global Music Market Overview. International Federation of the Phonographic Industry (IFPI). Available in: https://gmr2021.ifpi.org/report. Accessed February 2022.

^[3]  World music industry grows 7.4% in 2020; Published on March 23, 2021. Available in: http://www.ubc.org.br/publicacoes/noticia/17762/industria-fonografica-mundial-cresce-74-em-2020 Accessed February 2022.

^[4] The services of streaming correspond to 62.1% of the share of global income related to musical reproductions.

^[5] Ecad What Brazil hears. https://www3.ecad.org.br/em-pauta/Documents/O%20que%20o%20Brasil%20Ouve%20-%20Streaming.pdf.

Category: Capital markets

With the entry into force of Article 1 of Law 13.818/19 on January 1^st of this year, publications ordered by Law 6.404/76 (Brazilian Corporate Law) have gained new rules. The changes altered the Article 289 of the Brazilian Corporate Law and created a simpler and more flexible procedure, which meets the companies’ expectation for a modernized and less costly advertising regime, at least partially. To these changes, are added the recent amendments to the Brazilian Corporate Law promoted in 2021 by the Supplementary Law 182/21 (“Startups’ Legal Landmark”).

The most relevant change was to end the obligation of companies to carry out these publications in the official press vehicles of the Union, the states, or the Federal District. Pursuant to the new wording of Article 289, publications "shall be made summary form in a newspaper of general circulation edited^[1] in the place where the company's headquarters is located, and with simultaneous disclosure of the full content of the document on the page of the same newspaper on the Internet, which must provide digital certification of the authenticity of the documents kept on its page, issued by a certifying authority accredited under the Brazilian Public Keys Infrastructure (ICP-Brazil)".

The new wording applies to mandatory publications made from January 1^st, 2022, regardless of the period (fiscal year or quarter) to which they are referred. It covers, for example, the financial statements for the period ended December 31, 2021.

In relation to legal publications involving financial statements, Article 289 states that "the publication shall contain at least in comparison with the data of the previous fiscal year, information or overall values relating to each group and its classification of accounts or records, as well as extracts of the relevant information contemplated in the explanatory notes and opinions of the independent auditors and the supervisory board, if there is."

This became the general rule for the legal publications of publicly-held or closed companies, with certain exceptions related to the size of the company.

The Brazilian Securities Commission (CVM) issued its 39^th Guidance Opinion on December 20, 2021, in order to give further evidence to the publication requisites to be observed by the companies in the publications of the summarized financial statements. The document explains the procedures for the summary content of financial information, explanatory notes, reports by the independent auditors and the fiscal council – if in operation – for the disclosure of essential information. The summarized financial statements should be preceded by the following featured notices, in order to avoid doubts from readers:

• "The financial statements presented below are summarized financial statements and should not be considered in isolation for decision making. Understanding the financial and equity situation of the company requires reading the complete audited financial statements, prepared in accordance with corporate law and applicable accounting regulations"; and

• "The full audited financial statements, including the respective independent auditor's report, are available at the following electronic addresses:

1.  [insert the electronic address of the newspaper of general circulation in which the publication was made];
2.  [insert the company's electronic address, if Company registered in Category A];
3.  [insert CVM's electronic address]; and
4.  [insert B3's electronic address in the case of listed companies]".

As for other acts, however, such as the minutes of general meetings, there is no legal or regulatory provision regarding the acceptable level of information synthesis. The practice shall dictate certain reasonable standards, and it is up to each company to carefully assess the criteria it will adopt in its publications, including cases where the summary publication may, if necessary, not be justified.

Although there is not, in the current normative framework, a provision on the minimum content to be considered for the summary publication of the other documents listed in the Brazilian Corporate Law, this act should be understood as part of the set of information provided by the issuer to the market, which implies compliance with Articles 14 and 15 of CVM’s Instruction 480/09. Therefore, the document published in a summary form should include:

• the observation that this is summarized information and should not be considered in isolation for decision-making; and

• the electronic addresses of the newspaper of general circulation, CVM and B3 (in the case of listed company) where the full document is published.

Publications shall always be made in the same newspaper, chosen at a board of directors’ meeting. Any change shall be preceded by notice to shareholders in the statement of the minutes of the ordinary general meeting (AGO), pursuant to Article 289, third paragraph of the Brazilian Corporate Law.

It is assumed that the wording of Article 289, third paragraph of the Brazilian Corporate Law encompasses any change brought about by the company. Considering that not publishing in the official press vehicles is a change in disclosure, the Superintendence of Business Relations (SEP) understands that it is sufficient for the company to update the registration form, in item "Disclosure Channels", and provide a notice to shareholders clarifying the change, motivated by the amend to the legislation. We emphasize that, if the company's articles of association contain specific rules for legal publications (in other words, indicates that publications will be carried out in the official press), it will also be necessary to amend the articles of association in order to adapt it to the new Brazilian Corporate Law rules.

The Articles 294, 294-A and 294-B of the Brazilian Corporate Law – as the wording given by Startups’ Legal Landmark – establish certain special regimes for closed and publicly traded companies depending on the amount equivalent to their revenues, as an exception to the new general rule provided for in Article 289 of the Brazilian Corporate Law.

