Category: Tax

ME Ordinance No. 13/20, issued on February 13, made a series of amendments to MF Ordinance No. 479/00, which deals with the accreditation of financial institutions to provide federal revenue collection services.

One of them is the change in the conditions for accreditation of legal entities to offer such services. The requirement of registration with the Central Bank of Brazil (Bacen) to operate as a commercial department has been replaced by that of a bank reserve account or settlement account at Bacen.

From a regulatory point of view, fintechs would then be formally authorized to request technical registration from the Brazilian Federal Revenue Service (RFB) to provide such services and offer them to their clients.

However, doubts may arise as to the need for the RFB to issue a specific regulatory act to regulate the changes, especially since MF Ordinance No. 479/00, as amended, delegates to the RFB the competence to accredit institutions to provide federal revenue collection services.

Based on a comparative analysis between the prior text and the amended text of MF Ordinance No. 479/00, one of the conditions necessary for institutions to be accredited by the RFB to provide the service is changed, but not a "new" delegation of powers to the RFB, which would require the regulation of a specific procedure for accreditation and registration of new institutions that meet the current requirements of the ordinance.

Thus, it is understood that the delegation of regulatory powers to the RFB has already been exercised through SRF Ordinance No. 2.609/01, which governs the activities of the collection network. This same act establishes in articles 3 to 6 the procedure for accrediting and registering financial institutions to provide federal revenue collection services, becoming applicable also to fintechs that wish to do so.

Institutions that meet the conditions of MF Ordinance No. 479/00 and wish to qualify as collection agents must submit the following documents:

• bylaws of the financial institution
• minutes of the general meeting that elected the board of directors
• minutes of the board of directors that elected the officers
• ratification by Bacen of the election of the officers

According to article 5 of SRF Ordinance No. 2.609/01, after the accreditation and before the beginning of the services, the institution must:

• sign an administrative contract for the provision of services with the Federal Government.
• appoint a legal representative.
• report to the unit of the RFB that oversees the matrix of the information regarding the agencies that will do the collection (e.g., name, address, CNPJ).

From an isolated reading of the last item, it would be possible to argue that there is an incompatibility between SRF Ordinance No. 2.609/01 and the way fintechs operate, since these companies do not have physical collection agencies and do not follow the patterns of traditional banks, to which, no doubt, the regulation was addressed when it was promulgated.

Although it is desirable to change the provision to adapt it to the operational model of fintechs and to the new reality of federal revenue collection by such institutions due to the promulgation of ME Ordinance No. 13/20, we believe that the references contained in SRF Ordinance No. 2.609/01 to agencies should not be interpreted as evidence of incompatibility between the standards under review.

Category: Real estate

The paid purchase of real estate is a taxable event that generates the Property Transfer Tax (ITBI), paid by purchasers. The rate of this municipal tax varies between 2% and 5% of the transaction value or reference value of the property (calculated based on what each municipality considers to be its market value), whichever is higher.

In the acquisition of real estate by public auction, via judicial auctions, it is common for the purchase values to be well below the market average, due to the logic of the process itself. As a result, the charging of ITBI over on the reference value assigned by the municipalities ends up resulting in payment of a much higher tax than that calculated based on the price actually paid by the purchaser.

In these cases, some cities, such as Rio de Janeiro and Brasília, already provided for an ITBI calculation basis that would be the value of the auction. The judiciary has also decided to the effect and determined that the ITBI should be calculated on the basis of the value of the asset, not the reference value or assessed value assigned by the city government.

Purchasers of real estate at judicial auctions need to be aware of this issue. If the form for payment of the ITBI is issued by the city government considering a calculation basis other than the price actually paid at the auction, it is fitting to evaluate the judicial questioning of the value.

Category: Tax

On February 19, the Joint Commission for Executive Order No. 899/19 approved the text of the bill to convert the Executive Order (MP) in law, which is now to be voted in the Chamber of Deputies. The so-called Taxable Person MP was published on October 17, 2019, with the purpose of regulating tax transactions, which has been admitted by the National Tax Code for over 50 years. The measure aims to reduce tax litigation and to fill the public coffers for debts deemed irrecoverable or difficult to recover.

The original text of the MP received 220 parliamentary amendments and was discussed at a public hearing held on the 13th, attended by representatives of the government and taxpayers.

According to the report approved by the commission, the approval of the MP meets the constitutional requirements of urgency and relevance, especially due to the fact that the debt portfolio under judicial discussion that could be subject to settlement would be in the order of R$ 1.4 trillion, an amount higher than half of the Federal Government's outstanding debt inventory. In the administrative sphere, R$ 600 billion was said to be linked to about 120,000 lawsuits in progress before the Administrative Tax Appeals Board (Carf).

The high degree of litigation between taxpayers and the tax authorities, associated with significant volume of potential funds to be collected, was said to justify the relevance of the measure.

The Joint Committee opted to forward the matter in the form of a conversion bill because it believes that this is the best alternative in order to organize the amendments accepted and to give the text the structure recommended by the legislative technique. The 61 amendments approved aim, according to the proposition report, to rule out potential errors of unconstitutionality and illegality and to mitigate the risk of objections.

The main aspects of the new proposal:

• Three types of transactions are provided for: (a) debts, whether or not tax in nature, enrolled as outstanding federal tax debt; (b) tax debts in judicial or administrative litigation, involving a widespread and relevant legal controversy; and (c) tax debts in administrative litigation of low value.

• In the first type, the transaction may be proposed by the Attorney General of the National Treasury (PGFN) or by the debtor, on an individual basis or by adherence based on a public notice. The proposal may relate to: (i) the granting of discounts in penalties, late fees, and charges relating to debts classified by as irrecoverable or difficult to recover; (ii) the term or method of payment, including deferral and default fines; and (iii) offering, substituting, or disposing of guarantees or freezes.

• For companies in general, the principal amount of the tax debt does not allow for a reduction. A reduction of more than 50% in the total value of the debts transacted is also forbidden. Payment of the debt must occur within 84 months. For individuals, small businesses, and microenterprises, reduction of the debt principal is not allowed, but reduction of the total amount may reach 70% and have a payment term of up to 100 months.

• In the bill, the discretion of the revenue authorities in classifying what should be considered irrecoverable or difficult to recover has been reduced: this classification is no longer exclusively assigned to the revenue authority, and the PGFN must act to establish the objective criteria for this classification.

• The proposed settlement will not suspend the enforceability of tax debts or the progress of the respective tax foreclosures, which does not prevent a stay in proceedings by agreement of the parties, until the debts are extinguished.

• In the second type, the settlement proposal is made by the public authorities, with a view to closing customs and tax disputes arising from "relevant and widespread legal controversy." The taxable person must adhere to the conditions and requirements laid down in the public notice. In this case, there is no provision for a settlement on an individual basis.

• A legal controversy involving a considerable number of taxpayers, going beyond the subjective interests of the cause, is considered relevant and widespread.

• Reductions and concessions in this case are also limited to a discount of 50% of the debt, with a maximum term for payment of 84 months.

• The taxpayer that adheres to the settlement will be subject, with respect to future and uncompleted taxable events, to the understanding given by the tax authorities to the matter in dispute, with the exception of prospective termination of the settlement resulting from binding precedents (STF decisions in concentrated control of constitutionality, binding precedents, appellate decisions in proceedings of assumption of jurisdiction, or resolution of repetitive claims and repetitive appeals) or with respect to a matter that is the subject of an opinion, in force and approved by the PGFN, that reaches a conclusion to a different effect, and in the other cases of dismissal by the PGFN to challenge and appeal, as provided for in article 19 of Law No. 10,522/02.

• Still in the second type: (i) the adherence will cover all litigation related to the theory at issue in the settlement existing on the date of the request, not yet definitively ruled on; (ii) the application for adherence suspends the processing of administrative proceedings as long as the review thereof lasts; and (iii) adherence that does not entail extinguishment of the administrative or judicial litigation will not be admitted, except in the event that it is possible to segregate subject matter of the debate, under the terms of a public notice to be published by the public authority.

• Special attention should be given to the scope of the waiver that this type of settlement by adherence should entail in practice, since the rule imposes on the taxpayer relinquishment of discussion in all proceedings involving the same legal theory, in accordance with the criteria to be defined in the public notice. In principle, it would not be possible to select specific cases for relinquishment, which could render the settlement inviable.

• In turn, in the third type, the transaction falls exclusively on tax debts under administrative litigation whose value does not exceed 60 minimum wages and that have as the taxpayer an individual, microenterprise, or small company. The granting of discounts may not exceed the maximum limit of 50% of the total value of the debt, in which case a reduction in the value of the principal is authorized.

  In all types:

• Although it expressly prohibits the settlement of debts by repeatedly delinquent debtors, the proposition does not define what should be understood as being a “repeatedly delinquent debtor", assigning this task to another specific law.

  Currently, the closest possible legal provision is Bill No. 1,646/19, under way in the Chamber of Deputies and according to which a repeatedly delinquent debtor would be "taxpayer whose tax behavior is characterized by substantial and repeated default on taxes.” This default was said to correspond to the existence of debts in the name of the debtor or related individuals or legal entities, whether or not recorded as outstanding debt of the Federal Government, and in the amount of R$ 15 million or more, in an irregular situation for a period of one year or more.

