On September 20, 2019, Provisional Measure No. 881, known as the Economic Freedom MP, was converted into law. It was drafted by the Executive Branch and aims to reduce bureaucracy and simplify the opening of companies and daily business activities.[1] (“Economic Freedom Act”). Additionally, the Economic Freedom Law also brings innovations in the labor, tax, civil, and urban planning spheres, as we will see below.

The Economic Freedom Act is in line with the program advocated by the government, that is, it seeks to facilitate and increase innovation and freedom in the economic sector by reducing bureaucratic obstacles.

Among its innovations, the new law seeks to facilitate low-risk economic activities. According to an act of the executive branch, certain activities may be classified as low-risk and will be exempt from public authority authorization for their operation (License), except for special laws or restrictions in the private sphere.

Furthermore, individuals will enjoy the presumption of good faith in acts performed in the exercise of economic activity, and doubts or ambiguities must be resolved to preserve the autonomy of will. Although such provision is open, that is, it has the character of a declaration of will, the aim is to reduce the bureaucratic constraints of their acts, such as the need for registration in notary offices, notarization of signatures, among others.

Furthermore, other innovations that seek to facilitate business activity are: (i) the preference for filing documents digitally, dispensing with the physical version for legal purposes; (ii) when a process is presented to the executive, the establishment of a maximum term for analysis, and if this term is not met, the request will be tacitly approved; (iii) the possibility of companies offering new products/services to a limited group of people, provided that they have their express consent, except in cases of national, public or health security; and (iv) the autonomy of the parties in entering into contracts must prevail in legal disputes.

One of the most relevant points of the Economic Freedom Act is related to the change in the Civil Code regarding the disregard of the legal personality of the company to reach the assets of the partners. The previous wording was broad and caused several risks of contrition and limitations on the personal assets of the partners due to debts from the business activity. With the new wording, more objective criteria were defined for disregard, such as, for example, the use of the legal entity to harm creditors, commit illegal acts or generate patrimonial confusion in order to make it impossible to separate the assets of the partners and the company. Thus, the existence of the same economic group without the configurations of patrimonial confusion or deviation of personality will not be subject to disregard.

Furthermore, regarding corporate law, the Economic Freedom Act also changed art. 1,052 of the Civil Code by allowing a limited liability company to be formed by only one partner without the need for a minimum share capital. With this change, we believe that the EIRELI (Individual Limited Liability Company) should lose its function, since it needs to have a paid-in capital of at least 100 (one hundred) minimum wages.

Finally, we highlight the inclusion of articles 1,368-C to 1,368-F, which now deal with investment funds. Until the enactment of the Economic Freedom Act, only the rules issued by the CVM dealt with the definition of investment funds and their characteristics. With this amendment, the Civil Code now deals with general rules that will guide the establishment and operation of Investment Funds.

[1] Law No. 13,874, of September 20, 2019