Pursuant to the Article 294 of the Brazilian Corporate Law, closed companies with annual gross revenues of up to R$ 78 million are exempt from publishing in a printed newspaper, and can publish them exclusively electronically. Ordinance 12.071/21 of the Ministry of Economy, in turn, established that this disclosure should be made both on the company's own website and in the Balance Sheet Center of the Public System of Digital Bookkeeping (“SPED”). The net worth and the number of shareholders of the company, previously provided for in the amended article, are no longer criteria for the exemption from publication.

The Normative Ruling of DREI/ME 112 (IN DREI 112), of January 20, 2022, has altered the Normative Ruling of DREI 81 (IN DREI 81), of June 10, 2020, which provides for the general standards and guidelines of the Public Registry of Companies. The objective is to adapt IN DREI 81 to the new rules on publications ordered by the Brazilian Corporate Law. The Companies Registration Manual, which corresponds to the Annex V of IN DREI 81, has been already changed, especially in items 17 and 17.1, Section I, Chapter II, which specifically deals with publications ordered by the Brazilian Corporate Law and publications of closed companies with annual gross revenue of up to R$ 78 million, respectively.

The new wording given by IN DREI 112 reinforces that companies must carry out their publications exclusively in a newspaper of general circulation (printed and digital), edited in the place where its headquarters is located, and clarifies that it is not up to the local Board of Trade to analyze the merit of publications held in summary form in the printed newspaper,  except in the case of the financial statements in summary form, which shall contain the minimum provided for in Article 289, item II of the Brazilian Corporate Law.

For registration purposes, IN DREI 112 also clarifies that compliance with the requirement regarding the annual gross revenue must be measured upon presentation of a statement by the company. The SPED will allow the issuance of documents proving the authenticity, inalterability and date of publication of the acts. Furthermore, according to IN DREI 112, the specific provisions on electronic publications do not apply to the controller of a group of companies or affiliated thereto, referred to in Article 265 of the Brazilian Corporate Law.

Smaller publicly-held companies, that is, those with annual gross revenues of less than BRL 500 million, may also be exempted from the formalities provided for in Article 289 of the Brazilian Corporate Law regarding publications ordered by law – but this will depend on specific regulation of CVM, as established in Article 294-A, item IV, of the Brazilian Corporate Law.

To summarize the rules applicable to legal publications provided in the Brazilian Corporate Law, as introduced by the Startups’ Legal Landmark and Law 13.818/19, we present the following resume:

We also point out that the provisions of the Brazilian Civil Code on publications of simple and limited-liability companies have not been changed – in the few cases where they are required, such as capital reductions, mergers and incorporations. In principle, those companies remain obliged to use the official press vehicles in such cases, which creates a clear legislative imbalance. Micro and small-sized legal entities, on the other hand, remain exempt from the publication of any corporate act, pursuant to Supplementary Law 123/06.

The new publication rules introduced by Law 13.818/19 have caused doubts to companies about the possibility of publishing their financial statements in full content in the newspaper. It is also unclear whether this would disown the company from publishing it in newspaper's website. In other words, would it be possible for companies to choose publishing the full content of financial statements in the printed newspaper? And if so, would they be exempted from publishing on the newspaper's website?

The new wording of Article 289 of the Brazilian Corporate Law contains divergent interpretations on this issue. From a perspective, it would be possible to interpret that companies must carry out the publications of their financial statements in a newspaper of general circulation in a summarized way, with simultaneous disclosure of the full content on the website of the same newspaper; alternatively, it can be interpreted that the publication in a printed newspaper, in a summarized way, is optional. In this case, companies that chose to publish financial statements the full content on printed newspaper would be free to make any disclosure on the newspaper's website, either in full or in summarized form.

Although CVM’s 39^th Guidance Opinion treats the changes introduced by Law 13.818/19 to the Brazilian Corporate Law as a possibility that allows companies to carry out publications in the printed newspaper in a summarized way, conservatively, and until there is a definitive position of CVM on this regard, we understand that the companies should carry out their legal publications in a summarized way in newspapers of general circulation, with the simultaneous disclosure of the full content on the  same newspaper’s website.

Even if, unfortunately, the changes in the Brazilian Corporate Law were not broader, they represented an important advance in terms of cost reduction and simplification of the bureaucratic procedures of legal publications, and contributed to simplify the scenario of the information regime of Brazilian companies. We hope that, in the future, legal publications will be carried out exclusively through digital means, as a definitive step of modernization and cost reduction for companies, without prejudice to the wide access to this information which are indispensable to the market.

^[1] We understand that, if the newspaper of general circulation chosen is not effectively edited in the locality of the company's headquarters, this fact should not, in any way, prevent the registration of publications by the local Boards of Trade, whenever and when the newspaper meets the distributive criterion, according to the guidance given to the local Boards of Trade in Circular Letter SEI No. 3153, of the National Department of Business Registration and Integration, of November 23, 2020.