• Settlements that reduce criminal fines and grant discounts for debts related to the Simples Nacional tax regime, pending the enactment of a complementary law, and to the FGTS, pending the authorization of its Board of Trustees, is prohibited.

• The proposed settlement is conditioned on the abandonment of administrative and judicial litigation regarding the subject matter of the settlement and the waiver of any claims of a right on which these claims are based, including legal actions of a collective nature. In the case of judicial proceedings, the waiver must be subject to a request for extinguishment of the settlement with a resolution on the merits, through the ratification of the settlement, under the terms of item "c" of subsection II of article 487 of the Code of Civil Procedure.

• The Federal Revenue Service is not authorized to file foreclosure proceedings in the event of termination of the settlement, but may request that the judicial reorganization proceeding be converted into bankruptcy in this case.

• Failure to comply with the conditions established in the settlement will result in termination thereof in the cases provided for by law. The debtor shall be notified of this act and may challenge it within 30 days. Within this period, it is also permitted to bring into good standing a curable defect that gives rise to a notice of termination.

In relation to the points of attention identified in the text of the MP, the conversion bill deals with a very important issue, referring to the instruments of relinquishment to be requested by the debtor in judicial proceedings.

According to the new wording proposed, the purpose of the request for waiver to be submitted to the court will be to close the proceeding with a resolution on the merits for ratification of the settlement. It will also have the effect of forming a judicially enforceable instrument. Therefore, since this is a typical settlement, with mutual concessions from party to party for the ending of the dispute, there should not be, in our opinion, any judgment to charges for loss of suit.

In this respect, it is also inconsistent, in our view, to provide for a mere reduction in the legal charges incurred when registering the debt as outstanding debt of the Federal Government. Since they take on the nature of attorneys' fees, such amounts should also be excluded from the final amount to be paid in the event of a settlement.

On the other hand, the conversion bill no longer addresses the situation of tax debts that have not yet been registered, but for which the administrative proceeding has already been closed. This debt, in principle, would not be provided in any of the settlement types, until it is the subject matter of a legal action, in the form of article 19 of the bill.

If the goal of the measure is to reduce litigation, it is as important to close ongoing proceedings as it is to avoid the initiation thereof. Thus, it would be necessary that debts already created not yet enrolled in outstanding debt could also be subject to settlement.

In turn, the proposition rightly seems to have solved the situation of tax debts not yet created by the tax authorities, by providing that the second type of settlement must have as reference a controverted theory, being only conditioned, in principle, on the existence, on the date of publication of the public notice, of an active judicial or administrative litigation pending final judgment, in relation to the theory that is the subject matter of the settlement.

Therefore, the existence of a materialized contingent liability is not required to settle on a certain legal theory, which allows the rule to be applied in writs of mandamus and declaratory suits whose subject matter is discussion of the tax obligation, for example.

Thus, criticism is maintained regarding the supposed lack of provision for settlements with debts in the interim between the final creation thereof in the administrative sphere and the registration in outstanding debt. However, extension of the measure to legal disputes involving an as yet unestablished tax obligation deserves praise.

As for administrative litigation for small amounts (debts not exceeding 60 minimum wages for which the taxpayer is an individual, a microenterprise, or a small business), the bill, in consideration for the more favorable conditions for the settlement, brings in a relevant limitation on the taxpayer's right to resort to Carf, which will certainly be challenged. It is expected that the judgment of such cases will be carried out at the last level of appeal by a panel of the Federal Revenue Service, observing the binding effect of Carf's understanding.

This means that such taxpayers would not have access to a parity judgment at the last level of administrative appeal, since all the judges at the judgment offices are tax auditors of the Federal Revenue Service. In addition, the hearings at the offices are not currently disclosed to taxpayers, who are only notified regarding the outcome of the judgment, without the possibility of monitoring it in person, scheduling hearings with judges, or submitting oral argument.

In our opinion, if the proposal is approved, the regulations to be issued by the Revenue Service will have to change the functioning of the offices so that the agency may function as the last level of appeal, with full guarantee of an adversarial proceeding and a broad defense for taxpayers and the legality itself of the final creation of the tax debt, by means of equal structuring of the adjudicatory bodies (judges appointed by the RFB and by taxpayers).

Once the general terms of the bill for conversion of the Taxable Person MP is presented, there is great expectation surrounding the enactment of the law and the regulations thereof.

The bill went to the Chamber of Deputies for a floor vote. The limit for approval by the two legislative houses is March 25, 2020.

Category: M&A and private equity

The Brazilian Securities and Exchange Commission (CVM), through Public Hearing SDM No. 07/19, proposes to regulate, pursuant to article 291 of the Brazilian Corporations Law, a scale to reduce the percentage of share capital provided for in paragraph 4 of article 159. The objective of the draft instruction, currently under review by the agency is to make it easier for minority shareholders to file civil liability suits against officers and directors. If approved, the draft may have some impacts, which are analyzed below.

According to the current wording of the head paragraph of article 159 of the Brazilian Corporations Law, the rule provides for the possibility of filing a civil liability suit against officers and directors, first against the company, upon prior resolution at a general meeting of shareholders. If, however, the general meeting decides not to move forward with the suit, it may be brought directly by shareholders representing at least 5% of the capital stock, the so-called "derivative suit."

The draft CVM instruction suggests changes in this percentage. The proposal is to divide public companies into five bands, according to the value of their capital stock. For each of the bands, a percentage of the shares required is established so that minority shareholders may directly file the civil liability suit. The higher the capital stock, the lower the minimum percentage required:

The possibility for a minority shareholder to file suit directly is a mechanism to protect against abuses by controlling shareholders. The objective is to prevent them from creating a bubble to protect dishonest acts performed by officers and directors appointed by them, to the detriment of the best interests of the company and its shareholders as a whole.

What is discussed is not the existence of the mechanism itself, but the percentage considered "ideal" to avoid abuses, by both controlling and minority shareholders.

This is not the first time that the CVM has exercised its prerogative under article 291. An example of this is CVM Instruction No. 165/91, in which the agency regulated the scale, reducing the percentage of capital required for a request for a multiple vote, and No. 324/00, which regulated the percentages for requests for setting up an audit committee at companies that do not have one.

The justification presented by CVM in the public hearing notice refers to an alleged low capacity of coercion of the measures established by the provisions to be regulated. The CVM also mentions in the document that while, on the one hand, the existence of minimum percentages prevents the filing of frivolous suits, on the other hand, high percentages may prevent relevant shareholders from taking measures to protect the interests of the companies themselves.

It cannot be denied that the CVM's intention to establish mechanisms to strengthen the healthy and positive performance of minority shareholders is a beneficial measure that should be applauded. The measure could be even more effective if combined with the intention demonstrated by the CVM at the same hearing to reduce the percentages required for full disclosure of the company's books (pursuant to article 105 of the Brazilian Corporations Law) in cases where acts violating the law or the by-laws are reported or there is a well-founded suspicion of serious misconduct committed by a body of the company. This is because the prerogative of inspection is directly related to the possibility of filing a lawsuit.

The standard suggested, however, will not necessarily foster activism on the part of minority shareholders, since they do not obtain direct financial benefits from the measure. In fact, according to paragraph 5 of article 159 of the Brazilian Corporations Law, positive results of actions for compensation are intended only for the company, and not for the shareholder who filed the action. This shareholder will have reimbursed only the expenses incurred, including interest and adjustment for inflation). That is, for that individual shareholder, who does not have a relevant interest in the Company, the intended change may be ineffective, since this shareholder will continue to not directly benefit from the filing of such measure.

On the other hand, it cannot be ignored that the intention to reduce the percentages for filing such lawsuits could lead to abuses by minority shareholders, since the rule did not establish mechanisms to avoid opportunistic conduct, such as the requirement of uninterrupted corporate holding for a minimum period. This measure, in our opinion, could discourage the filing of lawsuits by shareholders that are not in line with the company's long-term policies and strategies. It could also make the idea of buying shares in a company for the sole purpose of bringing suits for liability against certain members of management less attractive.

Thus, although we believe that the measure may be beneficial to encourage greater participation and representativeness of minority shareholders in the Brazilian capital market, it does not seem advisable to us to simply reduce the percentages without creating any additional requirement to prevent abuse by ill-intentioned minority shareholders.

Category: Banking, insurance and finance

On February 6, the Brazilian Securities and Exchange Commission (CVM) issued Instruction No. 619, which amends specific issues of Instruction No. 592/17 (on the activity of securities consulting), to expressly allow investment consultants based abroad to operate in Brazil.

According to the CVM, the standard esteems an approach of multilateralism aligned with a future accession of Brazil to the Organization for Economic Cooperation and Development (OECD). By promoting the opening of the Brazilian market to foreign investment consultants, CVM Instruction 619, which enters into force on June 1 of this year, adapts the regulatory treatment applicable to the issue to the reality of an increasingly global market.

