By: Antonio Carlos C. Mazzucco and Fernanda Lazzarini
There are basically two ways to acquire a company:

• By acquisition of shares or quotas, which refers to the acquisition of a legal entity with all its assets and liabilities through the transfer of ownership of the company's quotas or shares; and
• By acquisition of assets, which refers to the transfer of material or immaterial assets and may or may not involve liabilities.

The acquisition of shares or quotas.

This is a transaction involving the purchase and sale of shares or quotas representing the capital of a company. It may involve all or part of the shares or quotas of a company. Furthermore, it may involve existing shares or quotas or may be carried out through the issuance of new shares or quotas that will be subscribed and paid up by the buyer. It may also involve a combination of new shares or quotas and existing shares and quotas.

Depending on the type of company, the purchase and sale is formalized in one way or another. In the case of shares, the transfer is made by signing the transfer document in the Share Transfer Book (one of the mandatory corporate books according to Law 6,404/76). In the case of quotas, the transfer is made by amending the Articles of Association. This is without prejudice to the formalization of a purchase and sale agreement between the parties, establishing the terms of the transaction, in particular the responsibilities for assets and liabilities.

The acquisition of assets.

A transaction involving the purchase and sale of assets has as its object specific tangible or intangible assets (brands and customer and supplier portfolios, for example). It may also consist of a complete production unit, constituted in the form of a branch of a given company. This is the case that is relevant to this article. As such, it may also involve the transfer of contracts, rights and obligations relating to that same production unit. As a rule, however, it does not involve liabilities and contingencies, although there are contingencies that necessarily accompany some assets (environmental contingencies relating to real estate assets, for example). Liability for these contingencies must be the subject of a contract between the parties.

In the case of the sale of assets, there is no change in the ownership of the legal entities involved in the transaction. The formalization of the transfer of assets depends on the nature of the assets themselves and may involve several formalities, from the mere issuance of invoices to the formalization of deeds and registrations, as in the case of real estate assets. If it involves a complete production unit, the branch of the selling company must be closed and a new branch of the purchasing company must be opened, according to the records that each of the parties must provide with the respective commercial boards and with the board of the state of the federation where the establishment is domiciled.

The choice of one or another acquisition method.

The choice of another type of business may be necessary due to the nature of the assets. This is the case of the sale of a production unit established as a branch of a certain company. Although this unit may be transformed into a company, followed by the sale of the respective shares or quotas, the sale of the unit in the form of an asset of the selling company may often be the most practical option.

Often, the choice of this type of asset is due to a situation of insolvency of the seller, particularly due to tax and labor debts. However, even the purchase of assets in these circumstances may result in the succession of the acquirer and the transaction must be carried out with great care and with experienced legal advice.

The purchase of shares or quotas is certainly simpler from an operational point of view, as there is no need for specific formalities due to the nature of each of the assets. There is also no need to identify each of the assets that are part of the business, since only the shares or quotas are transferred, as previously mentioned. Therefore, it can be more easily implemented.

From a tax perspective, in any of the modalities, a careful assessment of the implications will be necessary, considering the acquisition costs of the shares or quotas and the assets by the seller. It is also necessary to consider the accounting issue and the possibility of amortizing the premium paid on the acquisition of shares or quotas compared with the impact of the depreciation cost of each of the assets.

Legal forecast

While the sale of shares or quotas is not provided for in any law, the same does not occur with the sale of assets.

Article 1,142 of the Civil Code expressly deals with the sale of assets in the form of a commercial establishment. This is defined as the complex of organized assets necessary for the exercise of economic activity, whether by the entrepreneur or the business corporation.

The acquisition of an establishment illustrates an acquisition of assets (including intangible assets, such as a brand, for example) from one person by another, without any interference in the corporate structure of the companies involved, that is, if the seller is a business company, it will continue to exist with the same partners and completely distinct from the acquirers of its establishment.

The acquisition of a commercial establishment requires care as there are legal requirements for the purchase and sale to be effective before third parties (and especially the seller's creditors). Below we detail these precautions.

Firstly, the contract for the sale of the establishment must be registered – and approved – with the commercial board of the respective headquarters of the selling entrepreneur and also in the official press. This is so that it can produce effects before third parties.

The buyer must also ensure that, after the sale, the seller has sufficient assets to meet his obligations to all his creditors. The law requires that creditors be notified of the sale. From the date of notification, creditors will have a period of 30 (thirty) days to act on the transaction. If after this period, without any manifestation, it is presumed that they have consented (tacit consent). If they expressly express their disagreement, the creditors must be paid, otherwise the transaction will be ineffective in relation to them.

The interests of creditors are of utmost importance in order to prevent the sale of a business by a company from being used as a tool to defraud creditors. Article 1,146 of the Civil Code provides for the liability of the purchaser of the business for the payment of the debts of the transferor assumed prior to the transfer, provided that they are regularly accounted for. In other words, the law seeks to protect the interests of creditors. This is even done to an exaggerated extent, since the law already provides for the legal concepts of fraud against creditors and fraud of execution. In any case, the law stipulates that the transferor (“original debtor”) remains jointly and severally liable for a period of one year, starting from the publication of the transaction in the official press (which is a requirement for effectiveness before third parties), with regard to overdue credits, and from the respective due date of each of the credits, with regard to credits not yet due.

With regard to tax credits, the law provides for the subsidiary or joint liability of the purchaser of the establishment. Subsidiary liability when the seller continues to operate the activity. Joint liability when the seller ceases to continue to carry out the commercial activity. This is what is provided for in Article 133 of the National Tax Code.

As for labor obligations, if the purchaser continues with the employment contracts, there will be a succession of obligations, becoming responsible for the labor obligations due.

Exceptions to the above succession rules are the purchase and sale of assets carried out in judicial recovery and bankruptcy processes, which will be dealt with in due course.

Conclusion

From the brief provision on the acquisition of assets and shares or social quotas, it is clear that, despite being a simple process to carry out, it is necessary to carry out a legal and tax audit (the so-called “due diligence”), since the analysis and evaluation of the liabilities and creditors of the company or establishment currently being sold is extremely important so that the acquisition operation is positive and profitable for both the acquirer and the seller.