Category: Capital markets

In the Administrative Procedure SEI 19957.005011/2020-67 (RJ2020/04610) initiated by SRE (Superintendância de Registro de Valores Mobiliários) to determine the liability of the company and its officer for realizing a public offer of collective investment agreements (CIC) in the hotel sector without prior registration or waiver before CVM, the company and its officer were sentenced to the penalty of warning by CVM collegiate. Both would have violated art. 19, caput and §5, I, of Law 6,385/76 and the arts. 2^nd and 4^th of CVM Instruction No. 400.

Collective investment agreements and their use in the hotel sector

Pursuant to art. 19, caput, of Law 6,385/76, public securities issues without prior registration before CVM are prohibited. Without discussing the theoretical difference between public issues (as mentioned by law) and public offerings, CVM should focus on any public offers that appeal to popular savings. In this sense, §5 of art. 19 confers powers to CVM to define other situations that may be considered public issues for registration purposes - in this context, ICVM 400 was edited.

According to art. 2, IX, of Law 6,385/76, as amended by Law 10,303/01, securities are subject to the law regime for publicly offered contracts when "grant the right to participate, partnership or remuneration, including resulting from the provision of services, in cases in which income comes from the effort of the entrepreneur or third parties". After this change in the early 2000s, a list of securities, such as shares, debentures, subscription bonuses and others, was included in the law - in addition to a more generic hypothesis to be applied in cases that do not fit the others.

The concept of collective investment agreements was imported from the well-known U.S. case SEC v. W. J. Howey Company tried in 1946.^[1] The case related to the offering of pieces of land for orange cultivation with the optional contracting of cultivation services and management of the property.

Considering the very broad and generic definition, CVM has historically faced contracts of this nature in various sectors, such as ostrich breeding,^[2] participation in the rights of football players,^[3] cryptocurrencies,^[4] condo-hotel enterprises, among others.

In that sense, "the characterization of a given product as a collective investment agreement does not depend on the prior position of CVM, but on its adequacy to the requirements of the so-called Howey Test"^[5] which basically consists of verifying the following aspects:

• Is there an intention to make an investment?
• Has the investment been formalized by means of a contract?
• Do the investment agreements have a collective nature (that is, was the agreement carried out by several investors)?
• Was the investment made with profit expectation?
• Does the profit arising from the investment result from the efforts of the entrepreneur or third parties (that is, not from the investor itself)?

In case these elements are present, the collective investment agreement is understood as a security.

Regulatory time milestones on condo-hotels

The use of collective investment agreements in hotel developments has been recognized, at least since the 1980s, when there was a significant increase in hotel rooms in the country.^[6] By condo-hotels, one should understand the hotel development organized through a building condominium (condomínio edilício).

Provisional Measure 1,637/98 indicated collective investment agreements as a securities species. Despite this, for many years, these contracts were treated exclusively from the perspective of their real estate nature and subject to the specific rules of real estate development and the Brazilian Civil Code. In 2001, as already mentioned, collective investment agreements were included in the securities list, but, given its peculiarities, it was not quickly assimilated by the market as such.

On December 12, 2013, CVM issued a market warning regarding the characterization of condo-hotels as securities. From then on, the position of the commission on the subject became clear and CVM began to supervise the condo-hotels' enterprises in a stronger way. CVM Resolution 734, published on March 17, 2015, regulated the subject and established requirements for the exemption from registration of this modality of agreement.

In general, the collegiate considers that events prior to the market alert shall not be subject to CVM Resolution 734 and its penalties. However, in relation to events between the market alert and the issuance of CVM Resolution 734, there is an uncertainty with relation to their submission to the resolution and its penalties. Therefore, the conduct shall be analyzed in light of the circumstances of the case.

Subsequently, on August 27, 2018, CVM Instruction 602 was issued and revoked CVM Resolution 734 (“ICVM 602”). Currently, ICVM 602 regulates:

• the requirements of the application for registration of the offer;
• rules on the content of the offer and the corresponding advertising material;
• the criteria for exemption from registration of the distribution, among other topics, such as the role of hotel operators.

The role of hotel developers and operators

It is important to highlight the difference between developers and hotel operators in relation to the collective investment agreements offering.^[7] In general, developers are identified as responsible for public offerings. On the other hand, the operators, as responsible for the management of the business operation, are relevant to the offer, because the success of the enterprise depends on the management executed by them. However, the operator may not be involved in the offer of the condo-hotel, which is the reason why, in principle, CVM understands that the operator is not an offeror.

CVM's understanding of hotel operators has already been different. Originally, the operator was assigned the role of co-offeror. Since 2017, however, operators have not been included in the stop orders related to irregular offers, and decisions have further explored the difference in roles played by operators in the offers. CVM Instruction 602 defines "offeror" as the developer or any person who performs public distribution acts of the hotel collective investment agreements. The instruction also imposes on the operator the obligations to cooperate in the preparation of the documents of the offer and to report accounts but does not establish obligations relating to the distribution of securities itself.

As described, the collective investment agreements in the hotel industry is quite recurrent in the decisions of the Commission and, therefore, it is important to pay attention to the elements that define such contract, so that legal and regulatory measures are properly observed.

