On April 30th of this year, Prosecution 881 was published on DOU (Official Daily Gazette), called by the Federal Government the “Prosecution of Economic Freedom”, establishing the Declaration of Economic Freedom Rights – one of the main proposals of the new government – establishing new principles of market and altering ordinary legislation related to the exercise of business economic activities.

The Prosecution established some guiding principles of the measures to be implemented, the reasons for which were outlined in the explanatory memorandum of the Prosecution’s edition proposal, such as: presumption of freedom in the exercise of economic activities; the presumption of good faith of the individual and the minimal and exceptional subsidiary intervention of the State on the exercise of economic activities.

These new principles have the fundamental objective of guiding, protecting and limiting the norms and rules already sanctioned and those that come to be sanctioned as a result of the edition of the new Prosecution. It is fundamental in Brazilian Law the function of the principles of giving consistency to the constuction of norms, since that is from these principles that all laws result and seek protection. The Government, precisely for this purspose on giving guidance and subsistence to the current legislation, decided to expressly strengthen the principles in question, based on the constitutional precepts and liberties guaranteed to citizens and private entities.

Although the new regulation is in force as of its publication, many issues addressed in it are still subject to regulation by the competent bodies – federal, state and/or municipal – so that the operationalising of some of the changes introduced by the measure is not yet a certainty .

For example, the norm has led to a business classification that does not exist in Brazilian law, which would be the “low-risk economic activity”, whose companies will be exempt from obtaining permits, licenses and other prior authorizations to carry out the activity . The concept – “low risk” activity – will still be defined and regulated by the Federal Government, in order to give effectiveness to the measure implemented.

The measure also amends the Civil Code, specifically the articles 50, 421, 423, 480-A, 480-B, 980-A, 1,052, 1,368-C, 1,368-D and 1,368-E. Among the main alterations, is the expressed provision regarding the impossibility of piercing the corporate veil only by the existence of an economic group and without the presence of the requirements of the deviation from purpose or equity confusion, also altered and clarified by the new rule.

The motion to pierce the corporate veil is an issue that has long been the subject of a judicial discussion, and the new Prosecution was happy to express the majority position of the courts, abolishing doubts about the subject, bringing greater legal certainty.

One of the most discussed points has been the creation of the Committee formed by members of CARF (Administrative Tax Appellate Board), Brazlian Federal Revenue Service Office and General Counsel for the Federal Treasury Office, responsible for the edition of binding precedents that shall govern the administrative, normative and decision-making acts practiced by said bodies. Some legal professionals understand that the provision disfavors and render ineffective the precedents issued by the CARF, in the quality of last resort in federal administrative matters. However, the competence and limits of the performance of this Committee will still be duly regulated.
The creation by the Prosecution of a new corporate figure also gave rise to some discussions and comments by the operators of the law. The individual and sole company appears as an alternative to limited-liability proprietorship, whose constitution requirements prevented its use for certain activities, such as the requirement of minimum capital of 100 thousand reais. The new figure, in addition to limiting the responsibility of its owner to the capital, shall be constituted automatically by the competent bodies, observing certain legal requirements in a proper regulation issued by the Brazlian Department of Business Registration and Integration (DREI).

In the opinion of Dr. Raphael Zaroni, founding member of Zaroni Advogados, “Prosecution is an essential measure for the recovery of the economy of the country, but because it is temporary and emergency, its maintenance depends on the subsequent approval of Congress – conversion into law – , which may generate some insecurity for those who intend to invest in the country”.