Executive Order No. 881 (MP 881), issued on April 30 of this year, aims to ensure and foster economic freedom in Brazil, as well as reduce bureaucracy in various industries.

The principles that guide the text are: (i) presumption of freedom in the exercise of economic activities; (ii) presumption of good faith by private entities; and (iii) minimal intervention by the federal government in the economy. A practical example of these principles is that MP 881 expressly provides that that which is agreed upon by the parties prevails over regulations by the public order, with some specific exceptions.

Already in its article 1, the presidential decree reflects a liberal view of the law, in line with the basis of free enterprise, provided for in article 1, IV, of the Federal Constitution. As we shall see below, the text eliminates various formalities for business activity, including more stringent requirements in order to pierce the corporate veil.

MP 881, which should be read in conjunction with some infra-legal rules, ensures that individuals and legal entities are protected by a set of rights under the Federal Constitution, especially as regards private property and its social function, free competition, and encouragement of small businesses. Certain provisions of Law No. 10,406/2002 (the Civil Code), for example, have been amended to give greater legal certainty to contracts.

The presidential decree also amended article 421 of the Civil Code, stating that, in agreements between individuals, State intervention must be minimal. This makes any revision of contractual provisions an exception rather than a rule. This provision is relevant because it addresses the fact that Brazilian courts often adopt a broad interpretation of powers to revise contracts. For the same reason, the new article 480-A has been included in the Civil Code to allow parties to set objective parameters for revision of contracts and requirements for termination.

Article 480-B has also been included to establish that in commercial transactions it should be assumed that the parties had equal bargaining powers and that their allocation of risks should be respected. The aim is to avoid interpretation against the weaker party in business dealings and to restrict judicial revision of contracts.

For the investment fund segment, MP 881 brought in changes by introducing articles 1,368-C to 1,368-E in the Civil Code. The highlight is the limitation on liability of unitholders of funds and fiduciary service providers. The articles in question apply to all classes of investment funds, including those governed by CVM Instructions 555/14 and 578/16. Regarding the activities of fiduciary service providers, it is estimated that the changes brought in by MP 881 will encourage these agents to engage in the entire process of operations involving investment funds.

Presidential decrees have the same force as federal law, but are only effective for 60 days (extendable for another 60 days). During this period, the National Congress may (i) convert them into law, as originally written or amended; or (ii) reject them in their entirety, thus making them no longer effective.

MP 881 brings in significant advances related to economic activity as a whole. However, it is necessary to determine whether it will be converted into law and even then such provisions will still be subject to the Judiciary and regulations by public agencies.