Business models recently analyzed by the collegiate

On October 30, 2018, SRE submitted a formal consult^[8] to CVM collegiate in the application for registration of an offer of a hotel collective investment agreement formulated pursuant to ICVM 602. The business model included the purchase and sale commitments for 141 autonomous units that could be disposed entirely or in ideal fractions (up to four per autonomous unit).

The technical area of CVM understood that the offer of collective investment agreements of autonomous units (resulting from the formation of the building condominium) would be covered by ICVM 602. However, the offer of collective investment agreements for the ideal fractions would imply the formation of a voluntary condominium, a regime expressly excluded from the scope of ICVM 602.

In the analysis of the consultation, the collegiate, following the vote of the rapporteur, understood that "the provisions of CVM Instruction 602 apply to the public offering of collective investment agreements under this case [i.e., ideal fractions of autonomous unit], since the hotel development would be structured in the form of an building condominium, in accordance with the terms provided for in Articles 1,331 to 1,358 of the Civil Code, and would comply with the rules established in the Incorporation Law (Law 4,591/64). [...] Article 3 of said instruction should be interpreted to exclude from the legal regime public offerings of collective investment agreements of hotel enterprises not subject to the Incorporation Law or to the discipline of building condominiums".

However, due to the peculiarities and risks involved in the formation of a voluntary condominium resulting from the offer of collective investment agreements on the ideal fractions, it is necessary that the offeror discloses "relevant information on the operation of voluntary condominiums and the specific risks incurred in this type of investment".

Shortly thereafter, on April 22, 2019, SRE formulated a new formal consult^[9] to CVM collegiate in the context of a complaint that originated in the sale of fractions of time in condominium under the multi-property regime (time sharing). In this condominium modality, the owner of the multi-property is entitled to a fraction of the time to use and enjoy the property and its facilities, also used by other holders according to the fractions of time allocated to each of them.

The properties on which multi-ownership is established may also "be integral parts of an enterprise in which there is a system of leasing of the fractions of time in which the holders can or are obliged to lease their fractions of time exclusively through a single administration, sharing among themselves the revenues of the leases regardless of the effective occupation of each autonomous unit".^[10]

In the assessment of the consult, CVM collegiate, following the rapporteur's vote, established the following criteria to verify whether the disposal of time fractions linked to Pool or not a collective investment agreement subject to the public offering regime:

• The mere acquisition of a real estate unit, either under the general regime or in the multi-property regime, for the purpose of investment is not sufficient to attract the securities regime. This happens when, among other elements, the profit perspective is associated with the efforts of the entrepreneur or another third party;

• The mere fact that the investor is required to take certain measures is not necessarily sufficient to drive away the securities regime. The collective investment contract can be characterized even when the efforts of third parties are not exclusive, if they are, in the end, preponderant and decisive for the profit expectation;

• When the acquisition of the real estate property or the temporal fraction is subject to the execution of a contract by means of which that unit or fraction is placed in a rental mandatory pool, that is understood as a collective investment agreement;

• When the sale of real estate and the pool are not inseparable – and this inseparability needs to be analyzed not only from the legal but also economic aspect – other elements should be considered to verify whether or not the offer involves a collective investment agreement. In particular, attention should be paid to the motivation of investors in acquiring the properties and the emphasis given by the seller on the promotion of investment; and

• If real estate property is sold for the primary purpose of personal use, there is no collective investment contract offer.

Given the versatility of the structures that can be explored with condo-hotels and, also, the recent understanding of CVM on the offer of hotel collective investment agreements, prior to the launch of new estate projects, it is necessary to analyze whether the contractual arrangements that formalize the purchase of the property by the interested parties are considered a collective investment agreements. If that is the case, the agreements shall be submitted to the public offering regime, pursuant to ICVM 602 or ICVM 400, depending on the case.

^[1] SEC v. W. J. Howey Company, 328 US 293 (1946).

^[2] CVM PAS No. 23/04, rel. Dir. Wladimir Castelo Branco Castro, j. September 28, 2006.

^[3] CVM PA RJ 2014/11253, j. June 30, 2015.

^[4] CVM PAS 19957.003406/2019-91, rel. Dir. Gustavo Gonzalez, j. October 27, 2020.

^[5] PAS CVM 19957.006343/2017-63, winning vote dir. Gustavo Gonzalez, j. May 7, 2019 (free translation).

^[6] For reference, PAS CVM 19957.004122/2015-99, rel. Dir. Gustavo Borba, j. April 12, 2016 ("Oliva Case") and PAS CVM 19957.008081/2016-91, rel. Dir. Gustavo Borba, j. April 10, 2018 (on historical aspects of CVM's position in the supervision and regulation of collective investment agreements offers of condo-hotel).

^[7] For reference, PAS CVM RJ 2017/2255, rel. Dir. Gustavo Gonzalez, j. 08/28/2018, PAS CVM RJ 2018/324, rel. Dir. Gustavo Gonzalez, j. 10/30/2018, PAS CVM 2017/4412, rel. Dir. Pablo Renteria, j. 10/30/2018, PAS CVM RJ 2017/4779, rel. Dir. Marcelo Barbosa, j. 11/12/2018 (on differentiation of responsibility of the operator and developer in the offer of condo-hotels).

