Transparência e Governança

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1. What is Corporate Governance?

Corporate practices which aims to improve the decision-making process of a company with a view to protecting all the parties involved, consequently increasing the transparency to the market and investor´s confidence, thus assisting in access to capital from third parties. The analysis of corporate governance practices applied to the capital markets mainly involves transparency, equal treatment of shareholders and accountability.


2. What is the ‘Novo Mercado’?

Over recent years, Brazil has been trying to improve the corporate governance of its public companies in order to encourage investment in shares by both Brazilian and foreign investors. Within this context, BM&FBovespa (the São Paulo Stock Exchange) developed a listing category called the ‘Novo Mercado’, containing a series of different levels, designed to improve the process of corporate governance amongst Brazilian companies. However, any principle or law can only have any real impact if it is implemented, required and – most importantly – demanded by investors and regulators. The Novo Mercado was an important step forward for the improvement of corporate governance in Brazil, even though adhesion to any one of its levels is undertaken voluntarily by the companies and their controlling shareholders. Find out more at:

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3. What are minority shareholders’ principal rights, according to the Corporate Law?

•    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

To find out more information and details about each specific right that minority shareholders in Brazil have, visit:


4. As a minority shareholder, how can I check up on the management of the company?

In the first place, by following the companies’ results and publication of Material Facts. It is important to frequently check the filings and postings at the CVM site that each company does, as some documents are only available there or are easier to find versus the investor relation site.  Many public companies hold quarterly teleconferences for the publication of results, as well as open meetings (APIMEC). It is also important to question and understand these results and information in order to recognize their effects for minority shareholders and the future of the company itself.

Another important point is to present any suspicions of irregularity or harm to minority shareholders to the Department of Investor Relations and the CVM (complaints can be done in written form or through CVM´s web site) . In addition, the Corporate Law establishes rights that need to be checked upon in order for their principles and compliance to be demanded. Careful monitoring by minority shareholders will aid in improving corporate governance in Brazil, as well as making the CVM more effective and efficient in its role as sheriff to the market. A more transparent market with better corporate governance will be a better market for investment in shares – for both minority shareholders and companies.


5. What are the attributes of the audit committee?

The function of this body is to examine the activities practiced by administrators and provide opinions on the company accounts (financial statements, alterations to capital, mergers, the issue of debentures, etc.). To do so, the members of the audit committee meet to fully analyze the issues under their responsibility and issue opinions and statements on their findings. Any shareholder can ask to read the audit committee’s opinions either at assemblies or when the committee is created, and also suggest the election of qualified members to part of such official body of the company.


6. Can minority shareholders stand for election to the audit committee or the company’s administrative bodies?

Yes, minority shareholders can stand for election and receive votes for positions on both the administrative bodies and the audit committee, as long as they meet all the necessary requirements and are not prohibited in accordance with Articles 147 and 162 of the Corporate Law.




7. How do I obtain access to information regarding the company in which I am investing? Do I have to request it or should I directly receive periodic information?

Controlled access to information for all the agents operating in the market is one of the fundamental principals of market transparency. Information on companies should primarily be made public through the CVM’s ‘IPE’ system ( whilst most of it is also accessible on the investor relations sections of company websites. It is important to frequently check the filings and postings at the CVM site that each company does, as some documents are only available there or are easier to find versus the investor relation site.

On top of this, a shareholder can also request direct access at the company’s headquarters or from the investor relations department. Many companies publish information by means of e-mails and, in order to receive such correspondence, the shareholder may, indeed should, register themselves with the investor relations department of the company they are interested in. Many brokerage firms also issue reports and analyses on the strategy and results of many companies for their clients. A conscientious and active shareholder should seek all the information which is available, read it, analyze it, clarify any doubts and take care of their rights.

The law establishes a number of obligations for the publication of information, including: the company headquarters should make documents available concerning those issues that are to be discussed at general assemblies as of the date of publication of the first announcement scheduling such assembly; access to information referring to the ownership and transfer of shares and securities it has issued, whenever requested by any shareholder; the provision, to any shareholder with at least 0.5% of the capital stock, of the addresses of the other shareholders with the aim of attempting to obtain power-of-attorney to represent them at the company’s general assemblies; information concerning the purchase and sale options on shares and debentures convertible into shares issued by the company or companies which are either subsidiaries or part of the same group; etc.


