Corporations have their share capital divided into shares, which reflect the equity interest of each shareholder in the business.
In this form of business organization, shareholders have limited liability consistent with the value of their shares, so that, in the event of company bankruptcy, the shareholder’s personal assets do not, as a rule, account for corporate debts.
In corporations, business ownership, held by shareholders, is separate from business management, carried out by an executive board and a board of directors.
Corporations have a profit purpose, being always legally considered as business companies, regardless of corporate purpose. Thus, they are is aimed at generating profit and dividend distribution to shareholders.
Also, as a result of this corporate legal nature, corporations are subject to bankruptcy and may request court-supervised reorganization.
Which are the differences between publicly held and privately held corporations?
Publicly held corporations have its shares traded on the stock exchange, such as B3, which is a Brazilian stock exchange, headquartered in the city of São Paulo/SP.
In privately held corporations, shares are not publicly traded, but are restricted to a certain group of shareholders, usually founders, family members, and private investors.
It is important to note that the publicly held corporations are supervised by the Brazilian Securities and Exchange Commission (CVM), which is a public entity linked to the Ministry of Finance that is mainly responsible for regulating and supervising the securities market.
Who can legally opt for the corporations model in Brazil?
Any person may opt for the corporations model in Brazil, provided that the preliminary requirements for their incorporation are met, as provided for in Article 80 of Law 6404/76, which is referred to as the “Brazilian Corporations Act.” They are:
a) Subscription, by at least two (2) persons, of all shares into which the capital stock established in the Articles of Incorporation is divided;
b) initial investment of at least ten percent (10%) of the issue price of the shares subscribed in cash, unless the law requires the initial investment of a greater part of the capital stock;
c) deposit, at Banco do Brasil S/A, or at another banking establishment authorized by the Brazilian Securities and Exchange Commission, of the part of the capital paid up in cash.
How does the taxation of corporations work?
Corporations may choose to be taxed under the presumptive profit or taxable income tax regime.
The presumptive profit may be advantageous for corporations that have simplified businesses, with low operational complexity, and with recurring profit margins above the percentages presumed in the laws.
In turn, taxable income can be advantageous for corporations with businesses characterized by operational complexity, with robust structures, since this regime allows deducting operating expenses from the payment of taxes, in addition to offsetting any losses.
It should be noted that corporations cannot opt for the National Simplified Taxation System, even if they fall within the income limit, as expressly prohibited by law.
It is important to note that the Taxable Income taxation system is mandatory for companies in general with gross revenue greater than BRL 78 m per year and for certain sectors, such as the financial sector and businesses that make profits abroad.
Are the tax authorities stricter when it comes to the supervision of this type of company?
I believe that the stringency of tax authorities is found in the inspection of publicly held corporations that opt for the Taxable Income taxation regime. This is due to the robustness of the business structure, which leads to greater complexity in the calculation of taxes, given the possibility of deducting expenses, credit recording, and offsetting losses.
Which well-known Brazilian companies are corporations? Are there any sectors that benefit more or less from the model?
Considering their market values, among the largest publicly held corporations in Brazil are: Petrobras, Itaú Unibanco, Vale, Ambev, Banco do Brasil, Bradesco, and Weg.
The corporations model benefits several segments of the market, especially companies that seek greater access to financial resources for large expansion projects, better visibility in the market to draw investors, and ease in making acquisitions and mergers with other companies.
In the case of a publicly held corporations, shares traded on a stock exchange allow shareholders an easier flow of purchase and sale, and so companies are able to use this capital to expand their businesses or acquire other companies, for example.
Available in: https://valor.globo.com/empresas/artigo/o-que-e-sa-e-como-funciona.ghtml
Autor: Sandro Miguel Siqueira da Silva Junior • email: sandro.junior@ernestoborges.com.br
