About Diligência prévia Law
Diligência prévia, or due diligence, is the structured process of investigating and verifying information before entering into a transaction or agreement. This helps you understand risks, liabilities, and the true value of what you are buying or agreeing to. In a Brazilian context, diligência prévia often accompanies mergers and acquisitions, real estate deals, and complex contracts to ensure accuracy and informed decision making.
The process typically includes gathering documents, reviewing financial records, validating legal compliance, assessing contractual obligations, and producing a summary report with recommendations. Engaging a qualified attorney or legal counsel helps ensure the scope is appropriate, questions are well framed, and no critical issues are overlooked. Effective diligence reduces the chance of post‑transaction disputes and hidden costs.
Key terms you may encounter include material facts, disclosure requirements, representations and warranties, covenants, and indemnities. A lawyer can tailor the diligence plan to your sector, such as corporate, real estate, or regulatory compliance risks. This guide focuses on practical steps for residents seeking legal guidance in Diligência prévia in Brazil.
Why You May Need a Lawyer
Hiring a lawyer for diligência prévia supports you through specific, concrete scenarios. Below are real-world examples where legal expertise is essential.
- Acquiring a mid-size software company and uncovering undisclosed IP licenses, open source obligations, and pending litigation before finalizing the deal.
- Negotiating a real estate development with a landowner, where you must verify title, encumbrances, environmental liabilities, and zoning restrictions.
- Raising funds for a startup with venture capital, requiring a thorough review of cap tables, option plans, and tax compliance in Brazil.
- Participating in a municipal bidding process under Lei de Licitações, where bid documents, compliance history, and ongoing contracts must be audited.
- Entering a cross‑border merger with a foreign partner, needing compliance checks for foreign ownership limits, tax treaties, and transfer pricing risks.
- Facing potential regulatory scrutiny due to compliance gaps, where a legal team helps map remedial actions and timelines.
Local Laws Overview
Lei 6.404/1976 - Lei das Sociedades por Ações (Company Law)
The Lei das Sociedades por Ações sets the framework for corporate governance, fiduciary duties, and disclosure obligations in Brazilian corporations. It shapes how information related to transactions must be disclosed to shareholders and regulators during diligence. This law has guided corporate practice since its enactment in 1976, with ongoing amendments to address modern governance needs.
Official sources confirm the law's role in governing corporate information flow and related party transactions.
For authoritative text, consult the Planalto’s legislation portal: Lei 6.404/1976.
Lei 10.406/2002 - Código Civil Brasileiro (Civil Code)
The Civil Code governs obligations, contracts, and general civil liability, which are central to diligência prévia. It governs representations, warranties, damages, and remedies that arise during and after diligence in commercial transactions. The Civil Code underpins how risks are allocated between parties in negotiated deals.
Legal commentators note the Civil Code's broad reach over diligence assumptions and contract interpretation.
Access the official Civil Code text on Planalto: Lei 10.406/2002.
Lei 8.666/1993 - Lei de Licitações e Contratos Administrativos (Public Procurement)
This law governs public procurement and contracting, where diligência prévia is commonly used to verify compliance, licensing, and eligibility before awarding contracts. It remains a cornerstone for ensuring competitive and lawful public deals. Changes over the years reflect evolving procurement practices in Brazil.
Official guidance highlights due diligence as a critical step in public contracting.
Foundational text is available via Planalto: Lei 8.666/1993.
Instrução CVM 480/2009 (Disclosure and Due Diligence in Public Offerings)
The Comissão de Valores Mobiliários (CVM) regulates disclosures and information flows in capital markets, including due diligence expectations for offerings and corporate actions. Instrução CVM 480/2009 established procedures around information availability to investors, which is a core element of diligência prévia in public market contexts.
Brazilian regulators emphasize robust due diligence to support investor confidence.
Official CVM resources provide guidance on instructions and market oversight: CVM.
