Central Bank of Brazil amends foreign direct investment rules
On September 11, the Central Bank of Brazil (“Banco Central do Brasil” or “BCB”) published Resolution No. 410/2024, amending BCB Resolution No. 278/2022 (“Resolution”), which regulates Law 14.286/2021, in relation to foreign investment in Brazil, in foreign credit and foreign direct investment operations, as well as the provision of information to the Central Bank of Brazil. Check out the changes!
First, new definitions were inserted in the Resolution, to delimit corporate issues involving non-resident and resident investors:
(i) “Sale to resident” means the transfer of equity interest in a Brazilian company from a non-resident investor to a resident;
(ii) “Acquisition of resident” means the transfer of equity interest in a Brazilian company from a resident investor to a non-resident;
(iii) “Inactivation of the SCE-IED code” means the end of the relationship between the receiving-investor pair due to the termination of the investment; and
(iv) “Closing of receiving company” means the liquidation, total spin-off, merger or incorporation of the Brazilian company receiving the investment.
It should be noted that the SCE-IED code is the unique identifier of the non-resident recipient-investor pair generated automatically by the Information Provision System of Foreign Capital of Foreign Direct Investment (SCE-IED) after identification of the recipient and the non-resident investor.
Additionally, some definitions were revoked and no longer apply to the Resolution, as follows: (i) the definition of assignment of equity or stocks (which also allowed the transfer of equity interest in a Brazilian company between non-resident investors); (ii) the definition of exchange of equity or stocks in Brazil (which allowed the exchange of equity interests in Brazilian companies, where at least one of which is a recipient of foreign direct investment, between resident and non-resident investors, or between non-resident investors); and (iii) the definition of transfer of equity or stocks in Brazil (which allowed the transfer of equity or stocks paid up in the capital of a company in Brazil, held by a non-resident investor, for the payment of capital subscribed by such non-resident investor in another recipient in Brazil), so that such transactions are no longer regulated by the Resolution.
Furthermore, the person responsible for providing information to the Central Bank of Brazil or the legal representative is now required to inform BCB of the deactivation of the SCE-IED code and the closure of the investment recipient, if applicable.
In addition, one more information was included, to be declared within 30 days to the Central Bank of Brazil: capitalizations through virtual assets. Therefore, the following information must be declared to the Central Bank of Brazil within this 30-day period regarding transactions resulting from foreign direct investment: i. distribution of profits and dividends, payment of interest on equity, acquisition of residents, sale to residents, return of capital and net assets resulting from liquidation, capitalization of profits, dividends and interest on equity and other capitalizations, when not carried out in accordance with art. 35; ii. conversion into investments of remissible rights not classified as foreign credit; iii. international share transfer; and vi. capitalization through tangible, intangible or virtual assets.
However, some transactions no longer need to be reported within 30 days, as follows: (i) those arising from the assignment, exchange and transfer of equity or stocks between resident and non-resident investors, or between non-resident investors; (ii) those arising from corporate reorganization; (iii) those arising from payments and receipts in national currency in non-resident accounts; and (iv) those arising from reinvestment.
The Resolution with the amends described above came into effect on October 1, 2024, and seeks greater simplicity in the provision of information for the Central Bank of Brazil’s control of foreign investment transactions in Brazil.
