1E9Ct5D

3.3. Branch Offices of Foreign CompaniesA foreign company may directly operate in Brazil through a branch office, i.e, through an extension ofthe foreign corporate entity itself. However, this procedure presents some disadvantages incomparison with the establishment of a business concern in Brazil through ownership interests, for thefollowing reasons:a) the need of prior authorization, through an act of the Federal Executive Branch;b) prohibition of the remittance of royalties to the head office abroad for the use of trademarks andexploitation of patents, andc) tax disadvantages, as indicated in item 6.1.1.2 below.3.4. Corporate Reorganization Operations and Sale of EstablishmentsCorporate reorganization operations involving the transformation, spin-off, merger and merger byincorporation of companies may be conducted both by S/As and by LTDAs.In a transformation, the company is transformed from one type of company to another, without thedissolution or interruption of its activities.In a spin-off, the company transfers portions of or even its total equity (assets and liabilities) to one ormore companies, with the continuation of the spun-off company, if its equity has been partiallytransferred, or with its extinction, if all its equity has been transferred. The law stipulates specificsuccession rules for the obligations of the spun off or extinguished company.In a merger, two or more companies are combined to form a new company, which succeeds them toall their original rights and obligations.In a merger by incorporation, one or more companies will be absorbed by another company, whichsucceeds them to all their rights and obligations. S/As and LTDAs may further sell their industrial orcommercial establishments, in which case the acquirer will succeed to all their respective rights andobligations. In this regard, please refer to the notes contained in chapter 17 below, notably as regardsthe new Bankruptcy Law.22