Ano: 2024

November/December 2024

_The November | December edition│2024 of our Newsletter has the following highlights:

– Disclosure of the Corporate Events calendar

– CVM amends rules regarding Public Offers to Acquire Shares

– STJ decides that Stock Options cannot be seized

_Disclosure of the Corporate Events calendar

Listed companies with shares traded on the special listing segments of B3 S.A. – Brasil, Bolsa, Balcão must disclose, by December 10, the annual calendar for the 2025 fiscal year, including at least the dates of the following events:

 

  • release of the complete annual financial statements and standardized financial statements (DFP);
  • release of the quarterly information (ITR);
  • holding of the Ordinary Shareholders’ Meeting; and
  • disclosure of the reference form (formulário de referência).

 

For other listed companies, the Brazilian Securities and Exchange Commission (CVM) Circular Letter recommends that the annual calendar also be disclosed to ease the monitoring of the company’s activities by investors and other stakeholders.

 

_ CVM amends rules regarding Public Offers to Acquire Shares

CVM has issued Resolutions 215 and 216, which address the rules applicable to Public Offers to Acquire Shares (“OPAs”), following Public Consultation No. 05/2023.

 

Resolution 215 establishes a new regulatory framework for OPAs, revoking CVM Resolution 85. Resolution 216 was issued to amend other existing regulations, aligning them with the provisions introduced by Resolution 215. Both resolutions will take effect on July 1, 2025.

 

Among the changes introduced by the resolutions, the main improvements are as follows:

 

 

  • OPA for Participation Increase: The obligation to carry out an OPA will now apply whenever the acquisition of outstanding shares by the controlling shareholder or an affiliated party reduces the total outstanding shares of the same class and type to less than 15%. Under the current rule, the OPA is mandatory only when the acquisition corresponds to more than one-third of the outstanding shares of a specific class or type, which has previously led to debates about adjustments in calculation parameters over time. Notably, if a company already has less than 15% of outstanding shares of a given class or type when CVM Resolution 215 takes effect, this will not trigger an OPA due to an increase in participation.

 

  • OPA for Cancellation of Registration: For companies with less than 5% of outstanding shares, the quorum for delisting has been reduced to a simple majority, replacing the current requirement of two-thirds of the share capital. For companies with more than 5% outstanding shares, the acceptance quorum of two-thirds of the share capital remains unchanged.

 

  • Automatic Waiver of Valuation Report: The price of the shares can now be set based on alternative criteria which may work as a fair value, such as:

 

  • Based on a legal transaction conducted within 12 (twelve) months prior to the OPA registration request date, provided that: (i) it was executed between non-related parties; (ii) it involves a quantity of shares equal to or greater than 20% of the company’s share capital; and (iii) it is not associated with another legal transaction from which the parties involved, or individuals/entities related to them, have received or will receive other financial compensation.

 

  • Based on the highest unit price reached by shares of the same class and type as those subject to the OPA on the stock exchange where the company’s shares have the highest trading volume within 12 months prior to the OPA registration request date, provided that: (i) the company has complied with the submission of periodic and event-related disclosures; and (ii) the shares subject to the OPA were traded in at least 95% of trading sessions during this period, with an average daily financial trading volume equal to or exceeding BRL 10 million.

 

  • Based on the price the bidder is willing to pay, if this applies to a delisting OPA combined with a control acquisition OPA, and the number of shares required for the success of the control acquisition OPA equals or exceeds 20% of the company’s share capital.

 

  • Based on the price at which holders of more than one-third of the outstanding shares have committed to selling their shares in the OPA, if this commitment is not linked to another legal transaction from which the parties involved, or individuals/entities related to them, have received or will receive other financial compensation.

 

  • Auction: The minimum period for the auction has been reduced from 30 to 20 days after the launch of the OPA. In the case of changes in the OPA, the minimum period is 5 business days before the auction for price increases or renunciation of conditions, and 10 business days before the auction for other cases. Furthermore, the auction can be automatically waived in cases of low shareholder dispersion or when auction costs are disproportionately high in relation to the offer value.

