What it is
Foreign capital invested in a Brazilian company must be declared to the Central Bank of Brazil through its electronic system for foreign direct investment, known as SCE-IED. The declaration records the foreign investor, the Brazilian company, the amount and date of each investment, and the resulting shareholding. It is a declaratory registration made by the company, with the resident representative's credentials, and it is mandatory.
Why it matters
The registration is the legal basis on which the company can later remit dividends to the foreign shareholder, return capital on a reduction or liquidation, and repay intercompany loans, all through the official exchange market. A bank will not close an outbound exchange contract for these purposes without a matching registration. A company whose capital was never registered, or was registered incorrectly, cannot lawfully pay its foreign owner.
When it is done
- Before the investment: the foreign investor is enrolled in the Central Bank's non-resident registry, with a resident attorney-in-fact.
- On each remittance: the capital contribution is declared within the period set by the rules after the exchange contract is closed.
- On every change: capital increases, transfers of shares between foreign and Brazilian owners, and corporate reorganisations are updated.
- Periodically: companies above certain asset thresholds file quarterly and annual economic-financial declarations.
Common errors
- Capital paid in without a proper exchange contract, for example through informal transfers, which cannot be registered.
- Registration of the investor omitted before the remittance, delaying the exchange operation.
- Capital increases recorded at the Board of Trade but never declared to the Central Bank.
- Share transfers that change the foreign ownership without an update to the registry.
Regularisation
Companies that skipped or mishandled the registration can usually be regularised through late declarations and, where needed, corrective corporate acts and evidence of the original funds flow. Penalties may apply and the process takes time, which is why it is best avoided. Brazil Company Setup handles both initial registrations and the regularisation of companies formed by other providers; see Central Bank registration services.