^[8] For reference, PROC. SEI 19957.009425/2018-41, rel. Pablo Renteria, j. on 30.10.2018.

^[9] For reference, PROC. SEI 19957.009524/2017-41, rel. Gustavo Gonzalez, j. on 04.22.2019.

^[10] Art. 1.358-R, § single, of the Civil Code.

Category: Labor and employment

Executive Order No. 1,108, published on March 28, substantially modified the rules on teleworking established by the Brazilian Consolidated Labor Laws (CLT).

Among the main changes, we highlight the following:

• Equivalence between home office and teleworking

Remote work performed not predominantly outside the employer's premises (home-office) is now considered equivalent to teleworking / remote work: from now on, the provision of services outside the employer's premises, whether or not predominantly, with the use of information and communication technologies, which, by their nature, do not themselves qualify as external work, are characterized as a teleworking or remote working arrangement; teleworking and remote work are now equivalent for all purposes.

• Tracking of working hours

From now on, only teleworking employees who provide services by production or tasks (i.e., employee who are paid based on production/tasks) are exempt from tracking working hours. In other words, employers with more than 20 employees must track the working hours of all employees who are not exempt, including of employees working in a teleworking arrangement who were not hired by production/tasks.

• Contractual provision

The provision of services in the form of teleworking must be expressly established in the individual employment agreement: due to the equivalence between a home office arrangement and teleworking, a home office arrangement must now also be regulated by individual agreement or internal policies with individual assent by employees.

• Interns and apprentices

Adoption of a teleworking arrangement for interns and apprentices is now expressly allowed: here, the law has reached what already happens in practice.

• Union framework

Employees in a teleworking arrangement are subject to the provisions established in local legislation and in collective bargaining agreements applicable to the territorial basis of the employer’s establishment to which the employee is registered: with this, the executive order now expressly provides that, when the location where services are provided is not relevant, labor union representation follows the location of the employer's establishment, in line with the understanding of Brazilian case law.

• Teleworking abroad

Brazilian laws apply to employment agreements of employees hired in Brazil who choose to work remotely outside Brazil, except for the provisions of Law 7,064/82, unless otherwise agreed upon by the parties: with this, the executive order minimizes the risk of international remote work constituting international temporary transfers, preventing potential disputes involving this matter.

The executive order also brought in some clarifications on teleworking:

• attendance, even if habitually, at the employer's premises to carry out specific activities, which require presence at the workplace, does not denature the teleworking arrangement.

• employees subject to a teleworking arrangement may provide services per hour (hourly or monthly), per production, or per task.

• individual agreements may provide for timetables and means of communication between employee and employer, as long as legal rest periods are ensured.

• employers must give priority to employees with disabilities and employees with children up to four years of age in the allocation of teleworking or remote work.

• the employer will not be responsible for expenses resulting from return to on site work if the employee has chosen to work remotely outside the location established in the agreement, unless otherwise agreed upon between the parties.

• time spent using technological equipment and the necessary infrastructure, and software, digital tools, or internet applications used for teleworking, outside the employee's regular working day, does not constitute time available to the employers, time as standby, or time on-call, unless there is a provision in an individual agreement or in a collective bargaining agreement: for teleworking activities that require employees to be on standby or on-call, it would be possible to agree on payment of amounts without denaturing the teleworking arrangement and exceptions from tracking of working hours of employees who work by production/task.

• a teleworking arrangement is not the same as or equivalent to occupation of a call center or work as a telemarketing operator.

Although the executive order produces legal effects from the date of its publication, its transformation into law requires approval by the Brazilian Congress.

Due to the substantial changes introduced by the executive order, companies that have already implemented teleworking, home office, or remote work policies must reassess and adjust their practices to adapt them to the new rules.

Employers' obligations under the executive order will lose their effect if the executive order is not converted into law. Contractual agreements made during the term of the executive order will be effective beyond termination thereof.

Machado Meyer Advogados will continue monitoring the evolution of the matter and potential developments thereunder.

Category: Competition

In a recent ruling on a transaction involving the investment of large trading companies  in a joint venture that operates in the intermediation of road freight, the Administrative Tribunal of of the Administrative Council for Economic Defense (Cade) addressed the risks to competition related to collaboration among competitors and the mechanisms to mitigate them.

The subject is extremely relevant, considering that transactions between rival companies, such as joint ventures, infrastructure sharing agreements and associative agreements  are frequent in a wide array of sectors.

Transactions of this nature often have pro-competitive objectives, such as achieving economies of scale, diluting risks and costs in the implementation of a new project, or obtaining better results in research and development, among others. However, collaboration between rival companies can harm competition and consumers due to the risk of exchange of  sensitive information and increase in the ability or incentive to raise prices and/or reduce output, quality of products or services and innovation – a concern that may apply not only to the market directly affected by the transaction, but also other markets in which the parties are actual or potential competitors.

For this reason, collaboration agreements among competitors tend to undergo careful scrutiny by Cade, which takes into account factors such as the market shares of the companies involved, the characteristics of competition in the relevant market and how the transaction was structured, to assess whether there are risks of exchange of sensitive information and/or incentives and conditions for coordination between the parties that may facilitate explicit or tacit collusion in others markets where they operate independently.

