The COVID-19 pandemic has severely impacted the global supply chain and has caused delays and suspended deliveries of goods and services. Also, it is inevitable to work with a scenario of retraction in some sectors of the economy, which will eventually lead to defaults, partial, or total, of contractual obligations.

Given this situation, it is essential that individuals and companies are prepared to renegotiate obligations with their customers and suppliers, either amicably or, ultimately, using legal means to review or terminate contracts.

Check below the content prepared by our contract team:

04.17.2020 – Renegotiation of contracts in COVID-19 times: After all, what can be done?

Given the countless social and economic repercussions resulting from the pandemic of the new coronavirus (COVID-19), public authorities have recommended preventive measures and imposed restrictions on the entire population. Public and private entities adopted precautionary protocols and reformulated their activities to better adapt to times of crisis.

The first measures planned to deal with the public health emergency resulting from the spread of COVID-19 were set out in Law No. 13.979, of February 6, 2020, among them: isolation and quarantine of people; temporary closure of ports, highways and airports; compulsory laboratory exams and tests and medical treatments; requisition of goods and services, with subsequent compensation; exceptional and temporary authorization to import products without registration with Anvisa; and exemption from bidding for the purchase of health goods, services, and supplies for dealing with calamity.

With the worsening of the crisis, , the Brazilian Senate recognized the state of public calamity (Legislative Decree No. 6, 2020), with effects until December 31st, 2020. In the same direction, the Governments of mainly all the States, as well as the respective Governments of the biggest Municipalities, declared a situation of public emergency, to implement measures to face the pandemic. General restrictions on the movement of people were imposed, with the suspension of classes in public and private schools and universities, closure or teleworking regime in public agencies, reduction in the operation of public transport, and closure of commercial establishments. Offending agents are subject to civil, administrative and criminal liability, as regulated by the Ministries of Justice and Public Security and Health.

Aware of the repercussions caused by such an emergency, the teams from Fraga, Bekierman & Cristiano Advogados prepared this report with a summary of the main normative acts related to COVID-19 and their impacts on business continuity.

Tax and Customs Aspects
For more detailed information about tax aspects, please access our Newsletter about the main tax measures to mitigate the impacts of Covid-19 clicking here.
Labor Aspects
For detailed information about labor aspects, please click here.
Contractual Aspects
Check out the material that our team has prepared regarding the contractual alternatives in the context of the pandemic by clicking here.
Other Legal and Economic Aspects
Here are the main measures proposed by the authorities so far.
Public Bodies Functioning and Terms
Except for the health area, all public agencies have adjusted their functioning to deal with the emergency scenario of COVID-19.


Our offices in Rio de Janeiro and São Paulo are available to answer any questions about the measures described above.

The partner Marcelo Leonardo Cristiano was recognized as a leading private practitioner in Corporate Law and Contracts and in the Health and Steel and Mining sectors by Análise Advocacia 500, an important Brazilian directory that identifies and points out the country’s most admired lawyers and law firms.

For more information, access:

Fraga, Bekierman & Cristiano Advogados was recognized in Tax, Corporate, Contracts, and Labor Law by Análise Advocacia 500, an important Brazilian directory that identifies and points out the country’s most admired lawyers and law firms.

For more information, access:

The partner Marcelo Cristiano will participate as speaker of the seminar Smart Contracts: Applications and Legal Challenges, organized by EMAP, of Fundação Getúlio Vargas. The seminar will promote the debate on Blockchain technology, possible applications of Smart Contracts and the main legal challenges to its use, including practical cases and existing projects. The seminar will be held on October 18, at 16:00, at Fundação Getúlio Vargas headquarters, in Botafogo.

Date: October 18, 2018

Time: 16:00

Location: Praia de Botafogo, 190

On July 19th 2017, the Brazilian Federal Revenue (RFB) issued the Normative Ruling No. 1,719 (IN 1,719/2017), which regulates the Complementary Law No. 123/2006 (LC 123/2006) and set rules regarding the taxation on capital injection operations performed by the new legal category of the Brazilian legislation, the “angel investor”. In the following topic, we present some of the main aspects of the new regulation.

1.Capital Injections

According to the general rule of the LC 123/2006, the angel investor interested in investing in micro and small companies must enter into a “participation contract”. These contracts must observe certain conditions, such as the term of the investment, which may not exceed seven years, and also stipulates the forms of remuneration of the angel investor. In this sense, we highlight that the angel investor, as an individual or a legal entity, may perceive returns resulting from its investments in three situations:

(i)  when the invested company distribute its results, as established in the participation contract;

(ii)  when the angel decides to transfer its ownership rights regarding the participation contract; or

(iii)  when the injection is redeemed. Although there is no legal provision, RFB established different tax criteria for each one of these scenarios.

2. Distribution of Results

As determined by LC 123/2006, Article 61-A §4 III, the participation contract will grant the angel investor a return on the investments, limited to a maximum period of five years.

In this context, the IN 1,719/2017, Article 5, determines that the “earnings” resulting from capital injections are subjected to withheld income tax, calculated observing the following tax rates:

(i)  22.5% (twenty-two and a half percent), regarding participation contracts with term up to 180 (one hundred and eighty) days;

(ii)  20% (twenty percent), regarding participation contracts with term from 181 (one hundred and eighty-one) to 360 (three hundred and sixty) days.

(iii)  17.5% (seventeen and a half percent), regarding participation contracts with term from 361 (three hundred and sixty-one) to 720 (seven hundred and twenty) days;

(iv)  15% (fifteen percent), in participation contracts with term over to 720 (seven hundred and twenty) days.

