As discussões envolvendo o aquecimento global e as mudanças climáticas, apesar de parecerem recentes, já fazem parte de nosso cotidiano há mais de 30 anos, desde o Primeiro Relatório do Painel Intergovernamental sobre Mudanças Climáticas (IPCC), datado de 1990.
Muito se discute sobre a responsabilidade de um sócio após a alienação de sua participação em uma sociedade limitada ou o distrato da sociedade.
A participação dos investidores nas assembleias de acionistas, via boletim de voto a distância, foi objeto de discussão no ano passado por causa de dificuldades enfrentadas nos encontros de algumas empresas, como Vale e Petrobras.
– CVM publishes Circular Letter with general orientations regarding the rules and procedures that must be observed by listed companies
– The Role of Corporate Governance in the ESG Agenda
– Understanding Shareholders’ Agreement: Tag Along and Drag Along
– Understanding Shareholders’ Agreement: Preemptive Right and Right of First Offer
On February 24, 2022, the Brazilian Securities and Exchange Commission (“CVM“) published their annual Circular Notice (“CVM Notice/2022“)which outlines general guidelines from the Superintendency of Company Relations (“SEP“) on procedures to be observed by listed companies, especially regarding the disclosure of periodic and eventual information. Among the updated matters, we highlight:
The full text of CVM Notice/2022 can be accessed in Portuguese through the following link:
https://conteudo.cvm.gov.br/legislacao/oficios-circulares/sep/oc-anual-sep-2022.html
Over the past few years, it is possible to observe a significant increase in discussions involving ESG topics in the management of companies around the world. Although social and environmental aspects are gaining increasing prominence, the most advanced pillar in Brazil today is corporate governance.
Since the creation of the Novo Mercado segment of the B3 stock exchange in 2000, the Brazilian market has been establishing a high standard of governance, with the adhesion of specific practices and obligations aiming at increasing transparency in the disclosure of information for the decision-making process of shareholders and investors.
In this context, unsurprisingly, the result of a recent survey by AMBIMA (Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais – which stands for the Brazilian Association of Financial and Capital Market Entities)[1] with 209 asset managers, released earlier this year, indicated that governance is the ESG aspect most observed by asset managers, with ethics and transparency being the factors most mentioned by them (92%).
Among the governance priorities, labor policies and relations (79%), data privacy and security (77%), board independence (75%), and board compensation (54%) were also mentioned.
The survey’s conclusion is encouraging, since pillar G is the core of ESG. Without good corporate governance, it is impossible to effectively implement social and environmental actions and align the company’s objectives with the creation of long-term value not only for its shareholders, but also for society in general.
Under the scope of governance, the rules and procedures to be observed in the decision making of companies are defined, from the elaboration of policies to the determination of rights and responsibilities among its different participants, including the board of directors, officers, shareholders, stakeholders, and the market in general. Thus, the increase in corporate governance standards is directly related to an increase in the transparency with which companies relate and communicate with the market and their shareholders, managers, employees, and partners in general.
It is no coincidence that over the past few years, companies with good corporate governance practices have outperformed the general market indexes in both the US and Brazil.
In this line, an S&P Global survey (2020)[2] on governance factors showed that companies rated below average in relation to good governance are more susceptible to mismanagement. Therefore, failures in governance policies may expose companies to unacceptable levels of risk, significantly compromising their business
Given the evolution of the Brazilian market on the subject, the simple disclosure of information on integrity, policies and codes of ethics and conduct is not enough. It is essential that companies realize the value that the effective adoption of good corporate governance practices generates in their relationships, in the management of their business, and in their perception before the market and the community in which they operate.
The text above was published Portuguese in the Legislação & Mercado section of Capital Aberto on February 22, 2022, and can be accessed through the link below:
https://legislacaoemercados.capitalaberto.com.br/o-papel-da-governanca-corporativa-na-agenda-esg/
[1] Accessed at https://www.anbima.com.br/pt_br/imprensa/governanca-e-o-aspecto-do-esg-mais-observado-pelas-gestoras-de-recursos-8A2AB2887E4BC696017E54173A2C381B-00.htm.
