Potential new alternatives for foreign investment into Brazil resulting from changes to EIRELI (Wholly-Owned Legal Entity) regulations

The Wholly-Owned Limited Liability Entity (EIRELI) is a legal entity provided for in Brazilian law in which a single person holds the entirety of the capital stock, as opposed to other Brazilian legal entities where at least two such holders are required. The referred corporate vehicle allows for individual entrepreneurial activity, with limitation of equity holder’s liability to up to the amount corresponding to that of the capital stock.

Although the EIRELI was created in 2011, until recently there was no consensus between market agents and authorities regarding the possibility of its incorporation and equity holding by other legal entities, rather than individuals. On May 2nd 2017, Normative Instruction no. 38 of the Brazilian Department of Business Registration and Integration (DREI) expressly authorized legal entities (regardless of their being established in Brazil or not) to hold the capital stock of an EIRELI.

Based on the regulation above, there are now new possibilities for the usage of EIRELI as a vehicle for foreign investments into Brazil. Such possibilities now only depend from a practical standpoint on conclusion of certain internal system adaptations to the new regulation by the relevant Commercial Registries and the Brazilian Federal Revenue.