On November 17, State Law No. 7.753/2017 (“State Law”) came into force, enacted by the State of Rio de Janeiro, which now requires companies interested in doing business with the State Government to implement and maintain Compliance Programs. The requirement only applies to public contracts that are valid for 180 (one hundred and eighty) days or more and that surpass BRL 1,500,000.00 (one million and five hundred thousand Reais) for construction works and engineering services, or BRL 650,000.00 (six hundred and fifty thousand Reais) for purchase of goods and provision of services.

The State Law applies to all business companies and civil partnerships, incorporated or not, regardless of their corporate organization, as well as any foundations, associations of entities or persons, including foreign companies, that have their headquarters, branch or representation in Brazilian territory, established factually or legally, even temporarily, that contract with the Rio de Janeiro State Government.

The companies shall bear all costs regarding the implementation of the Program, which will not be reimbursed by the contracting entity. Implementation must occur within 180 (one hundred and eighty) days from the signing of the contract, failing which the contracted company will be subject to a fine of 0.02% (two hundredths of a percent) of the contract value for each day of delay, limited to a cap of 10% (ten percent), and this amount would not be returned to the contracted company upon compliance with this requirement.

The contract managers will be responsible for the supervision of the implementation of the Compliance Program. The State Law also allows the State Executive Branch to hire consulting companies that specialize in training for detection of cases of corruption and fraud, in order to enable government employees to identify corrupt practices in public contracts.

The enactment of this Law is another demonstration of the rise of an Anti-Corruption & Compliance culture in Brazil since the Clean Company Act (Law No. 12,846/2013) entered into force.