At first glance, the distribution of any results would be subject to withholding of income tax. However, we understand that there are strong arguments to question this interpretation since there is no legal provision allowing tax authorities to connect the distribution of results to financial earnings.

It is important to highlight that distribution of results to the angel investor must not be higher than 50% (fifty percent) of the profits of the company that received the capital injection.

3. Transfer of Participation Rights

If the angel investor sells or transfers the ownership of rights related to its participation contract, the income tax will be levied. The tax basis must consider the positive difference between the sale value and the original amount of the injection. In this scenario, the same tax rates of the distribution of results shall be applicable.

4. Investments Redemption

LC 123/2006 allows the angel investor to redeem the value of its injection after at least two years of the investment. In this scenario, the angel’s assets will be calculated based on the equity value of the company, limited to the invested amount.

5. Specific Rules for Investment Funds

The RFB established different tax rules for investment funds characterized as angels investors. According to the IN 1,719/2017, withheld income tax is waived, regarding the earnings and net gains or capital gains earned by investment funds portfolio, which inject capital as an angel investor. As for quotas’ redemption, however, the same rules established for funds regulated by general rules or for those organized as a closed-end fund shall be applied, as the case may be.

At the first reading of IN 1,719/2017, it seems clear that, instead of creating tax incentives, the RFB established tax standards that conflict with the goals of promotion and incentive regarding investment and innovation activities, as desired by the Complementary Law No. 123/2006.

The teams of Fraga, Bekierman e Cristiano Advogados law firm are available to provide advice in any questions regarding this matter

Brazil is in the midst of a complex political turmoil, which has been fueling a deep economic crisis. The outlook for the near future is uncertain. For Brazilians, the ongoing crisis is frightening and embarrassing. For international investors, however, the moment may be an outstanding opportunity for portfolio diversification.

In the current context, main players of the industrial, commercial and service sectors have already filed for judicial reorganization under the Brazilian Judicial Recovery and Bankruptcy Law, the Law # 11,101/2005 (Brazilian equivalent to United States Chapter Eleven procedure). This process of debt restructuring includes selling off assets and spinning off non-core businesses. Investors interested in this kind of equity usually encounter undervalued assets and company’s shares at a lower price. Along with this scenario, there is a specific procedure intended to create grounds for investments able to save companies from the bankruptcy.

According to the rules governing the Judicial Recovery, a company under restructuring process must present a plan of recovering. Specifically, the plan has to itemize the measures to demonstrate its economic feasibility. Examples of these measures include disposal of goods, selling of subsidiaries or isolated production units of the debtor, as well as M&A operations or assignment of its shares at a lower price.

Concerning legal aspects, there are incentives for both debtors and investors. During the restructuration, the company’s current lawsuits are temporarily suspended for 180 days. Investors, in their turn, benefit from the absence of any legal succession related to debtor’s prior liabilities, including tax and labor debts.

This is a very interesting chance for investors seeking affordable and potentially profitable assets in Brazil. Considering that the dust will eventually settle and the Brazilian economy will get the track of growth again, strategic investor, private equity, venture capital and so on should benefit from gainful opportunities born in the heart of the crisis.

In sum, amid the political standoff and the economic crisis, several investment opportunities are emerging in Brazil. Contexts like these are usually the perfect timing to expand asset portfolios. Our team is actively engaged in several transactions linked to this scenario and will be glad to assist you in any way possible.

The gathering clouds of a perfect economic storm looms already on Brazil’s horizon: economic downturn, fiscal retrenchment, rising unemployment, exchange rates climbing to unprecedented levels and multimillion-dollar corruption scandals indicate that Brazilians have been plunged into a deep crisis. What this tenebrous portrait of Brazil’s current situation means to international investors? Simply that they have an outstanding time to do business there.

Only in the last two years, several companies of the main players from different sectors of the Brazilian economy filed for judicial reorganization under bankruptcy law. Well-known names have already brought or are about to bring lawsuits aiming to avoid bankruptcy. This will presently trigger the sale of equity in companies controlling important businesses and public concessions such as the São Paulo airport, Rio de Janeiro’s subway system operation, operation of several key federal and state roads, shipyards, residential development and construction, water supply, treatment and distribution, sewage and industrial waste management, charter and operation of vessels and platforms for the oil & gas industry, brand new FIFA World Cup stadiums, power generation, mining, real estate, logistics, retail, agroindustry etc.

Investors, national and foreign alike, interested in acquiring equity or assets under judicial reorganization have a huge incentive granted by the Brazilian legislation, which is the absence of any kind of legal succession.

In addition, another factor to consider is that Brazil’s currency depreciation against US Dollar and other currencies sped up this year, reaching the lowest level in more than a decade, as shown in graph bellow:

Exchange Rates Graph (USD, BRL)

According to plenty of economic specialists, the Brazilian Real will continue to depreciate in the coming months on the back of US dollar strength. Under this scenario, investment opportunities become cheaper and potentially lucrative to foreign investors.

If it’s always darkest before the dawn then this is a great moment to take advantage of the Brazilian crisis. Among many other advantages, Brazil is well known for its huge consumer market and the existence of plenty of natural resources. Its democratic regime is undoubtedly stable. In spite of the regional economic imbalances, this South American powerhouse has several islands of prosperity with more than adequate logistics and qualified workforce.

In short, Brazil has all elements to resume strong and steady growth as early as 2016, which makes the current problematic scenario of 2015 the perfect timing to invest.

Fraga, Bekierman & Cristiano Advogados’ team is actively engaged in several transactions linked to this new scenario and will be glad to assist you in any way possible