With the 2014 FIFA World Cup, Brazil is well and truly under the spotlight, however, that is not the only reason the country is gaining attention. On January 29, 2014, the Brazilian Clean Companies Act (CCA) entered into force, penalising companies for acts of corruption carried out by their employees, offices or representatives, against national and foreign public administrations. Originally published on http://hrmagazine.com.hk/. Commentary from José Carlos Wahle from our Brazilian member firm Veirano Advogados.

1. Brazil forces HR to clean up its act
Jun 14, 2014 in HR Features, Summer 2014
With the 2014 FIFA World Cup now underway, Brazil is well and truly under
the spotlight, however, that is not the only reason the country is gaining
attention. On January 29, 2014, the Brazilian Clean Companies Act (CCA)
entered into force, penalising companies for acts of corruption carried out by
their employees, offices or representatives, against national and foreign
public administrations.
In light of the new law, Ius Laboris, the world’s largest employment law
alliance, offered advice to the HR departments of international companies
operating in Brazil to take note of the CCA and ensure that their existing
compliance controls and procedures respond appropriately to its particular
features, even if their presence is merely temporary.
Implications of the CCA
Brazilian legal entities will be liable for acts against a foreign public
administration even if it is performed outside Brazilian territory. Related or
associated companies will be held jointly liable for applicable fines and for
damages. In the event of mergers, the liability of the legal entity, which
succeeds the original legal entity, will be limited to the amount of transferred

2. assets. Other penalties will apply to the newly formed entity after the merger,
in cases of fraud.
Ius Laboris pointed out that organisations should not interpret the CCA as
the Brazilian equivalent of the US Foreign Corrupt Practices Act (the FCPA),
or the UK Bribery Act. In fact, the CCA does not provide for any criminal
sanction to implicated individuals or companies’ legal representatives. It
provides for civil and administrative liabilities of companies and individuals,
stipulating different penalties, both administrative, which are sanctioned by
governmental authorities, and judicial, which are sanctioned only by a court
of law.
It’s a penalty!
The most significant administrative penalties can range from 0.1% to 20% of
a company’s gross revenues in the year preceding the initiation of
administrative proceedings (excluding taxes). The fine will not be lower than
the advantage obtained, where such advantages can be assessed; if it is not
possible to assess the amount of the total gross revenue of the legal entity,
the fine may range from R$6,000 to R$60,000,000. Judicial sanctions range
from loss of property to suspension and even compulsory dissolution of the
legal entity.
The Brazilian CCA does not revoke the provisions contained in other statutes
that deal with similar acts, including the Antitrust Law (12,529/2011), the
Administrative Misconduct Act (8,429/1992) and the Public Bidding Law
(8,666/1993), among others. All such correlated legislation contains different
provisions, including criminal sanctions being placed on implicated
individuals, and other specific penalties applicable to companies and
individuals.
Get prepared HR
Ius Laboris advised that while organisations that already comply with the
FCPA and the UK Bribery Act will be ready and able to adhere to the terms
of the CCA, the implementation of corresponding internal policies is very
much advisable for HR departments.
First of all, internal policies will ensure compliance with specific aspects of
CCA rules. In particular, they will educate employees about specific acts and
conduct that are illegalised under the act, which may not be as obvious as
overt bribery. These include, for example, the duty to cooperate with public

3. authorities expressed in the general prohibition on obstruction of or
interference with investigations or monitoring activities conducted by public
authorities.
The implementation of internal policies is also advisable because the CCA
stipulates that the existence of internal mechanisms and procedures relating
to corporate integrity, audit and incentives for reporting irregularities, and the
effective application of codes of ethics and conduct within the legal entity,
may be considered as a mitigating factor in the application of the relevant
sanctions.
The implementation of specific policies addressing the provisions of the CCA
is advisable to all companies within a group and to all business partners in
light of the clear cross-border provisions contained within the Act. Likewise,
foreign companies who lack a local presence but nonetheless maintain
interests in Brazil must also pay close attention to local business partners’
compliance with the Brazilian CCA. As way of example, any foreign company
entering into a joint-venture agreement with a Brazilian company may be
held jointly liable for wrongdoings committed by a local partner.
Control the workplace
Ius Laboris pointed out that, under national Labour Laws, companies in
Brazil are duty-bound to coordinate and control their workplace, so as to
ensure general compliance with laws and ethical business standards.
Organisations have the authority to carry out internal investigations upon the
slightest indication of non-compliance with the Brazilian CCA. Accordingly,
companies may issue their own set of internal rules providing for
administrative routines and compliance mechanisms. As long as they do not
contain any intrinsically illegal features, such sets of internal rules will be
mandatory for all employees. The communication of such rules is sufficient to
put them in effect and employee acceptance is unnecessary.
The internal policies stipulating ethical standards and enforcement
mechanisms are essential for the companies to comply with the CCA. For
example, monitoring corporate e-mail accounts will be possible under a pre-
existing specific policy. Recurring training sessions are also advisable to
ensure comprehension of this new law.
This article was originally published in HR Magazine HK – the online
version can be found here.