On 12 July 2022, Brazilian Federal Government enacted Decree No. 11,129/2022, a new regulation on Law No. 12,846/2013 (the "Brazilian Clean Company Act"), which will revoke Decree No. 8,420/2015, previously in force. The new Decree No. 11,129/2022 comes into effect on 18 July 2022, and outlines the process for imposing administrative and civil liability on companies for acts against the national or foreign Public Administration under the Brazilian Clean Company Act.
The Brazilian Clean Company Act came into force in 2014 and it provides for anti-corruption provisions, illegal actions that affect or interfere with public biddings or contracts, and interference with government inspections. The Clean Company Act is similar to the Foreign Company Practices Act in respect to corruption or bribery activities involving government officials and/or any related third parties of such government officials. Decree 8,420/2015 was enacted in 2015 and it regulated the Clean Company Act.
The main changes outlined in Decree 11,129/2022, which revokes Decree No. 8,420/2015, include:
Enforcement
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Provisions related to the procedure to establish and issue decisions regarding preliminary investigations and Liability Administrative Proceeding (in Portuguese, Processo Administrativo de Responsabilização);
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Provisions concerning the information to be obtained from the companies' gross turnover for the purpose of calculating monetary fines (Decree 11,129/2022 reduced the percentages considered for the calculation of fines by removing a minimum fine to be applied);
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Provisions connected to the entering into of leniency agreements between companies and the Public Administration, including the objectives, obligations by companies, procedures, calculation of penalties, and consequences for the breach of the leniency agreements, such as (i) prohibition to entering into a new leniency agreement with CGU for a three years term, (ii) early maturity of the fine installments, and (iii) potential application of other penalties that can be included in the agreement;
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Direct and/or indirect monitoring by the Brazilian Office of the General Comptroller (in Portuguese, Controladoria Geral da União – "CGU") of (i) the commitments undertaken under the leniency agreement and (ii) the implementation and improvement of the integrity program, as provided under the leniency agreement;
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The possibility of the CGU suspending or replacing penalties imposed in certain circumstances, such as: (i) the suspension is beneficial to the Public Administration; (ii) there is evidence of good faith by the company; (iii) facts that may prevent the company to comply with the leniency agreement (e.g., inability-to-pay);
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Provisions concerning the imposition of administrative sanctions on individuals and companies within the Registry of Debarred Companies (in Portuguese, Cadastro de Empresas Inidôneas e Suspensas – CEIS) and the National Registry of Convicted Companies (in Portuguese, Cadastro Nacional de Empresas Punidas – CNEP);
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Provisions regarding institutional communication between the Ministry of Justice, CGU, and the Brazilian Federal Attorney's General Office (in Portuguese, Advocacia-Geral da União – AGU).
Integrity program
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In relation to the parameters for assessing the effectiveness of integrity programs, in addition to the parameters provided under Decree 8,420/2015, the new Decree 11,129/2022 outlines the:
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Inclusion of a provision to "foster and maintain a culture of integrity within the company's environment";
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Proper resource allocation so that the integrity program demonstrates the "tone at the top";
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Implementation of periodical communication actions by companies in addition to training;
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In addition to a commitment to undertake risk analysis, it should include "adequate risk management, including its analysis and periodic reassessment" to enable "necessary adaptations to the integrity program and efficient allocation of resources;"
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Inclusion of agents, consultants, commercial representatives, and associates within the description of third parties for the purpose of conducting appropriate due diligence upon their hiring and supervision;
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Inclusion of politically exposed persons and their family members, close collaborators, and companies that they are part of, for the purposes of conducting appropriate due diligence upon their hiring and supervision;
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Need to conduct due diligence and implementation of mechanisms for sponsorships and donations supervision; and
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Implementation of procedures for the treatment of complaints originating from hotlines.
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Inclusion as a parameter for evaluating the adequacy of an integrity program, in addition to the number of employees (i.e., size of the company): (i) revenues (indicating that it should be taken into consideration whether the company is a micro or small business); and (ii) the corporate governance structure (number of departments, structure and governing bodies, etc.); and
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Simplified evaluation for micro and small companies.
In a nutshell, Decree 11,129/2022 outlines relevant changes in parameters that were included in the former Decree 8,420/2015, as well as incorporates numerous provisions that have already been included in resolutions, normative acts, and internal guidelines of CGU and AGU, in addition to new provisions. The new Decree 11,129/2022 will apply immediately to ongoing proceedings, with the caveat of acts carried out before its enactment.
Next steps
Please do not hesitate to contact us to receive more information about this new Decree 11,129/2022 and any questions you may have with respect to conducting business integrity in Brazil, or across Latin America.
Authored by Isabel Costa Carvalho, Mariana Vasques Matos and Cíntia Rosa.
