Brazilian Securities and Exchange Commission mandates disclosure of corporate disputes
New resolution seeks to ensure public awareness of proceedings involving publicly-held companies, their shareholders and administrators
On May 2, 2022, a resolution regarding the registration and release of information on securities issuers came into effect, having been published by the Brazilian Securities and Exchange Commission (CVM) in March 2022. CVM Resolution No. 80/2022 also sets rules for disclosing corporate disputes in its Annex I, following the efforts of a joint working group the CVM and Brazil’s Ministry of Economy formed after a public consultation held in 2021.
Pursuant to Annex I, the resolution applies to judicial or arbitration proceedings related to corporate or securities legislation involving security issuers, their shareholders or their administrators, and concerning individual or collective rights or cases in which a decision may legally affect the company or other securities holders.
Effects of the resolution
The resolution is especially relevant to arbitration proceedings, which are usually confidential. Annex I determines that obligations arising from arbitration conventions or regulations set by arbitration authorities (that usually provide for their confidentiality) do not exempt security issuers from regulatory obligations to disclose certain information.
Thus, despite the confidentiality of arbitration proceedings, security issuers must now disclose the main details of corporate disputes to the market. However, the obligation to disclose does not refer to all documents submitted over the course of a given arbitration, such as written submissions, pieces of evidence and decisions.
The provisions of Annex I are only mandatory for corporate disputes that are initiated from May 2, 2022. For disputes that commenced prior to this date, the rules provided for by Annex I remain optional.
Deadlines and items for mandatory disclosure
In the event the securities issuer is the claimant, the corporate dispute must be disclosed within seven business days of the date it is filed, or a request for arbitration is submitted. On the other hand, if the issuer is the defendant, the disclosure must occur within seven business days from the date of service of the proceedings or receipt of the request for arbitration. The information that must be disclosed includes:
- The parties involved;
- The financial sums, assets or rights involved;
- Key facts;
- The claims;
If the dispute is taken to the courts, the security issuer must disclose the following information within seven business days:
- Decisions on requests for injunctive relief, jurisdiction, inclusion or exclusion of parties;
- Judgments on the merits or dismissals without judgment on the merits.
For arbitrations, securities issuers must disclose the following information within seven business days:
- The submission of a response to the request for arbitration;
- The execution of terms of reference or document that indicates the scope of the dispute;
- Decisions on interim or emergency measures, the arbitrators’ jurisdiction, and the inclusion or exclusion of parties;
- Arbitration awards, whether partial or final.
Disclosure of agreements
Annex I of CVM Resolution No. 80/2022 provides that agreements entered into over the course of the corporate disputes must also be disclosed within seven business days from the date they are executed, indicating the financial sums, parties, and other aspects that may be relevant to shareholders.
Special attention by publicly-held companies
The new resolution (and Annex I) is a response to requests for greater transparency in arbitration proceedings involving publicly-held companies, their shareholders and their administrators. Indeed, the CVM and the Ministry of Economy’s working group had already signaled an intention to adopt rules similar to the resolution, in order to give shareholders time to assess whether they should take any measures regarding the arbitrations themselves.
For these reasons, compliance with the new rules will require publicly-held companies and other securities issuers to take special care. Shareholders and company administrators are responsible for disclosing the information mandated by the resolution.
Although the disclosure deadlines were extended as a result of the public consultation, Annex I of the resolution determines that companies must disclose the main information concerning corporate proceedings within seven business days from the moment they are made aware of any dispute. Moreover, publicly-held companies should seek guidance to ensure the disclosure meets the Annex’s requirements without compromising confidentiality of the proceedings (whenever applicable) and to avoid potential negative repercussions from failing to comply with these obligations.