In line with international best practices, whenever Cade considers it necessary to adopt remedies in transactions of this nature, the agency generally requests the adoption of Chinese Walls, robust compliance programs, and independent management bodies for the joint business. Additionally, Cade may required that:

• sensitive data relating to the activities of partners outside the scope of the joint venture that are necessary for their joint business be collected, processed and analyzed by an independent third party;

• sensitive operational information on the joint venture provided to partners be limited to what is strictly necessary to ensure the monitoring and protection of their joint investment; be restricted and protected by physical and electronic barriers to avoid access to other companies of the partners’ groups, and/or be only transmitted to partners in aggregate, historical or anonymized form;

• all meetings of partners or management bodies of the joint venture be subject to previous convocation, with a clear and precise agenda, expressly prohibiting discussions on matters involving information on the individual business of the partners outside the scope of the joint venture, and that all the matters discussed in these meetings be duly registered in minutes;

• meetings between partners and members of management bodies be monitored by an external lawyer to prevent the exchange of sensitive information relating to their individual business; and/or

• employees and/or members of the joint venture management bodies be prohibited from acting in other companies of the economic groups of the partners, or even in the management of competing companies of other groups (interlocking directorates).

In such cases, antitrust risks should be assessed before the conclusion of the transaction agreements, allowing the parties to discuss and design adequate governance mechanisms and antitrust protocols before submitting the transaction to Cade's analysis. This caution tends to avoid a longer analysis by the agency and reduce the risk of remedies to obtain clearance. .

Category: Infrastructure and energy

Since its advent in 1992, the Law of Administrative Improbity, Federal Law 8.429, has evolved, either by the interpretation of our courts or by legislative reforms, in the search for a difficult balance: on one hand, to combat the public agent in bad faith and, therefore, to deter dishonest behavior or deviation from the principles that govern the Public Administration; on the other hand, not to restrain the well-intended public agent from making decisions in the performance of his duties aimed at the best public interest, even if such decisions do not prove to be the most effective or right in the future.

During the first years in which the law was in force, there was a higher perception of impunity. The pendulum was shifting to a gradual hardening of the norm. Laws of 2005, 2014, and 2015, for example, added new items to the illustrative list of acts of misconduct associated with illicit enrichment (art. 9), injury to the public treasury (art. 10), or violation of the principles of public administration (art. 11). Courts have established jurisprudence admitting the merely generic intent for acts of misconduct then based on necessarily intentional conduct (arts. 9 and 11). It was sufficient to show that the public servant had voluntarily incurred on a sanctioned conduct, regardless of bad faith or specific purpose.

The hardening of the Law of Improbity peaked during Operation Lava Jato, which generated a large number of demands and convictions.

However, if an increasing dose of the strictness of the law contributed to reducing the perception of impunity of the malicious public agent, on the other hand, generated a serious and undesirable side effect: administrative paralysis. Even the zealous public agent prefers not to make decisions, under the fear that he or she will be questioned by the control bodies and be subject to personal liability.

This blackout of pens causes great damage to the Public Administration, private agents, and society, because projects are paralyzed, and public services are precariously provided.

In reaction to this scenario, in April 2018, Law 13,655, called the Law on Legal Certainty, introduced new provisions in the Law of Introduction to The Rules of Brazilian Law. Among the innovations for the theme analyzed here, article 28 stands out, according to which "the public agent will be personally liable for his decisions or technical opinions (only) in case of misconduct or gross error."

Inspired by this article, Law 14.230/21 reinforced the fight against the aforementioned administrative paralysis. It brought new wording to the Law of Improbity to, among other changes, remove the penalties against negligent behavior, imposing sanctions only on intentional misconduct. Law 14.230/21 seems to have gone beyond Law 13.655/18 itself because it did not even refer to the gross error.

Several other changes promoted by the new law have also moved towards reducing the rigor of the law. Among them, the following stand out:

• The intentional conduct shall involve the specific purpose of achieving the illicit result (art. 1, §§2 and 3);
• The sanctions have also been eased. For example, in its previous wording, the Law of Improbity provided for fines of up to three times the value of the illicit enrichment, without prejudice to the obligation to repair the damage. Law 14.320/21 reduced the fine, as a rule, to the value of the illicit enrichment or relevant damage;
• The same unlawful act cannot lead to double civil or administrative penalties in the Improbity Law and other laws. Thus, for example, the acts criminalized by the Anti-Corruption Law (Law 12,846) cannot be criminalized by the Law of Improbity (art. 12, §7);
• Damage caused to public property must now be effectively proven, and no longer merely presumed (art. 17-C, I);
• Powers to bring a lawsuit under the law are now attributed only to the Public Prosecutor's Office, and no longer to the injured public entity.

The profound changes promoted in the Law of Improbity have provoked both applause and strong criticism. It is too early to know how our courts will react and interpret the new wording of the law and whether or not it will strike a better balance between combating impunity and defending the public agent acting in good faith.

Category: Litigation

The 3rd Panel of the Superior Court of Justice (STJ) has recently judged the Special Appeal (REsp) 1.801.518/RJ, in which the legitimacy of the Public Prosecutor's Office (MP) was discussed to promote the liquidation and collective enforcement of judgment in the protection of homogeneous individual interests or rights provided for in Article 81, sole paragraph, item III, Consumer Protection Code (CDC).

In the case under discussion, the Public Prosecutor's Office of the State of Rio de Janeiro (MPRJ) filed a public civil action (ACP) against a property developer, so that the company would review a contractual clause that provided for the retention of installments paid in case of withdrawal of the acquisition of property (between 75% and 90% to 25%). It also requested for the recognition of the right of consumers who were harmed to double the debt. The MPRJ´s pleading was granted^[1], and the sentence was reformed by the Court of Justice of the State of Rio de Janeiro (TJRJ) only to rule out double repetition and collective moral damage.

With the judgment finalized, the MPRJ, in addition to requesting the conviction of the property developer to pay a fine for the alleged delay in compliance with an injunction granted by the Court on an incidental basis, began the collective compliance of the judgment, based on Article 98 of the CDC, referring to the simple return of the amounts due to the injured individuals.

When being summoned about the beginning of the execution phase, the company expressed the illegitimacy of the MP to promote the collective execution of the sentence, which was not accepted by the Court of Origin. The decision was the subject of an instrument appeal, to which the local court dismissed.

Against the judgment, the defendant filed REsp 1,801,518/RJ, arguing that only injured consumers could demand compliance with the award. This understanding was unanimously accepted by the Superior Court, confirming the Court's previous view on the subject.^[2]

In the conception of the Ministers of the Superior Court, the public interest that would justify the MP's action in the collective action was overcome in the execution phase, leaving the parquet only the hypothesis of residual execution provided for in Article 100 of the CDC.

According to the vote of the rapporteur, Minister Paulo de Tarso Sanseverino, although Article 98 of the CDC admits the collective execution of the sentence by the entities legitimized in Article 82 of the CDC – among them, the MP –, at the stage of enforcement of the judgment there is no longer the social interest provided for in article 129, item III, of the Federal Constitution to justify ministerial action, since the legal interest at this stage is restricted to the patrimonial and available scope of each of the consumers admittedly injured.

In this sense, the rapporteur minister understood that, in the execution phase of the sentence, the controversy over the homogeneous character of the law is already overcome. Thus, the sentence that recognizes homogeneous individual rights – hypothesis of the case under analysis – can be executed individually, as authorized by the CDC in art. 97.

As for the residual execution hypothesis provided for in Article 100 of the CDC, the rapporteur minister considered that it was not applicable in the case under analysis, since the period of one year would not have elapsed without the qualification of interested parties, under the terms of the article. Thus, the rapporteur declared the MP's active illegitimacy to initiate the execution of the sentence handed down in a collective action - without prejudice to the residual execution, after the legal deadline.

The understanding of the Superior Court has faced criticism from some members of the legal community, who understand that the judicial function is not exhausted with the end of the knowledge phase, under penalty that the satisfaction of collective rights recognized by the judiciary is impaired. Thus, the social relevance of the implementation phase would justify the legitimacy of the MP.^[3]

However, in the face of the last judgments of the Superior Court on the matter, there is a tendency to consolidate the understanding in the sense that there is no social relevance in the execution phase, which is why the MP does not have active legitimacy to promote the collective execution of judgments that protect homogeneous individual rights.

The matter under discussion will be again faced by the STJ in the judgment of RE 1.758.708/MS. Until then, it is expected that the courts of the country observe the position adopted by the STJ and move away from the legitimacy of the MP for compliance with judgment in collective action that protects homogeneous individual rights.

^[1]Before the trial of the ACP, the Court determined that the property developer list the contracts signed with potentially injured consumers, under penalty of a fine of R $ 1 million, due to non-compliance with the court order.

^[2] Cf. REsp 869.583/DF, 4th Class, rapporteur min. Luis Felipe Salomão, tried on 5.6.2012.

^[3] This understanding is in line with the decision given by Minister Nancy Andrighi (Resp 1.028.855/SC), in which it was highlighted that the amendment of the wording of certain articles of the Code of Civil Procedure (CPC) – like the arts. 162, §1, 267, 269, and 463, Caput –, it would show that the proceedings are not necessarily exhausted by the declaration of law, and that the judicial function would only end with its effective satisfaction.

Category: Tax

In the opening article of the monthly column "Carf's Judgments", the theme could be no other than discussions involving the “casting vote”. The existence of a tiebreaker that favors the tax authorities, or the taxpayer, has long permeated the debates on conflict resolution within the Administrative Council of Tax Appeals (Carf).

Carf's collegiates are peer public entity, formed, in the regimental composition, by the same number of advisors representing taxpayers and the National Treasury. This composition presupposes the search for a balance in the interpretation of the tax law, ensuring a neutrality of the analysis. The point is that parity often results in a tie in the trial, resulting in the need for a tiebreaker criterion.

