On January 30, 2017, the Central Bank of Brazil ("BACEN") instituted a new rule that revises the Electronic Registration Statement - Direct Foreign Investment (“RDE-IED”) and establishes new procedures for registering direct foreign investments in Brazil.
The principal changes introduced by the new rule are: (i) local companies receiving direct foreign investments are now solely responsible for registrations within the RDE-IED; (ii) sales and acquisitions of equity interest to or from Brazilian companies or individuals, capital increases, nationalization of investments, and capital reduction require only an update to the corresponding registered corporate equity structure; and (iii) remittance abroad of dividends and interest on net equity no longer requires registration with the RDE-IED prior to the foreign exchange transaction. On the other hand, (i) corporate reorganizations, (ii) contribution of shares or quotas in Brazil, (iii) capitalization and reinvestment of profits, interest on net equity, and reserves by the Brazilian company, (iv) payment of dividends and interest on net equity abroad or in Brazil, among other transactions, still require the Brazilian company to conduct the necessary registrations with the RDE-IED.
Under the new RDE-IED system, Brazilian companies receiving direct foreign investments with total assets or net worth equal to or greater than two hundred and fifty million Brazilian Reais (R$250,000,000.00) must submit four (4) financial reports to BACEN per year referring covering the base dates of March 31, June 30, September 30, and December 31.
Such reports must be submitted electronically to BACEN through the new RDE-IED system available on the website www3.bcb.gov.br, within the deadlines provided for in the applicable regulations, as follows:
(i) By June 30, referring to the base date of March 31;
(ii) By September 30th, referring to the base date of June 30;
(iii) By December 31, referring to the base date of September 30; and (iv) By March 31, referring to the base date of December 31.
Financial information from the Brazilian companies and registration information from non-resident investors must be provided to fulfill the reporting requirement, such as amounts of paid-in capital stock, net worth, assets and liabilities, profits and losses, as well as the country of domicile of the investor's final controlling shareholder, among other details.
In addition, Brazilian companies receiving direct foreign investment with total assets or a net worth lower than two hundred and fifty million Brazilian Reais (R$250,000,000.00) must maintain their information relating to paid-in capital stock and net worth duly updated whenever a change in the corporate ownership stake held by a foreign investor occurs, as well as on an annual basis by March 31 of each year, referring to the base date of December 31 of the previous year.
The first quarterly report and annual update of information relating to paid-in capital stock and net worth must be concluded by March 31, 2017, relating to the base date of December 31, 2016.
Failure to submit a report, or submission of a report that does not comply with the applicable regulations, subjects the violator to a fine of up to two hundred and fifty thousand Brazilian Reais (R$250,000.00).
(BACEN Circular No. 3,814, of December 7, 2016, and BACEN Circular No. 3,822, of January 20, 2017, CMN Resolution No. 3,844, of March 23, 2010; BACEN Circular No. 3,689, of December 16, 2013, and CMN Resolution No. 4,533, of November 24, 2016.)