The case of social network X and the requirement of a legal representative for foreign companies in Brazil!

Recently, the Brazilian judiciary summoned Company X (formerly Twitter), emphasizing the requirement that foreign companies operating in Brazil must have a legal representative in the country. According to the Brazilian Internet Civil Framework (Law No. 12.965/2014), any company collecting data or communicating with users in Brazil, even if only one terminal is located in the country, must have a legal representative there.??

This situation is not new for social networks in Brazil. Previously, Telegram faced a similar situation and complied with judicial orders, underscoring the importance of adhering to local legal requirements. Additionally, Decree No. 92.319 (Art. 6) mandates that foreign companies authorized to operate in Brazil must have a permanent representative in the country with full powers to address and resolve any issues, and who can be sued and receive initial summonses on behalf of the company.??

This requirement applies even if the activities are carried out by a legal entity based abroad, as long as it offers services to the Brazilian public or has a company from the same economic group established in Brazil (§ 2 of Art. 11 of the Internet Civil Framework). The legal representative is crucial for ensuring that the company meets its obligations, particularly regarding data protection and responding to legal demands.?

Non-compliance with these obligations can have severe consequences. According to Article 12 of the Internet Civil Framework, violations of the provisions in Articles 10 and 11 subject the company to various sanctions, applied individually or cumulatively, including: ? ?

• Warning, with a deadline for adopting corrective measures;?
• A fine of up to 10% of the economic group's revenue in Brazil in the previous fiscal year, excluding taxes, considering the offender's economic condition and the principle of proportionality between the severity of the offense and the intensity of the sanction;
• Temporary suspension of activities involving the acts provided for in Art. 11; or?
• Prohibition of exercising activities involving the acts provided for in Art. 11.

Having a legal representative in Brazil is more than a regulatory requirement; it is an essential strategy to ensure regulatory compliance and mitigate risks in the Brazilian market. If your company operates or intends to operate in Brazil, it is crucial to ensure that this obligation under the Internet Civil Framework and Decree No. 92.319 is strictly followed, ensuring the continuity and security of operations in the country.??

In addition to this requirement, companies with one or more foreign partners in their articles of incorporation, whether individuals or legal entities, must appoint a tax-resident attorney in Brazil to represent the interests of these partners. It is equally important for the company to have the support of an accountant from the moment the CNPJ is opened, ensuring compliance with tax obligations with the Brazilian IRF.??

Many foreign investors are unaware that, even when the company is not operating, it still has responsibilities to the tax authorities and social security. This includes the regular submission of accessory declarations, both monthly and annually. Failure to submit these declarations can result in fines and the CNPJ being rendered inactive, making it ineligible to operate.?

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Brazilian laws are already a problem for the natives themselves, let alone for foreigners. This is why it is important to work with good professionals, especially lawyers and accountants, so that the operations are not wrongfully carried out and end up creating future contingency if it happens.?