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.
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:
• The right to participate in the profits
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.
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.
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.
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 (www.cvm.gov.br) 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.
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.
Requests for postponement of assemblies may be sent to the CVM by any shareholder under the following circumstances:
The calling of general assemblies is the responsibility of the administrative bodies, although in certain
- 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;
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.
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.
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.
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.
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.
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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