The Brazilian President of Republic has signed in the afternoon of December 13, the Provisional Measure No. 863, which authorize foreigners to hold 100% of the equity of Brazilian airlines, currently limited to 20%.

The Measure changed and excluded provisions of the Brazilian Aviation Code (Federal Law No. 7,565/86), simplifying the operations of the Brazilian airlines.

Besides the exclusion of the limits to the participation of foreign capital, the Measure has also extinguished the obligation of obtainment of previous approval form the aviation authority for:

(i)                  incorporation of companies rendering aviation services,

(ii)                changes to the corporate documents of such companies; and

(iii)               transfer of equity of these companies.

The Brazilian airlines shall also be freed of the obligation to inform twice a year the names and contact information of each shareholder and all transfers of equity participation. Pursuant to the current law, the companies in breach of such obligations, could be subject to the aviation authority to consider such transfers void.

The Provisional Measure has to be confirmed by the National Congress within 120 days, to become fully enforceable. The 120-day period shall be extended due to the National Congress recess period.

The Brazilian Federal Government expects that these changes may help the development of the civil aviation sector, allowing further opportunities for financing sources of the airlines.

There has been a previous attempt to allow foreign participation of up to 49% of equity in the Brazilian airlines in 2016, a few days before former President Dilma Rousseff being stepped down, but then vetoed by the current President.

We believe that the new regulation to be a good move, including the reduction of bureaucracy, allowing more agility for the implementation of corporate changes for these companies. We hope, this time, the proposed changes will be approved by the National Congress and by the elected new President, to take office on January 1, 2019.

Paulo Shigueru Yamaguchi

pyamaguchi@tesslaw.com

* This article should not be considered as a legal opinion, being used only for informative and debate purpose.