When operating in Brazil, investment consultants not based in Brazil will be subject to the same regulatory framework applicable to local consultants, i.e., the new rule favors symmetry of regulatory treatment, a plea claim greatly reinforced during the public hearing that culminated in the issuance of the instruction, on the grounds of avoiding any risk of "regulatory arbitrage."

In this regard, the mandatory recognition by the CVM of investment consultants based abroad is highlighted, as is the observance of the rules issued by the agency on suitability (CVM Instruction 539/13) and prevention of money laundering and financing of terrorism (CVM Instruction 301/99). However, these requirements will only apply when the foreign consultant operates in Brazil, as expressly provided for in article 2, sole paragraph, of CVM Instruction 592/17, introduced by CVM Instruction 619/20.

In our view, this provision correctly delimits the scope of CVM Instruction 619 to investment consultants based abroad that provide services in Brazil to investors residing here, thus eliminating the regulatory barrier that required these consultants to have their headquarters or domicile in Brazil. Thus, the CVM's recognition provided for in the rule should not cover consultants domiciled abroad if their service is rendered exclusively outside Brazil, even if to investors residing in Brazil.

In other words, nothing should change in the operations of foreign investment consultants who continue to perform their activities only abroad: they will continue having to comply with the requirements and conditions for licensing and conducting activities established by foreign law. However, still more caution will be needed in order to avoid the risk of Brazilian law becoming applicable to their activities, especially the requirement for recognition by the CVM established by the new instruction, among other rules.

Category: Labor and employment

Discussions related to working hours and control thereof are extremely relevant for companies in Brazil, due to the large number of lawsuits in the Labor Courts involving the payment of overtime, a problem historically related to two factors:

• The mismatch between work hours rules (and control thereof) and social changes in the work environment; and
• Some precedents created in recent decades by the Labor Courts that represented the granting of additional rights related to working hours based on an extensive interpretation of the legislation (for example, the precedent that considered travel time between home and work and vice versa, known as hours in itinere, as part of the work day, depending on the location of the company and the supply of public transportation).

In order to correct these points, ensure greater legal certainty for companies and employees, and reduce the number of complaints in the Labor Courts, the Labor Reform and the Economic Freedom Law have changed the rules on work hours, adapting laws and regulations and case law to the new dynamics of social and labor relations and the new forms of rendering services.

An example of a change was the regulation of the telework system by the Labor Reform, in order to exempt employees who work in this manner from control of working hours. The measure was extremely important to provide legal certainty to a new system of working resulting from social and technological advances and which are highly desired by employees.

The requirement to control working hours by means of pre-approved manual, mechanical, or electronic recording systems for establishments with at least 20 employees (previously it was 10) reduced costs and facilitated the business of small companies and startups.

The Economic Freedom Law, in turn, amended the Consolidated Labor Laws (CLT) to authorize employees and employers to enter into individual agreements instituting and regulating the control of working hours by exception, which is more practical and economical than traditional methods. In this system, employees should only input into the system working hours that deviate from the usual working hours. For this purpose, employees are assumed to work the contractually normal hours on a regular basis, except on days when overtime is entered into the system.

Before this authorization, the legality of control by exception was questioned in the Labor Courts, which generated risks to the application of this system. The legislative amendment came after a judgment in which the TST recognized the legality of the control by exception instituted by a collective bargaining agreement, settling the discussion on the subject. With the recent change, control by exception may be adopted without the involvement of the trade union, which makes the procedure for implementation simpler and facilitates companies’ day-to-day operations.

Although the changes did not alter the limits on working hours, they authorized parties to negotiate compensation agreements directly, without the need for trade union participation, as was previously required.

The new rules have reduced bureaucracy and made a positive contribution to legal certainty in employment relations. As a result, the number of new labor claims involving overtime pay has decreased by almost 40% in the last two years.

According to the Superior Labor Court (TST), 509,863 new labor claims were filed in 2017 with this type of claim. In the following year, the total fell to 355,148 and in 2019 it retreated further to 317,373.

The changes reflect the new global trend to reduce state intervention in private relations, especially labor relations, so that parties may negotiate working conditions more freely and adapt them to their needs and wishes. This freedom to negotiate has its limits well established by the CLT and by the constitutional rights guaranteed to workers, which avoids undermining rights.

Category: Environmental

The year 2019 was marked by great uncertainties and numerous challenges for Brazilian environmental law. Changes and legislative developments and events throughout the year have generated various demands, actions, and business opportunities in relation to various topics, such as mining and dams, climate change, fires and deforestation, solid waste, environmental licensing, and economic development with sustainability.

Some changes in competencies and responsibilities were made early in the year with the publication of Executive Order No. 870 (converted into Federal Law No. 13,844/19) and Federal Decree No. 9,660/19, which transferred the Brazilian Forestry Service (SFB) to the Ministry of Agriculture, Livestock, and Supply (Mapa). Mapa also received some new competencies previously belonging to the National Indian Foundation (FUNAI) and the National Institute of Colonization and Agrarian Reform (INCRA), including the identification, delimitation, and demarcation of indigenous lands and quilombolas. Federal Decree No. 9,806/19 was also published, which altered the composition and functioning of the National Environmental Council (Conama), reducing the vacancies dedicated to the participation of civic society.

In January, attention turned to Minas Gerais, where a new mining dam rupture was registered, this time at the Córrego do Feijão mine. As expected, various rules on dam safety and disaster prevention were enacted after the accident in order to tighten existing rules at the federal and state levels. For example, one may emphasize State Law No. 23,291/19, which established the State Dams Safety Policy in Minas Gerais (PESB-MG), in addition to Semad/Feam Joint Resolution No. 2,784/19, which provided for the decommissioning of all dams containing tailings and waste raised by the upstream method^[1] arising from mining activities in Minas Gerais. At the federal level, in turn, Resolution No. 13/19 of the National Mining Agency (ANM) was approved, establishing additional regulatory measures to ensure the stability of mining dams.

The year was also marked by a significant increase in the number of burns and deforestation in the Amazon,^[2] which raised international interest and influence on the Brazilian environmental scenario. In response to growing pressure, the government promulgated Federal Law No. 13,887/19, which amended provisions of the Forest Code regarding registration in the Rural Environmental Registry (CAR) and the Environmental Regularization Program (PRA). The new rule established mandatory registration in the CAR for an indefinite period, given the requirement of this registration for subsequent adherence to the PRA. The CAR is a electronic public registry, created by the Forest Code (Federal Law No. 12,651/12), with the objective of assisting in the control of deforestation and facilitating the monitoring of rural properties, through a national system that removes the need for on-site inspection.

At the end of December, the federal government published a series of decrees on the same subject. These include: (i) Federal Decree No. 10,140/19, which establishes the structure of the Amazon Protected Areas Program Committee (Arpa); (ii) Federal Decree No. 10,142/19, which created an executive commission to develop policies aimed at controlling illegal deforestation; and (iii) Federal Decrees No. 10,143/19 and 10,145/19, which establish, respectively, the National Fund and Policy on Climate Change and the Interministerial Committee on Climate Change.

In general, climate change has become a focus of attention again for the government and the public. After years asleep since the decision not to renew the Kyoto Protocol in 2012, the issue has regained strength in international forums such as the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (COP-25), with the consequent reopening of discussions on the carbon market.

In Brazil, in terms of innovation in market instruments for the environment, the Ministry of Mines and Energy (MME) published Ordinance No. 419/19, which regulated the form of issuance, bookkeeping, trading, and expiration of decarbonization credits (CBios), as established by article 17 of Federal Law No. 13,576/17 (RenovaBio Law). The standard reinforces the potential of expanding Brazil’s agricultural capacity, without the need to harm the environment, stimulating the issuance and trading of CBios related to the production of biofuels (e.g. ethanol, biodiesel, biogas, biomethane, and biokerosene).

The year 2019 also saw extremely important legislative advances on the subject of solid waste. In order to provide more transparency to the activities of monitoring these wastes, the Ministry of Environment (MMA) implemented the National System of Information on Solid Waste Management (Sinir) through MMA Ordinance No. 412/19. Also noteworthy is the publication of the Interministerial Ordinance No. 274/19, implemented in a partnership among the MMA, the Ministry of Regional Development, and the Ministry of Mines and Energy. In order to regulate the energy recovery from solid urban waste (MSW), the standard makes it mandatory to draw up contingency and emergency plans and a decommissioning plan for energy recovery plants.

Still on the subject of waste, the MMA and various entities representing the industry finally signed in October the Sector Agreement on Reverse Logistics of Electronics, which provides specific goals for players in the industry, such as reinsertion of materials into the production line, creation of points for consumer awareness actions, and increase in the number of collection points for these products. Compliance with the agreement is expected to reduce inappropriate product disposal and associated environmental impacts.

During the year there were also significant changes in the federal administrative process for investigating environmental violations. For example, Federal Decree No. 9,760/19 amended provisions of Federal Decree No. 6,514/08, which deals with environmental infractions and sanctions and establishes the federal administrative procedure to investigate them. The major changes were the creation of the Environmental Conciliation Center (NCA) and the modification of the Environmental Fines Conversion Program.

