79

JAN-MAR 2023

INFRAESTRUCTURE AND REGULATORY & GOVERNMENT AFFAIRS

Gender perspective in infrastructure projects INSTITUTIONAL

The BMA Women Mentorship Program: Strengthening professional and socio-emotional competencies INFRAESTRUCTURE AND REGULATORY & GOVERNMENT AFFAIRS

Changes to the National Waters Agency and their effect on the Basic Sanitation Framework Law INFRAESTRUCTURE AND REGULATORY & GOVERNMENT AFFAIRS

New ANP regulation deals with third-party access to fuel terminals

FINANCIAL AND CAPITAL MARKETS

TAX

A new regulatory framework for investment funds in Brazil

Res judicata in tax matters and an unprecedented decision by Brazil’s Supreme

COMMERCIAL CONTRACTS AND FRANCHISES

TAX

Information and transparency – legal requirements for franchise disclosure document

Framework Legislation for Stock Option Plans

BMAReview® #79 EDITORIAL COMMITTEE

Francisco Müssnich Luiz Antonio Campos Paulo Cezar Aragão Plínio Simões Barbosa PRODUCTION

Eduardo Souza Luciana Monteiro Flavia Diniz (FSB Comunicação) COORDINATION

Lara Paz (BMA Advogados)

Experience, agility and innovation: three competences that are part of our DNA. Our wide-ranging expertise allows us to offer creative solutions to the needs of our national and international clients and provide secure legal structures for their business activities. MAIN PRACTICE AREAS OF BMA - BARBOSA MÜSSNICH ARAGÃO:

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DATA PRIVACY AND CYBERSECURITY

EDITION CLOSING DATE: MARCH 2023

BMAReview is published for educational and informational purposes only and is not intended and should not be considered as legal advice. Te articles in this edition os BMAReview were written by members of BMA Advogados.

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OIL & GAS

TAX

TELECOMMUNICATIONS WEALTH AND SUCCESSION PLANNING

Index

6 4 INSTITUTIONAL

THE BMA WOMEN MENTORSHIP PROGRAM: STRENGTHENING PROFESSIONAL AND SOCIO-EMOTIONAL COMPETENCIES

10 TAX

RES JUDICATA IN TAX MATTERS AND AN UNPRECEDENTED DECISION BY BRAZIL’S SUPREME COURT

16 TAX

FRAMEWORK LEGISLATION FOR STOCK OPTION PLANS

8 INFRASTRUCTURE AND REGULATORY & GOVERNMENT AFFAIRS

GENDER PERSPECTIVE IN INFRASTRUCTURE PROJECTS

12 INFRASTRUCTURE AND REGULATORY & GOVERNMENT AFFAIRS

CHANGES TO THE NATIONAL WATERS AGENCY AND THEIR EFFECT ON THE BASIC SANITATION FRAMEWORK LAW

18

FINANCIAL AND CAPITAL MARKETS

A NEW REGULATORY FRAMEWORK FOR INVESTMENT FUNDS IN BRAZIL

14 COMMERCIAL CONTRACTS AND FRANCHISES

INFORMATION AND TRANSPARENCY – LEGAL REQUIREMENTS FOR FRANCHISE DISCLOSURE DOCUMENT

INFRASTRUCTURE AND REGULATORY & GOVERNMENT AFFAIRS

NEW ANP REGULATION DEALS WITH THIRD-PARTY ACCESS TO FUEL TERMINALS

3

INSTITUTIONAL

The BMA Women Mentorship Program: Strengthening professional and socioemotional competencies By Committee BMA Women

We believe that inspiring women’s leadership strengthens BMA and its values and culture of diversity

B

MA Women was created in 2016 with the aim of promoting professional development for women at the firm, ensuring a receptive work environment, and contributing to networking opportunities, reflecting our commitment to gender equity. In the years since it was created, BMA Women has carried out various initiatives, including changes to some of our internal policies, such as increasing the length of maternity and paternity leave and more balanced gender representation on internal committees, along with roundtable discussions, women’s networking events and events to raise awareness of the challenges faced by women in their professional and personal lives. In 2022, BMA Women launched a project that had been in the works for some time: the Mentorship Program. The program is aligned with one of BMA Women’s main objectives, which is to realize the potential of women in our organization by helping them to overcome challenges and to boost their career progression, though dialogue and guidance with more experienced colleagues.

