Article for translators: The Law of Business Organizations under the New Brazilian Civil Code

The Law of Business Organizations
under the New Brazilian Civil Code

By Danilo Nogueira
(Professional translator, editor,
writer, consultant, trainer)
Brazil
danilo.tradutor@uol.com.br

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There is this great little law, Lei Complementar 95, of February 26, 1998, about how a proper Brazilian law should be drafted. Required reading for every professional interested in legal translation, I would say. This and all other Brazilian laws can be found in www.planalto.gov.br, which is an official federal government site and I strongly recommend that you bookmark it. Now this law says that the basic unit of any law shall be the artigo which may be divided into parágrafos or incisos, and that the parágrafos themselves may be divided into incisos, the latter into alíneas and the latter in turn into itens (notice the spelling with "n" for the plural form).

Anglo-American law does not recognize the difference between commercial and civil [companies].

Now, this is not the way laws are articled elsewhere. In addition, a Brazilian artigo may have a single parágrafo¸ whereas elsewhere there can be no subdivision one without a subdivision two. An artigo corresponds approximately to a section in an American law. Unfortunately the section sign ("§") is called in Portuguese sinal de parágrafo and accordingly it indicates a parágrafo in a law. What is called a "paragraph" in English, viz. "¶," is not normally used in Portuguese and, when used at all, is called parágrafo americano or pê invertido, meaning American paragraph or inverted P, respectively.

The above is a bit confusing and makes life very hard for the common variety of translator, meaning you and I, and there is a lot of talk going on concerning whether we should call an artigo of a law an article or a section (an artigo in a newspaper is a story and an artigo in grammar is an article—but that falls beyond the scope of the present article) and there is also a lot of talk about what to do with parágrafo único and with caput which is an artigo, net of all of its parágrafos and stuff. In other words, when we say no caput do artigo 120, we mean in the initial paragraph, not in the parágrafos, and when we say artigo 120, we mean the whole article 120 enchilada.

I hope you are still with me, because we have more important and complicated issues to deal with today and I will end this overlong introduction by saying that, things being what they are, I will call an artigo an article and a parágrafo a paragraph and use the "§" to indicate a parágrafo and also use sole paragraph for our parágrafo único. I hope you agree. Oh, I almost forgot to say that caput will be translated as main body.

Let's get down to business.

The New Civil Code

Brazil has a new Civil Code, Law 10.406 (notice that Brazil and practically all the rest of the world uses periods as thousands separators, a practice that is kept in this article for reasons both unexplained and unexplainable). Código Civil is usually abbreviated as CC, although CC in Brazilian Portuguese also means B.O., which is very unfortunate. The new CC steals much of the thunder from the old Código Comercial (CCo). The CCo still exists, as a sort of rump law and will probably die a slow death as other laws take care of the rest thereof.

Although I very much enjoyed reading the old CCo, I do not regret its death, since the existence of the two codes created a lot of confusion that was not easy to deal with in translation. The main problem was that the Commercial Code dealt with what you would probably call the law of business organizations and said certain organizations were comerciais. The CCo was not concerned with noncommercial organizations, of course; noncommercial organizations were dealt with elsewhere, meaning the Civil Code (the old one, of course). As a consequence, they were usually referred to as sociedades civis, usually translated as companies organized under the provisions of the civil code, noncommercial companies, service companies, nontrading companies or some other equally awkward and/or imprecise expression.

Anglo-American law does not recognize the difference between commercial and civil and it was not always easy to explain to an American lawyer that you cannot file for the bankruptcy of a firm of financial consultants because it is a sociedade civil, not a sociedade comercial.

That, of course, was the task of the Brazilian lawyer, not of the translator, which is a very good thing indeed. On the other hand, it was often our unpleasant task to convince Brazilian lawyers that they would have to amend their legal opinions, otherwise the American reader wouldn't be able to make head or tail of it.

