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BRAZIL: THE NEW SOCCER CORPORATION

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August 2021 – Brazil – Rossetti Advogados

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Last July 14th, the Brazilian House of Representatives approved Bill No. 5.516/2019, which encourages the incorporation of soccer corporations (SAF), the main activity of which is the practice of soccer in professional tournaments. The Bill was submitted by the president of the Brazilian Senate, Rodrigo Pacheco (DEM-MG). The matter had already been approved by the senators and will now be sent for the President to sign it into law.

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In addition to offering the Brazilian soccer clubs the opportunity to become companies, the Bill institutes governance, transparence, debt management and asset protection rules, and it also institutes soccer financing means and provides on a transitory tax system.

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This Bill represents a huge advancement for Brazilian clubs, which for the most part have significant debts, either overdue or coming due, difficulty in managing sports and economic activities and the need to protect property and assets.

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Soccer clubs currently qualify as not-for-profit associations. With the legislative change, individuals, legal entities and investment funds may participate in the management. 

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In this scenario, the current soccer clubs may approve the incorporation of an SAF, with emphasis on and adoption of the following legal rules, to be applied to the relationships with their creditors, associates, the government and the society in general:

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I.SAFs are not liable for the obligations and debts of the club that composes them, irrespective of they being previous or subsequent to the date of their incorporation. In case the debts, both overdue and coming due, remain in the club and the property and assets of the club are transferred to the new corporation, the soccer corporation agrees to monthly transfer to the club the amount corresponding to 20% of the monthly revenue in the first 6 years. The debts may be managed by the club under the centralized execution system, which shall concentrate in a single court the revenue transferred and the distribution thereof to the creditors.

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II.The club may contribute its assets (property, fixed and movable assets, name, trademark, distich, symbol and properties) to the SAF.

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III.The transfer of the rights and assets of the club to the SAF does not require the authorization or consent of creditors or interested parties.

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IV.The SAF shall administrate and manage the soccer activities in professional tournaments, as well as the economic operation of assets, including real estate assets, assets involved in the formation of professional athletes and any soccer-related activities.

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V.SAFs shall have administrative governance, as well as provisions on a board of directors and fiscal council, on the conduction of external audit by an independent company, and on electronic publication of the interim balance sheets and financial statements, pursuant to the law, it being understood that legal entities and investment funds may participate in the management.

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VI.SAFs may attract investors and have new forms to obtain funds by means of the issue of shares, debentures, bonds or securities.

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VII.SAFs may institute an education and social development program to engage, under an agreement with a public teaching institution, in actions to benefit the development of education and sport.

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Without prejudice to these rules, the Bill grants the club the right to file for court-supervised and/or out-of-court reorganization, being subject to the rules of the Reorganization Law, which eliminates the understanding that civil associations could not use such laws.

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Finally, with respect to tax matters, a specific tax system for soccer (TEF) is instituted for soccer corporations, upon establishment of a single tax rate of 5% of the monthly revenue, encompassing the contributions and taxes levied by the National Social-Security Institute (INSS), Corporate Income Tax (IRPJ), Social Integration Program (PIS)/ Public Servant Property Formation Program (Pasep), Social Contribution on Net Income (CSLL) and Social–Security Financing Contribution (Cofins).

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The club may use the tax settlement mechanism for the debts not included in refinancing programs of the federal government.

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For more information on the above or in other matters, please contact Maristela SA Rossetti (mar@rraa.com.br) or Gilberto Rossetti (gmr@rraa.com.br).

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This article is based on publicly available information and given for informational purposes only. It is not intended as legal advice or as a comprehensive analysis of the matters referred to herein.

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