Analysis: Proposal for creation of corporate soccer clubs in Brazil gathers strength

RIO DE JANEIRO, BRAZIL – Most soccer clubs are still operating as non-profit organizations and are managed by directors and board members.

In the soccer clubs’ scenario, one immediately associates the fans’ love for the team and the excitement of a goal. However, it is off the field that the new directions of Brazil’s great national passion have been debated. There is a bill in progress that seeks to create the club-company, which enables clubs to choose their legal regime, ceasing to be non-profit associations and becoming for-profit business entities.

This bill seeks to introduce updates that have long been requested by soccer sports organizations, and is about to be voted in the Senate. These updates include everything from the creation of special tax rules and the renegotiation of debts to the possibility of judicial reorganization.

Bill 5.516/19 was drafted by senator Rodrigo Pacheco (DEM-MG) and sponsored by senator Carlos Portilho (PL-RJ). Among many other bills in circulation, this is the closest to progress.

The text does not oblige clubs to adopt the new business model. In fact, the bill seeks to seduce clubs into adapting to the new demands and to solve chronic problems, such as the lack of transparency and the growing debts with the federal government and creditors.

Currently, the associative model prevails. This format stems from the first legal provisions that addressed the demand in the 1940s, which prevented sports associations from being profit-oriented. However, the club-company issue has been under discussion in Brazil since the late 1990’s, and is now finding more solid support for it to be applied.

In the lengthy process of club renovation, it was only in 1993 with the enactment of Law 8.672, known as the Zico Law, that the possibility of sports associations becoming profit-oriented was allowed, thus paving the way for clubs to become companies – although, in practice, the model has not been implemented in Brazil to this day.

Most sports associations still operate as non-profit organizations and are still managed by directors and board members. This means that there is no owner, although there is a president. This situation prevents the club from having a continuous management, with transparency and legal security.

Although some legislative changes have already made it possible for non-profit association clubs to become corporate clubs, few in Brazil have pursued the change to the new corporate regime, which can be attributed to the fact that as associations, clubs benefit from advantages such as tax exemptions.

The many bills currently underway, including the one closest to progress, seek to modernize soccer organizations, focusing on the tools needed to improve the management of these organizations and provide greater efficiency and transparency.

However, there are differences between previous bills and the current one, such as Bill no. 5.082/16, authored by ex-deputy Otavio Leite (PSDB-RJ) and deputy Domingos Sávio (PSDB-MG). The main difference is that Bill 5.516/19 establishes compensations in terms of debt negotiation, option for judicial recovery and simplification of the employment system, aiming, later on, to reach another level of regulation.

This other bill, No. 5.082/16, proposes the creation of a regulatory framework to meet investors’ need for legal security and, after such adjustment, the adoption of the new corporate type can be enforced.

In this context, it would encourage clubs to adopt business entity well known in the market, such as the corporation (S/A) and the limited liability company (Ltda). Thus, clubs that would choose the S/A model could register with the Securities and Exchange Commission (CVM) and, provided they meet the legal requirements, they could qualify for a publicly traded shares, and even issue shares on the stock exchange (IPO).

This means that corporate clubs could go public on the stock exchange and attract investors, thereby increasing their sources of income to hire new season’s reinforcement players, improve cash liquidity, and launch high-performance training equipment.

The text, originated in the Senate by Senator Pacheco, seeks to create a specific corporate structure, the Football Joint Stock Company (SAF), by creating a shareholding control composed of two sets of common shares, A and B.

This means that corporate clubs will be able to have owners or investor partners. The associative model in which the club has no owner gives way to a model in which there is a representative owner who dictates the pace to be followed, changing the management scheme of current teams.

In this respect, Bill no. 5,516/19 aims to offer a new model with its own governance, control, and transparency rules. This proposal changes the game by allowing clubs to have a greater focus on professional competitions, for example, by providing new means of financing and establishing a special federal tax regime for these entities.

The fact is that since the 1990s a lot has happened and there is still a lot to come. The most important thing is to hope that these changes will add even more to soccer as a national passion.

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