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The Brazilian REDESIM: Efficiency , Trustworthiness and Speed of Corporate Registers

The Brazilian REDESIM: Efficiency , Trustworthiness and Speed of Corporate Registers. Mr. Rubens Branco da Silva Member of Rio de Janeiro Board of Trade. The Brazilian REDESIM. INTRODUCTION: BRAZILIAN FEDERATIVE ORGANIZATION IN TERMS OF REGISTRATION AND LEGALIZATION OF COMPANIES.

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The Brazilian REDESIM: Efficiency , Trustworthiness and Speed of Corporate Registers

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  1. The Brazilian REDESIM: Efficiency, TrustworthinessandSpeedof Corporate Registers • Mr. Rubens Branco da Silva • Member of Rio de Janeiro Board of Trade

  2. The Brazilian REDESIM INTRODUCTION: BRAZILIAN FEDERATIVE ORGANIZATION IN TERMS OF REGISTRATION AND LEGALIZATION OF COMPANIES • Brazil (officially the Federal Republic of Brazil) is constituted by the union of 26 states and the Federal District, which are divided in 5.570 Municipalities; • The concentration of Municipalities per state is not uniform  varies from 15 in Roraima to 853 in Minas Gerais. • That said, the entrepreneurs used to face a relevant number of obstacles to proceed with the registration of a company at any of those Municipalities, once local rules and peculiarities ended up establishing a wide range of requirements without guaranteeing the success of the respective constitution  result: a great waste of time and money for the entrepreneur.

  3. The Brazilian REDESIM INTRODUCTION: BRAZILIAN FEDERATIVE ORGANIZATION IN TERMS OF REGISTRATION AND LEGALIZATION OF COMPANIES 26 STATES + FEDERAL DISTRICT 5.570 MUNICIPALITIES UNCOUNTABLE OBSTACLES FOR THE ENTREPRENEUR TO ESTABLISH A COMPANY IN BRAZIL

  4. The Brazilian REDESIM I - CONSTITUTIONAL AMENDMENT # 42/2003 • For a long time, the entrepreneurs have expected and demanded for agility in the procedures regarding company opening, modification and termination, in addition to cost reduction. • As such, Constitutional Amendment # 42/2003 has added the item XXII to the article 37 of the Constitution of the FederativeRepublicofBrazil (CRFB/88), which determined that tax administrations should operate in an integrated manner, sharing records and tax information, as provided by law or agreement.

  5. The Brazilian REDESIM II - DEFINITION AND OBJECTIVE • “REDESIM”  National Network for the Simplification of Registration and Legalization of Companies and Business. • REDESIM was introduced in Brazilian legal system by Federal Law # 11.598/07. • Main objective: reduction of time and costs/expenses for establishing a company in Brazilian territory.

  6. The Brazilian REDESIM III - PREMISES • Enables both the online access to information and the guidance for the opening, modification or termination of a business; • Integrates all agencies/departments in a single process/register; • Brings transparency to the process; • Grants permits and licenses quickly.

  7. The Brazilian REDESIM IV - PREVIOUS PROCEDURES ACCORDING TO BRAZILIAN LEGISLATION • Initially, the entrepreneur had to register the company at both State Board of Trade and Brazilian Federal Revenue Service. • After the successfully conclusion of the registers above, the entrepreneur had to proceed to the registration of the company in the totality of the competent agencies of the Municipality, according to the activities that would be developed by the entity.

  8. The Brazilian REDESIM V - DISADVANTAGES OF PREVIOUS PROCEDURES • Increased investments regarding time and money spent for legalizing the company at both state and federal levels; • Only after registering the company at both State Board of Trade and Brazilian Federal Revenue Service the entrepreneur would be authorized to submit the respective constitution to Municipal analysis regarding the possibility of developing determined activities locally; • Commonly, those activities were restricted or even not allowed to be developed by the Municipality, and the entrepreneur would only find that out after going through those procedures before State Board of Trade and Brazilian Federal Revenue Service  WASTE OF TIME AND MONEY! • Some inconvenients ended disqualifying those previous procedures as a proper method for constituting a company in Brazil:

  9. The Brazilian REDESIM Wide different numbers and types of procedures; Long time taken to constitute a company; Overspending on travels and certified copies; Fragile documentation; V - DISADVANTAGES - IN SUMMARY

  10. The Brazilian REDESIM Excessive bureaucracy; Difficulties on monitoring the constitution process; Divergent entries. V - DISADVANTAGES - IN SUMMARY

  11. The Brazilian REDESIM VI - CONSTITUTIONAL AMENDMENT # 42/2003 • Considering those cited disadvantages, the entrepreneurs had remained for a long time expecting and demanding for agility in the procedures regarding company constitution, modification and termination, in addition to cost reduction. • As such, Constitutional Amendment # 42/2003 added the item XXII to the article 37 of the Constitution of the FederativeRepublicofBrazil (CRFB/88), which determined that tax administrations should operate in an integrated manner, sharing records and tax information, as provided by law or agreement.

  12. The Brazilian REDESIM VI - CONSTITUTIONAL AMENDMENT # 42/2003 • Additionally, the Constitutional Amendment # 42/2003 reinforced that provision including item IV in the sole paragraph of article 146 of the CRFB/88, as it follows: “Article 146, CRFB/88: (...) IV – the collection, the supervising and the exaction may be shared by federal agencies, being adopted a single national register of taxpayers."

  13. The Brazilian REDESIM VII – THE FOLLOWING LEGISLATION • Based on the innovations brought by the Constitutional Amendment 42/2003, Complementary Law # 123/2006 and Ordinary Law # 11.598/2007 were issued. • Complementary Law # 123/06 reaffirmed the idea of ​​integration and simplification introduced by the Constitutional Amendment 42/2003. • Law # 11.598/2007 instituted the REDESIM.