8. Under what circumstances is it possible to request postponement of assemblies?

Requests for postponement of assemblies may be sent to the CVM by any shareholder under the following circumstances:

- when the subject to be discussed is extremely complex, requiring a greater period of time for analysis, it may be requested that the run-up period to the general assembly be extended to 30 days;

- when it is deemed necessary for the CVM to be better acquainted with and analyze the issues to be addressed at the assembly, and, should it be the case, inform the company of the reasons why it understands that the proposed decisions to be taken at the general assembly violate legal and regulatory arrangements. In this case, the period between the call and the date scheduled for the assembly may be interrupted for up to 15 days.


9. Under what circumstances do minority shareholders have the right to request a call for an assembly?

The calling of general assemblies is the responsibility of the administrative bodies, although in certain

cases minority shareholders can call them:

- should the administrators delay the call for more than 60 days during situations in which the Law or the articles of association expressly stipulate the holding of a general assembly;

- minority shareholders who hold at least 5% of the capital stock, individually or jointly with other shareholders, have the right to request a call for an assembly to discuss issues which they believe to be in the best interests of the company;

- when the request for the calling of an assembly to decide upon the installation of the audit committee has not been acted upon by the company administrators within eight days, those shareholders with at least 5% of the voting capital or 5% of shares without the right to vote may call a general assembly;

- in cases of public offers for the acquisition of shares issued by a public company which are in circulation in the market, due to the cancellation of the registration of an open company, or an increase in the share of the controlling shareholder representing at least 10% of the shares in circulation in the market (float).


10. What is the purpose of the CVM’s Guideline no. 35?

The CVM’s Guideline no. 35 concerns the fiduciary duties of administrators in transactions like mergers and incorporation of shares involving companies under common control. Its purpose is to ensure that dealings between the controlling shareholder and the administrators of the subsidiary company are conducted in an effective and independent manner.


11. What is Article 115 of the Corporate Law concerned with?

This concerns the conflict of interests and abuse of the right to vote by the shareholders which should be exercised in accordance with the company’s interests and not those of a specific group. According to the law, it is considered abusive (with the possibility of being declared null and leading to punishment) to exercise the right to vote with the intention of causing any form of harm to the company or another shareholder, or to bring benefit to oneself with consequent harm to the company or its shareholders.


12. What is Article 264 of the Corporate Law concerned with?

This arrangement states that, in merger, separation or incorporation of shares or companies involving subsidiary companies or companies under common control, in addition to the information on the exchange ratio that has been proposed, the results of the exchange ratios of those shares belonging to the non-controlling shareholders should be presented to those shareholders with shares in the subsidiary company, such exchange ratio should be based upon the value of the net worth of the shares of the companies involved, having been evaluated using the  same criteria, and on the same date, as the market prices, or based upon another criteria which has been accepted by the CVM.

This article is often used to justify the vote of controlling shareholders, even despite the language containing in Article 115 of the same law.



13. What is the time limit involved in the calling of assemblies according to the new Corporate Law?

Article 124 of the new Corporate Law concerns the time period allowed for the calling of assemblies, such which changed from eight days to fifteen days for the first call and from five to eight days for the second call. However, upon request from any shareholder, the CVM may, at its own discretion (or, in other words, it may decide for itself, but always taking into consideration compliance with the law), extend this period to up to 30 days or even interrupt the progress of the period for up to 15 days should it believe it necessary to establish a longer period in order to better analyze the proposals to be presented to the assembly.


14. What is an expert evaluation report and what purpose does it serve?

An expert evaluation report is a document drawn up by one or more specialists, who is/are generally independent to the process, with the aim of defining the attributable amount of equity (the assets, rights and obligations as a whole), according to Generally Accepted Accounting Principles and using either evaluation methodology or the market value. Although in many cases they are not obligatory, the expert reports are often used to recommend decisions or to justify decisions at the administrative board or general assemblies.  Expert valuation reports are often used in merger, acquisitions, corporate restructurings and other important corporate transactions.


15. What is an expert report which is performed ‘backwards’?

This concerns an expert report drawn up with the intention of arriving at the final result which is intended to be presented. To do so, data is presented which fits together and, as part of this process, certain information is omitted from the expert report since it does not support the formation of the desired final result, or future projections are manipulated in order to arrive at a certain result – an objective of the company, its controlling shareholder or any specific party, to the detriment of other stakeholders.


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