What is Social Contract?

What is Social Contract
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The Social Contract is the document that certifies the foundation of a company. It serves, together with the register of the CNPJ, to prove the existence of the business and also make the basic definition of some information.

How to draw up a social contract?

Typically, the social contract model must be drawn up with your accountant and he will advise you at all points, except for more complex exceptions in which you need to involve law firms, such as defining the end-of-business activity when the product is very innovative and not yet legislation.

In any case, it is important for you to understand the general structure of the social contract, even to collaborate and understand the work of the accountant. In it, you will define in general, but not limited to, these topics:

a) who are the partners
b) participation of shares / quotas of the partners
c) home address
d) branch of activity of the company
e) definition of economic activity (CNAE)
f) duties and rights of members
g) capital of business
h) rule of entries and exits of members
i) rule of sale of the business
j) rule of profit distribution / pro labore 

Different variations of the social contract

Technically speaking, the term social contract is used only for a limited partnership (LTDA). However, other types of company formation also have their respective documents that serve as proof of the foundation and existence of the business. Are they:

Social Contract for Individual Entrepreneur

In this case, the document is called Entrepreneur Application. These models are usually supplied by each state's own business board and have no variation in structure. In addition, they also do not allow future changes.

Social Contract for EIRELI

An EIRELI is an Individual Limited Liability Company. The correct document in this case is a Constitutive Act. It is very similar to the actual social contract, but has some standard clauses that serve to dismiss the limited liability of the individual in relation to the legal entity.

When will you use the social contract?

The Social Contract must be first elaborated when the business is founded. To the company opening, the social contract must be registered with the Commercial Board of your state. This is the stage prior to the issuance of the CNPJ.

However, it is also commonly used in registers with customers or suppliers, as well as being an indispensable document in any other type of more formal legal relationship such as bank account opening or bidding participation. Apart from these events, you will revisit your social contract to change it in order to always portray the actuality of your business.

How to change the social contract

Whenever any of the clauses of the social contract no longer reflect the reality of the business, the social contract must be submitted again to the Board of Trade. These changes usually occur as a result of a change of seat, change in the corporate structure or economic activity of the company. Because the change has costs, the entrepreneurs usually let them "accumulate" some before performing the upgrade.

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  1. It is necessary to make a contract for this "donation" of quotas and change the social contract to be the same


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