Publicly-held companies bulletin: new developments in Brazil

The main updates for June 2024 are provided below.

REGULATORY UPDATES

CVM announces changes to rules for shareholders’ meetings

The CVM has issued Resolution No. 204, amending Resolutions No. 80 and No. 81 to provide for new rules concerning shareholders’ meetings. The resolution will take effect on January 2, 2025, and seeks to make market players’ participation in these meetings more effective and less burdensome.

The changes are part of the process of expanding and modernizing mechanisms that allow shareholders to participate and vote remotely at these meetings, while also promoting the use of technology and reducing participation costs. There is a particular emphasis on:

• Expanding the use of remote voting forms, which is set to become mandatory for all shareholders’ meetings (with some specific exceptions);
• Changing how voting instructions are transmitted, with an extended deadline for shareholders to submit their voting instructions and a provision that such submissions may be made via a central depository;
• Changes concerning requests made via the remote voting form for the installation of a fiscal committee, which become ineffective if there are no candidates for such body;
• Amendments concerning applications for election to the board of directors by multiple votes made via the remote voting form, which become ineffective if there are no candidates other than those put forward by the management or by the controlling shareholder; and
• Changes to provisions concerning a waiver for making the remote voting form available, which is permitted in the event of a low turnout for remote voting at previous meetings.

View Resolution No. 204 in full (available in Portuguese)

B3 opens public consultation on proposed changes to Novo Mercado rules

In early May 2024, Brazil’s B3 stock exchange opened a public consultation on a series of proposed changes to the rules of its special listing segment “Novo Mercado”.

The public consultation is divided into three blocks:

• Central topics, which cover the main issues to be discussed;
• Secondary topics that provoke reflection on adopted practices or the need to adapt existing rules; and
• A series of questions directed at the market, addressing the convenience of including certain topics in the regulations.

The main proposed changes involve:

• The inclusion of new scenarios in which directors of the board would not be considered independent and restrictions on directors holding various positions at public companies;
• Increasing the minimum percentage of independent directors to 30%, with a minimum of two independent directors on boards of directors consisting of up to six members;
• New measures to increase the reliability of financial statements, with statements from the directors declaring that internal controls have been effective, backed by assurances from independent auditors;
• The creation of the label ‘Novo Mercado – Em revisão‘ (‘Under Review’) for cases concerning:
  • Possible material errors in financial statements;
  • A delay of more than 30 days in submitting financial statements or independent auditors’ reports with a modified opinion;
  • Judicial reorganization (or similar proceeding abroad);
  • Failure to disclose a substitute or succession plan regarding the departure of statutory officers (due to death or imprisonment) within seven business days;
  • Failure to disclose an action plan for environmental disasters, fatal accidents involving workers and service providers, and
  • Labor practices in violation of human rights.

• The inclusion of the penalty of disqualifying individuals from acting as officers, audit committee members or fiscal council members at companies listed in the Novo Mercado segment for a maximum period of ten years, as well as an increase in the value of fines;
• The possibility of other arbitration chambers being accredited with the B3’s Market Arbitration Chamber (CAM) so that they may be included in the bylaws of Novo Mercado-listed companies.

The consultation is open to companies, investors, regulators, and other market agents and stakeholders until August 2, 2024. Comments and suggestions can be submitted to the B3 via email: [email protected]. After analyzing the contributions, a restricted hearing will be held for the companies listed on the Novo Mercado to vote on the final proposal, which will be subject to the CVM’s approval.

View the proposed changes in full (available in Portuguese)

CVM provides guidance on preparing financial statements in light of Rio Grande do Sul floods

On June 20, 2024, the CVM’s Department of Accounting Standards and Auditing (SNC) and Department of Corporate Relations (SEP) published Circular Letter No. 1/2024, providing guidance on important aspects public companies in Brazil must observe when preparing financial statements.

The CVM has emphasized the importance for public companies to inform the market about the physical risk of flooding to their operations, especially when making sustainability disclosures. This development comes in the wake of the disastrous floods that recently afflicted Rio Grande do Sul, a state in Brazil’s south.

Companies should also assess the need to disclose any material events and potentially revise projections and estimates in their CVM reference forms in accordance with applicable regulations.

View the new circular letter in full (available in Portuguese)

CVM provides guidance on improvements to Empresas.Net system

On June 25, 2024, the SEP published CVM/SEP Circular Letter No. 5/2024 to provide information on improvements that have been made to Empresas.Net (a system that companies must use to disclose certain information to the CVM).

Systemic changes are highlighted in Section 11.2 – Transações com partes relacionadas (‘Transactions with related parties’) and Section 13 – Responsáveis pelo formulário (‘Parties responsible for the form’) of the CVM reference form.

For companies exempt from CVM registration, a rule obligating company directors to complete Section 7.1 – Principais características dos órgãos de administração e do conselho fiscal (‘Main characteristics of management bodies and fiscal council’) and Section 8 – Remuneração dos administradores (‘Management remuneration’) has been removed.

View the new circular letter in full (available in Portuguese)

ADMINISTRATIVE SANCTION PROCEEDINGS

CVM sets fine for failure to disclose material facts about the effects of judicial decisions

The CVM’s decision addresses the failure of a public company’s CEO to disclose a material fact to the market (either directly or via the company’s investor relations officer) regarding a court decision that extended the effects of a certain limited liability company’s bankruptcy to the public company in question.

The CVM’s Board unanimously decided to set a BRL 460,000 fine as part of the formal accusation. The fine takes an aggravating factor provided for in Article 65, Item VII of CVM Resolution No. 45/2021 into account – namely, the violation of fiduciary duties linked to the position that the accused held.

View Reporting Director Otto Lobo’s report and vote, as well as CVM Chairman João Pedro Nascimento’s voting statement in full (available in Portuguese).

COMMITMENT AGREEMENTS

Biannual Report (January-June 2024)

See below a report on commitment agreements companies entered into with the CVM during the first half of 2024. The report includes an analysis of the main issues and average values of the counterparties’ monetary contributions: