Públicada em: Tuesday, September 5, 2023

On June 2, 2023, the Brazilian Department of the Treasury’s Executive Branch introduced Bill No. 2.925/2023 to the National Congress. Authored by the Brazilian Securities and Exchange Commission (CVM), the bill aims to amend Law No. 6,385/76 (the “Securities Market Law”) and Law No. 6,404/76 (the “Corporations Law”). The primary focus of the bill is to strengthen the Brazilian capital markets by enhancing corporate protections.

The primary aim of the bill is to enhance transparency in arbitration proceedings and to protect investors’ rights in the securities market. Given the multitude of proposed changes, it is crucial to highlight the most significant alterations and their implications:

Expansion of CVM’s Authority

The proposal substantially broadens the scope and governance authority of the CVM over pre-sanction measures. It empowers the CVM to conduct on-site inspections of companies under investigation and to request search and seizure warrants from the judiciary to support investigations or administrative proceedings.

In addition, the CVM will have the authority to request copies of investigations, lawsuits, and administrative proceedings initiated by other entities. It will also be able to share confidential information with other entities, specifically information under secrecy with tax and monetary authorities.

Introduction of Class Actions

The proposal creates an avenue for minority shareholders and debenture holders who have suffered due to the improper actions of majority shareholders, executives, or intermediaries to initiate collective civil liability actions. This is akin to the Class Action lawsuits commonly seen in the United States.

Currently in Brazil, public civil actions and collective arbitrations can only be initiated by specific entities, such as the CVM, the Public Prosecutor’s Office, or civil associations. Under the new proposal, a Class Action would become legitimate if initiated by either 2.5% or fifty million reais (BRL 50,000,000.00) of the public company’s share capital.

Mandatory Disclosure of Arbitration Proceedings

One aspect of Bill No. 2.925/23 aims to mandate the public disclosure of arbitration proceedings involving public companies. This will allow affected investors to actively monitor the progress of these arbitrations.

The push for transparency in arbitration proceedings is rooted in the need to resolve corporate disputes that occur between minority shareholders and either managers or majority shareholders. Such conflicts are collective in nature but also involve individual rights. While centered on shareholders’ rights within a company, these issues can potentially affect the interests of all participants in the securities market.

Broadening the Scope of Matters Reserved for the General Shareholders’ Meeting

Bill No. 2.925/23 seeks to extend the exclusive matters that fall under the purview of the General Shareholders’ Meeting, as outlined in Article 122 of the Lei das Sociedades por Ações (Corporations Law). This expansion is proposed through the inclusion of the authority to terminate liability actions, as detailed in Articles 159 and 246 of the Corporations Law.

This would be within the remit of the General Shareholders’ Meeting for both public and privately-held companies. Furthermore, even if most shareholders vote to approve the termination of the action, such termination will not take effect if shareholders representing 10% of the voting capital choose to reject it.

Restrictions on Exoneration for Executives and Auditors

Another significant change proposed in Bill No. 2.925/23 is the amendment to paragraph 3 of Article 134 of the Lei das Sociedades por Ações (Corporations Law). This amendment specifically includes a provision stating that the approval of the company’s annual financial statements does not automatically exonerate executives and auditors from liability.

In this context, the General Shareholders’ Meeting is required to pass a specific resolution to exempt executives and auditors from liability for events that transpired during their tenure and within the duration of their mandates. This provision applies to both public and privately-held companies.

Criteria for Initiating Liability Actions

Bill No. 2.925/23 proposes an amendment to the requirements for shareholder standing in initiating liability actions, as outlined in Articles 159 and 246 of the Lei das Sociedades por Ações (Corporations Law).

The bill specifies that a liability action can be filed by shareholders holding a minimum of (i) 5% of a privately-held company’s share capital and (ii) either 2.5% or fifty million reais (BRL 50,000,000.00) of a public company’s share capital. Moreover, Bill No. 2.925/23 states that the company may not launch an independent liability action if a similar action has already been initiated by a shareholder.


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