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In the program’s first cycle, both men and women mentors, all BMA partners, took part, and began with training sessions to help them make the most of the mentorship. The mentees were 26 women practitioners from our Rio de Janeiro, São Paulo and Brasília offices, who highlight some of the program’s main benefits: increased self-confidence and self-awareness, tools to build a personal image capable of sustaining their career objectives, development of their capacity to influence and delegate, and support in developing a career plan. The Mentorship Program was supervised by the BMA Women Committee, in conjunction with a specialized consulting firm engaged to help us implement the program. After assessing the first cycle and its impacts, strengths and weaknesses, we are making adjustments to improve the program and getting ready to launch the second cycle in 2023. We believe that inspiring women’s leadership strengthens BMA and its values and culture of diversity.

JAN-MAR 2023 | BMA REVIEW #79

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INFRASTRUCTURE AND REGULATORY & GOVERNMENT AFFAIRS

GENDER PERSPECTIVE Reprodução de IN INFRASTRUCTURE fotografias divulgadas PROJECTS na internet pode ser

gratuita By Mayna Dias Melo

Although most infrastructure policies are still indifferent or neutral with respect to gender, some countries have projects that take into account the specific needs of girls and women.

W

hen we think of infrastructure, we generally think of large-scale projects, like airports, highways, and hydropower, whose users do not have gender, race, sexual orientation, religion or any other distinguishing feature, as if all people benefit equally from every project.

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The reality is that although “classic” infrastructure projects can impact the lives of many people, that impact can be heightened if the project model takes into account the needs of certain socially and economically vulnerable groups. A good example is women and girls who do not

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have public transportation or basic sanitation close to their homes, which means that they have to travel significant distances, usually on foot, just to obtain access to services such as schools and potable water. The scarcity of basic infrastructure where these women live reduces the time they have for other activities, such as investing in their own education, working, and seeking financial independence. The phenomenon is known as time poverty. Adding a gender perspective in the development of infrastructure projects has the potential to alleviate this problem and help women to achieve better social and economic conditions in their lives. In addition, including gender considerations when developing infrastructure projects gives women the status of active, participating agents in their communities, as entrepreneurs, managers, collaborators, leaders and users of services (World Bank Group, 2019), which generates benefits for society as a whole. To illustrate some of these far-reaching impacts, a study by the McKinsey consulting group indicates that women holding a greater share of positions of power in the work market could increase the global GDP by 26% by 2025 (McKinsey apud Woetzel et al. 2015). Along the same line, studies cited by the World Bank

Mayna Dias Melo Lawyer Infrastructure and Regulatory and Governmental Affairs [email protected]

suggest that eliminating the salary difference between men and women could result in a 9% increase Brazil’s net GDP. Although most infrastructure policies are still indifferent or neutral with respect to gender, some countries have projects that take into account the specific needs of girls and women. In Brazil, the issue has been gaining visibility over the last few years, and on March 8th of this year, the publication of Decree 11.430/2023 marked a significant step forward, by providing for “the requirement, in public contracts, for a minimum percentage of the workforce be composed of women who were victims of domestic violence, and the use, as a criterion in breaking ties between bidders, of the bidders’ development of actions for fair treatment of men and women in the workplace, in contracting by the federal government, federal agencies and federal foundations.”1 Although its focus is not infrastructure projects, there is no denying that the Decree represents an advance that has the potential to influence such projects. And as the positive impacts of Brazilian projects that incorporate gender are identified and become known by infrastructure policy-makers, planners and users, the incentive to take women’s needs into consideration will grow, bringing Brazil into line with international trends.