[2] Accessed at https://www.spglobal.com/en/research-insights/articles/what-is-the-g-in-esg
It is very common for shareholders’ agreements to have clauses with the purpose of regulating the transfer of shares issued by the company, both for the shareholders themselves and for third parties. In this context, shareholders’ agreements may contain mechanisms used to protect controlling and minority shareholders in case of transfer of shares, such as Tag Along and Drag Along clauses.
The Tag Along mechanism in general aims to protect minority shareholders. The term “Tag Along” translated into Portuguese means, literally, “to go together”, since the Tag Along clause grants the right to sell the shares held by the minority shareholder together with the shares held by the controlling shareholder, in case of receiving a proposal to sell its shares.
Minority shareholders shall have the option to exercise or not the tag along right, so that they can choose between selling their shares together with the controlling shareholder or remaining in the company after the entrance of the acquiror of control. If they decide for the joint sale, they will have the right to demand that the acquirer offers the equivalent value, or a percentage thereof to be established in the shareholders’ agreement, of the amount paid per share to the controlling shareholder, under the same terms and conditions offered to the controlling shareholder.
The Drag Along mechanism, also known as the right to demand the sale, generally aims to protect the controlling shareholder, since it guarantees the controlling shareholder the right to compel the minority shareholder to sell its shares in the event of receiving an offer from a third party to acquire all of the company’s shares. In this regard, the main idea is to prevent good opportunities to sell the company from being lost.
Since it is a “forced sale”, it is quite common that minimum conditions are established so that the controlling shareholder can exercise his Drag Along right, such as the determination of a minimum offer price and the form of payment of the acquisition price.
In the event of applying the Drag Along clause, the price to be paid for the minority shareholder’s shares may be equivalent to the price received by the majority shareholder or a percentage thereof to be determined in the shareholders’ agreement, which may establish other criteria for setting the value, as well as payment terms and conditions.
It is important to emphasize that Tag Along and Drag Along clauses can be used in other shareholding structures, including in companies that do not have the figure of a controlling and minority shareholders. In any case, the scenario and characteristics of each company and its shareholders must be analyzed in order to establish the best mechanisms for share transfers to be used in each case.
The text above was published in Portuguese in the Legislação & Mercado section of Capital Aberto on February 15, 2022, and can be accessed via the link below:
Unlike listed companies, whose basic principle is the free circulation of shares, article 36 of Law No. 6.404 of December 15, 1976, as amended (“Corporation Law“), allows some limitations to be imposed on the circulation of shares issued by closely-held corporations, since these limitations are strictly regulated in the by-laws and their negotiation is not prevented or conditioned to the approval of the company’s management bodies or by the majority of shareholders.
The possibility of limiting the circulation of shares is mainly due to the personal character (intuitu personae) that often prevails in closely-held corporations, in which the identity or some attribute of the shareholders is highly relevant. Thus, in these companies, shareholders seek ways to have greater control over the shareholding structure of the company, precisely to prevent their shares from being sold to someone who does not have the same attributes as the transferee shareholder or in whom the other shareholders do not have the same confidence.
Among the possibilities of mechanisms restricting the free circulation of shares, two of them are very common in shareholders’ agreements and in some by-laws: (i) the Right of First Refusal and (ii) the Right of First Offer.
The most common mechanism to restrict the transfer of shares is the right of first refusal. If any shareholder wishes to sell his shares (“seller“), this mechanism guarantees that the other shareholders (or part of the other shareholders, as the case may be) (“offerees“) have preference in the acquisition of such shares, on equal terms with the potential buyer, which may be another shareholder or a third party
The right of first refusal usually originates with the receipt of an irrevocable and irreversible proposal from a third party to the seller for acquisition of the shares. For it to be efficient, it is recommended that the right of first refusal clause provide for the obligation of the seller to notify the offerees of the proposed acquisition of the shares, containing the conditions presented by the third party, so that the offerees can evaluate whether or not to exercise their preference to acquire the shares offered under the same conditions proposed by the third party.
