Joint Ventures and Shareholders’ Agreements in Brazil

in Brazil. By entering into a partnership with a local company, international investors can benefit from the local partner’s market knowledge, distribution networks, and regulatory familiarity, while contributing with capital, technology, and global expertise.

However, successfully structuring a joint venture or partnership in Brazil requires careful legal planning.

This article outlines the main legal structures and agreements available to foreign investors seeking to enter the Brazilian market and establish a joint venture with local partners.

Why Joint Ventures in Brazil?

Foreign companies often choose joint ventures as an entry strategy into the Brazilian market for several reasons, including:

Access to local market knowledge and clients;
Shared investment and risks;
Regulatory or sector-specific requirements that make partnerships advantageous or mandatory. The recently passed regulations on the online gambling industry, for example, require that at least 20% of the equity of the entity exploring online gambling activities is held by a Brazilian citizen;
Opportunity to combine technology and expertise with a Brazilian partner’s infrastructure and relationships.

How to structure a joint venture in Brazil?

A joint venture can be structured through different corporate vehicles. Typically, a limited liability company (sociedade limitada) or a corporation (sociedade anônima), depending on the nature and size of the business. You may find additional insights on each of such types of entities and Brazilian corporate law at https://mmrlaw.com.br/en/types-of-companies-in-brazil/.

A joint venture may also be structured contractually, without the partners sharing equity of a legal entity. This may be done through an operational or joint venture agreement, in which the obligations and targets of each of the partners will be set forth.

Alternatively, the joint venture can be formalized as a sociedade em conta de participação (or SCP). This is a type of company that has no body corporate (it is a “contractual company”). In this type of company, one partner (the active partner) is responsible for carrying out all the operations of the SCP under its own name.

The other partner (the silent partner) is limited to providing tangible and/or intangible assets to the SCP (funds, know-how, equipment, machinery, intellectual property, etc.) in exchange for a participation in the profits generated by the SCP business. Brazilian law shields the silent partner from any labor and tax liabilities relating to the SCP.

Under this structure, the Brazilian partner would act as the active partner and the foreign investor would act as the silent partner.

Determining which structure is more suitable will depend on a close review of the particulars of the transaction, including tax aspects, liabilities associated with the local partner and/or the business, the complexity and duration of the business, among other factors.

Why are Shareholders’ Agreements Important?

In Brazil, the corporate bylaws or articles of association are often not sufficient to regulate all aspects of a joint venture. For this reason, when the partnership is structured through a corporate vehicle, the parties usually enter into a shareholders’ agreement to set forth key rights and obligations of the parties with respect to the partnership and the business.

Although technically speaking the term shareholders’ agreement would apply to corporations (sociedades anônimas) and the term partners’ agreement would apply to limited liability companies (sociedades limitadas), in this article reference to shareholders’ agreements shall encompass both types of contracts.

Shareholders’ agreements typically address the following matters:

Definition of the corporate governance of the company, including quorum and voting rights, election and removal of directors and officers and the roles of directors and officers;
Rights and obligations of the shareholders, such as capital contributions and dividend distribution;
Transfer of shares or quotas (tag-along, drag-along, rights of first refusal, rights of first offer, etc.)
Deadlock resolution mechanisms (buy-sell clauses, arbitration, or other dispute resolution tools);
As applicable, minority shareholders’ rights (such as veto rights for certain matters);
Exit provisions, including circumstances in which exit is permitted, valuation and payment provisions;
Non-compete provisions; and
Ownership of intellectual property developed by the joint venture.

Conclusion

Joint ventures can be an effective way for foreign investors to expand into Brazil, but their success depends on careful structuring and well-drafted agreements. These instruments ensure governance, protect investments and provide clarity in the event of conflicts or changes in strategy.

At MMR – Mastrocola Marcondes Rocha Advogados, we have extensive experience advising international clients on structuring joint ventures and drafting all applicable legal documents tailored to Brazilian laws, including with respect to the incorporation of legal entities, shareholders’ agreements, joint venture agreements, operational agreements and SCP agreements. Our team combines knowledge of local laws with an international perspective, helping clients establish secure, efficient and successful partnerships in Brazil. Contact us to discuss how we can support your investment or expansion in the Brazilian market.