REFERENCES MULTILATERAL INVESTMENT FUND. Toolkit for Mainstreaming Gender in MIF Projects. Washington, D.C.: Inter-American Development Bank, January 2017. Available at . Acessed July 20, 2021. WOETZEL, J. et al. How Advancing Women’s Equality Can Add $12 Trillion to Global Growth. McKinsey & Company, s.l., September 1, 2015. Available at: . Accessed August 20, 2020. WORLD BANK GROUP. Gender Equality, Infrastructure and PPPs: A Primer. S.l., 2019. Disponível em: . Accessed August 9, 2021.

1. Preamble to Decree11.430/2023. Our translation.

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FINANCE AND CAPITAL MARKETS

A new regulatory framework for investment funds in Brazil By Jane Goldman Nusbaum

The new regulation is composed of a general part, applicable to all investment funds, with annexes containing rules dealing with the particularities of each category of fund.

O

n December 23, 2022, Brazil’s securities and exchange commission, the CVM (Comissão de Valores Mobiliários) launched its new regulatory framework for investment funds in Brazil. Eagerly awaited by the market, which looked for changes in the CVM’s regulations to bring them into line with Law 13.874/2019 (the Economic Freedom Law, or EFL), the new CVM Resolution 175 not only achieved that objective but went further, and incorporated decisions made by the CVM over the years and suggestions received from market agents while the earlier regulations were in force. The result modernizes Brazil’s regulations and aligns them with international recommendations and practices. The new regulation is composed of a general part, applicable to all investment funds, with annexes containing rules dealing with the particularities of each category of fund. When CVM Resolution 175 was issued, the annexes dealing with financial investment funds (FIFs – fundos de investimentos financeiros) and receivables investment funds (FIDCs – fundos de investimentos em direitos creditórios) were also released. The CVM expects to issue annexes dealing with the remaining categories of investment funds by the time the new resolution comes into effect, on April 3, 2023.

The main changes introduced by CVM Resolution 175 are precisely those derived from the EFL, including the possibility of creating classes of fund units with different rights and obligations and limiting the liability of fund unitholders and service providers. The Resolution also establishes more detailed rules and mechanisms to address fund insolvencies. Funds will now be able to have more than one class of shares, with segregated assets, like the segregated portfolios found in other jurisdictions, which tends to reduce fund structuring and maintenance costs. This new flexibility is not absolute, however, since all classes in the fund must belong to the same category, and funds may not create classes of units that change the tax treatment of the fund and the existing classes. The former unit classes, which shared the same pooled assets but differentiated unitholders according to the targeted investor segment, the terms and conditions applicable to investment, amortization and redemption, and/or fee structure, are now called “subclasses” and have been extended to all fund categories (unless the category annex provides otherwise), including FIFs, which until now could not have different classes of units. A fund’s by-laws can limit unitholders’ liability

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to the amount they subscribe for, in which case “Limited Liability” must be added to the class of units. If the fund by-laws does not provide for limited liability, the unitholders are liable for any negative net worth, although service providers will also have liability in cases of fraud and bad faith. The new Resolution also adopts a more balanced approach to fund administrators and managers, treating both as “essential service providers” and providing that, as a rule, they do not have joint liability in the exercise of their duties. In FIDCs, fund managers now have a central role in structuring the funds and checking the supporting documents to ensure the existence, integrity and ownership of the receivables acquired by the fund. Other advances are the Resolution’s extension of the concept of authorized capital to all closed classes, the introduction of rules on the use of inside information in trading in fund units, more transparency in the fees charged by service providers, greater flexibility in investing in

assets outside Brazil, inclusion of carbon credits and cryptocurrency in the list of financial assets that funds may invest in (although with certain restrictions), and setting minimum criteria that funds must meet if their name makes reference to environmental, social and governance (ESG) factors. Also, FIDCs may now access retail investors, subject to certain requirements. CVM Resolution 175 was issued after 20 months spent reviewing the 92 submissions received in the public hearing, and repeals 38 CVM regulations, establishing a new, systematic regulatory framework for investment funds in Brazil. The new Resolution comes into force on April 3, 2023, although certain provisions will become effective later. Existing funds are given a period of time to adapt to the new rules. In parallel, the CVM has said that it is working on modernizing the rules governing investment fund disclosure and reporting, with a view to making the system more efficient, less costly, and more useful to investors.

