On March 18, 2015, President Dilma Roussef signed Decree 8.420/2015, which regulates certain features of the Clean Companies Act. The highlights of Decree 8.420/2015 are available here. On April 7, 2015, the Office of the Federal Comptroller General (“CGU“), the body with authority to investigate and sanction illegal acts prohibited by the Clean Companies Act that are committed against foreign Public Administrations (CGU also has concurrent authority to investigate local bribery at the Federal Executive level), issued four new regulations related to the Clean Companies Act. The regulations are already in force. Below are their main highlights. Ordinance 909/2015. This Ordinance sets forth the procedure for evaluation of compliance programs (the elements of the compliance program are listed in Decree 8.420/2015). It establishes that, as part of the evaluation process, legal entities will have to present a profile report and a compliance report. In the profile report, the legal entity will have to: i) indicate the sectors and countries in which it has business; ii) present its organizational structure, describing its internal hierarchy, as well as the decision making process and competences of Officers, Board Members, departments and sectors; iii) provide the number of employees; iv) specify and contextualize the interactions with public and foreign administration (e.g., number and amount of contracts with public entities, percentage of the revenue from contracts with public entities; use of third parties to interact with public sector); v) describe its corporate structure (parent company, controlled companies, consortiums, etc.); and vi) inform if it is a small size company. In the compliance report, the legal entity will have to: i) inform the structure of the compliance program, indicating which and how the parameters set forth in Decree 8.420/2015 have been implemented, as well as describing the importance of each of the parameters taking into consideration the specificities of the legal entity; ii) demonstrate how the compliance program’s operations are integrated into the activities of the legal entity with historical data, statistics and concrete cases; and iii) demonstrate how the compliance program worked in the prevention, detection and remediation of the violation under investigation. The Ordinance further establishes that, as part of the evaluation process, authorities can carry out interviews and request documents. Further, the Ordinance clarifies that legal entities that implement compliance programs after the wrongdoing will not receive the maximum credit for such programs (though they would still get some credit for it). Companies may want to consider preparing such reports in advance. In addition to avoiding time constrains during the administrative proceeding, they may help companies identify weakness in their programs (when pen meets paper, loopholes in the programs may become move obvious). Ordinance 910/2015. This Ordinance further clarifies the rules around administrative proceedings and leniency agreements. It clarifies, for example, that CGU will exercise its concurrent authority in cases where the authority that is originally competent has not acted; in complex, relevant or high repercussion cases; and in cases involving more than one body or entity of the federal public administration, among others. Regulatory Instruction 1/2015. This Regulatory Instruction sets forth a methodology for the calculation of gross revenue and taxes to be excluded for purposes of calculating the fine established in the Clean Companies Act. In summary, it refers to other tax regulations that set forth that the gross revenue includes: i) the proceeds from the sale of goods in the company’s own operations; ii) the price of the services; iii) the results earned in third party account operations; and iv) profits from the main activity or objective of the legal entities not included in the previous items. The taxes due on such activities are excluded for purposes of calculating the fines. Small businesses are subject to a different methodology. Given the difficulties in defining the exact contours of gross revenue and tax deduction, one may expect that such calculation will result in time-consuming litigation, complicating enforcement. Regulatory Instruction 2/2015. This Regulatory Instruction addresses issues related to the operations of the National Registry of Debarred and Suspended Entities (CEIS) and the National Registry of Sanctioned Entities (CNEP). The second one is for entities sanctioned under the Clean Companies Act only. Information about both registries will be kept in the Transparency Portal. As part of their third party due diligence vetting process, companies operating in Brazil should consider incorporating such lists into their vetting processes. This article was originally published on FCPAméricas.
Carlos Ayres is an attorney with the law firm Trench, Rossi e Watanabe Advogados (associated with Baker McKenzie) in São Paulo, Brazil. He focuses on anti-corruption and compliance issues, with a particular emphasis on Brazil and other regions of Latin America. Mr. Ayres co-chairs the Anti-Corruption and Compliance Committee of IBRADEMP (The Brazilian Institute of Business Law) and teaches FCPA and Compliance as a visiting professor at the Post-Graduate Program of GVLaw, School of Law, in São Paulo. He is also a visiting professor at the Post-Graduate Program in Risk Management and Fraud Prevention of FIA (Fundação Instituto de Administração) Business School in São Paulo