In the business sphere, the Economic Freedom Law (Federal Law No. 13,874/19), aimed at accelerating Brazil's growth, also had repercussions on environmental law, with the adoption of measures to reduce bureaucracy in the environmental licensing system. They speed up and assign good faith and legitimacy to the information provided by developers and technical managers.

The current government has already expressed its intention to implement new measures to further speed up environmental licensing, foster the productive sector, and reduce conflicts between the environmental authorities and the private sector or other areas of the Executive. In 2020, therefore, new rules are expected to be defined to make general environmental licensing more flexible, linked to a bill on the subject that has been before the Federal Chamber of Deputies for 15 years and may be voted on at any time. The objective is to provide greater legal certainty to environmental licensing processes, defining the aspects to be assessed and the deadlines for response by the competent bodies, encouraging voluntary practices and initiatives aimed at good environmental management and limiting excessive discretion on the part of public agents.

The discussions on the environmental agenda should therefore gain more strength in the national scenario in 2020. The storms, floods, and fires recorded at the beginning of this year demonstrate the clear need to address environmental issues seeking to improve and strengthen the existing legal framework, which is awaiting a vote. Environment Minister Ricardo Salles has already recognized the need to strengthen the urban environmental agenda, focusing on sanitation and waste management. This agenda will also gain relevance with Brazil's attempt to join the Organization for Economic Cooperation and Development (OECD). And with the inclusion of environmental issues on the federal government's agenda since the beginning of the year, it is certain that 2020 will also be a year with plenty of business, opportunities, and challenges for all who work in environmental law.

^[1] Semad/Feam Joint Resolution No. 2,784/19, article 2, item IV: "upstream method: dam construction methodology in which the construction material is placed upstream from the axis of the initial dam.”

^[2] According to Greenpeace: "From January to August 20, the number of fires in the region was 145% higher than in the same period in 2018" (https://www.greenpeace.org/brasil/blog/amazonia-sob-ataque-queimadas-tem-aumento-de-145-em-2019/?gclid=EAIaIQobChMInu-mgNHR5wIVk4KRCh0jaQ3qEAAYAiAAEgIoT_D_BwE) Also, according to the National Institute of Space Research (INPE), satellites registered almost 90,000 fire outbreaks in the Amazon region, 30% more than in 2018. (https://noticias.uol.com.br/meio-ambiente/ultimas-noticias/redacao/2020/01/08/amazonia-fecha-2019-com-89-mil-focos-de-queimadas-30-a-mais-que-2018.htm)

Category: Institutional

As a legal advisory firm with a strong presence in the business area, we have been able to perceive with great sensitivity the moments of change in investors' mood towards Brazil's economy. The most recent one, no doubt, started in the second half of 2019 and has been intensifying in the beginning of this year, driven by an atmosphere of more optimism and confidence in Brazil.

A positive agenda of more liberal tendencies, involving cutting red tape and fiscal discipline, has given a new focus to the market and had a very clear impact on projects of various natures that we are being invited to support.

Even in the face of threats such as the coronavirus epidemic in China, whose potential impacts on Brazil are not yet very clear, there is a general perception of a resumption of growth, benefiting from a previously repressed agenda of projects in the areas of airports, ports, highways, basic sanitation, energy, oil and gas, among others.

Another factor that contributes to improving the business environment is the control of inflation and the persistent downward trend of basic interest rates in the economy, currently at their historical low. The real estate segment, for example, is already registering signs of reheating.

This new economic environment opens a very positive window for business in the capital markets, with the prospect of increasing initial public offerings (IPOs) by Brazilian companies in search of new ways to finance their operations. We have no doubt that good projects, in expanding sectors, will attract the interest of investors.

Abroad, where low and even negative interest rates have been a reality for some time, there is a huge liquidity stock awaiting good and safe projects in reliable countries with properly functioning institutions. The interest of foreigners, be they institutional investors, private equity funds or sovereign wealth or pension funds, in local projects has been increasing since last year.

If Brazil is able to advance this year in structural reforms that boost our productivity and reduce market uncertainties regarding the economy in the medium and long term, part of these funds that are now available abroad will certainly take Brazil's course in ever-increasing and faster flow, increasing our chances of sustained growth.

Examples are administrative reform, an attempt to restructure the federal public service to contain the increase in compulsory government expenditure, and tax reform, designed to simplify and cut red tape in the payment of taxes in Brazil. Both are scheduled to be debated by the Brazilian Congress in 2020.

Another issue that will be on companies’ day-to-day agenda is the effort to adapt to the General Data Protection Law (LGPD), which comes into force in August. This work began last year and should intensify going forward, with companies finishing mapping the data they store and the forms of access authorized for them to implement the new procedures required by the legislation start on August 15.

The LGPD is just one example of how technology should affect business decisions in all sectors in the coming years. In the legal segment, the trend is no different. Technological advances may generate relevant transformation in the services we provide, with an overall improvement in the quality and efficiency of operations for clients.

To the traditional concern with the technical qualifications of our lawyers has been added in recent years to a keen eye for technological innovation, with investments in research and development for automation projects and artificial intelligence. Our team for technology applied to law, for example, achieved major advances in 2019 and we expect to implement some projects already in 2020.

Little by little, these investments are translating into a better experience for clients not only in terms of costs and response time, but above all in more precision in our analyses, in order to continue offering the market legal intelligence capable of boosting good business, a key issue in a year that promises to be very positive for the Brazilian economy.

Category: Tecnology

Law No. 13,709/18, or the General Data Protection Law (LGPD), expressly consolidates the principles and rules of a positive framework for data protection in Brazil. Although it will only take effect on August 16, 2020, many of its rules are based on the current legal system. Practically all economic activities will be subject to the application of the LGPD, since the performance of any data processing operation^[1] is enough for the standard to find factual support. In this article we specifically analyze the advertising industry,^[2] more specifically children's advertising, and the processing of personal data of minors for this purpose.

The subject is quite controversial, because some currents take the position that children's advertising itself is abusive. Considering that the most modern techniques of advertising use contextual and behavioral analyses, based on the profile of users, to direct advertising to children (especially under 12 years old), it is increasingly important to discuss these practices from a legal and ethical point of view.

The LGPD should be applied in a manner consistent with the legal system in force as a whole, establishing a normative efficiency not only restricted to a specific branch, but also functional in relation to the entire legal system, in order to avoid regulatory antinomy and incompatibilities. The idea is to complement the system with the protection of personal data and the rights of the data subjects, taking into account the existing rules.

In this sense, the subject of children's advertising is already regulated by established rules, such as Law No. 8,069/90 (Child and Adolescent Statute), Decree No. 99,710/90, which promulgated the United Nations Convention on the Rights of the Child, Law No. 8,078/90 (Consumer Defense Code - CDC), Resolution No. 163/14, of the National Council of the Rights of the Child and Adolescent (Conanda), although both the competence and the obligation of this rule are a source of controversy, and the Brazilian Code of Advertising Self-Regulation, of the Advertising Self-Regulation Board (Conar).

A fundamental difference, and one that may generate discussions in the implementation of LGPD, is the framework applicable to children, distinct from that of adolescents. To make it clear, the concepts of children and adolescents are those established in the Child and Adolescent Statute: the former refers to persons up to 12 years in age, while the latter covers individuals between 12 and 18 years of age.

The system for protection of minors, established by Law No. 8,069/90, is based on the principles of full protection and their best interest, recognizing respect for their integrity as a person, allow for the possibility of full human development. These principles ensure the prevalence and primacy of the interests of the minor as a beneficiary of rights, and are guided by a concern for the full development of the minor's physical, psychological, and personality capacities, especially those of children.

Under the Brazilian Advertising Self-Regulation Code, which establishes parameters and guidelines for advertising aimed at children and adolescents, no advertisement shall address an imperative appeal to consumption directly to children.

In this sense, the code defines in its article 37 the guidelines for advertising aimed at this audience. Advertisements should reflect special care with regard to safety and good manners and should also refrain from: (i) undermining positive social values; (ii) deliberately provoking any type of discrimination, particularly against those who, for whatever reason, are not consumers of the product; (iii) associating children and adolescents with situations incompatible with their condition; (iv) imposing the notion that consumption of the product provides superiority or, in the absence thereof, inferiority; (v) causing situations of embarrassment to parents or guardians, or molesting others, with the purpose of encouraging consumption; (vi) employing children and adolescents as models to vocalize a direct appeal, recommendation, or suggestion to use or consumption; (vii) using a journalistic format, in order to avoid having the advertisement be confused with news; (viii) proclaiming that the product intended for consumption by children and adolescents contains peculiar characteristics that, in fact, are found in all similar products; and (ix) using situations of psychological pressure or violence that are capable of instilling fear.

The controversy was created, however, with the promulgation of Conanda Resolution No. 163/014, which establishes as abusive, due to the national policy of care for children and adolescents, the targeting of advertising and marketing communications to children, with the intention of persuading them to consume any product or service. The resolution prohibits any form of advertising to minors using: (a) children's language, special effects, and excessive color; (b) soundtracks of children's songs or sung by children's voices; (c) representation of children; (d) people or celebrities with appeal to children; (e) children's characters or presenters; (f) cartoons or animation; (g) dolls or the like; (h) promotion with the distribution of prizes or collectible gifts or with appeals to children; and (i) promotion with competitions or games with appeal to children, as a way of establishing proximity to children, taking^[3] advantage of their inexperience.