Jane Goldman Partner Finance and Capital Markets [email protected]

9

TAX

Res judicata in tax matters and an unprecedented decision by Brazil’s Supreme Court By Lígia Regini and Luiza Lacerda

The case dealt with by the STF involved one of Brazil’s corporate income taxes, the Social Contribution on Net Profit (CSLL – Contribuição Social sobre o Lucro Líquido). At the beginning of the 1990s, the taxpayer won a case contesting CSLL, on the grounds that the tax was unconstitutional. Years later, in 2007, in a Constitutional Challenge against CSLL, the STF held that CSLL is constitutional.

O

verturning res judicata in tax matters is an issue that has caused great commotion and concern among taxpayers recently. There is good reason for that concern: respect for final judicial decisions is one of the most fundamental principles of the rule of law, so much so that it is found among the fundamental rights and guarantees set out in article 5 of the Federal Constitution of Brazil. Fair or not, final, unappealable judicial decisions is one of the pillars of legal certainty. At the very beginning of the 2023 judicial year,

10

the Supreme Federal Court (STF – Supremo Tribunal Federal), Brazil’s constitutional court, ruled that final, unappealable decisions in cases dealing with taxes that are levied periodically will cease to have effect if the STF later issues a contrary decision in a Constitutional Challenge proceeding, or in a “general repercussion” case, where the STF’s decision is also binding on all lower courts. Essentially, the STF’s rulings in Themes 881 and 885 mean that when STF issues a decision in a Constitutional Challenge proceeding, or in a “general repercussion” case, all taxpayers are subject to the STF’s

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understanding of the law, even if they had obtained final judicial decisions reflecting a different interpretation . The case dealt with by the STF involved one of Brazil’s corporate income taxes, the Social Contribution on Net Profit (CSLL – Contribuição Social sobre o Lucro Líquido). At the beginning of the 1990s, the taxpayer won a case contesting CSLL, on the grounds that the tax was unconstitutional. Years later, in 2007, in a Constitutional Challenge against CSLL, the STF held that CSLL is constitutional.

The scope of the STF’s position has the potential to reach far beyond CSLL, extending to industrialized products tax (IPI) levied on resale of imported products, service tax (ISS) on franchise contracts, and social security contributions on the constitutionally-guaranteed vacation “bonus” of one-third of a month’s salary. Justice Luís Roberto Barroso).

Now, in 2023, the STF has decided on the impact of its 2007 decision on res judicata in individual cases, where taxpayers had obtained rulings contrary to the STF’s later decision. The STF concluded unanimously that res judicata in individual cases will lose effect from the time the STF issues its judgment in the Constitutional Challenge.

The scope of the STF’s position has the potential to reach far beyond CSLL, extending to industrialized products tax (IPI) levied on resale of imported products, service tax (ISS) on franchise contracts, and social security contributions on the constitutionallyguaranteed vacation “bonus” of one-third of a month’s salary.

There was intense debate, and a close vote (6 to 5), but the STF decided not to modulate the effects of its decision, which means that the 2023 decision on res judicata has retroactive effect to 2007 – and exposes taxpayers that relied on res judicata in individual cases to potential liability for CSLL in past tax years.

In this unsettled scenario, we can expect the debate over retroactivity to heat up, especially where res judicata in individual cases is disturbed by decisions made by the STF in general repercussion cases (unlike the CSLL decision, which was made in a Constitutional Challenge).

