Any company has ancillary obligations to deliver. These obligations may have different legal natures, and are present in any and all formalized undertakings. In Brazil, starting with the MEI Individual Microentrepreneur, there are already obligations that need to be fulfilled in order for the company to continue operating normally – or to avoid the creation of liabilities such as fines or non-operational tax debts.

Compliance is a term used to refer to all the obligations that the company needs to fulfill in order to remain regularized before the tax authority. It means that, as a whole, the company complies with the rules it needs to follow – encompassing corporate, sectoral, environmental, labor, accounting and tax obligations.

To learn more about the importance of compliance in Brazil, read on.

WHAT DOES COMPLIANCE MEAN FOR BUSINESSES?

The term comes from the verb “to comply”, which means to obey, comply, and act according to a rule. Once related to the corporate world, the term refers to that of a company before the legal provisions that must be followed in its segment of activity.

We can initially relate the lack of compliance with corporate corruption – which, sadly, was perceived as commonplace in recent years in Brazil. Compliance is, indeed, a term closely linked to corporate governance and the prevention of corruption in companies. But the matter does not end there.

COMPLIANCE AS RISK PREVENTION

As a known set of obligations, compliance monitoring has the power to act as an element of risk prevention. If the company knows and fulfills its obligations, its governing body will naturally be acting to avoid the constitution of non-operating liabilities, related to non-compliance with current legislation.

In practice, the role of compliance, as a corporate resource or a separate department, is to monitor obligations so that they do not become a source of risk. At this point, it is observed that compliance, to be correctly implemented in most companies, needs to be part of a paradigm shift.

This is largely because, classically, the relationship between the business community and regulatory agents in Brazil has always been reactive – that is, compliance with certain legal provisions, including those of a tax nature, leads to the state’s questioning. The definition that compliance will be met, provides for a proactive practice, in which the fulfillment of obligations precedes and actively prevents the company from suffering administrative sanctions, in the different spheres of the company x state or regulatory power relationship.

Obviously, compliance cannot become an anchor, which immobilizes or sinks a company. Compliance with legislation, especially in the tax sphere, also depends on a deep knowledge of the legal and regulatory frameworks in the company’s area of ​​operation.

It is this knowledge that will allow compliance to be effectively planned and fulfilled in a conscious and competitive manner by the company.

An important example of this work of in-depth understanding of legislation, for its intelligent compliance, is tax planning. This type of prior planning establishes that the company’s tax framework will be strategically carried out, seeking the lowest possible tax burden, with full compliance with current legislation – that is, in this case, compliance will consist of the royal compliance with tax obligations, on optimized bases.

COMPLIANCE AND ITS ADVANTAGES

Compliance, when well implemented, brings important benefits to the company. These are:

Risk Prevention: It is by complying with the obligations provided for by current legislation that companies are able to avoid taking unnecessary risks. Ensuring compliance means making sure that hidden risks do not arise.

These risks can result in financial imbalance and damage to your business. Its prevention consists of identifying, correcting and avoiding failures that compromise the development of your company’s activities.

Corporate Governance: Corporate governance represents the set of processes, policies, laws, and regulations that establish the way a company is managed. The search for compliance has the effect of realigning internal processes, as a way of guaranteeing compliance with current legal provisions.

As a result, the implementation of compliance brings with it a new level of corporate governance. In fact, governance and compliance are terms that have strong interdependence: there is no compliance without governance, and compliance, in the final analysis, attests to the quality of corporate governance.

Transparency and assurance for managers and employees: A company that actively seeks to comply with legal requirements, in its different spheres, naturally guarantees greater security for its actors. This occurs as misguided internal policies can lead, in specific cases, to civil liability.

Compliance, on its different fronts, also acts to remove possible issues in this regard.

Business Sustainability: A business built on the basis of non-compliance with the rules to which it must be submitted is like a giant with feet of clay. As the company builds a non-compliance practice, the risk exposure automatically increases proportionally.

In this way, the investments made are vulnerable to fines or other types of sanctions. Compliance, in turn, also acts to protect the investments made, providing legal certainty to the operation as a whole.

Greater attractiveness for new investors: One of the most important aspects for attracting potential new investors in Brazil is compliance. This item is of great importance in the valuation of any company, as it can, in its absence or deficiency, represent significant liabilities – which can even jeopardize the perpetuity of the business.

Compliance, therefore, works to ensure that new investments can be made with due legal certainty, including from a tax point of view.

To ensure compliance in your operations in Brazil, count on Gescon specialists, a partner you can rely on.