Appointing an Agent in Brazil: What You Need to Know
Brazilian agency law is significantly more protective of agents than most foreign legal systems. Before appointing a commercial representative in Brazil, foreign principals need to understand the mandatory rules, and the potentially substantial costs of getting them wrong.
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A commercial representative in Brazil is subject to rules that most foreign principals do not expect.
Under Brazilian law, a “commercial representative” (representante comercial) is any individual or company that regularly brokers commercial deals on behalf of a principal. The relationship is governed primarily by the Representatives Law, a statute designed to protect agents that imposes significant obligations on principals.
While there is a majority view that parties may choose a foreign law to govern their agency agreement, a minority of court decisions have found the Representatives Law to be mandatory regardless. This creates genuine legal risk for foreign principals that attempt to structure their way out of its provisions.
The practical result is that many foreign companies find themselves bound by Brazilian mandatory rules on termination, commission rates and agent entitlements, even when their contract says otherwise. Understanding these rules before appointing an agent, and structuring the relationship accordingly, is essential.
Where flexibility is a priority, a distributor structure is often preferable. Distribution agreements may be governed by foreign law and the Superior Court of Justice has consistently upheld that choice.
What the Representatives Law requires
The cost of ending an agency relationship
The termination provisions of the Representatives Law are one of the most important, and most overlooked, aspects of appointing an agent in Brazil. The compensation formula can result in very large payments, particularly for long-running agency relationships.
When your agent becomes your employee
Brazilian courts will reclassify an agency relationship as an employment relationship if the facts suggest the agent was actually an employee. The consequences are severe: employment compensation, severance pay, social security contributions and statutory benefits can far exceed the Representatives Law compensation.
The Federal Supreme Court has been progressively overturning lower court decisions that ignored contractual terms, but the risk remains real, especially for individual agents working exclusively for one principal over a long period.
The following factors are the ones courts look at most closely. If several of them are present in your agency relationship, the employment reclassification risk is significant.
- ,Services are of a personal nature: the same individual always performs them
- ,The principal exerts control or supervision over how the agent works
- ,The agent receives a regular, steady income from the principal
- ,The agent works exclusively for the principal on an ongoing basis
- ,There is no written contract clearly setting out the agency relationship
What foreign principals get wrong
What to check before appointing an agent
Appointing an agent based on face value alone is one of the most common and costly mistakes foreign principals make in Brazil. A structured due diligence process on the agent and their key persons should always be completed before the agreement is signed.
In addition to the legal due diligence, we recommend a financial and commercial assessment of whether the agent has the capacity, and the incentive, to perform their obligations under the agreement.
- ✓Verify CORE registration (commercial representative registration)
- ✓Review corporate documents from relevant Company Registries
- ✓Federal, State and Municipal tax clearance certificates
- ✓Social Security and employment compliance certificates
- ✓Federal and State court searches including Employment Court hierarchy
- ✓Analysis of relevant ongoing or past litigation
- ✓Background check on key shareholders and directors
- ✓Financial capacity assessment
Experience in Brazilian commercial relationships
Deffenti Lawyers advises foreign companies on the full range of issues involved in appointing agents and distributors in Brazil, including structure selection, agreement drafting and review, due diligence on prospective agents, commission disputes and termination management.
Our founding partner, Fabiano Deffenti, has extensive experience advising multinational clients on Brazil-related commercial contracts across multiple sectors and jurisdictions.
Appointing an agent in Brazil?
We can advise on whether an agent or distributor structure is right for you, draft or review your agency agreement, conduct due diligence on your prospective agent, and assist with trademark registration.
This page is a summary only and does not constitute legal advice.
More market entry guides
All Guides →The Brazilian Representatives Law imposes mandatory obligations on principals that cannot be excluded by contract, including a termination compensation formula that can result in payments equal to years of commissions. In most cases, a distributor structure offers significantly more flexibility. If you are undecided between the two, read our guide to appointing a distributor in Brazil first.
Brazilian lawyers for foreign companies, investors and law firms.