By: André Jerusalem

On September 9, the National Department of Business Registration and Integration (“DREI”), linked to the Ministry of Economy, published Circular Letter SEI No. 3510/2021/ME (“Letter”) addressing all Commercial Boards regarding the tacit revocation of the Individual Limited Liability Company (“EIRELI”) of item VI, art. 44 and art. 980-A and paragraphs, both of the Civil Code, due to Law No. 14,195, of August 26, 2021 (“Law 14,195”).

Art. 41 of Law 14,195 is the crucial point in the repeal of the EIRELI business type, as it determines that “existing individual limited liability companies (EIRELI) on the date this Law comes into effect will be transformed into single-member limited liability companies regardless of any change in their articles of association”, that is, it culminates in the extinction of the EIRELI, which will be completely replaced by single-member limited liability companies, which, until the advent of the Economic Freedom Law (Law No. 13,874/2019), could not be constituted according to the Civil Code and, therefore, the EIRELI type was created.

Single-member limited liability companies (which fit the “Ltda.” type) follow the line of standard limited liability companies, with no need to pay in a minimum share capital for incorporation, as is the case with EIRELI, in which it was necessary to pay in at least 100 minimum wages, and it does not require that the sole partner be a natural person, nor does it limit the partner to having only one legal entity in this modality.

In view of this, the revocation of the EIRELI type by Law 14,195, replacing it with the single-member limited liability company, brings more flexibility to the entrepreneur, greater ease in the formation of companies, in addition to reducing the existing conflicts that the traditional limited liability company had, such as the obligation to reconstitute the plurality of partners within 180 days.

Finally, the end of article 41 of Law 14,195 stands out, which deals with the transformation of an EIRELI into a single-member limited liability company, and which will be “independently of any change in its articles of incorporation”. In other words, the DREI, together with the Federal Revenue Service (“RFB”), will work together to change the registration of EIRELIs both within the scope of the Commercial Boards and in the National Registry of Legal Entities (“CNPJ”) through the integrated Redesim system. In short, it will not be necessary for the entrepreneur to file a process to transform an EIRELI into a Limited Liability Company, as there will be a joint effort for the automatic conversion of the legal types.