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.
Get in TouchMandatory rules apply: Brazilian courts have found the Representatives Law to be binding even where foreign law was chosen to govern the contract.
Termination is expensive: Terminating an agent without just cause triggers a statutory compensation of 1/12 of all commissions paid throughout the entire agency relationship.
Employment risk is real: Courts regularly reclassify agency relationships as employment, with far higher compensation consequences.
Consider a distributor instead: Distribution agreements are more flexible and may be governed by foreign law. Read our guide →
Agency in Brazil is not like agency elsewhere
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.
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
Written agreement
A written agency agreement is not legally required but is strongly recommended. Without one, the agency relationship can be proved by conduct, which often makes terms disputed and difficult to enforce. The absence of a written contract is also one of the factors courts consider when reclassifying an agent as an employee.
Commission rates are nearly impossible to reduce
Once a commission rate is established, it is extremely difficult to reduce it under Brazilian law. Agents are entitled to claim the difference between any higher historical rate and any reduced rate, with the Superior Court of Justice holding that claims are limited to the last five years of the relationship.
Entitlement to commissions on deals in territory
Unless the agreement provides otherwise, an agent is entitled to commissions on all deals closed within their territory, even deals that the agent did not bring about directly. This default rule can be excluded by contract but must be done expressly.
Registration requirements
Individual commercial representatives must be registered with the Conselho Regional dos Representantes Comerciais (CORE) of the state where they operate. Principals should verify this registration before appointing an agent, as working with an unregistered agent creates additional legal risks.
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.
Termination without just cause
The agent is entitled to compensation equal to 1/12 of all commissions paid throughout the entire agency relationship. This applies even if the contract was renewed annually. The compensation is calculated on the gross commissions paid, not on profits.
Termination with just cause
No compensation is payable where the agent was terminated for just cause. The Representatives Law provides specific grounds, including breach of material obligations, acts that damage the principal's commercial reputation, or a criminal conviction relating to the agent's professional activities.
Constructive termination
If the principal reduces the supply of goods or services to the point where the agency relationship becomes commercially unviable, the agent may treat this as a termination without just cause, triggering the full compensation entitlement. Care must be taken in managing supply during any wind-down.
Fixed-term agreements
If a fixed-term agency agreement is renewed, the agent accrues rights as if the relationship had always been indefinite. Principals sometimes attempt to use consecutive fixed-term contracts to limit exposure, but this strategy is generally not effective under Brazilian law.
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
Relying on a choice-of-foreign-law clause alone
Some Brazilian courts have found the Representatives Law to be mandatory regardless of the governing law clause. A foreign law clause reduces, but does not eliminate, the risk of Brazilian mandatory rules applying. The agreement must be specifically drafted to minimise exposure.
Not registering the trademark in Brazil
Brazil follows the first-to-file principle for trademarks. Your agent, or a third party, may register your brand before you do. This can be expensive and slow to reverse. Trademark registration should happen at the same time as market entry, under the Madrid Protocol.
Not registering the ".br" domain name
Domain registration in Brazil follows a first-come, first-served system. Your brand's ".br" domain may already be held by your agent or a third party. This should be secured as part of your Brazil market entry plan.
Ignoring transfer pricing rules on exclusive agencies
Since January 2024, Brazil's transfer pricing rules follow OECD guidelines. For exclusive agency arrangements between related parties, the pricing of goods and services supplied to Brazil must comply with the arm's-length standard and be properly documented.
Skipping due diligence on the agent
Brazil is one of the most litigious countries in the world. An agent with undisclosed tax debts, labour claims or criminal convictions can expose the principal to reputational and legal risks. A structured background check before appointment is essential, not optional.
Using a standard international contract template
A generic agency agreement, even with a choice-of-law clause, will not adequately protect a foreign principal in Brazil. Brazilian mandatory laws on commission rates, territory entitlements and termination need to be specifically addressed. The agreement must be reviewed by a Brazilian lawyer before being presented to the agent.
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
D&Q 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.
For the full technical background on Brazilian agency law, see our article on appointing an agent in Brazil on LawsofBrazil.
- Brazil: Advogado
- Australia: Solicitor
- New Zealand: Barrister & Solicitor
- New York: Attorney-at-Law
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. Initial enquiries are always welcome.
This page is a summary only and does not constitute legal advice. For the full technical background, visit LawsofBrazil.