These rules are aligned with the part of the legal scholarship that defends as abusive and unconstitutional in the Brazilian legal system any and all advertising directed at children,^[4] considering that the CDC provides in its article 37, second paragraph: "discriminatory advertising of any nature, among others, is abusive when it [...] takes advantage of the deficiency in judgment and experience of children, [...] or is capable of inducing consumers to behave in a way that is harmful or dangerous to their health or safety.”

Likewise, the STJ has been emphatic when deciding on the matter, delimiting the matter on the basis of the specific case presented. In deciding REsp 1.558.086/SP in a public civil action regarding illegality in the purchase of watches conditioned on the purchase of food products, the STJ expressly stated that "marketing (advertising or sales promotions) of food directed, directly or indirectly, to children is abusive. The decision to buy and consume food, especially in times of an obesity crisis, must reside with the parents", notably because minors have “their discernment incomplete, but on the other hand, have an enormous capacity to convince their parents, caretakers, or family members, to buy those products that interest them."

This was also the guidance of the STJ in REsp 1.613.561/SP on a campaign aimed at children and the youth public, which encouraged minors to exchange stamps printed on food packages for uniformed plush mascots.

Both the self-regulation of the advertising sector, represented by the Conar code, and Conanda Resolution 163/14 claim validity of application in our legal system. Conanda’s position is that advertising aimed at children is abusive and that advertisements should be directed to parents and guardians. Conar, on the other hand, which prohibits imperative appeals to consume directed to children, establishes guidelines for validity, in theory, of advertisements that could be released to minors. On January 24 of this year, the National Consumer Bureau, an agency linked to the Ministry of Justice, released a public consultation by submitting for discussion a draft of a new ordinance to be issued to regulate the matter.

The content under analysis seems to be in line with Conar's guidelines, to the effect of regulating, and not prohibiting, these types of advertisements, but it is possible to find points in common, such as: the presence of the paradigm of the principles of full protection and the best interest of the minor, and the principle of more comprehensive protection for the public under 12 of age, i.e. children.

But how can the issue of data processing be thought about in that context?

The LGPD establishes as a rule that the processing of personal data of minors (children and adolescents) must also obey the best interest principle. Thus, the standards cited above must be obeyed.

In relation specifically to children, any form of processing should be carried out with the specific and clear consent of at least one of the parents or the legal guardian. One observes, therefore, greater protection for children. It is also noted that, in addition to the legal bases for processing personal data indicated in articles 7 and 11 of the LGPD, the data controller must be subject to article 14 of the law when there is data relating to children.

There are two possible exceptions to the specific and clear consent rule from the child's legal guardian: when the collection of the data is necessary to contact the parents or legal guardian (such data must be used only once and must not be stored) or for the protection of the child. Under no circumstances may the child's data be passed on to a third party without the consent of guardians.

The LGPD does not, however, address the legal basis for the processing data regarding adolescents, which could establish a debate on the application thereof. Is the consent of the guardian, as expressly indicated for children, also necessary for adolescents?

For the purposes of exercising consent, individuals over the age of 16 and under the age of 18 are incapable with respect to certain civil acts or with respect to the manner in which they consent to them and need the assistance of their guardians. On the other hand, minors under 16 years of age are absolutely incapable of personally performing acts of civic life, requiring representation for the performance of any act.

The Civil Code also states that "no one may claim what, by an annulled obligation, he has paid to an unfit person, if he does not prove that the amount paid reverted to such person." In other words, in order for the effects of a legal transaction entered into with a minor to be maintained, it must be proved that such effects reverted to that minor. Thus, assuming that, in a scenario of processing of personal data of adolescents, this processing is reverted to the benefit of the adolescent himself, it would be possible to argue that this action would dispense with the consent of the adolescent’s guardian.

Upon establishing a restriction to the effect of requiring the specific and clear consent of at least one of the parents or legal guardian, the legislator did so specifically for children, excluding adolescents from this rule. It is not, therefore, a gap, but eloquent silence. Thus, there does not appear to be an additional requirement beyond the consent of the adolescent and/or the use of any of the legal bases of articles 7 or 11 of the LGPD in the case of data processing, including in the context of advertising.

However, the question is raised in the data protection system, with part of the legal scholarship indicating the need for guardian consent for both children and adolescents.^[5] It is hoped that the National Data Protection Authority can help to settle the issue by establishing clearer criteria regarding the processing of personal data regarding adolescents, including in contexts such as advertising.

^[1] Per the terms of article 5, subsection X, of the LGPD, processing is all operations carried out with personal data, such as those relating to the collection, production, reception, classification, use, access, reproduction, transmission, distribution, processing, filing, storage, discarding, assessment, or control of the information, modification, dissemination, transfer, diffusion, or extraction.

^[2] See Resolution No. 163/2014 of the National Council for the Rights of Children and Adolescents (Conanda).

^[3] Article 2 of Conanda Resolution No. 163/2014.

^[4] As an example, we have Prof. Diogo Coutinho, in a recently published article: “Publicidade Infantil: ilegal e ponto final” [“Advertising to Children: illegal, period”], available at https://www.jota.info/opiniao-e-analise/artigos/publicidade-infantil-ilegal-e-ponto-final-03022020 Accessed on: February 9, 2020.

^[5] In that sense, Rosana Leal da Silva in "A Infância Conectada: A Proteção de Dados Pessoais de Crianças e Adolescentes em Perspectiva Comparada entre a União Europeia e o Brasil” [“The Protection of Personal Data of Children and Adolescents in a Comparative Perspective between the European Union and Brazil”], found in Direito e Internet IV [“Law and Internet IV”] (São Paulo: Quartier Latin, 2019), indicates that "according to the Brazilian civil law system, children and adolescents are incapable of performing valid legal acts, an incapacity that will be remedied by the representation or assistance of their parents or guardian. Requirement of consent correct and appropriate", pg. 279.

Category: Labor and employment

Faced with the covid-19 pandemic, companies have discussed possible actions to help stop the spread of the virus. We highlight below the main options for corporate environments and some precautions that should be taken from a legal point of view.

Home office

This is the option to work from a distance, usually at the worker's home. It must be instituted in an internal policy and does not require formalization in an employment contract.

Implementing it is an alternative in the current scenario, and it is advisable to make it clear to employees that the measure is temporary and exceptional.

It is also advisable to provide guidance on health and safety standards for exercising activities at home and to adjust the means of controlling work hours for employees who usually have their work hours recorded.

Teleworking or Remote Work

This is also an option for distance working (provided for in articles 75-A and 75-E of the Consolidated Labor Laws) which has as its main characteristic the performance of activities by the worker predominantly outside the premises of the company.

Even if teleworking or remote work is only stipulated temporarily due to the covid-19 outbreak, there is no prohibition on having it agreed upon between the company and employee for a certain period of time, as long as, in the meantime, the activities are provided predominantly outside the corporate environment.

Unlike with the home office option, the choice to telework or work remotely must be formalized individually with the employee, in a document that contains the specifications of the activities to be performed and an agreement on who will be responsible for costs related to equipment and infrastructure needed in this regard.

In addition, as provided for in article 75-E of the Consolidated Labor Laws, the company must guide its employees on preventing occupational diseases and accidents.

Unlike with the case of a home office, teleworking or remote work dispenses with control of work hours.

Individual and collective vacation

As a rule, individual vacation must be granted to employees who are enjoying the period granted, upon 30 days advance notice.

To grant collective or company-wide vacation, the employer must notify the Ministry of Labor (currently, the Department of Labor) and the trade union 15 days in advance. Collective or company-wide vacation must cover all employees or all employees in (a) certain sector(s).

For both vacation arrangements, failure to comply with the legal requirements may result in a fine against the company of R$ 170.25 per employee.[1]

Considering the exceptionality of the covid-19 pandemic situation, however, there are good arguments to justify relaxation of these deadlines and non-application of fines.

Any change in the work regime unilaterally undertaken by the employer during this period must be done with caution and reasonableness. The change may be justified as a measure caused by force majeure,[2] since employers are responsible for ensuring good health and safety conditions for their employees, under penalty of being held liable for any acts of negligence that are shown to expose them to risk.

In this context, an employee who refuses to follow the guidelines or changes proposed by the employer during this period may be penalized with a warning, suspension, or even termination for cause.

In accordance with the rules enacted[3] by the government to contain and prevent the advance of the disease, workers who undergo clinical and laboratory investigation of the disease must remain in isolation, preferably at home, for a period of 14 days.

If isolation is recommended by a doctor or epidemiological surveillance agent, the employee may not come to work, without affecting salary, and may work under one of the arrangements for distance working (home office or teleworking).

If the suspicion of the illness is confirmed, employees may be put on leave if they present a medical affidavit, in which case the general rules for medical leave must be applied; it is not possible to treat this period as vacation or even require that the employee work in a home office or teleworking arrangement.

