Transparência e Governança

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The rights of minority shareholders in Brazilian companies come, essentially, from the so-called Corporate Law (*) (Law no 6.404/76, altered by Law numbers 9.457/97, 10. 303/01 and 11.638/07) and from regulations issued by the CVM. According to these sources, the principal rights attributed to minority shareholders in Brazil are:

  • The right to participate  in the profits
  • The right to inspection
  • The right to information
  • The right to preference in the underwriting of shares in any increase of capital
  • The right to withdrawal
  • The right to vote (if ordinary shares, preferred shares have vote only on very specific circumstances)
  • The right to file an action of responsibility in the name of the company
  • The right to nomination of members of the administrative board (with a certain significant percentage of capital)
  • The right to request the calling or adjournment of general and special assemblies
  • The right to request the installation of a fiscal council and elect its members

Details concerning each one of these rights attributed to minority shareholders are available on the CVM website:

(*) the Brazilian Corporate Law.


Article 115 of the Corporate Law deals with conflict of interests and the abuse of the right to vote by any shareholder. As a result of companies’ share structure, the most harmful is the vote exercised by the controlling shareholders who, ultimately, vote and can decide for the company due to the fact that they hold control of the majority of votes. In other words, the right to vote should be exercised in line with the company’s interests and not those of a specific group. According to the law, it is considered to be abusive (and punishable) to exercise the right to vote with the intention of causing any type of damage to the company or another shareholder or for one’s own benefit, with consequent damage to the company or the other shareholders.

Despite the clear nature of the Law within this article and its non-exclusion on any other point, there still exist cases in which majority shareholders propose corporate operations, especially those involving mergers between companies in which they hold a distinct corporate share, and despite this provision controlling shareholders exercise their vote. The mechanism and justification are relatively simple: an evaluative report is contracted from an ‘independent’ party, usually an investment bank, and, as the operation is conducted based upon the evaluation of a third-party, the commutative nature of the proposal under review is assured, and the controlling shareholder is free to vote.


(Link to the Law in full)

For a long time now, the CVM has been discussing the question of finding a solution that will be effective in preventing acts of abuse of control and conflicts of interest. It recently looked for a way of improving the situation through the publication of Guidance n° 35, which helps in establishing the fiduciary obligations of the administrators in merger and share incorporation operations, and the merger of shares involving the controlling shareholder and their controlled parties, with a view to the establishment of a special independent committee for negotiation on the operation, such which would submit its conclusions to the administrative board.

In the same way that a report may be created based upon its results, the committee’s procedure can also be adjusted in such a way that it achieves a previously desired result. In such cases, the independent nature of the committee does not generally stand up to questioning which goes beyond its formal aspects since it is, essentially, nothing but a transaction conducted specifically within the framework initially proposed by the controlling shareholder. A special independent committee may not actually solve the problem since, if there is no real impartiality or independence in its work, its conclusions will always tend to be manipulated and will always possibly serve only the interests of the controlling shareholder.


(Link to the law in full)



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