 

  • Registration Procedures: Two new registration procedures have been established, automatic and ordinary procedures, replacing the previous voluntary and mandatory OPA regimes. The ordinary procedure requires prior analysis by the CVM and includes current “mandatory” OPAs and voluntary OPAs involving a securities swap. The automatic procedure, where prior CVM analysis is not required, applies to current voluntary OPAs that do not involve a securities swap, which are now referred to as optional OPAs.

 

Additional details about CVM Resolutions 215 and 216 can be found in Portuguese at the following link: https://www.gov.br/cvm/pt-br/assuntos/noticias/2024/cvm-edita-regra-para-ofertas-publicas-de-aquisicao-de-acoes-e-introduz-procedimentos-mais-simples

 

_ STJ decides that Stock Options cannot be seized

The 3rd Panel of the Brazilian Superior Court of Justice (STJ) has ruled that Stock Options cannot be seized. In September, the Court determined that Stock Options have a commercial rather than compensatory nature and has now affirmed the unseizability of this instrument.

 

The unanimous decision was reached within the scope of REsp 1841466 in a case examining the possibility of seizing Stock Options granted by a Company to a former director. According to the vote of the presiding Justice, Ricardo Villas Bôas Cueva, supported by all other justices, Stock Options serve as incentives for employees to participate of the company’s activities and possess a highly personal nature that should be preserved to avoid legal uncertainty. This instrument is intended to sustain employee engagement while maintaining alignment with shareholders. Allowing the seizure of Stock Options would enable any individual to become a shareholder, which could potentially bring outsiders into the business, resulting in the undermining of the instrument fundamental prerogatives.

 

The decision aligns with discussions in Bill 2,724/2022, which proposes the regulation of Stock Options. The bill is currently under consideration in the Brazilian Chamber of Deputies, where it awaits a report from the rapporteur in the Labor Committee, after having already been approved in the Senate.

 

For more information about the ruling in Portuguese, please consult: https://scon.stj.jus.br/SCON/GetInteiroTeorDoAcordao?num_registro=201803046034&dt_publicacao=11/11/2024.

Novo Mercado reduz hipóteses de alerta aos investidores

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October 2024

_The October edition│2024 of our Newsletter has the following highlights:

– B3 conducts a new public consultation to revise the rules of the Novo Mercado trading segment

– STF rejects income tax charge on donor for advance inheritance

_B3 conducts a new public consultation to revise the rules of the Novo Mercado trading segment

In October, B3 launched the second public consultation regarding updates to the Novo Mercado Regulation, aiming to gather new contributions for the evolution proposal of the rules applicable to companies listed in this special segment.

 

The first public consultation with initial proposed changes was presented by B3 in May of this year, and some points faced criticism from law firms, public companies, and market representatives.

 

Given the high number of interactions and expressions from the market, along with the quality of the debate, B3 deemed it appropriate to hold a second public consultation, incorporating amendments to the original proposal. This will be the last opportunity for interested parties to submit their proposals before the closed hearing, during which listed companies in the segment will vote on the final proposal, which will also be subject to CVM approval.

 

Below, we highlight the main changes introduced in the second public consultation.

 

  • Novo Mercado “Alert” and List of Situations

 

In its first public consultation, B3 proposed the inclusion of the Novo Mercado “Under Review” label for companies involved in relevant events that may require a swift action by B3. This does not necessarily refer to situations linked to any irregular practice but could simply be the consequence of an adverse economic scenario.

 

Thus, in its initial proposal, B3 considered that the occurrence of the following events would warrant the inclusion of the “under review” label:

 

  • Disclosure of a relevant fact indicating the possibility of a material error in financial information, including those related to fraud;
  • Delay of more than 30 days in delivering financial information;
  • Report from independent auditors with a modified opinion;
  • Request for judicial recovery in Brazil or equivalent procedures in another country;
  • Inability to keep the statutory director in function due to incarceration or death, without disclosing a substitute or succession plan for more than 7 business days;
  • Environmental disaster involving the company; or
    Disclosure of a relevant fact regarding: (a) fatal accident involving employees or service providers of the company while performing their duties that is not accompanied by an action plan; or (b) the existence of labor practices that violate human rights within the company’s operational scope.

 

In light of the significant number of responses regarding the issue, in its second public consultation, B3 proposed changing the name to Novo Mercado “Alert” to clarify that it is merely an informational measure, without excluding the company from the Novo Mercado, and also reduced the list of situations warranting the label to only include the events listed in items (i), (ii), (iii), and (iv) above. Additionally, it proposed the possibility of prior expression from the Company subject to the label’s inclusion, as well as the introduction of a procedure for the company to disclose the alert issued by B3.

 

  • Limitation of participation in boards of directors

 

In its first public consultation, B3 proposed that managers of Novo Mercado companies could dedicate themselves to a maximum of five boards of directors of public companies.

Considering the contributions received, in its second public consultation, B3 maintained the limit of five boards and proposed the following changes:

  • Positions held in the boards of directors and management of companies will be counted as a single position in the case of: (i.1) controlling, controlled, or commonly controlled companies; (i.2) that have their annual consolidated financial statements; or (i.3) part of the same group of companies, as defined in the Corporations Law; and
  • The CEO or main executive holding a position on the board of directors of the company itself will be counted as a single position.

 

  • Limit on terms for independent directors

 

In the first public consultation, B3 proposed a limitation of 10 consecutive years for a director to be considered independent in the same company. However, in light of the received comments, B3 proposed increasing the duration to consider the board member independent until the 12th year of service on the board.

  • Reliability of Financial Statements

 

Regarding the reliability of financial statements, B3 had proposed that, in the annual management report, declarations regarding the effectiveness of the company’s internal controls be presented by the CEO and the CFO, as well as the disclosure of a review report issued by an independent audit firm attesting the evaluation made by the management.

In the second public consultation, the proposal is to maintain the declaration regarding the effectiveness of internal controls, which may be presented in the annual management report, in the reference form, or in a separate document, allowing each company to choose the format that best suits it. Regarding the assurance report by an independent audit firm, B3 opted to withdraw it from the proposal.

  • Sanctions

 

B3 had proposed in its first public consultation the possibility of applying a penalty, by itself, of disqualification at the end of a sanctioning process initiated due to violations of the inspection and control rules, along with an increase in fines.

 

However, concerning the disqualification penalty, the main criticisms were, in summary, that (i) such a measure should not be applied within the context of voluntary self-regulation, (ii) the measure would be contradictory as it would only apply to the Novo Mercado segment, (iii) B3 would not have the authority for its application; and (iv) the costs with D&O insurance and indemnity agreements would be high.

 

Considering this scenario, B3 withdrew from the proposal the creation of the disqualification penalty and the alteration of fine amounts. It is part of the proposal, however, the modification of the monetary correction criterion for fines, which is currently done annually by the variation of the Broad Consumer Price Index (IPCA), to the positive annual variation of the Interbank Deposit (DI) rate.

 

  • Arbitration – Market Chamber

 

Finally, B3 maintained its initial proposal for flexibility in utilizing other arbitration chambers to resolve conflicts involving listed companies and proposes that the criteria for accrediting other chambers be approved by the B3 board of directors.

Updates on public consultations can be accessed through the following link: https://www.b3.com.br/pt_br/regulacao/regulacao-de-emissores/atuacao-normativa/revisao-dos-regulamentos-dos-segmentos-especiais-de-listagem.htm

 

_ STF rejects income tax charge on donor for advance inheritance

In a judgment held on October 23, 2024, the 1st Panel of the Superior Federal Court (STF) unanimously rejected an appeal from PGFN – the Federal Attorney General’s Office, which sought to impose income tax on donations of assets and rights, valued at market price, made by a taxpayer to his children as an inheritance advance.

 

The case was analysed under Special Appeal No. 1.439.539/RS, filed against a decision by the Federal Regional Court of the 4th Region (TRF-4), which had denied the incidence of income tax. PGFN argued that the tax should be applied to the donor’s increase in wealth, i.e., between the difference of the acquisition of the assets value and the value attributed to them at the time of the donation.

 

The reporting minister, Mr. Flávio Dino, stated that the TRF-4’s decision is in line with STF jurisprudence, which establishes that the triggering event for income tax is the actual increase in wealth, which did not occur in the case at hand. This is because, in the case of an inheritance advance, the donor’s wealth is reduced, not increased, which makes the tax imposition unjustified.

 

Furthermore, Dino emphasized that this type of transfer of wealth is already subject to the Inheritance and Donation Tax (ITCMD), a tax under the jurisdiction of states. He states in his vote that the imposition of income tax on the advance on inheritance would result in double taxation, which violates the constitutional principles of isonomy and proportionality.

 

The decision is important in the current context as it reaffirms STF’s jurisprudence, ensuring legal security for those who may wish to advance inheritance, as well as confirming the understanding that the appreciation of the donated asset is already taxed under ITCMD.

 

For more details about the ruling, refer to: https://noticias.stf.jus.br/postsnoticias/stf-rejeita-cobranca-de-imposto-de-renda-de-doador-sobre-adiantamento-de-heranca/

https://portal.stf.jus.br/processos/detalhe.asp?incidente=6651871

RERCT, ampliado, facilita regularização de bens não declarados

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September 2024

_The September edition│2024 of our Newsletter has the following highlights:

– STJ rules on Stock Options commercial nature

– Due to deadlocks, B3 will launch a new public consultation to revise the rules of the Novo Mercado trading segment

– B3 releases the first edition of the Companies Guide

– CVM promotes enhancements to the Empresas.Net System

_STJ rules on Stock Options commercial nature

By a vote of 7 to 1, the 1st Section of the Superior Court of Justice (STJ), in a context of Special Appeals (Theme 1.226), decided that stock options have a commercial and not compensatory nature.

The discussion held in the STJ through REsps 2.069.644 and 2.074.564 was whether the taxation of the acquired shares should occur at the time of purchase (compensatory nature, subject to a 27.5% income tax rate) or at the time of sale (commercial nature, subject to capital gains tax rates ranging from 15% to 22.5%).

The heart of the matter was to determine whether stock option plans should be considered as a part of employees’ compensation or as an independent commercial transaction. This definition would help to identify the applicable income tax rate and the timing of its incidence.

The recognition of the mercantile nature by the Superior Court of Justice has established the understanding that income tax should be applied at the moment the employee sells its shares with capital gain, causing a significant tax impact for individuals. The decision served to preserve the purpose of stock options which is to encourage employee participation in the company’s activities, allowing them to benefit from better performance of the company’s shares in the market.

More details about the Court decision in Portuguese can be accessed through the following link: https://processo.stj.jus.br/repetitivos/temas_repetitivos/pesquisa.jsp?novaConsulta=true&tipo_pesquisa=T&cod_tema_inicial=1226&cod_tema_final=1226.

_ Due to deadlocks, B3 will launch a new public consultation to revise the rules of the Novo Mercado trading segment

B3 plans to launch a new public consultation regarding updates to the Novo Mercado trading segment regulation. The last structural reform of the segment took place in 2017 with the implementation of stricter governance rules. However, after some controversies involving listed companies, B3 decided to revise the regulation to provide greater security to companies in the Novo Mercado.

As a result, in the first half of this year, B3 presented a public consultation with initial changes proposals, which were criticized by law firms, listed companies and market representatives. The 58 contributions to the consultation revealed some issues that need to be solved, particularly regarding the “Under Revision Seal” and the new limitations for board members.

