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Decree introduces a special regime for divestment of assets by federal mixed-capital companies

9Nov2017Nov9,2017
Infrastructure and Energy
The Brazilian federal government published Decree No. 9,188 (full text), on November 3, 2017, establishing rules for governance, transparency and best market practices in relation to the special regime for divestment of assets (regime especial de desinvestimento de ativos – “REDA”) by federal mixed-capital companies.
The purpose of REDA is to govern the partial or total sale of assets owned by such entities (art. 1) by regulating the State-Owned and Mixed-Capital Companies Act (specifically, art. 28, paragraph 3, section II, and paragraph 4, and art. 29, main heading, section XVIII of Law No. 13,303/2016).

1. Application of Decree No. 9,188

The regime established by Decree No. 9,188 is applicable to federal mixed-capital companies, including their subsidiary and controlled companies (art. 1, main heading and paragraph 1). The provisions of Decree No. 9,188 are not applicable to:

•    the sale of assets relating to the corporate objects of mixed-capital companies;
•     holding companies controlled by public financial institutions and investment banks (art. 1, paragraph 2);
•     sale transactions between mixed-capital companies and their subsidiary and controlled companies and sales transactions between such subsidiary and controlled companies (art. 1, paragraph 5).

2. Observance of REDA

The adherence of mixed-capital companies to the REDA is optional and requires: (i) the approval of the company’s board of directors or its highest governing body; (ii) communication to the supervising Ministry; and (iii) approval by the relevant statutory bodies of each sale as established in the divestment program (art. 3, paragraphs 1 and 2).

The the asset divestment program may be prepared and proposed by the board of executive officers of mixed-capital companies, which program must indicate at least:

•     the business segments in which the divestment will be concentrated;
•     purposes and goals to be achieved as a result of the divestment;
•   compatibility between the transaction and the interests of the mixed-capital company;
•    convenience and opportunity of the sale considering the company’s strategic plan, business plan, plurennial plan or similar instrument;
•      macroeconomic perspectives and premises;
•   specific internal procedures to support the divestment program (art. 3, main heading).

3. Competitive sale process 

Sales must be effected by means of a competitive process in order to obtain the best economic return for the mixed-capital company (art. 5). The principles of publicity and transparency must govern the competitive sale process in order to enable the supervision, conformity and control of the actions carried out by the mixed-capital company (art. 7).

A competitive sale process within the REDA is not applicable in the following cases (art. 6):

•     sale of assets which are governed by procedures governed by regulatory agencies;
•    consortia with national and foreign companies, whether or not in the capacity of leader, seeking to expand activities, accumulate technology and increase investment in the industry;
•   payment in kind, swaps and other cases in which competition is not feasible, including those resulting from rights established in shareholders’ agreements;
•   cases in which it is possible to show that it is not feasible to execute a competitive sale process in accordance with the legislation.

The phases in the competitive sale process are as follows:

•    preparation;
•    interest inquiry;
•    submission of preliminary offers;
•    submission of binding offers;
•    negotiation;
•    signature of negotiated legal documents.

Among the phases set forth in Decree No. 9,188, the “interest inquiry” phase is especially relevant because, by means of sending out a communication disclosing the opportunity, it enables the mixed-capital company to assess the interest of market players in the intended transaction prior to sending the document requesting proposals (art. 21).

4. Control and supervision

Internal and external controlling agencies from the three spheres of government must supervise the sales carried out by mixed-capital companies, their subsidiaries and controlled companies, including those domiciled abroad, with regard to the financial cost-benefit and effectiveness of the application of REDA, from accounting, financial, operational and asset perspectives (art. 39).

Within the period of thirty days as from the date of execution of the negotiated legal documents for each sale, the mixed-capital company must submit copies of such documentation to the Federal Audit Court for its information (art. 4).


5. Transition rules

Competitive sale processes concluded prior to the date of the publication of Decree No. 9,188 or transactions in respect of which definitive agreements have already been executed are not subject to the REDA, in compliance with the principle of legal certainty. As to transactions already initiated, if the mixed-capital company opts to adhere to the REDA, the actions undertaken prior to adherence must be preserved and the competitive sale process is applicable to the phases subsequent to the publication of Decree No. 9,188 (art. 40).

For additional information, please contact:


Thiago Luís Sombra 
T +55 61 3218-6010

Bruno Werneck
T +55 11 3147-7781

Felipe Feres
T +55 21 3231-8126

Thiago Fernandes Moreira
T +55 21 3231-8115

Pablo Sorj
T +55 21 3231-8203

Fabiano Luz de Brito
T +55 11 3147-7726

Giovani Loss
T +55 21 3231-8206


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