¹ Executive Order No. 905/19 appreciably altered the fines for labor infractions, in rules that will take effect after an act of the Executive Branch. If this occurs, fines calculated per employee affected (as occurs with violations related to vacation) may vary between R$ 1,000 and R$ 10,000 per employee.

[2]Article 501 of the CLT: "Force majeure is understood to be any inevitable event, in relation to the will of the employer, and for the occurrence of which it did not contribute, directly or indirectly."

[3] Law No. 13,979/20, published on February 7, 2020, provides specifically for measures to deal with the public health emergency caused by covid-19. The law was regulated by the Ministry of Health through Ordinance No. 356, published in the Official Gazette on March 12, 2020.

Category: Corporate

The recommendations of the Brazilian government authorities to avoid meetings and crowds of people to combat the spread of COVID-19 in Brazil concern publicly-held companies and the market in general in relation to the deadline required for the ordinary shareholders’ meetings to resolve on the company’s financial statements. According to article 132 of Law No. 6,404/76 (the Brazilian Corporations Law), such ordinary shareholders’ meetings shall be held within the first four months after the end of the last fiscal year.

The Brazilian Securities and Exchange Commission (CVM) has not yet formally expressed its opinion on the matter, whether so as to not impose administrative sanctions against companies which have not held their ordinary shareholders’ meetings within the aforementioned deadline, whether to confirm and guide companies that wish to hold them virtually. In this article, we examine the second scenario.

Currently, shareholders’ general meetings of are held at the companies' headquarters, mostly in person, with all formalities imposed by the applicable laws and regulations for their validity, such as registration of the shareholders' attendance in the proper book, transcription of the minutes of the meeting in the proper book, and preparation of certified copy of the respective minutes of the meeting for presentation before the boards of trade. These formalities generally requires the physical presence of shareholders.

Regarding the current coronavirus pandemic, however, such meetings do not comply with the recommendations of health professionals and government authorities, since shareholders and advisors often need to travel (often by plane) to the places where the meetings are to be held. Given this situation, would it be possible, from the corporate point of view, to hold entirely electronic or virtual meetings?

Electronic or virtual meetings are those "that occur entirely electronically, without the physical presence of or need for meetings by shareholders. Shareholders remotely access a platform by means of which they register their presence through digitalsignature certificates, discuss the agenda, and then vote. This whole process takes place virtually, allowing shareholders in different places around the world to participate at the same time in the same meeting, without the need to travel to a particular location."

On this subject, the first paragraph of article 121 of the Brazilian Corporations Law provides that "in publicly-held companies, the shareholder may participate and vote virtually in a general meeting, in accordance with the regulations of the Brazilian Securities and Exchange Commission." Likewise, the first paragraph of article 127 of the Brazilian Corporations Law, which addresses concerns related to the attendance book, states that "for all the purposes of this law, shareholders who record their presence remotely shall be deemed to be present at the general meeting, in the manner provided for in the regulations of the Brazilian Securities and Exchange Commission." Both provisions were the result of amendments to the Brazilian Corporations Law by Law No. 12,431/11, which aimed not only to accept the possibility that shareholders vote remotely, but also to embrace the possibility of "providing systems that would enable shareholders to participate and vote remotely and in real time."

CVM Normative Ruling No. 481/19 ("ICVM 481"), however, included as an obligation for companies to make available only the vote the remote ballot. Such ballot allows shareholders to vote remotely on matters to be resolved on at the meeting, by filling it out and sending it to the company a certain amount of time in advance. The submission may be provided directly to the company by shareholders or through the custody agent or bookkeeping agent of the shares issued by the company in question.

But even though it represented a great advance, especially to avoid massive absence of the shareholders, the ballot provided for in ICVM 481 is a limited instrument, since it does not allow shareholders to participate in the debates and discussions held during the meeting. The ballot must not be confused with holding the meeting of shareholders itself virtuallly, which should allow shareholders to effectively participate in the meeting, discussing the topics presented, posing questions to the management members, and casting their vote remotely in real time.

Since 2015, CVM has pointed to the possibility of holding virtual meetings. The subject was discussed through the report on the public hearing SDM No. 09/14 upon which amendments to ICVM 481 were discussed. The conclusion of the report, however, was to leave virtual meetings as an option for companies, since, in the understanding of CVM, there was not yet, at the time, sufficient technology to hold them: "In the process of preparing the draft, studies were conducted on the existing technologies for holding virtual meetings and electronic transmission of votes at the time of the meeting. The conclusion of these studies was that, although they are evolving rapidly, there are no technologies that have been sufficiently tested in order to ensure that a virtual meeting may be held efficiently. Therefore, the CVM believed that it would not be advisable to require companies to adopt these technologies at this time. It is possible that in the future, with the increase in the degree of reliability of these platforms, CVM will review this decision. For the time being, and even so as not to inhibit the development of appropriate technologies, virtual meetings will remain an option for companies.

Reinforcing this position, article 21-C, paragraphs 1 and 2, of ICVM 481 expressly states that "without prejudice to the provisions of article 21-B [remote ballot], the company may make available to shareholders an electronic system [...] for remote participation during the meeting [...] and, if it makes an electronic system for remote participation during the meeting available, the company must provide the shareholder with an alternative for participating and voting."

In other words, both the Brazilian Corporations Law and ICVM 481 allow companies to structure the means to hold their ordinary shareholders’ meetings virtually. In addition to complying with recent public health recommendations from government authorities, the measure may help promote increased shareholder participation in these discussion forums.

The most complicated issues to be faced in the implementation of meetings of shareholders virtually are those related to technology, since the platforms used should ensure that shareholders are able to: (i) identify themselves appropriately (through a digital signature certificate); (ii) send proxy documents and other documents requested from them in the usual manner by digital means, if they have not sent them in advance; and (iii) participate and vote remotely, in real time.

There are still other legal issues to be addressed, but for which companies can structure solutions, especially considering the current emergency scenario. They are:

1. The need to hold the meeting at the company's headquarters: article 124, paragraph 2, of the Brazilian Corporations Law states that meetings must be held at the company's headquarters and, in any case, never outside the locality of the headquarters. As a solution the company may delegate a responsible professional to be present at the headquarters and assume the function of secretary and/or chairman to conduct the meeting in house, even if the discussions and votes occur virtually.

2. Company’s Regular Disclosure Documents (Formulário de Referência): Annex 24 of ICVM 480/09 provides a separate field ("if the company provides an electronic system for remote receipt of the ballot or remote participation") in its item 12(h) for companies to report whether they have a system that allows remote participation by shareholders (and not mere exercise of voting rights) at general meetings. For the time being, as companies wishing to hold virtual meetings will not have time to include the procedures involved in their regular disclosure documents, we believe that shareholders may be guided by the information provided by the company in a notice to shareholders and in the instructions provided for in the management proposal for the meeting.

3. Registration of attendance in the proper book: An electronic document that mirrors the physical shareholders' attendance book could be made available in the virtual platform developed by the company, with access restricted to those have been previously accredited upon proof of shareholder status. It must be signed with the digital signature certificate.

4. Conduct of the proceedings: by means of the virtual signature of the attendance book, shareholders would receive a password to access the videoconference where the discussions of the general meeting will be conducted by the chairman and secretary.

5. Transcription of the minutes in the proper book with the signature of those in attendance: by means of the declaration of adjournment of the meeting, the minutes would be drawn up during the videoconference and, once approved by all, would be available for signature with the digital signature certificate in the same virtual platform of the company as referred to in item 2 above; and

6. Preparation of certified copy of the minutes to be filed: the company's management would prepare a digitally signed certified copy of the minutes and present it for file before the applicable board of trade. Only the certified copy of the minutes authenticated by the chairman and secretary shall be presented to the board of trade. Therefore, it could be signed in a physical copy if there is a regulatory barrier to filing it with only the digital signatures of the chairman and secretary.

The members of the management, the company's independent auditors, and shareholders would participate remotely. However, it should be noted that the possibility of holding a general meeting of shareholders electronically does not require the shareholder to choose to participate in the meeting by virtual means. Thus, companies should be prepared to receive shareholders who wish to appear in person at their headquarters. For this reason, it will be necessary to designate a professional responsible for receiving and verifying the documents of such shareholders, assuming the role of secretary and/or chairman of the meeting.

The measure also avoids allegations that the meeting was held outside the location of the company’s headquarters. In other words, general meetings held on a virtual basis open up a new possibility for participation by shareholders, which in no way excludes in-person participation. Companies must be ready to reconcile the participation of all in both virtual and in-person meeting arrangements.

It is possible to conclude that CVM's legal and regulatory framework allows Brazilian publicly-held companies to hold virtual meetings. Until the present date, however, no company has tested this model. If COVID-19 continues to advance, the market expects CVM to formally express its opinion on the matter. This opinion could come in the form of both guidance to companies wishing to test the virtual meeting model and suspension of penalties for those who fail to hold such meetings within the dealine provided for by the laws and regulations. The latter option may not solve the problem of companies that depend on financing or are participating in bids, situations which require that the ordinary shareholders’ meeting be held.

