SISCOSERV: Implications for Brazilian
Private Equity Fund Managers
September 20, 2012
Peter A. Furci
Offshore Fund Structures
• Funds for international investors are typically structured as
limited partnerships (Delaware, Cayman Islands or Canada) with
investors as limited partners and sponsor as general partner
– Sponsor generally entitled to 20% of profits as carried
interest once investors receive capital back plus hurdle
– Governance of fund generally within sponsor control, with
limited items referred to investor advisory committee
– Fund will typically have both a general partner and an
investment manager
Brazil-focused international funds utilize this structure, but also
typically utilize a “FIP” structure to make investments in Brazilian
portfolio companies
Brazil: FIP Basics
• Closed-end investment funds organized to invest primarily in
shares of sociedades anonimas (target companies)
IOF of 0% on investments in and outflows from FIPs
– Rate fluctuated in 2009-11 between 0% and 6%
FIP is not taxed on dividends or gains on sale of shares
Distributions by the FIP to an offshore quotaholder are exempt
from tax if
– Quotaholder (individually or with related parties) owns less
than 40% of the FIP quotas/economic interests
– FIP does not own debt exceeding 5% of net equity (except
convertible debentures, warrants and government bonds)
– Quotaholder not domiciled in a tax haven jurisdiction
FIP must be managed by an onshore investment manager
licensed with the CVM
FIP/Offshore Fund Structure
GP of GP
General Partner
contract with
Offshore Funds
Fund A
(Cayman LP)
Fund B
(Cayman LP)
Fund C
(Cayman LP)
Delaware LLC A
Delaware LLC B
Delaware LLC C
Offshore Manager
contract with
Offshore Manager
Brazilian Manager
contract with FIPs
(Public and nonBrazilian Portfolio
Private Brazilian
Portfolio Company
Private Brazilian
Portfolio Company
Private Brazilian
Portfolio Company
Scope of Services
• Services covered by SISCOSERV include “financial services”
such as “portfolio management and administrative services”
– Includes “investment banking” services such as merger and
acquisition, asset valuation, risk capital and corporate
finance services
– Also includes “other auxiliary services related to financial
services not specifically classified”
Advisory services provided by Brazilian based investment
managers to funds organized outside Brazil would likely be
covered under one of the above categories
Reporting requirements for financial services begin February 1,
Reporting Requirements
Information required to be provided by the Brazilian service provider
includes the name and country of organization of the person or entity
receiving the services and details regarding the service transaction
Identity of service recipient will depend on fund structure
– If there is no offshore manager, Brazilian manager will provide
services to offshore funds and potentially the Delaware LLCs
– If there is an offshore manager, Brazilian manager will provide
services to FIPs and potentially to offshore manager via a subadvisory agreement
– If Brazilian manager only provides services to the FIPs,
reporting would not appear to be required
– Although the guidance is not detailed, identity of fund investors
should not be required to be disclosed as there is no direct
provision of services between Brazilian manager and the investors

Offshore Fund Structures