Unusually, even before publication of the STF’s judgment, the National Treasury and the STF itself commented publicly on the decision, going so far as to suggest that the STF’s decision as to the retroactive effects (or lack thereof) of its ruling was specific to CSLL, and that the court might take a different position with respect to other taxes (interview given by

For the time being, we can say that the STF’s position is unprecedented, important, but not yet formally published,1 and does not affect any and all final decisions favorable to taxpayers. As always, care and critical analysis are recommended when assessing the effects of favorable judgement in tax cases, precisely to promote legal certainty and stability.

Lígia Regini

Luiza Lacerda

Partner Tax

Partner Tax

[email protected]

[email protected]

1. Até o fechamento desta edição, o acórdão ainda não havia sido publicado.

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INFRASTRUCTURE AND REGULATORY & GOVERNMENT AFFAIRS

Changes to the National Waters Agency and their effect on the Basic Sanitation Framework Law By Ana Candida and Marina Maciel

Moving the National Waters and Basic Sanitation Agency – ANA to the Ministry of the Environment and Climate Change may signal changes for the sector.

T

he early days of Brazil’s new government saw the publication of legislation and regulations that reorganize the federal administrative structure. One of the most significant changes was in the National Waters and Basic Sanitation Agency (ANA – Agência Na-

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cional de Águas e Saneamento Básico) and its jurisidiction to establish reference regulations on basic sanitation, which are essential to ensuring greater uniformity in the rules governing the sector.

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Provisional Measure 1.154/2023 removes an essential part of article 3 of Law 9.984/2000 (as amended by Law 14.026/2020, the Basic Sanitation Framework Law), which made the ANA “responsible for creating national reference regulations on the provision of public basic sanitation services”, while Decree 11.401/2023 puts the ANA back under the authority of the Ministry of the Environment and Climate Change (MMA – Ministério do Meio Ambiente e Mudança do Clima). Originally, the ANA’s functions were directed to regulating and inspecting the use of water resources, involving, for example, monitoring and evaluating actions undertaken in compliance with applicable federal legislation, and granting permits to use water resources in bodies of water under federal jurisdiction. With the advent of the Basic Sanitation Framework Law, the ANA acquired, in addition to its previous functions, responsibility for issuing reference regulations on public basic sanitation services (art. 4-A, Law 9.984/2000). The reference regulations are directed to providers of services and regulatory agencies, and must comply with the guidelines established in the Basic Sanitation Framework Law. To encourage adoption of the ANA’s reference regulations, the Framework Law makes access to federal funds and financing conditional on compliance with the reference regulations (article 50, Law 14. 026/2020; article 4-B, Law 9.984/2000). Federal technical and financial support for adapting basic sanitation services to the new standards also depends on compliance with ANA regulations (as provided for

Ana Cândida de Mello Carvalho Partner Infrastructure and Regulatory & Government Affairs

in article 13, Law 14.026/2020 and in regulations under Federal Decree 10.588/2020). To assist the ANA in meeting the challenges created by these new responsibilities, Law 14.026/2020 put the agency under the authority of the Ministry of Regional Development. The changes introduced by Provisional Measure 1.154/2023 generate uncertainty for the sector, since the other provisions of Law 9.984/2000 dealing with reference regulations, like article 4-A1 mentioned above, continue in effect. Since the ANA plays a crucial role in regulating and supervising the sector by means of the reference regulations, much more clarity is needed on how the changes made by the Provisional Measure will apply vis-à-vis the objectives established in the Basic Sanitation Framework Law. Moreover, Decree 11.401/2023 once again put the ANA under the authority of the Ministry of the Environment and Climate Change – MMA, removing it from the Ministry of Regional Development. The move could signal that the focus of the ANA’s work will return to environmental matters, such as regulation and inspection of water resources, which would be in line with the new federal government’s concern with environmental issues. Time will tell how the ANA’s new links to the MMA will affect its activities, especially in matters related to regional development and basic sanitation. The first year of the new government will be essential to show how the Basic Sanitation Framework will be implemented, and whether its goals are on track.

Marina Maciel Lawyer Environmental and Climate Change [email protected]

[email protected]

1. Article 4-A provides that “the ANA will issue reference regulations to be used in the regulation of public basic sanitation services by service providers and regulatory and inspection entities.”