Category: Environmental

Joint Normative Instruction (IN) No. 2/20, published on January 29 by the Ministry of the Environment (MMA), the Brazilian Institute of Environment and Natural Resources (Ibama), and the Chico Mendes Institute for Biodiversity Conservation (ICMBio), brought in new regulations on the federal administrative procedure for investigating administrative environmental violations. The standard seeks to consolidate administrative procedures at Ibama and ICMBio, repealing prior instruments.

Following the trend of judicial proceedings, the IN established an electronic administrative proceeding, i.e., all the process will be done via the online system of federal agencies as of the drafting of the infraction notice. Access to the electronic process will be ensured to the defendants and their attorneys upon written request, regardless of power of attorney. This access will be considered a valid way to acknowledge the infraction notice or any decision within the administrative proceeding.

An important aspect of the new regulations is the inclusion of a conciliation hearing as an initial step in the administrative proceeding. The conciliation hearing had been introduced as a dispute resolution method within the Federal Environmental Public Administration by Federal Decree No. 9,760/19.

Even this hearing may be conducted electronically, provided that there is agreement by the defendant and adequate infrastructure and technology at the environmental administrative unit in question. Equal procedures and guarantees given to respondents in relation to hearings in person should be guaranteed. Hearings of an electronic type should preferably be used, at the discretion of the Environmental Conciliation Nucleus (Nucam), to enable the presence of respondents who face difficulty in appearing or when a complementary hearing is held, in order to expedite the procedure.

Once the agreement by the respondent has been expressed, the hearing will be automatically scheduled for at least 30 days after the infraction notice is drawn up. The time limit for submitting a defense shall be suspended until the date of the hearing.

The respondent may also waive the right to participate in the environmental conciliation hearing by means of a written declaration filed by the scheduled date of the session. In that case, the time limit for presentation of the defense shall start to run as of the filing of that brief.

The submission of a partial defense is allowed if, in the environmental conciliation, the defendant disagrees with one or more precautionary administrative measures and penalties which have been applied.

When regulating Nucam's operation, the IN divided it into two distinct teams: the Preliminary Analysis Team (PEA) and the Conciliation Hearing Conduct Team (ECAC).

It is incumbent on the EAP to validate infraction notices presenting a curable error, to declare null and void infraction notices that present an incurable flaw, in order to analyze the appropriateness of converting the fine into services of preservation, improvement, and recovery of the quality of the environment, as well as to decide on whether to maintain the application of the precautionary administrative measures and the application of the other sanctions.

The preliminary review of the assessment shall be formalized by the EAP in a reasoned opinion and sent to the relevant ECAC at least seven days in advance. The opinion of the EAP, however, is not binding.

The ECAC will be responsible for conducting the conciliation hearing, presided over by a full-time public servant who does not belong to the staff of the federal environmental agency responsible for the assessment. The ECAC will also take the measures necessary after the hearing has taken place, both in cases of successful conciliation and in cases where the environmental inspection continues.

In the event that the proceeding continues due to lack of conciliation or environmental conciliation with disagreement by the respondent regarding one or more injunctive administrative measures and sanctions applied, the Investigation Team (EI) will continue the process.

Another highlight of IN is the express provision that the inspection report must demonstrate the subjective element of the environmental infraction, that is, it is required that the conduct have been committed by the offender with intent or willful misconduct. This inclusion changes the practice of environmental agencies in the administrative environmental liability sphere and is in line with the understanding of the Superior Court of Appeals (STJ) that administrative environmental liability is subjective, i.e., it requires on proof of intent or willful misconduct (STJ). (Motion to Resolve Divergence in Special Appeal: EREsp 1.318.051-RJ, Reporting Opinion drafted by Justice Mauro Campbell Marques, First Section, unanimously, decided on May 8, 2019, published in the Electronic Gazette of the Judiciary on June 12, 2019).

Seeking to modernize inspection at the federal level, the IN innovated by allowing an environmental agency that has seized assets in inspection actions to install tracking equipment on the items seized with the purpose of monitoring their location and use during the time the seizure measure is in effect. In addition, the inspection agent may request the installation of trackers as a condition for the deposit or use of the asset by the offender after the seizure. These measures are unprecedented in federal administrative sanctions procedure.

The rule also allows the respondent to request revision of the infraction notice after the infraction notice has been definitively issued. This request for revision is intended to undo or modify the judgment, which will only be admitted when the respondent alleges new facts or relevant circumstances that justify the inadequacy of the sanctions applied. In this case, it will be incumbent on the authority that delivered the final judgment to examine the request for revision. It will not be possible to harshen the penalty or restrictive legal sanction already imposed. Therefore, a request for revision gives the respondent one more chance to fight the case still in the administrative sphere, which may avoid prolonging the litigation in the judicial sphere.

Category: Environmental

Federal Decree No. 10,240/20, published in February, implements the reverse logistics system for electronic products and their components for domestic use. The regulation was expected, since important players in the marketing cycle of these products, especially the retail sector, had not adhered to the industry agreement on the subject signed on October 31, 2019. At the time, various sectors assumed obligations before the public authorities to implement appropriate reverse logistics of waste arising from the market of electrical and electronic products and their components, on a voluntary basis, due to the contractual nature of the agreement.

Rules to ensure equal protection in the inspection and compliance with the obligations imputed by article 33 of the National Solid Waste Policy (PNRS, instituted by Law No. 12,305/10) had already been established by Federal Decree No. 9,177/17 for non-signatories of an industry agreement or consent order. Now, Decree No. 10,240/20 adopts another instrument provided for in the PNRS and in article 15 of Regulatory Decree No. 7,404/10.

The objective is to impose obligations very similar to those provided for in the industry agreement for all manufacturers, importers, distributors, and dealers of household electrical and electronic products and their components, who will also have to establish and implement reverse logistics systems for their electrical and electronic waste independently of the public collection system.

The decree applies to electrical and electronic products for domestic use whose operation requires electric supply with a maximum voltage of 240 volts. Domestic use is defined as own or personal, residential or family use exclusively by individuals. The decree also allows companies or management entities to receive electrical or electronic products and their components with characteristics similar to those of domestic use, but discarded by micro or small businesses.

As established in the industry agreement signed in October, the first phase of the structuring and implementation of the reverse logistics system is underway and is expected to be completed by December 31, 2020. In this phase, the Monitoring and Performance Group (GAP) will be created, responsible for monitoring and disseminating the implementation of the reverse logistics system. Manufacturers, importers, traders, and distributors must adhere to management entities or submit an individual model for implementation of the system.

Still in the first phase, a financial mechanism will be established to ensure the system, in addition to another mechanism that will allow the collection of the data necessary for monitoring and follow-up on the system through the GAP. On the part of the Public Administration, the Ministry of the Environment should respond, vis-à-vis state agencies, in favor of tax measures to simplify the transport of waste and support measures to facilitate the installation of waste reception and consolidation points. It is Ibama's responsibility to regulate interstate transportation in order to recognize electrical and electronic waste as non-hazardous and, consequently, allow transit thereof.

The second phase, scheduled to begin in 2021, will include qualification of service providers, development of communication and environmental education plans, leadership training, and installation of reception or consolidation points.

One issue that was much debated was the possibility of remuneration, compensation, or payment to consumers who deliver electrical or electronic products at reception points. The decree vetoed this point, but allowed the adoption of incentive mechanisms by companies or managing entities.

The reverse logistics system will be fully financed by companies in proportion to their market share. Financial resources will also be differentiated for each type of product and defined according to technical and economic criteria and the particularities of the product in question. The decree provides for possible costs related to the necessary arrangements for disposal of the waste. It is understood, therefore, that expenses related to transportation of the waste to the collection points will not be covered by the system, but solely and exclusively by the consumer or the person who performs the disposal. Considering the prohibition on compensation, remuneration, or payment to the consumer, this may be a point of discussion, because in the case of larger waste, the return may represent a cost that consumers will not want to bear, despite their shared responsibility.

The decree stipulates that manufacturers and importers are obliged to provide for environmentally sound final disposal for all waste received by the system, with preference for recycling. Although the PNRS imposes a hierarchy in solid waste management that must be observed^,[1] the preference for recycling is due to the particularities and difficulties of reuse of electrical and electronic products. If re-use is feasible, however, companies should not hesitate to opt for this form of destination.

For importers, the decree mandates participation in reverse logistic systems as a requirement for compliance in the performance of their activities. The Import Declaration must also contain information on who is responsible for structuring, implementing, and operating the reverse logistics system, otherwise the license to import electrical and electronic products will not be granted.

Distributors should be encouraged to join the management entities or establish their own reverse logistic systems, as well as make physical spaces available for consolidation points, where waste will be stored pending its transfer for environmentally appropriate disposal.

Closing the cycle of the companies involved are the merchants who work in physical stores, in distance sales, or by e-commerce. It is up to them to receive, package, and temporarily store the electrical and electronic products discarded by consumers and return them to importers and manufacturers. Merchants should also be involved in the implementation of communication and non-formal environmental education plans. These obligations also apply to companies providing mobile telephony services that sell electrical and electronic products subject to the decree.