Demise of a Distinction, Birth of a Murkier One

The new CC contains the basics of business organization law and does not talk about comerciantes anymore. The distinction between comerciante and não comerciante is absolutely dead. It won't be missed, at least by translators.

Unfortunately, it has introduced a different category, that of empresário, allegedly defined in Article 966 and its sole paragraph. The definition used in the main body of the article seems to be clear enough. It approximately says that if you conduct a business for profit and the business is engaged in production or distribution, then you are an empresário, which seems to be fair enough.

Then, the sole paragraph says that those who exercise an intellectual, scientific, literary or artistic activity are not empresários, even if they rely on the help of others in their endeavors, unless the exercise of the profession is an element of empresa. That unless is murder and means that you are an empresário unless you ain't and you ain't one unless you are. If you do not believe me, just read this:

"Art. 966. Considera-se empresário quem exerce profissionalmente atividade econômica organizada para a produção ou a circulação de bens ou de serviços.

"Parágrafo único. Não se considera empresário quem exerce profissão intelectual, de natureza científica, literária ou artística, ainda com o concurso de auxiliares ou colaboradores, salvo se o exercício da profissão constituir elemento de empresa."

A lawyer said that this is very simple. Publishing is an empresa. Tax consulting is not. But a tax consultant who publishes a magazine is an empresário, even if it is a magazine about taxation. Of course, if the magazine is published as an integral part of the activities of a tax consulting firm, it would not be an atividade empresária, although it could be argued that it was if subscriptions were sold separately from the provision of tax consulting services. I suspected it very much depended on what was convenient to one of his clients at the moment, but I thought asking this type of question would be a bit rude.

Basically, however the new sociedade simples correspond to the old sociedade civil and sociedade empresarial is the heir to the late sociedade comercial.

What do you Call an Empresário in English?

So far, I have not found a translation for atividade empresarial that pleases me. Some local lawyers are using entrepreneurial activity, but these are the same guys who gave you quotaholder and insist that it is perfectly good, clear, idiomatic, honest-to-God English. Perhaps business activity would be a better idea, since trading has already been preempted for different purposes.

Perhaps business is a good solution because its meaning is nearly as vague and misleading as the meaning of atividade empresarial in the CC. Unfortunately this would deprive us of the very handy law of business organizations for the Portuguese direito societário. We could say corporate law, of course, but that would probably be seen by most foreigners as the law applicable to sociedades anônimas only.

No End of Trouble

To add to the problem, a sociedade empresária is opposed to a sociedade simples (Art. 982). This is not as simple as it seems to be: sociedade in Portuguese, is a general term that includes partnerships, limited liability companies and share corporations, so that simple partnership (remember that direito societário applies equally to partnerships, LLCs and corporations) simply won't do and perhaps simple company will, but probably the best answer is nonbusiness company although this is not very satisfactory either.

To make things worse, sociedade simples, should not be confused with sociedade inscrita no SIMPLES. SIMPLES, in this sense, should be always spelled in full caps because it is an acronym for Sistema Integrado de Pagamento de Impostos e Contribuições das Microempesas e Empresas de Pequeno Porte, which could be translated as Integrated Tax and Contribution System for Very Small and Small Companies and explained as a simplified tax accounting and payment system for the smaller guys.

The sociedade simples is roughly the same as the sociedade civil of yore and must be registered in the Registro Civil das Pessoas Jurídicas (probably Civil Registry Office for Legal Entities), whereas the sociedade empresarial roughly corresponds to the older sociedade commercial and must be registered with the Junta Comercial (Registry of Commerce), an entity that is part of the Departamento Nacional do Registro do Comércio. I suspect that in due time the Registry of Commerce will rechristened as the Registro de Entidades Empresariais (Business Entity Registry).

As a general rule, both types of sociedade must be registered.

Sociedades Personificadas and Não Personificadas

But we are putting the cart ahead of the oxen. We should first deal with sociedades personificadas and não personificadas. As a rule, Brazilian companies have always been considered pessoas jurídicas, that is, legal entities. A sociedade personificada is a company that is a legal entity. A sociedade não personificada is a company that is not a legal entity.