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Information and transparency – legal requirements for franchise disclosure document By Tatiana Sister and Letícia Gomes De Oliveira

In general terms, a franchise agreement creates a collaborative business venture, in which the franchisor transfers knowledge and structures the sale of products and services to a network of franchisees “As for FDD specifically, Federal Law No. 13.966/2019 increased the amount of information that must be contained in the Document …. If the franchisor fails to provide the information, the franchisee can seek to void any agreement made on the basis of the FDD, and demand reimbursement of amounts paid to the franchisor. Federal Law No. 13.966/2019 thus reinforces the central role played by informational transparency in franchising, and the courts apply equal rigor ….”1

I

n general terms, a franchise agreement creates a collaborative business venture, in which the franchisor transfers knowledge and

structures the sale of products and services to a network of franchisees. One of the mainstays of franchises, and a feature that differentiates them from other types of business ventures, is full transparency, especially when it comes to disclosure of information of the business opportunity offered to potential franchisees, prior to the signing of the franchise agreement.

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COMMERCIAL CONTRACTS AND FRANCHISES

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courts and represented points of uncertainty for franchisors and franchisees.

“Federal Law No. 13.966/2019 thus reinforces the central role played by informational transparency in franchising, and the courts apply equal rigor.”1”

This concern with transparency and the need to align the contracting parties’ expectations was present in the first Franchising Law adopted in Brazil, Federal Law No. 8.955/1994, which established a list of information that had to be disclosed by the franchisor to potential franchisees at least ten days prior to the signing of the franchise agreement. A little more than two decades after the first franchising legislation was passed, it was replaced by the new Franchising Law, Federal Law No. 13.966/2019. The new legislation did not introduce big changes. Instead, in view of the growth of the franchises in Brazil and the potential for expansion in the sector, the legislator has finetuned some concepts and resolved certain questions that repeatedly ended up in the

Tatiana Dratovsky Sister Partner Commercial Contracts and Franchises [email protected]

As for the Franchise Disclosure Document (FDD) specifically, Federal Law No. 13.966/2019 increases the amount of information that must be contained in the Document (23 items under article 2). If the franchisor fails to provide all the information, the franchisee can seek to void any agreement made on the basis of the FDD, and demand reimbursement of amounts paid to the franchisor. Federal Law No. 13.966/2019 thus reinforces the central role played by informational transparency in franchising, and the courts apply equal rigor, treating disclosure of the information as a requirement for the validity of franchising agreements. Without detracting from the importance of transparency and information sharing in franchising arrangements, Brazilian courts nonetheless are firm in rejecting opportunistic conduct. The Court of Appeal of the State of São Paulo, for instance, has taken the position that defects will be considered to be cured, and the franchise agreement will remain in effect, when the franchisee does not raise the deficiency in the FDD at the earliest opportunity, but instead argues the defect much later, in an attempt to undo a mature contract.2

Letícia Gomes de Oliveira Lawyer Commercial Contracts and Franchises [email protected]

1. TJSP, Civil Appeal AC 1002149-08.2017.8.26.0114, Civil Appeal AC 1006648-44.2018.8.26.0132, Civil Appeal AC 1015267-18.2020.8.26.0576. 2. TJSP, Civil Appeal AC 0015191-16.2017.8.26.0576, Civil Appeal AC 1006265-58.2019.8.26.0576, Civil Appeal AC 1037391-29.2019.8.26.0576, Civil Appeal AC 1023473-28.2018.8.26.0564, Civil Appeal AC 1071671-33.2018.8.26.0100.

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TAX

Framework Legislation for Stock Option Plans By Franciny de Barros and Luciana Marsal

Given the importance of SOPs, Brazil needs legislation that not only provides tax certainty, but also reflects the country’s economic realities.

