The Declaration of the Rights to Economic Freedom has been recently established in Brazil by Provisory Measure No. 881/19 (“MP 88”). MP 881 brings changes to the Civil Code, the Corporations Act, the In-Court Reorganization and Bankruptcy Act, among other statutes. The purpose of the MP 881 is to ensure free enterprise and the broad exercise of economic activities and it will mostly benefit small entrepreneurs.
MP 881 establishes free market guarantees and lays down the fundamental economic rights to which individuals and legal entities are, at the minimum, entitled for the benefit of Brazil’s economic development, particularly startups and small and medium-sized companies. The objective here is to improve legal certainty, foster new entrepreneurial activities, reduce bureaucracy surrounding the relation between individuals and government entities, and acknowledge the freedom to contract.
MP 881 added to the Civil Code the definitions of deviation of purpose and commingling of assets, situations that constitute improper use of the corporate form and might lead to the piercing of the corporate veil (Civil Code, section 50). MP 88 also added to the In-Court Reorganization and Bankruptcy Act a provision determining that the effects of bankruptcy are only to be extended to the assets of the company’s members and officers if the requirements for piercing the corporate veil (Civil Code, section 50) are met.
With respect to the Corporations Act, a relevant change was the addition of a provision authorizing the Brazilian securities and exchange commission, locally known as CVM, to waive, for small and medium-sized companies, certain requirements imposed in the corporate laws. The purpose here is to ease the access to capital market.
MP 881 came into force on April 30, but it is still pending in Congress. In addition, further regulations are also necessary. Our firm is up to speed with MP 881 developments and ready to provide our clients with further information.
