Normative Instruction No. 81 of the National Department of Business Registration and Integration of the Ministry of Economy (DREI), issued on June 15, 2020, consolidated general rules and guidelines related to company registration procedures, which were previously scattered among various instructions and letters issued by the agency. In all, 56 rules were revoked, of which 44 were normative instructions and 12 were circular letters, regarding the incorporation, amendment, and extinguishment of companies, company names, holdings of foreigners, corporate transactions (transformation, take-over, merger, and spin-off), among other subjects.

In line with the measures and principles consolidated by the Economic Freedom Law (Law No. 13,874/19), IN 81 should simplify consultation of the general rules on the Public Register of Companies and cut the red tape for procedures relating to the registration of companies. The new instruction also amended the rules on the following subjects:

• Formation of company name. IN 81 consolidates all prohibitions for the formation of corporate names, especially the existence of a name identical or similar to another already registered with the same board of trade, indication of the size of the company, or indication of words or expressions that denote an activity not provided for in the corporate purpose. In addition, it no longer provides for the obligation to expressly indicate the corporate purpose. However, it is important to note that the Civil Code provides in its article 1,158, paragraph 2, that the name of the limited liability company must designate the corporate purpose of the company. Thus, respecting the hierarchy of the rules, IN 81 (infra-legal rule) should not contradict the Civil Code (federal law). It will be necessary to await the positions of the boards of trade, courts, and appellate courts on this issue.

• Notarization of signatures and authentication of copies. No longer will the notarization of signatures and the authentication of copies be required for acts or filings with boards of trade. All that is required is a declaration of authenticity signed by the interested party's lawyer, accountant, or book-keeper.

• Automatic filling. Previously possible only for acts organizing sole proprietorships, Eireli’s, limited liability companies (except publicly-traded companies), and cooperatives, automatic filling was expanded to acts of amendment and extinguishment, provided that specific parameters are observed and the provisions standardized by the DREI are used.

• Preferred quotas with voting restriction. It is now expressly permitted to file articles of association containing quotas of different classes, and various voting and financial rights may be assigned to their holders and even eliminate or limit their voting rights. Before IN 81, the various boards of trade had no uniform understanding on the subject. Some accepted the filling of articles of association contemplating quotas without voting rights or with restricted voting rights, while others rejected this possibility.

• Digital filling. Another important novelty brought by IN 81 and that, to a certain extent, demonstrates that the DREI is paying attention to the digital transformation we are going through is the possibility of digital filling, with the disclosure of guidelines on digital signatures. It will be incumbent on the boards of trade to choose whether to accept documents electronically signed through a third party system or signature portals or to have their own specific system for that purpose. In the event of the use of a third party system or signature portals, digital signatures should have a time stamp or other mechanism that attests to the date and time when the documents were signed, in addition to allowing for verification of authenticity over the Internet, without the need for payment for services and regardless of user authentication.

• Conversion of association into business company. The provisions relating to corporate transactions, i.e. acts of transformation, merger, amalgamation, and spin-off, have not undergone major changes. However, the prohibition on the conversion of non-profit associations into business companies and vice versa, previously provided for in IN DREI No. 35, no longer exists. With IN 81, the DREI began to regulate the scenarios for "conversion" of an association into a business company and vice versa, in addition to the sequence of acts necessary for the coordination of the filing of documents between the civil registry offices and commercial boards.

• Incorporation of a company with negative equity. IN 81 now expressly states that there will be no prohibition on the take-over of a company with negative net equity. For some time now, the specialized legal scholarship on the issue took the position that it is possible to perform such a corporate transaction, even in the case of companies with negative net equity, since there is no express prohibition in law and private law is governed by the principle of freedom of contract. However, various boards of trade had been presenting difficulties hindering filling of corporate acts in such circumstances, causing legal uncertainty for the business community.

The initiative demonstrates the effort of the recording department to simplify its processes and improve the organization of existing standards, seeking to offer more security to the Brazilian business community.

IN 81 is already in force and effect as of July 1, 2020, except for the automatic filing of acts of amendment and extinguishment of sole proprietorships, Eireli’s, and limited liability companies, as well as the incorporation of a cooperative, for which it will become effective 120 days after its publication.

We will deal with these and other changes promoted by IN 81 in more detail and depth in a series of articles in the coming weeks.