The acquisition of a business may be achieved by purchasing the shares of the company that operates the business or the assets and liabilities of the business. Share acquisitions are more common than asset acquisitions in Brazil, as they are less burdensome from a bureaucratic point of view and, depending on the circumstances, may be more tax-efficient. Each type of acquisition has its advantages and disadvantages. The choice of structure will largely depend on the circumstances of the transaction and, in particular, the parties' tax considerations.

The acquisition of a company or business in Brazil does not require government consent, except for merger control approval if the parties' gross annual turnover is above antitrust thresholds or where the transactions involve regulated activities controlled by the government. Nevertheless, the transaction may trigger the application of various laws and rules to protect the rights of parties or persons.

Auction processes in Brazil are quite common, usually preceded by bid process letters. Usually, the negotiations start with a letter of intent and bids are issued as nonbinding offers. However, bid letters may be binding depending on the process, particularly in the final offer stage of the process.

Scheme of arrangement procedures are not addressed in the Brazilian legal framework.

In Brazil, the following types of mergers are available: (i) horizontal; (ii) vertical; (iii) market extension; (iv)product extension; and (v) conglomeration. In general, the most common types of mergers in Brazil are vertical mergers in which two or more companies operating in the same supply chain merge.

A Sociedade Limitada (Ltda) is generally considered a more flexible form of a limited liability company. A Sociedade Anônima (SA) is another common form of private company.

The two most common types of limited liability companies are the following:

• SA, a limited liability corporation
• Ltda, a more flexible form of a limited liability company

These types of companies are the most popular with nonresident investors in Brazil. A new rule was recently enacted authorizing Ltdas to have only one owner.

In an SA, shareholders' liability is limited to the amount of capital invested by each shareholder. This type of corporation may be closely held (capital fechado) or publicly held (capital aberto).

An SA must have at least two shareholders, except in a few situations in which it can be wholly owned. The shareholders may be entities or individuals.

There are no residency or nationality requirements for the owners of Ltdas and SAs; however, if they are not a Brazilian resident, they must appoint an attorney-in-fact resident in Brazil vested with powers to receive court summons on its behalf.

At least 10% of the stated capital of the SA must be paid up in cash at the time of the SA's incorporation. No minimum capital is required except to carry out certain regulated activities, e.g., banking, insurance and trading companies. The capital of the SA is divided into shares. According to the rights attributed to their holders, the shares may also be qualified as ordinary or preferred.

Organizing a Ltda may be more flexible since: (i) it involves lower costs, in both organization and management; (ii) its articles of organization may be amended by a simple document executed by the company's partners or their attorneys-in-fact, and the publication of the amendment in the official gazette and newspaper is not required; (iii) no stock certificates or corporate book, such as share registration, share transfer book, shareholders' and board meeting's minute books, are required; and (iv) Ltdas are now allowed to have a single quota holder. In a Ltda, all corporate information is addressed in its articles of organization. For this reason, the Ltda's structure is often used to incorporate wholly owned subsidiaries (including purchase vehicles for local acquisitions) in Brazil. The liability of quota holders is also limited to the amount of the capital invested by each quota holder, but if the capital is not fully paid in, quota holders are liable for the payment of the full amount of the company's capital.

Ltdas in Brazil can only have one owner. An SA must have at least two shareholders (except in a few situations it can be wholly owned).

From a transactional point of view, a share (or quota) transaction is much simpler and involves less documentation than an asset transaction. No individual transfers of title to the company's assets and inventory are required, and no cumbersome formalities need to be observed. Normally, public licenses and permits are not affected by a change in the control of the target company. Generally, unless a contract or agreement expressly requires prior consent before the transfer of control (common in contracts with the public sector, but not necessarily an obstacle), the company's rights and obligations under its contracts and agreements are not affected. A share acquisition also offers more flexibility in terms of tax planning.

Asset acquisitions tend to be much more complicated than share acquisitions, as each asset and liability to be included in the sale has to be identified and transferred, individually or by legal category (e.g., each equipment and inventory item must be described, valued and quantified in the transfer invoices to be delivered by the seller to buyer). In some cases, the issuance of these transfer invoices may trigger transfer taxes. The title to real properties is transferred through the registration of deeds that trigger the payment of tax and notarial fees.

The parties do not need to transfer the whole business and are generally free to select the assets and liabilities they wish to transfer. The buyer is generally liable only for obligations acquired, which the buyer assumes expressly in the purchase agreement. There are, however, certain exceptions where the buyer assumes certain liabilities of the seller by operation of law, e.g., tax, labor and environmental liabilities. This risk of inheriting hidden liabilities and the time-consuming procedural requirements tends to dissuade some buyers from electing asset deals as an acquisition vehicle in Brazil.

Some public licenses and governmental permits may not be transferred along with the business, in which case the buyer must apply for a new one. Buyers should therefore obtain all of the necessary governmental licenses before the completion of an asset deal to avoid any interruption to business and the risk of incurring penalties.