The right of first refusal clause may also establish that if more than one shareholder is interested in exercising the right of first refusal, the acquisition of the shares must be proportional to their holdings in the company’s capital stock.
If no offered party chooses to exercise the right of first refusal within a certain period established by the parties, then the seller may proceed with the sale to the third-party bidder.
In the right of first offer, in contrast to the right of first refusal, the procedures do not depend on an offer from an interested third party, the seller’s intention to sell is sufficient. In this case, the seller must, before offering its shares to any third party, present its intention to the other shareholders (or part of the shareholders, as the case may be).
In practice, after the seller communicates to the offerees about its intention to sell, the period begins for the offerees to send their proposals to acquire the shares.
If more than one offeree sends a proposal to acquire the shares, the seller may choose, at its sole discretion, the one that presents the best terms and conditions.
If no offeree chooses to exercise the right of first offer within the period defined by the parties, then the seller may request offers from third parties. If it receives offers from third parties on more favorable terms than those submitted by the offerees, the seller may sell its shares to such third parties.
Both right of first refusal and right of first offer allow their beneficiaries to have some control over the process of entrance of new shareholders in the company. The most notable difference between these two modalities of limiting the circulation of shares is whether or not a third-party proposal is required to initiate the procedures.
In other words, in the case of the right of first refusal, since the initial offer is sent by a third party, the offeree may have more assurance as to the market value of the company. Thus, this modality can become advantageous for minority shareholders or for shareholders who do not have a clear vision of the company’s value. On the other hand, the right of first refusal can make it difficult for the seller to obtain a good offer, since the potential buyer knows that his offer, even if accepted, will be subject to the right of first refusal of the other shareholders.
In cases where the offeree already has a clearer view of the company’s market value, it is likely that it will be better prepared to evaluate its investment and send a good proposal to the seller, so that, in this case, the application of the right of first offer may be more advantageous than the right of first refusal. In this case, the offeror will have greater liquidity in its sale process to third parties, since the potential interested party that may present a proposal knows that, once accepted, there will be no more uncertainty as to the possible acquisition by another shareholder.
Some shareholders’ agreements and by-laws provide for a combination of these mechanisms, starting with the right of first offer and then applying the right of first refusal. In this case, the offerees have, in fact, the possibility of covering a third party’s proposal that is more favorable than the one initially presented by them. This structure is usually well-suited to family businesses, where keeping the shares in the family is seen as essential by the shareholders.
In addition, it is quite common that if minority shareholders do not have the right of first offer, they are guaranteed with tag along rights, which will be covered in our next article in this series.
The text above was published in Portuguese in the Legislação & Mercado section of Capital Aberto on December 21, 2021, and can be accessed via the link below
A temporada de assembleias gerais ordinárias está se aproximando e muitas companhias, além de aprovarem as contas da administração e as demonstrações financeiras, deverão deliberar sobre a eleição ou reeleição de administradores para cumprir um novo mandato.
– Ordinary Shareholders’ Meetings and quotaholders’ annual meetings
– Brazilian Investment Offshore – Deadline for presenting the Annual Declaration of Brazilian Capital Abroad – DCBE 2022 before the Brazilian Central Bank
– Foreign Investment in Brazil – Deadline for presenting the financial and economic statement before the Brazilian Central Bank before the Brazilian Central Bank
– Brazilian Department of Business Registration issues a new instruction which updates rules and simplifies procedures for filings with board of trade
– CVM proposes changes to the regulation on the composition of the board of directors and plural voting within the scope of listed companies
In the upcoming months, corporations and limited liability companies shall disclose their financial statements and call their Ordinary Shareholders’ Meetings or quotaholders’ annual meetings, as appropriate, regarding the financial year ended on December 31st, 2021.
All corporations, publicly-held and closely-held ones, need to hold, within the first 4 months following the end of the fiscal year, an Ordinary Shareholders’ Meeting: (i) to examine the management accounts, analyze, discuss and vote the financial statements; (ii) to deliberate on the destination of the net profit of the relevant financial year and on the distribution of dividends; and (iii) to appoint managers and the members of the Audit Council (Conselho Fiscal), as applicable.
