Single-shareholder limited liability companies in brazil

31 de agosto de 2021 English

The most common type of legal entity in Brazil is the limited liability company (sociedade limitada” or “Ltda.”). Despite its popularity, not everyone is aware that, since 2019, it is possible for this type of legal entity to have a single shareholder; prior to 2019, at least two shareholders were required.

This change resulted in a reduction of bureaucracy and costs for limited liability companies, since, in many cases, the presence of the second shareholder in this type of legal entity has the sole purpose of complying with the law. In fact, it is common to find structures with shareholders who own a single share or insignificant equity interest.

Another issue to be considered is the bureaucracy involving the passing of shareholders who are natural persons. Succession procedures can be very lengthy, and companies may face problems until the succession is completed, e.g., in the context of M&A operations or in case the company must be shut down. It is important to mention that even if such shareholder has a foreign nationality or is domiciled in a foreign country, the succession proceeding regarding the share(s) must take place also in Brazil.

Therefore, in case a natural person figures as shareholder of a limited liability company for the sole purpose of creating a plurality of shareholders, it is recommended that such shareholder withdraws from the company.

Foreign companies which decided to operate in Brazil through the incorporation of limited liability companies, especially before 2019, may have a structure that fits in this scenario.

We are at your disposal for further clarification on this topic.