Frequently Asked Questions
What is diligência prévia and when is it typically used?
Diligência prévia is a process of verifying information before a transaction, such as an acquisition or contract. It is typically used in mergers, asset purchases, and cross-border deals to identify risks and liabilities before closing.
How does due diligence impact a corporate merger in Brazil?
Due diligence reveals material risks, enabling negotiating leverage and informed decision making. It can affect price, warranties, and indemnities offered in the merger agreement.
When should I hire a lawyer for a diligência prévia process?
Engage a lawyer at the planning stage, before collecting documents, to define scope and questions. Early involvement prevents scope creep and protects privilege.
Where can I find official regulations governing diligência prévia in Brazil?
Consult the Planalto official portals for Lei 6.404/1976 and Lei 10.406/2002, and the CVM site for market regulation guidance. These sources provide authoritative texts and interpretations.
Why is tax compliance part of diligência prévia in acquisitions?
Tax issues can create hidden liabilities and affect value. A tax diligence helps avoid penalties, interest, and unexpected tax exposures after the deal.
Do I need a local Brazilian attorney for cross-border deals?
Yes. Local counsel understands Brazilian corporate rules, tax implications, and enforcement practices. They coordinate with foreign advisors for seamless compliance.
What costs are typically involved in a diligência prévia process?
Typical costs include attorney fees, specialized due diligence consultants, document review, and potential audits. A clear scope minimizes unnecessary expenses.
How long does a standard diligência prévia take for a midsize company?
Duration depends on scope, but a typical midsize deal ranges from 4 to 12 weeks for comprehensive due diligence. Complex cross-border deals may take longer.
What is the difference between diligência prévia and due diligence?
Terminology varies by language, but the core concept is the same: a structured information review before a transaction. Diligência prévia is the Portuguese term used in Brazil and Portuguese-speaking jurisdictions.
Should I conduct diligência prévia for real estate transactions?
Yes, particularly for land titles, liens, environmental liabilities, and building permits. Real estate diligence helps prevent costly defects and regulatory problems.
Is CVM regulation mandatory for all diligência prévia in Brazil?
Not for every transaction, but if the deal involves securities or public offerings, CVM rules apply. In corporate transactions, governance and disclosure standards still guide diligence.
How to verify title, liabilities, and contracts during diligence?
Review public registries, encumbrances, tax liens, and existing contracts. A licensed attorney should coordinate title searches and contract reviews with specialists as needed.
Additional Resources
- Planalto - Portal da Legislação: official texts for Lei 6.404/1976 and Lei 10.406/2002. Lei 6.404/1976, Lei 10.406/2002.
- CVM - Comissão de Valores Mobiliários: regulatory guidance and market supervision. CVM.
- Receita Federal - Brazil tax authority: guidance on tax compliance and due diligence considerations. Receita Federal.
Next Steps
- Define the scope of diligência prévia with your goals and risk profile. List target assets, contracts, and jurisdictions involved.
- Engage a local attorney with corporate, tax, and contract expertise. Confirm language, privilege, and communication channels.
- Prepare a diligence checklist tailored to your deal, including financial, tax, labor, IP, and regulatory items.
- Collect documents from the target and set deadlines for submission, clarifications, and redactions as needed.
- Review findings with counsel, negotiate representations and warranties, and adjust the deal terms before signing.
- Confirm regulatory approvals and disclosures required by Lei 6.404/1976, Lei 10.406/2002, and Lei 8.666/1993.
- Finalize the diligence report and a negotiation memo detailing risks, remediation steps, and closing conditions.
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Aviso Legal:
As informações fornecidas nesta página são apenas para fins informativos gerais e não constituem aconselhamento jurídico. Embora nos esforcemos para garantir a precisão e relevância do conteúdo, as informações jurídicas podem mudar ao longo do tempo, e as interpretações da lei podem variar. Deve sempre consultar um profissional jurídico qualificado para aconselhamento específico à sua situação.
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