The two types of sociedade não personificada

There are two cases of sociedade não personificada. The first is the sociedade em comum which could be termed an unregistered partnership, or de-facto partnership. Since Brazilian entities organized for profit are legal entities, they must be registered as such. I know that in many countries registration is not required of general partnerships, but the beauty of legal translation (as compared to medical translation, for instance) is that no concept has a decent correspondent in the other language. Ever. The sociedade em comum is either a partnership in the organization stage or a partnership that was not registered on purpose and is deemed to be a partnership by a court of law. This roughly corresponds to the older sociedade de fato or sociedade irregular.

The other kind of sociedade não personificada is the sociedade em conta de participação (SCP), which is a secret partnership (article 991). Believe it or not, secret partnerships are regulated by law in Brazil. A sociedade em conta de participação has at least one sócio ostensivo (ostensive partner) and one sócio participante (secret partner). Because it is secret, it cannot be registered.

Sociedades Personificadas

There are four types of sociedade personificada:

The sociedade em nome coletivo (art. 1.039), roughly corresponding to a general partnership and is already defined in the older Commercial Code. It must be registered, of course.

The sociedade em comandita simples (art. 1.045) is like a limited partnership and is also defined in the older Commercial Code and must be registered.

The sociedade limitada (art. 1.052) corresponds to a Limited Liability Company (LLC) and was defined in a Decree dated 1919. At that time, it was called a sociedade por cotas de responsabilidade limitada and has always been the second most popular type of business in Brazil. I own one-half of one—and Vera, my wife, owns the other half. But it is not only for the small guys: there are very large enterprises organized as limitadas.

Finally, there is the sociedade anônima (art. 1.088), which is further governed by law 6404 as amended. In theory, there are two types of socidade anônima: the sociedade por ações (business corporation) and the sociedade em comandita por ações (limited partnership authorized to issue shares--not to be confused with the sociedade em comandita simples, which is a limited partnership). However, the comandita por ações was already falling in disuse in 1976 when the current Lei das S.A. was enacted and must be very rare today. So that, in practice, sociedade anônima is a synonym for sociedade por ações. A sociedade por ações may be de capital aberto (public) or de capital fechado (close).

What Happened to the Capital e Indústria?

The sociedade de capital e indústria is not mentioned in the new Civil Code. However, a company of that type can be organized as a limited partnership.

How Common is it?

In 2002, the Departamento Nacional do Registro do Comércio, registered 214,663 sole proprietorships, 227,549 limitadas, 1,012 sociedades anônimas, 1,556 cooperativas (cooperatives) and only 371 "other types." So that general and limited partnerships, which are very important elsewhere, are almost non-existent in Brazil. You can check the stats by clicking here.

General partnerships are the only form of business organization available to licensed professionals, such as lawyers and accountants, but those organizations are civil/simples and thus not reflected in Registry of Commerce statistics. I have never run into a Brazilian limited partnership or sociedade de capital e indústria: There must be very few of them. There are many sociedades em conta de participação, but those cannot be registered, so they are not reflected in the statistics above.

Envoi

If you are interested in Brazilian business law to the extent of reading this article until here, you might be interested in reading the other article I wrote for the Translation Journal on the same subject, before the new Civil Code was enacted, by clicking here. Much of it remains valid and, of course, you may run into something written using the old system.

Maximilianus Cláudio Américo Führer, whose works I have often recommended, has a new "Resumo de Direito Comercial (Empresarial)" that reflects the new rules. It is published by Malheiros Editores.

I am very sorry I cannot offer good solutions to many of the terminological problems presented by corporate law. I am afraid there aren't any. I still hold that translating a legal text is like completing a jigsaw puzzle with pieces taken from a different one: nothing ever fits correctly.

This article was originally published at Translation Journal (http://accurapid.com/journal).