Until the edition of Law 13.988/20, the only tiebreaker criterion existing for the carf trials was the "casting vote", which attributes the prevalence of positioning in the manifestation of the President of the Collegiate (art. 25, §9 of Decree 70.235/72). As, by provision of the Carf Internal Rules, the President of the Collegiate is always a representative of the National Treasury, the prevalence of his vote raised questions about the existence of a bias in the decision to be handed down.

Law 13.988 introduced Article 19-E in the drafting of Law 10.522/02, creating a second tiebreaker rule: in the case of administrative process judgment of determination and charge of the tax credit, the controversy will be resolved favorably to the taxpayer.

In our view, this new criterion can be understood as an unfolding of the legal rule provided for in art. 112 of the National Tax Code (CTN), which contains the maximum in dubio pro taxpayer. If there is no certainty as to the basic elements of the act, such as the legal capitulation of the fact; the nature or material circumstances of the fact; authorship; the nature or graduation of the applicable penalty, the tax law must be interpreted in the most favorable manner to the accused.

It happens that, after the publication of the new tiebreaker rule, the Ministry of Economy published Ordinance 260/20, establishing that the tiebreaker criterion in favor of the taxpayer would be applied exclusively in tax administrative processes of tax credits (release and notice of infringement). The other disputes to be resolved in the administrative body (compensation proceedings, discussions on procedural issues, etc.) would be resolved accordingly the old criterion of prevalence of the collegiate president's vote ("casting vote").

Throughout 2021, when cases with more relevant discussions gradually were returning to the Carf agenda, the effects of the coexistence of these two criteria were verified in practice.

Several controversies that have historically been resolved in favor of the tax authorities have come to have a final solution favorable to the taxpayer, among them: the possibility of deducting interest on retroactive equity (Judgment 9101-005.757), the regularity of the 30% lock for compensation in the event of extinction of the legal entity by incorporation (Judgment 9101-005.728) and the application of international agreements for the purposes of taxation of profits earned by subsidiaries and affiliates in  (Judgment 9101-005.809).

These same matters, when judged in the context of a compensation procedure, were resolved with the application of the criterion of tie-breaker of the vote of the President of the Collegiate, most often favoring the tax autorities (e.g. the recent judgment of Case 16682.720821/2011-35, which dealt with the deductibility of goodwill in the calculation basis of CSLL and, although it was analyzed by the same members of the 1st Superior Chamber of Tax Appeals (CSRF), it had a result opposite to Judgment 9101-005.894, of the previous month).

The relevance of this theme seems to grow in the same proportion of the limits of values for non-face-to-face judgments. As Carf expands the ceiling for non-face-to-face trials (currently r$ 36 million), more complex issues return to the agenda, and the criterion for resolving the trial becomes worth tens (or hundreds) of millions.

This relevance was recently accompanied by urgency: the Supreme Court (STF) took to March 23 the continuation of the trial of direct actions of unconstitutionality (ADIs) 6399, 6403 and 6415, which discuss the constitutionality of art. 28 of Law 13.988/20, a rule that "extinguished" the casting vote. The discussion within the Supreme is placed in two aspects: formal and material.

The formal unconstitutionality is defended by the fact that Article 28 of Law 13.988/20 was inserted in the text of Provisional Measure (PM) 899/19 by parliamentary amendment and already in the phase of conversion into law, without the original theme of PM having a relevant relationship with the tiebreaker criterion, which represents a violation of due process of legislation (what is called "legislative smuggling" or "jabuti").

Thus, the Attorney General's Office (PGR), the Brazilian Socialist Party (PSB) and the National Association of Fiscal Auditors of the Federal Revenue Service of Brazil (Anfip), which are the authors of the ADIs in question, point out that the device that instituted the pro-taxpayer tiebreaker was inserted into Law 13,988/20 improperly, without the legislative power to debate. Former Minister Marco Aurelio joined this current and voted for formal unconstitutionality.

The material unconstitutionality is defended based on the premise that the application of this new criterion favorable to the taxpayer would configure cancellation of the tax credit every time there is a tie, which would imply the prevalence of the private interest in the face of the public interest. Furthermore, it is claimed that the principles of due process and the legitimacy of the administrative act would be violated.

The constitutionality of the rule under discussion is justified by the restoration of the balance of the relationship between the tax authorities and the taxpayer in the administrative sphere since the system of tiebreaker by casting vote generated a distortion in favor of the Public Treasury. With the new system, the protection of the taxpayer's fundamental rights and guarantees against any excesses committed by the State is expanded.

This was the vote given by Minister Roberto Barroso, who understood that it is constitutional the new system of tie-breaker favorable to the taxpayer, provided that it is possible for the tax authorities to resort to the judiciary.

The judgment of these actions brings a series of discussions: if the unconstitutionality of the rule that "extinguished" the quality vote is declared for cases in which tax collection is discussed, how will those processes that have already been terminated by application of the device declared unconstitutional be treated?

On the other hand, in the event of a declaration of constitutionality, is there also a likelihood that the tax authorities will be allowed to turn to the judiciary to challenge decisions given in favour of the taxpayer?

The judgment of this theme by the Supreme Court is expected with high expectations, because its outcome is very relevant for the solution of tax conflicts in Brazil.