  14. The Brazilian REDESIM VIII - BRAZILIAN FEDERAL LAW # 11.598/2007 • In summary, the REDESIM embraces: • General orientation • Economic classification • Prior research • Collection of electronic information • Tax registration • Permits and licenses grants

  15. The Brazilian REDESIM IX - CHANGES INTRODUCED BY BRAZILIAN FEDERAL LAW # 11.598/2007 • Firstly, the entrepreneur proceeds to a previous online viability consultation (through Integrated Registration System – REGIN) which embraces a validation of company’s name and location, before the respective State Board of Trade and the Municipality; • After that, the applicant will receive a feedback informing about the possibility of the constitution of the correspondent company, including those name and location desired; • Only after receiving the positive feedback that the entrepreneur will be able to go to the respective State Board of Trade and pay the charges for opening and registering the company; • Nowadays, those are the steps that must be followed by the entrepreneurs who intend to establish a company in Brazilian territory:

  16. The Brazilian REDESIM IX - CHANGES INTRODUCED BY BRAZILIAN FEDERAL LAW # 11.598/2007 • The integrality of levels of public administration must be involved with the procedures that embraces the opening and legalization of a company, as it follows: • Brazilian Federal Revenue Service; • State Treasury Office; • State Board of Trade; • Municipal Treasury Office

  17. The Brazilian REDESIM IX - CHANGES INTRODUCED BY BRAZILIAN FEDERAL LAW # 11.598/2007 • (cont.) • e) Urban Development and Environment Secretariat (Land Use Department - SEDUR) ; • f) Municipal Environment Secretariat (Environmental Licensing Department – SEMMAM); • g) Health Secretariat (Health Surveillance Division).

  18. The Brazilian REDESIM IX - CHANGES INTRODUCED BY BRAZILIAN FEDERAL LAW # 11.598/2007 • The REDESIM is administered by a Management Committee composed of several Federal, State and Municipal agencies, which are responsible for the process in terms of register and legalization of entrepreneurs and companies in general; • The Brazilian Ministry of Development, Industry and International Commerce is responsible for the appointment of the members that will occupy the following main positions of the Committee aforementioned (Ordinance MDIC # 125/2009): • Services and Trade Secretariat of Brazilian Ministry of Development, Industry and International Commerce; • National Department of Business Registration (DNRC now DREI);

  19. The Brazilian REDESIM IX - CHANGES INTRODUCED BY BRAZILIAN FEDERAL LAW # 11.598/2007 • (cont.) • Brazilian Federal Revenue Service Secretariat; • Management Secretariat of the Ministry of Planning and Budget; • National Institute of Social Security (INSS); • National Association of the Presidents of Brazilian Boards of Trade;

  20. The Brazilian REDESIM IX - CHANGES INTRODUCED BY BRAZILIAN FEDERAL LAW # 11.598/2007 • (cont.) g) National Council of Treasury Policy (Confaz); h) Brazilian Association of State Capital Cities’ Financial Secretariats; i) General Entities Representing Brazilian Municipalities; j) Micro and Small Companies’ Permanent Forum.

  21. The Brazilian REDESIM X – MAIN ADVANTAGES FOR ENTREPRENEURS • Both delivery and archiving of companies´ registration process are centralized at the respective State Board of Trade  No need of delivering the same documents at different agencies or departments; • Online process  reduction of time,costs/expenses spent by the entrepreneur on the matter of company constitution.

  22. The Brazilian REDESIM XI – MAIN ADVANTAGES FOR PUBLIC AGENCIES • Online process reduces the flow of taxpayers at Federal, State and Municipal agencies; • All the aforementioned federative levels will be aware of the registration of a company; • Public agencies´partnerinstitutions will receive the same information, which will be permanently updated, related to a company once constituted (e. g. partners, economic activities, address, etc.).

  23. The Brazilian REDESIM XII – GENERAL ADVANTAGES Reduction of bureaucracy and time for company constitution; Concentration of general orientation and documentation in one place; Agility in the constitution process; Lower cost to the taxpayer;

  24. The Brazilian REDESIM XII – GENERAL ADVANTAGES Complete information for supervision; Unified and synchronized registration; Management and monitoring of the process; Efficiency and transparency.

  25. The Brazilian REDESIM XIII – CONCLUSIONS • The REDESIM, introduced in Brazilian legal system by Federal Law # 11.598/07, is an integrated system that allows the registration, modification, legalization and extinction of companies in the totality of Brazilian Boards of Trade, providing the simplification of the respective required procedures and reducing the bureaucracy to the minimum;

  26. The Brazilian REDESIM XIII – CONCLUSIONS • The REDESIM aims the integration of the procedures needed in all levels (Federal, State and Municipal), concentrating the presentation of documents in a predetermined moment and allowing the entrepreneur to monitor (online) the progress of the respective process;

  27. The Brazilian REDESIM XIII – CONCLUSIONS • The REDESIM does not prevent the entrepreneur from obtaining information or orientation apart from the internet. Consequently, in case the entrepreneur wishes, he/she can go in person to the competent agency or department and require information related to registration, modification and/or extinction of legal entities or entrepreneurs.

  28. The Brazilian REDESIM The Municipality proceeds with the analysis of the address viability (REGIN) and the procedures for licenses concession The respective State Board of Trade analyses both the name and the social object The entrepreneur proceeds with the feasibility consultation If applicable, the Municipality performs inspections and grants Business Licenses After the registration before the respective State Board of Trade and Tax Registration(all at Board of Trade), the Municipality is informed about the company opening.

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