“Under revision” seal

The first topic of the public consultation was the possibility of placing the Novo Mercado seal “under revision” if any of the following events occur: (i) Disclosure of a material fact that indicates the possibility of a material error in financial information; (ii) Delay of more than 30 days in delivering financial information; (iii) Independent auditors’ report with a modified opinion; (iv) Filing for judicial reorganization in Brazil or equivalent procedures in foreign jurisdictions; (v) Inability to maintain an executive officer in their position due to arrest or death, without the disclosure of a replacement or succession plan for more than 7 business days; (vi) Environmental disaster involving the company; and (vii) Disclosure of a material fact regarding a fatal accident involving the company’s employees or service providers in the performance of their duties, which is not accompanied by an action plan or regarding the existence of labor practices that violate human rights within the company’s operations.

The deadlines for the start of fact verification by B3 and the period during which the seal will remain “under revision” were outlined in the proposals listed in the public consultation. According to B3, the purpose of the proposed modification is to allow the Novo Mercado Seal to signal to investors and the market if something significant is happening with the company.

The criticisms on the proposal, however, were almost unanimous among participants of the public consultation. One of the arguments raised was that the function of signaling potential problems to investors is already addressed by CVM Resolution 44, which deals with the disclosure of material facts. Thus, the “under revision” seal could cause further reputational issues for companies and lead to premature reactions from investors, especially because B3’s proposal did not specify whether affected companies would have the right to prior notice or response.

Modifications regarding board members

Another proposal was to limit the participation of board members to a maximum of five boards of listed companies at the same time, except for executive officers (one board), statutory officers (two boards) and Chairmans of a Board of Directors (who can chair one board and participate in up to three more, or chair two boards and participate in one more).

Regarding this, some stakeholders expressed support for the change, while others opposed the limitation arguing that such decision should be made internally by each company. The suggestion made in this case was for the participation of board members in different boards to be disclosed transparently so that companies can make informed decisions.

Another change proposed by B3 was to limit the term during which board members are considered independent to 10 years. This provision was based on data from the “OECD Corporate Governance Factbook 2023,” which cites 29 countries that have a maximum term for board members to remain considered independent, with variations between 5 and 15 years.

In the Brazilian case, after the proposed 10-year period, the board member can remain on the company’s board but will no longer qualify as “independent.”

The main criticisms of the proposal were regarding the established term. The market for independent board members is scarce, which leads to the perception that a 10-year period is too short. The recommendations made in this case were to increase it to 12 years, with a longer adjustment period for companies.

Updates on the public consultation can be accessed in Portuguese through the following link: https://www.b3.com.br/pt_br/regulacao/regulacao-de-emissores/atuacao-normativa/revisao-dos-regulamentos-dos-segmentos-especiais-de-listagem.htm

_ B3 releases the first edition of the Companies Guide

In September, B3 launched the Companies Guide, a publication aimed at guiding listed companies on good practices in corporate governance and regulatory compliance. The guide provides a comprehensive overview of the main requirements and obligations of listed companies, covering topics such as disclosure of material information, compliance, risk management and the responsibilities of managers.

Additionally, the guide consolidates official documents released by B3’s, including recent updates to regulations as well as developments implemented based on practical experience gathered over the years.

The guide can be accessed in Portuguese through the following link: https://www.b3.com.br/pt_br/regulacao/regulacao-de-emissores/atuacao-orientadora/interpretacoes.htm

_ CVM promotes enhancements to the Empresas.Net System

Since December 2023, CVM’s technical department has been implementing changes to the organization’s technology tools. These measures are aligned with CVM’s efforts to promote improvements in the functioning of the capital market and its interaction with the regulatory body.

The most recent change was published through Circular Letter CVM/SEP 7/2024, released on September 11, 2024, which detailed changes to the Reference Form (FRE), the Standardized Financial Statements (DFP) and the Quarterly Information (ITR).

The modifications, which are of a technical nature, are fully listed in Portuguese in Circular Letter CVM/SEP 7/2024.

To access the full details of the latest modifications in Portuguese published in Circular Letters CVM/SEP 04/2024 and CVM/SEP 05/2024, please visit the respective links.

CVM aumenta multas para participantes do mercado

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