In 2016, the Substitute Bill of the Chamber of Deputies to Senate Bill No. 555 , proposed the previous year, was approved. With its enactment, Law No. 13.303/2016 was created , known as the State-Owned Enterprises Responsibility Law, or the State-Owned Enterprises Statute.

It establishes the legal framework for public companies, mixed-economy companies, and their subsidiaries. Its scope extends beyond the Federal Government, encompassing not only the States, the Federal District, and the Municipalities.

However, some legal professionals are still unaware of the content of this rule, as well as its practical application.

In this text, we will discuss the purpose of the legislation, how and when the Statute is applied, and provide some pragmatic examples.

What is the purpose of the State-Owned Enterprises Liability Law? 

Law No. 13.303/2016 originated from a Bill proposed in the Federal Senate (Initiating House), but which received a Substitute Bill in the Chamber of Deputies (Revising House). It returned to the Senate for consideration and received a partial veto.

The draft bill provides a summary of what the Statute would become:

"It provides for the legal status, corporate regime and social function of public companies and mixed-economy companies. It establishes the provisions applicable to these entities and their subsidiaries that exploit economic activity of production or marketing of goods or provision of services, with regard to bidding processes, contracts and forms of oversight by the State and Society."

The State-Owned Enterprises Responsibility Law originates from a constitutional mandate. Article 173, § 1, of the 1988 Federal Constitution stipulates that the law will establish the legal status of public companies, mixed-economy companies, and their subsidiaries that exploit economic activity in the production or marketing of goods or the provision of services.

The same provision specifies the subject matter of the future legislation:

• social function and forms of oversight by society and the State;
• to be subject to the legal regime applicable to private companies, including civil, commercial, labor, and tax rights and obligations;
• Bidding and contracting for works, services, purchases and sales, in accordance with the principles of Public Administration;
• The establishment and operation of the boards of directors and supervisory boards, along with the participation of minority shareholders;
• Terms of office, performance evaluation, and accountability of administrators.  

The teacher Alexandre Aragão explains that the objective of the State-Owned Enterprises Statute is to standardize the legal framework for state-owned companies engaged in economic activities.

The aim is to bring this legal framework closer to that applicable to private companies in general. We can therefore call it a regulatory framework to prevent, for example, corruption or political interference.

It also establishes several transparency and governance mechanisms that must be observed by state-owned companies. The Law contains rules for:

• risk management practices;
• dissemination of information;
• codes of conduct;
• Councils, from their formation to their functioning;
• requirements for the appointment of managers;
• oversight by society and the State.

Moreover, the law itself describes what we should understand by public company and mixed-economy company.

Article 3 states that public companies are legal entities under private law, created by legal authorization and with their own assets. Their share capital must be wholly owned by the Union, States, Federal District or Municipalities.

Examples include the National Bank for Economic and Social Development (BNDES), the Brazilian Postal and Telegraph Company (ECT), and the Federal Savings Bank. Here, the jurisdiction is the Federal Court.

Mixed-economy companies are addressed in Article 4 of the Law: legal entities under private law created by legal authorization, in the form of a public limited company. Here, the voting shares are mostly owned by the Union, States, Federal District, Municipalities, or an entity of the indirect administration.

We can cite Petrobras, Banco do Brasil, and Eletrobras as examples. In these cases, disputes are resolved in the ordinary courts.

However, it is worth noting that Article 1 of the State-Owned Enterprises Liability Law is not limited to public companies and mixed-economy companies engaged in economic activity. 

In fact, it encompasses any and all public companies and mixed-economy corporations that engage in economic activity involving the production or sale of goods or the provision of services, even if it involves the provision of public services.

This also means that there is no distinction between state-owned companies engaged in economic activity and those providing public services with regard to the applicability of the State-Owned Companies Statute.

Another topic addressed by the Law is the selection of administrators, which is provided for in Article 16, Section III. According to the sole paragraph of this article, members of the Board of Directors and the executive board may administer the public company and the mixed-economy company.

Article 17 sets out a series of requirements that must be met for members of the Board of Directors to be appointed and for individuals to be nominated for director positions, including chairman, general manager, and CEO.

If you work with bidding processes, you should observe the guidelines in articles 28 to 67. There you will find:

• Bidding requirements and cases of exemption and inapplicability – articles 28 to 30;
• General information regarding bidding and contracts – articles 31 to 41;
• Specific rules for works and services – articles 42 to 46;
• Specific rules for the acquisition of goods – articles 47 to 48;
• Specific rules for the disposal of assets – articles 49 and 50;
• Bidding procedure – articles 51 to 62; and
• Auxiliary procedures for bidding processes – articles 63 to 67.

When dealing with contracts, you should refer to articles 68 through 84. Pay attention to the following topics:

• Formalization of contracts – articles 68 to 80;
• Amendment of contracts – article 81; and
• Administrative sanctions – articles 82 to 84.

But how can I apply this law in my legal practice?

From theory to practice

We now know that the State-Owned Enterprises Responsibility Law establishes rules for Administrative Law directed at public companies and mixed-economy companies, regulating above all their activity and their bidding procedures.

If you work with organizations that do business with public companies, mixed-economy companies, and subsidiaries, or if you handle bidding processes involving these types of indirect administration entities, it is essential that you are familiar with the Statute.

It is also important to consider whether your actions involve corporate governance and compliance mechanisms.

In corporate governance, the goal is to achieve company stability with low risk and the greatest possible transparency. There should be a focus on best practices, strategies, management systems, planning, and oversight of the corporation to generate value and balance the interests of all stakeholders.

One of the focuses of their work as a corporate lawyer is to comply with legislation regarding accountability and corporate responsibility, and this is where the State-Owned Enterprises Responsibility Law comes in.

In the role of consultant, one of their responsibilities is to guide corporate leadership and investors in decision-making processes.

In this sense, you can more transparently monitor the organization's behavior in bidding and contracting processes with the public sector in which it participates, and pay attention to cases of exemption or inapplicability.

Your role here is to protect the company legally regarding contracts with state-owned enterprises and to analyze the risks. A broad understanding of the State-Owned Enterprises Liability Law will help you draft contracts, resolve potential disputes, and manage relationships with the legal departments of other parties.

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References

ARAGÃO, Alexandre Santos de. State-owned enterprises: the legal framework for public companies and mixed-economy companies.2nd ed. Rio de Janeiro: Forense, 2018.

BRAZIL. Constitution of the Federative Republic of Brazil of 1988.

BRAZIL. Law No. 13.303 / 2016.