Additionally, corporations must prepare the documents listed in art. 133 of Law No. 6,404/1976 (“Brazilian Corporations Law“) and publish a notice informing its shareholders that such documents are available at the company’s headquarters. Such disclosure is waived if the companies publish their financial statements up to 1 month before the date set for the Ordinary Shareholders’ Meeting or when such meeting gathers all the shareholders.
Nevertheless, corporations must publish their financial statements before the Ordinary Shareholders’ Meeting is held, and those with annual gross revenue of up to R$78 million may do so electronically through the SPED System (Central de Balanços do Sistema Público de Escrituração Digital – SPED), pursuant to article 294, item III, of the Brazilian Corporations Law and, according to Ordinance ME No. 12.071/2021.
Regarding limited-liability companies, within the first 4 months following the end of the fiscal year, they need to hold a meeting in order: (i) to examine the management accounts, analyze, discuss and vote the financial statements; (ii) to appoint management, as necessary. The meeting is not necessary in case all of the shareholders decide, in writing, on the aforementioned matters.
It is important to highlight that limited-liability companies, or group of companies under common control, which, in the 2021 fiscal year, recorded assets in an amount higher than R$240 million or annual gross revenue in an amount higher than R$300 million shall: (a) prepare their financial statements in agreement with the applicable rules set forth in the Brazilian Corporations Law; (b) submit the financial statements to the appreciation of an independent auditor registered at Brazilian Securities and Exchange Commission (“CVM“), and (c) publish the financial statements prior to the date of the general annual meeting.
Finally, due to the enactment of Law No. 14,030, of July 28th, 2020 (conversion of Provisional Measure No. 931/2020), the meetings may be held partially or exclusively on a digital platform, and shall comply with the applicable rules established by the Normative Instruction No. 622 of CVM, for listed companies, and/or those of the National Department of Business Registration and Integration (“DREI”), in case of closely-held corporations and limited liability companies.
Between February 15th, 2022 and April 5th, 2022, all individuals and legal entities resident, domiciled or headquartered in Brazil, which, on December 31st, 2021, held assets abroad in an amount equivalent to or higher than US$1 million shall submit the annual declaration of Brazilian capital abroad to the Brazilian Central Bank (“Annual Declaration 2022”)
Besides the Annual Declaration, it is mandatory to quarterly submit the Declaration of Brazilian Capital Abroad if the amount of goods and rights held abroad is equivalent to or higher than US$100 million, based on the following schedule:
| Base Date | Deadline |
| 03.31.2022 | 04.30 – 06.05.2022 |
| 06.30.2022 | 07.31 – 09.05.2022 |
| 09.30.2022 | 10.31 – 12.05.2022 |
It is mandatory that all Brazilian companies that have received foreign investment, regardless of the amount, inform, until March 31st, 2022, the value of their net equity and paid-up stock capital as of December 31st, 2021 (“Financial and Economic Statement”).
Please note that Brazilian companies with assets or net equity equal to or higher than R$250 million shall submit 4 Financial and Economic Statements per year, according to the schedule below:
| Base Date | Deadline |
| 03.31.2022 | until 06.30.2022 |
| 06.30.2022 | until 09.30.2022 |
| 09.30.2022 | Until 12.31.2022 |
Late submission of the Financial and Economic Statement or its submission with false, inaccurate, incomplete or incorrect information may result in fines of up to R$250 thousand.
On February 21, 2022, Normative Instruction No. 112 (“IN DREI 112”) was published, issued by the Brazilian National Department of Business Registration and Integration (DREI) which, among other measures, updates rules and simplifies the procedures of the Normative Instruction DREI No. 81/2020 (“IDREI 81”) which provides the general rules and guidelines for public registration of companies in Brazil.
In this sense, IN DREI 112 aims to regulate the provisions promoted by (i) the Legal Framework for Startups (Complementary Law No. 182, of June 1, 2021); (ii) the Football Corporation Law (Sociedade Anônima do Futebol) (Law No. 14.193, of August 6, 2021); (iii) Law No. 13,818, of April 24, 2019 (amending the Brazilian Corporation Law on mandatory publication rules); and (iv) Law No. 14,195, of August 26, 2021 (also known as the Business Environment Improvement Law, which promoted significant changes in the Brazilian market and in corporate law).