T

here are various reasons why companies increasingly use mechanisms to engage and retain employees that are tied to the company’s growth in value in the medium and long term: fluctuations in the economic scenario and the need to control cashflow, increased competition, with fewer physical barriers to hiring post-pandemic, and the need to engage newer generations by sharing profit and inspiring a sense of ownership. The fact is that the use of long-term incentives programs based on companies’ growth and market appreciation is becoming common, and companies that don’t offer such a long-term incentive program run the risk of becoming less attractive and less able to retain talent. The law and the courts in Brazil, however, have not kept pace with this evolution in corporate relations. The legal nature of one of the most wellknown long-term incentives programs, stock option plans (SOPs), has long been a matter of debate. Where taxation is concerned, decisions by the administrative authorities are plentiful, and unfavorable to taxpayers.1 In the courts, however, the decisions are mostly favorable2 in finding that at least some SOPs are mercantile in nature, although the courts have not yet reached a well-settled position on the tax aspects of SOPs. The courts tend to find that SOPs are mercantile

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The fact is that the use of longterm incentives programs based on companies’ growth and market appreciation is becoming common, and companies that don’t offer such a long-term incentive program run the risk of becoming less attractive and less able to retain talent. The law and the courts in Brazil, however, have not kept pace with this evolution in corporate relations. in nature when the plans are voluntary, participants are required to pay for the options, and the element of risk is involved, since in such cases it can be argued that the legal relationship established by the plan is dissociated from an employment relationship, in which any payments or advantages made by employer in favor of employees are remuneration for services. Bill PL 146/2019, better known as the Startups Framework Law, put regulation of SOPs, and especially their tax treatment, into the spotlight. As drafted, the Bill treated as remuneration from employment only the fair market value of the options granted under article 168§3 of the Brazilian Corporations Law, drawing on accounting rules and the single legal provision

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the draft legislation allows SOPs to provide for valuing options, updating values, forms of payment of the exercise price, and repurchase of shares by the company.

found in Law 12.973/2014. To a certain extent, the Bill attempted to balance the tax effects for the party granting the options (deductibility and payment of social security contributions) and the party receiving the option (payment of personal income tax). When the Bill became law, however, the provisions on SOPs were excluded, on the grounds that the subject required broader regulations which were “not restricted to startups”. The promise of broader regulation for SOPs was kept with Bill PL 2724/2022 (the “SOP Framework Law”): it is much wider in scope and unlike the earlier bill, which treated the fair value of options as remuneration from employment, the new Bill establishes the characteristics that SOPs must have in order to be considered “mercantile” in nature. According to the SOP Framework Law, the essential elements of a SOP are: a grant of options, a vesting period of at least 12 months, and payment of an exercise price. The Bill also highlights some features that can be added to SOPs without affecting their mercantile character, such as a minimum period of service with the company, the inclusion of targets, and restrictions on transferring options. In addition,

In practice, the points dealt with in the draft SOP Framework Law constitute the pillars of stock option plans. To address specific situations driven by their particularities and different economic realities, however, companies need flexibility to establish SOPs. In general, we see minimum waiting periods before beneficiaries can exercise their options (e.g. four years with partial vesting each year), which may or may not provide for cliff and lockup periods for shares acquired with the options as well. Still, some plans do not have cliff, and vesting and lock-up periods are less than a year, if the plan is designed for a certain purpose, such as contracting a C-suite executive by offering incentives and short-term liquidity to make the company’s proposal more attractive. Is it reasonable to say that such a SOP ceases to be “mercantile” because it provides for vesting in less than 12 months? On the other hand, the draft SOP Framework Law does allow plans to grant options carrying an exercise price lower than market value, which is a point that gives rise to a lot of disputes in the tax precedents, and which is certainly essential to making SOPs an effective instrument for attracting and retaining talent. Given the importance of SOPs, Brazil needs legislation that not only provides tax certainty, but also reflects the country’s economic realities.

Franciny de Barros

Luciana Marsal

Partner Tax

Partner Corporate and M&A

[email protected]

[email protected]

1. 58% of the decisions by the Administrative Tax Appeals Council (CARF) were unfavorable to the taxpayer, and of the favorable decisions, 30% were based on the nullity of the plan. 2. 73% of the court decisions were favorable to the taxpayer in finding that the SOP was mercentile in nature.