Decree No. 10,240/20 maintained the goals and deadlines of the industry agreement signed in October of 2019: at the end of the fifth year of operation of the system (2025), 17% of the electrical and electronic products placed in the Brazilian market for domestic use should have an environmentally appropriate destination. The target is calculated from the base year of 2018 in 400 cities across Brazil, but may be changed, however, by providing technical justifications supported by the life cycle particularities of each product.

As for the packaging of electrical and electronic products, the decree provides that it will be received at collection points and destined in an environmentally appropriate manner. The standard makes it clear, however, that companies will be able to sign legal instruments with other reverse packaging logistics systems, in a clear reference to those already operating in Brazil. The targets for recovery of packaging will be equivalent to those set in any of the industry agreements, decrees, or consent orders themselves, as defined by Decree No. 7,404/10 and Decree No. 9,177/17.

^[1] The PNRS provides for the prevalence of non-generation or the reduction of generation as initial strategies to be adopted for solid waste management.

Category: Banking, insurance and finance

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 (assets and rights, including corporate interests in companies, fixed-income securities, shares, real properties, deposits, loans investments, among others) amounting to or exceeding the equivalent to US$100,000.00 (one hundred thousand US Dollars) on December 31, 2019.

Furthermore, the individuals and legal entities mentioned above holding assets abroad must also deliver to the Central Bank of Brazil a quarterly report relating to assets held abroad on March 31, June 30 and September 30 of each year, in case the total amount of such assets reaches or exceeds the equivalent to US$100,000,000.00 (one hundred million US Dollars).

The report referring to December 31, 2019 must be delivered by means of the Brazilian Capital Abroad (CBE) reporting form available in the internet website of the Central Bank of Brazil at: www.bcb.gov.br, from February 17^th, 2020 through 6PM of April 6^th, 2020.

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

The late delivery, lack of reporting, or the submission of false, inaccurate or incomplete information subjects the violator to a fine of up to R$ 250,000 (two hundred thousand Brazilian reais).

(CMN Resolution 3,854, of May 27, 2010, BCB Circular 3,624, of February 6, 2013, and BCB Circular 3,857, of November 14, 2017, as amended).

Category: Labor and employment

The world has seen, in recent days, a global escalation of the coronavirus beyond the borders of China and Italy. A few days ago, the World Health Organization (WHO) declared Covid-19, a disease caused by the virus, to be pandemic, and stated that the number of patients infected, deaths, and countries affected is expected to increase throughout the month of March.

As of the preparation of this article, cases of coronavirus were registered in 114 countries, with a lethality of 3.4%. The pandemic impacts production, raises fears of a global recession, damages the economy, and interrupts the production of goods and the supply of services across the globe. Among all the impacts of the coronavirus, those caused in labor relations are silent and can affect the daily lives of thousands of companies and employees.

In Brazil, the federal government passed Law No. 13,979/20, regulated by Ordinance No. 356/20, which establishes control measures to combat the new virus. The law defines the concepts of isolation, removal of persons whose illness has been confirmed,[1] and quarantine, removal of persons with suspicion of contamination,[2] and governs, in its article 3, paragraph 3, the labor consequences of quarantines and/or isolation.

The program in question considers absences from public service or private work activities to be "justified absences" during the period in which the affected employee is on leave, under quarantine, or in isolation. However, as the law does not specify the impact of such justified absences on employment contracts, it is necessary to analyze the related laws in order to understand it.

From what is known so far, when infection with the coronavirus is confirmed, the estimate is that the patient needs more than 15 days for a full recovery and return to work, considering the incubation period of the virus of up to 12 days, approximately, and the time for manifestation of the disease.

Thus, if an employee is away from work activities for more than 15 days, such employee must be referred to the INSS, to start receiving sick pay, as provided for in article 59 of Law No. 8,213/91. It is important to point out that during the first 15 days of leave, the employment contract is interrupted; starting on the 16th day, the contract is suspended.

This means that during the first 15 days, employees stop providing services to the employer, but continue to receive their remuneration. This period counts as effective provision of services for all legal purposes. It is only a partial suspension of services.

As of the 16th day, the employee must be put on leave with the INSS, and the employer is no longer required to pay wages. In addition, this period of leave will not count as time of service for labor and social security purposes.

In this arrangement, there is the understanding of suspension of contract, since, temporarily, there will be stoppage in the provision of services and, therefore, termination of the employer's obligations and of any effect of the contract while the suspension of the contract lasts.

However, it should be noted that even during the period of suspension of the employment contract, the employer must maintain the health plan regularly granted to the employee.

Based on the law, therefore, isolation and/or quarantine periods due to contamination of the employee by the coronavirus have the same impact as justified absences presented today, that is, they interrupt the employment contract until the 15th day and, from the 16th day onwards, they suspend the contractual relationship maintained between the employer and the employee, regardless of the isolation or quarantine period.

[1] According to article 2, I, of Law No. 13,979/2020, isolation means separation of sick or contaminated persons, or of baggage, means of transport, goods, or postal parcels affected, from others, in order to avoid infection or spreading of the coronavirus.

[2] According to article 2, I, of Law No. 13,979/2020, quarantine means restriction of activities or separation of persons suspected of contamination from persons who are not ill, or from luggage, containers, animals, means of transport or goods suspected of contamination, in order to avoid potential infection or spreading of the coronavirus.

Category: Litigation

Recent changes in the Expression of Interest Procedure (PMI) should encourage private agents to cooperate with the Federal Public Administration in modeling partnerships and bidding procedures. The new rules were established by Decree No. 10,104/19 in November of last year.

The PMI is the instrument commonly adopted by the Federal Public Administration to seek out private partners in the preparation of surveys, investigations, and technical studies necessary to structure projects, concessions, and bids in general. Through it, a public call is conducted in order to seek out individuals and companies interested in technically supporting the structuring of public bidding projects.

If the material produced is effectively used in the preparation of the bid notice for the public tender to which the studies refer, the private party will be reimbursed for the consulting services provided, under the terms of the call for bids notice and the respective draft contract. These documents shall require the winner of the bidding procedure to reimburse the private party directly, in whole or in part, for expenses incurred in performing the consulting.

Decree No. 10,104/19 amended Decree No. 8,428/15, which regulates the procedure. The text is the result of a proposal prepared by the Special Bureau of the Investment Partnership Program of the President’s Chief of Staff and brought in innovations that make PMI more advantageous in the eyes of the Public Administration and private parties.

It is worth highlighting the expansion of the scope of the PMI, under the terms of article 1 of Decree No. 8,428/15. Previously, the PMI could only be used in "enterprises that are subject to a concession or permission for public services, a public-private partnership, the leasing of public assets, or the granting of a real property right." The new wording also includes the structuring of "company privatization and partnership contracts, in accordance with the provisions of paragraph 2 of article 1 of Law No. 13,334, of September 13, 2016.”^[1]

Partnership agreements are all those agreements related to "common concession, sponsored concession, administrative concession, concession governed by sector legislation, public service permission, leasing of public property, concession of real property right, and other public-private businesses that, due to their strategic nature and their complexity, specificity, volume of investments, long term, risks, or uncertainties involved, adopt a similar legal structure."

The possibility of using the PMI for processes for privatization of mixed economy companies and public enterprises goes in the same direction as recent government initiatives to foster the privatization of public assets and services.

Two other relevant changes:

• The selection process for the partner responsible for the studies may precede the authorization phase for the presentation of projects, surveys, investigations, or studies (article 1, paragraph 5).
• Authorization to submit projects may be granted with exclusivity or to a limited number of interested parties (article 6, I).

With regard to the anticipated selection and restricted number of interested parties, a provision allows the public call for bid notice of the PMI to establish as evaluation and study selection criteria, in an alternative or cumulative manner: (i) professional experience, (ii) the work plan, and (iii) preliminary assessments on the venture (article 10, sole paragraph).

Also as a relevant innovation, the decree revokes the previous provision that provided for supplementary compensation to private parties in the event of a need for corrections and changes in the studies (paragraph 6 of article 15 of Decree No. 8,428/15). This acts as an incentive for the final value provided for in the call notice to take into account any need for adjustments and changes. In addition to minimizing the risk of future financial discussions holding up the project, the measure contributes to lowering the cost of the bidding process as a whole.

Admittedly, the changes brought about by Decree No. 10,104/19 increase the scope of action and effectiveness of the PMI, on the one hand, and reduce expenses with projects prepared and unused, on the other. This normative change in the PMI accompanies the new trend of bidding procedures, provided for in the bill (PL 1,295/95)^[2] that intends to substantially amend Law No. 8,666/93. These are changes that promise to give greater efficiency and legal certainty to the execution of public contracts for the construction of more effective bidding models and improvement of infrastructure projects in Brazil.

^[1] Law which instituted the Investment Partnership Program (PPI), aimed at expanding and strengthening interaction between the public power and private initiative.

^[2] PL 1,295/1995. https://www.camara.leg.br/proposicoesWeb/fichadetramitacao?idProposicao=16526.