CVM Resolution 215, issued in October 2024 by the Brazilian Securities and Exchange Commission (CVM), introduced significant updates to Public Tender Offer (PTO) regulations. These adjustments align the Brazilian market with international practices while balancing market demands and investor protection. Additionally, they simplify and streamline the process.

A PTO is a mechanism through which companies or investors seek to acquire part or all of the shares of a publicly listed company, aiming to consolidate control or secure strategic interests. The offer, which may be voluntary or mandatory, is directed at shareholders and generally includes a price higher than the market value to encourage shareholders to sell their shares.

In Brazil, the Corporations Law requires a mandatory PTO in situations such as the direct or indirect transfer of control of a publicly traded company. In these cases, the acquirer must offer minority shareholders a price equivalent to at least 80% of the amount paid for the controlling stake.

Among the aspects of PTOs simplified by CVM Resolution 215 are the following:

• Mandatory appraisal reports prepared by specialists;
• Auction execution on stock exchanges; and
• High quorums, such as the two-thirds majority required for delisting.

Alternatives Related to Mandatory Appraisal Reports

Under the new resolution, share prices can be determined without an appraisal report, provided alternative criteria are met, such as:

a) Transactions within the last twelve months: These must involve at least 20% of the company’s share capital. Example: If a recent sale transferred 25% of the company’s shares, the price from that transaction can serve as a benchmark.

b) The highest unit price in the last twelve months: Applicable if the shares have an average daily trading volume exceeding R$10,000,000.00 (ten million reais) on at least 95% of trading days. Example: Shares consistently trading at R$12.00 per unit over this period can establish the offer price.

c) The price paid for acquiring control: This applies if the acquisition involved at least 20% of the share capital. Example: If a controlling interest was purchased at R$15.00 per share, this price can guide the PTO.

d) An agreed-upon value by significant shareholders: Shareholders holding more than one-third of outstanding shares and willing to sell can set the price. Example: Majority stakeholders negotiating R$14.00 per share for their sale can define the price framework.

These changes make the process more financially accessible while preserving price fairness, reducing costs, and minimizing regulatory bureaucracy.

Reduction of Auction Deadlines

Another important change was the shortening of the minimum period for conducting auctions from thirty to twenty days. Auctions may also be waived in cases of low shareholder dispersion. For example, this applies when (i) the PTO targets fewer than 100 shareholders; or (ii) the PTO involves fewer than 1,000 shareholders, and auction costs represent 10% or more of the offer’s total value.

These measures also benefit large companies by enabling faster operations, such as corporate restructurings and strategic acquisitions.

Changes to High Quorums

The quorum for delisting has been revised to benefit smaller companies. Previously, delisting required approval from two-thirds of outstanding shares, a threshold that often hindered the process for companies with low shareholder dispersion. Now, a simple majority quorum suffices when outstanding shares account for less than 5% of the company’s total share capital, making delisting more feasible and efficient for these firms.

With these changes, CVM Resolution 215 makes PTO processes more efficient and accessible, benefiting primarily small and medium-sized enterprises. The simplification of requirements such as appraisals, auctions, and quorums encourages these companies to participate in the capital market, fostering their growth and competitiveness.

Glossary:

CVM (Brazilian Securities and Exchange Commission) – the regulatory agency overseeing the securities and financial markets in Brazil.

PTO (Public Tender Offer) – a financial mechanism where companies or investors offer to acquire part or all of the shares of a publicly traded company, often to gain control or strategic advantages.

Mandatory PTO – a public tender offer required by law in specific scenarios, such as when control of a publicly traded company changes hands.

Appraisal Report – a document prepared by specialists to determine the fair market value of a company’s shares, often required in corporate transactions.

Delisting – the process of removing a company’s shares from public trading on a stock exchange.