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INFRASTRUCTURE AND REGULATORY & GOVERNMENT AFFAIRS

New ANP regulation deals with third-party access to fuel terminals By Ana Candida and Maria Sampaio

ANP Resolution 881/2022 is a step forward in fostering competition in the Brazilian fuels market, but it has its challenges

I

n October 2022, Resolution 881/2022 issued by the National Oil, Natural Gas and Biofuels Agency (ANP – Agência Nacional do Petróleo, Gás Natural e Biocombustíveis) came into force. The new regulation deals with the use, by interested third parties, of port and waterway terminals for handling oil, oil derivatives, natural gas derivatives and biofuels.

and owner of the product being stored – which previously existed for private terminals only has been extended to public terminals. At the same time, the priority is no longer based simply on the terminal’s capacity, and is now limited to 10 years and to the volume determined by the ANP, based on the volumes historically moved by the owner; and

ANP Resolution 881/2022 replaces the former regulation on the matter (ANP Directive [Portaria] 251/2000), and is designed to establish rules that will encourage competition in the handling and storage of fuels. The main issues addressed by the new rules are:

iii. Deverticalization: The Resolution bars shipper-owners from operating the terminal: in other words, where the owner of the terminal also uses the terminal’s services, the owner cannot also be the terminal’s operator. Companies that are owners, users and operators of the same terminal have until 2025 to comply with the new rules.

i. Non-discriminatory treatment for third parties: The new Resolution reinforces the rules on non-discriminatory treatment for third parties by, for example, requiring terminal operators to give third parties access whenever there is available or idle capacity in the terminal and to publish the fees charged for access; ii. Owner’s priority: The priority of “shipperowners” – defined as legal entities that are simultaneously owner of the terminal, user of the service provider by the terminal operator

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The new rules have a direct impact on terminal operations and have raised a number of questions over the measures that terminals should adopt to bring themselves in compliance with the new regulation, and over the criteria and procedures that the ANP will adopt to verify companies’ compliance with the new rules. From a broader, public policy perspective, the

JAN-MAR 2023 | BMA REVIEW #79

rules under ANP Resolution 881/2022 may lead to more efficient use of port infrastructure in Brazil by facilitating third-party access to idle capacity. On the other hand, by limiting guaranteed use of terminals by their owners, the new rules could create obstacles to new investment in the sector. Close attention will be needed in implementing the new rules, because in the absence of incentives to stimulate investment in the sector, the result of the new rules may be the opposite of their intended effect. ANP Resolution 881/2022 is one element in a broader initiative to promote competition in the Brazilian fuels sector. Another part of the initiative is the commitments made with Brazil’s antitrust agency, CADE, for divestment of Petrobras refineries, and the growing proximity between CADE and the ANP in pursuit of this common objective: of the eight refineries contemplated by the agreement, two have already been sold. Recently, in reviewing the sale of REMAN – Petrobras’s refinery in the state of Amazonas – to fuel distributor Atem, CADE reinforced, by means of a written

Close attention will be needed in implementing the new rules, because in the absence of incentives to stimulate investment in the sector, the result of the new rules may be the opposite of their intended effect. commitment, certain obligations under ANP Resolution 881/2022, making compliance with those obligations subject to monitoring by the antitrust agency as well. The same line of reasoning can be seen in Bill PL 2.316/2022, now before Brazil’s Chamber of Deputies, which would amend the Petroleum Law to boost the ANP’s efforts to ensure non-discriminatory access for third parties to pipeline and terminal infrastructure. The fate of the Bill, and of the commitments between CADE and Petrobras that have not yet been implemented, however, will depend on the new government’s agenda.

Ana Cândida de Mello Carvalho

Maria Sampaio

Partner Infrastructure and Regulatory & Government Affairs

[email protected]

Lawyer Competition Law

[email protected]

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BMAReview® #79

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