We highlight the following news set forth by IN DREI 112:
IN DREI 112 can be accessed in Portuguese at the link below:
On December 21, 2021, CVM submitted a draft resolution (“Draft”) to public hearing No. 09/21, with proposals for specific amendments to CVM Instructions No. 367/2002 and 480/2009 (“ICVM 358” and “ICVM 480”, respectively).
The Draft, which was open for comments and suggestions until February 18, 2022, aims to regulate and assign practical applicability to new legal provisions introduced by Law 14,195/2021, which is the results of the conversion of Provisional Measure No. 1,040/2021, and its main themes are: (i) separation of the roles of CEO and chairman of the board of directors; (ii) presence of independent members on the board of directors; and (iii) definition of relevance criteria for the inapplicability of plural voting regarding the approval of related party transactions.
We highlight below, in summary, the main changes proposed by the Draft, which may still undergo changes depending on the outcome of the public hearing:
According to article 138, §3, of the Brazilian Corporations Law, listed companies are not allowed to have the same person cumulating the position of chairman of the board of directors and chief executive officer or main executive of the company. However, §4 of the same provision provides that CVM may exempt the rule in §3 for smaller companies, pursuant to art. 294-B of the Corporate Law
In this sense, the Minute introduces the exception of the aforementioned prohibition for companies with consolidated annual gross revenue of less than R$500 million, as reported in the financial statements approved by the general meeting, in relation to terms of office starting after January 1st, 2023.
Pursuant to article 140, § 2, of the Brazilian Corporations Law, it is mandatory, in listed companies, the participation of independent directors, under the terms and deadlines defined by CVM. The mandatory presence of independent members was already applicable to certain listed companies due to the rules of the listing segments of B3 S.A. – Brasil, Bolsa, Balcão. In order to harmonize definitions and regulations, as well as seeking greater efficiency in the necessary adaptations, the Draft uses the Novo Mercado Regulation as a basis for the concept of independence and the number of independent members.
In this sense, the Draft provides for the need for at least 2 independent or 20% of the total number of directors, whichever is greater. The Draft provides that the rule for the presence of independent directors will only apply as of January 1st, 2023.
Additionally, the Draft proposes changes to ICVM 367 regarding the characterization of independence, describing the definitions and general rules that must be considered in the evaluation of the directors, pointing out cases in which the directors are or are not considered independent, and attributing the shareholders’ meeting the competence to determine the independence of a candidate. Furthermore, Schedule 24 to ICVM 480 (Formulário de Referência) will be adjusted to prevent a director from being indicated as independent without meeting the new criteria.
Pursuant to article 110-A, § 12, II, of the Brazilian Corporations Law, a plural vote will not be adopted at shareholders’ meeting that resolve on the execution of related party transactions that meet relevant criteria to be defined by CVM.
ICVM 480 already provided for a criterion to define the relevance of related party transactions with the purpose of disclosing information to investors. According to ICVM 480, relevant related party transactions are considered as: (i) those whose total value exceeds the lower of the following values, R$50 million or 1% of the issuer’s total assets; and (ii) those considered relevant by its management whose total value is lower than the parameters mentioned in item (i), considering the characteristics of the transaction, the nature of the relationship between the parties, and the nature and extent of the interest of the related party in the transaction.
In order to avoid different definitions of relevance, CVM proposes in the Draft that the criteria that were already used in ICVM 480 regarding disclosure should also be applied for the purposes of article 110-A, § 12, II, of the Brazilian Corporations Law. Therefore, the Draft provides that the plural vote does not apply to votes at shareholders’ meetings that resolve on related party transactions that shall be disclosed pursuant to Schedule 30- XXXIII of ICVM 480.
The full text of the public hearing notice SDM nº 09/2021 can be accessed in Portuguese through the following link:
http://conteudo.cvm.gov.br/audiencias_publicas/ap_sdm/2021/sdm0921.html.
2023 © Carneiro de Oliveira – All rights reserved.