- Introduction
The appointment of directors resident abroad has generated questions among businesspeople and legal professionals, especially in limited liability companies and corporations, due to the fact that until now it was impossible in LTDA and S.A. companies, the appointment could only take place by the Board of Directors. With Law 14.195/2021 – the Business Environment Improvement Law – which facilitated this practice in public limited companies, allowing the election of directors outside Brazil, the issue has gained new relevance. However, for limited liability companies, the legislation did not provide a direct answer, leaving room for interpretation.
This article will clarify whether it is possible to elect foreign directors in limited companies, based on the changes in legislation, the guidelines of the National Department of Business Registration and Integration (DREI) and the contractual practice of companies. We will discuss how the Corporations Law – Law No. 6,404/1976 – or the SA Law. – can be applied on a supplementary basis and the benefits of this flexibility for companies with international partners or investors.
- Changes to Corporate Law
The Business Environment Improvement Act brought about important changes for corporations, especially in article 146 of the Corporate Law. The main change was that the law now allows for the election of directors resident abroad, and to this end created the need for this non-resident director to appoint a representative resident in Brazil to receive summonses and subpoenas on his behalf, for the purposes and effects of company law, with powers that would extend even after the non-resident director’s term of office has ended.
Although the legislation does not refer directly to limited companies, the DREI, a body of the Ministry of Economy responsible for regulating and overseeing company registration in Brazil, ensuring that the business formalisation process follows the legal rules, has clarified, by means of DREI Normative Instruction No. 112 of 20/01/2022, that these companies can also appoint directors resident abroad, as long as they comply with the same requirement to set up a representative in Brazil. In this way, the application of the LSA rules, as long as it is duly expressed in the articles of association, facilitates the management of companies with international partners or investors.
- The Possibility of Electing Directors Residing Abroad in Limited Liability Companies
Limited companies do not have an express provision on the election of directors resident abroad, which raises doubts among entrepreneurs. However, it is possible to apply the provisions of the Corporations Law (LSA) by means of supplementary governing clauses inserted in the articles of association, in accordance with article 1,053 of the Civil Code. With this clause, limited companies can adopt the rules of article 146 of the LSA, allowing the appointment of directors resident abroad, provided that a representative is appointed in Brazil to receive summonses. This approach facilitates the management of companies with international partners or investors, without relying on specific legislative changes for limited liability companies.
- Drei/ME Normative Instruction 112
IN DREI 112/22, issued by the DREI (Department of Business Registration and Integration) is responsible for regulating and supervising the registration of companies in Brazil, including corporations (S.A.) and limited liability companies (LTDA). It issues rules to standardise business formalisation processes, ensuring that companies comply with legal requirements and adapt to changes in legislation. These rules aim to offer greater legal certainty, uniformity in procedures and transparency in the business environment, benefiting entrepreneurs, investors and regulatory bodies alike. It regulates the possibility of appointing directors resident abroad to limited companies.
In its article 13, the regulation clarifies that in order for a director resident outside Brazil to be registered, he or she must appoint a representative in Brazil, with powers to receive summonses for at least three years after the end of his or her term of office, as well as summonses in administrative proceedings brought by the Securities and Exchange Commission (CVM), in the case of directors of publicly traded companies.
This regulation facilitates the process of appointing foreign directors, ensuring greater legal certainty for limited companies, especially those with international partners or investors. In addition, the requirement to register the representative’s power of attorney in Brazil is a formality that ensures legality and transparency in corporate relations.
- Impacts and Benefits for Companies with Foreign Partners and Investors
The possibility of appointing directors resident abroad offers strategic advantages for companies with international partners or investors. Firstly, it simplifies corporate management, allowing global executives to assume leadership positions without the need to travel to Brazil, which facilitates the alignment of governance with international practices.
Countries such as the United Kingdom, the United States, Portugal, France, Hong Kong and Singapore also allow the appointment of non-resident foreigners as directors, making this a common practice in global markets. This flexibility is relevant for Brazil, as it can increase the country’s attractiveness for foreign investment, contributing to its competitiveness on the international stage. In addition, by reducing legal barriers, the measure makes the process more agile and less bureaucratic, facilitating the integration of global talent and offering greater flexibility to companies, which strengthens their competitiveness and response to global market demands.
- Conclusion
Generally speaking, from a legal point of view, the issue of appointing directors resident abroad to limited companies was resolved with the entry into force of Law 14.195/21, which amended article 146 of the Corporations Law, and with the publication of DREI IN 112. This rule, based on legislative updates, modified IN 81 of 2020, bringing about a substantial change in the rules for the residence of directors abroad.
In this way, the DREI regulation removed any doubt about the feasibility of electing foreign directors for limited companies, making the possibility not only feasible, but expressly authorised. As a result, legislation and regulatory practice have provided greater clarity and legal certainty, allowing companies with international partners and investors to benefit from more globalised and efficient management.