Mês: September

_the september│2023 edition of our Newsletter has the following highlight:

– CVM proposes reform in the rules and procedures of shareholders’ general meeting

– Review of the G20/OECD Corporate Governance Principles

– Judicial summons via messaging app may be valid if it provides unequivocal notice of the lawsuit

– Accession of the Fortaleza football team to the Football Joint-Stock Company (Sociedade Anônima do Futebol – SAF)

_ CVM proposes reform in the rules and procedures of shareholders’ general meeting

The Brazilian Securities and Exchange Commission (“CVM“) initiated on September 21, 2023, public consultation SDM 01/2023 with proposals for amendments to CVM Resolution No. 81/2022, which set forth the rules and procedures related to shareholders’ general meetings.

The proposal provides for the expansion and improvement of the mechanisms of remote participation and voting and is part of the CVM’s regulatory agenda for the year 2023.

The main points covered by the amendment proposal are:

• Expansion of the circumstances requiring the disclosure of the remote voting ballot for all shareholders’ meetings, i.e. general, or special, annual or extraordinary;
• Improvement of the remote voting ballot to incorporate the experience of CVM and the companies from recent years;
• Inclusion of cases for exemption from the obligation to provide the remote voting ballot, for situations in which shareholders are not using such mechanism; and
• Adjustments in the transmission flow of voting instructions, in order to optimize the use of the timeframe for collecting, processing and counting votes by the regulated entities involved in the process.

Suggestions and comments may be forwarded to the CVM until November 24, 2023.

More information about the public consultation SDM 01/2023 can be found in the link below:

https://conteudo.cvm.gov.br/audiencias_publicas/ap_sdm/2023/sdm0123.html

_ Review of the G20/OECD Corporate Governance Principles

On September 11, 2023, the G20 and the Organization for Economic Cooperation and Development (OECD) updated the Principles of Corporate Governance to promote corporate sustainability, trust and financial stability. The G20/OECD Corporate Governance Principles, considered to be the international standard for corporate governance, help policymakers assess and improve the legal framework and corporate governance of companies, as well as support market confidence.

Revised in 2023 to reflect recent developments in capital markets and corporate governance policies and practices, the update of the Corporate Governance Principles took into consideration, among other aspects:

• sustainability recommendations, including guidelines for dealing with the climate crisis and addressing other risks and/or opportunities;
• gender equality;
• concentration of corporate control;
• encourage the use of technology in corporate governance practices, such as remote and hybrid shareholders’ meetings;
• the role and rights of shareholders.

The Principles are divided into six segments: (i) ensuring a solid corporate governance structure; (ii) rights and equitable treatment of shareholders; (iii) institutional investors, stock markets and other intermediaries; (iv) promoting information disclosure and transparency; (v) defining the obligations and responsibilities of the board of directors; and (vi) emphasizing sustainability.

More information on the Corporate Governance Principles can be accessed through the link below:

G20/OECD Principles of Corporate Governance – OECD

_ Judicial summons via messaging app may be valid if it provides unequivocal notice of the lawsuit

According to a recent ruling by the Third Chamber of the Superior Court of Justice (“STJ“), the judicial summons via messaging app may be considered valid if it fulfills the purpose of providing the recipient unequivocal notice of the lawsuit filed against them, even if such practice lacks legal basis.

In the case decided by the Third Chamber of the STJ, the decision was for the annulment of a summons made via a messaging app, since it was found to have harmed the defendant, as they became absent or in default in the lawsuit.

Due to the absence of any legal basis or authorization, Minister Nancy Andrighi, rapporteur of the case, stated that the communication of legal proceedings via messaging app has a defect in terms of form, which could lead to its annulment. Nevertheless, the Minister also concluded that, in the context of civil procedural legislation, the general rule is freedom of forms, and it is necessary to investigate in these situations whether a deviation from the form provided for by law necessarily implies nullity of the act or whether, if the intended purpose is achieved (i.e. effective notification), it could eventually be validated.

More information about the aforementioned decision of the STJ can be accessed at the link below:

https://www.stj.jus.br/sites/portalp/Paginas/Comunicacao/Noticias/2023/22082023-Citacao-por-aplicativo-de-mensagem-pode-ser-valida-se-der-ciencia-inequivoca-da-acao-judicial.aspx

_ Celerity of corporate courts

A study points out that the average time of processing business lawsuits in specialized courts of the Court of Justice of the State of São Paulo (TJSP) is almost half the time of processing in generalist courts.

There are four specialized courts in the State of São Paulo and according to the study, the lawsuits in progress are divided into the following demands:

• 37% are about corporate issues;
• 23% are related to intellectual property and data protection;
• 20% correspond to cases of recovery and bankruptcy;
• 16% are related to contractual disagreements;
• 3% are arbitration-related topics; and
• 1% deal with other topics.

The central idea of the study was to evaluate whether the main objectives for the creation of such courts are being met, namely: celerity, quality, and predictability. The relevance of this issue lies in the billions of Brazilian Reais involved in the lawsuits and in ensuring legal certainty for investors, since without the business courts, cases of this nature would be distributed to the civil courts, which carry demands of the most varied natures.

More information about the study can be accessed in Portuguese through the link below:

https://valor.globo.com/legislacao/noticia/2023/08/01/varas-judiciais-empresariais-sao-mais-celeres.ghtml

_ Accession of the Fortaleza football team to the Football Joint-Stock Company (Sociedade Anônima do Futebol – SAF)

Fortaleza has just become another Brazilian football team to be framed as SAF. On September 22, 2023, supporters-members and board members voted to amend the bylaws of the Nonprofit Association to transform it into a SAF. In total, 1.256 club members voted, setting a historic recorded for the club in terms of voting participation.

The transformation into SAF aims to expand credit lines, implement professional governance models and improve attractiveness for potential investors. This model allows the retention of key decision-making and control of the club’s management, while also giving fans the opportunity to acquire assets of the institution.

In addition to the approval of the amendment of the bylaws, the necessary acts to adapt the SAF were carried out, including the election of the members of the Board of Directors and members of the Fiscal Council. There will also be the creation and hiring of the Chief Executive Officer (CEO), who will be responsible for the management of all the club’s football-related matters.

More information about the SAF of Fortaleza in the link below:

https://ge.globo.com/ce/futebol/times/fortaleza/noticia/2023/09/23/saf-do-fortaleza-e-aprovada-com-1195-votos.ghtml

_the september│2022 edition of our Newsletter has the following highlight:

– CVM eases rules for legal publications of small sized listed companies

– CVM regulates on rules of the Brazilian Corporate Law on plural voting and on the composition of the Board of Directors of listed companies

– The online version of the 2023 reference form (Formulário de Referência) is now available

_CVM eases rules for legal publications for small sized listed companies

On September 1, 2022, the Brazilian Securities and Exchange Commission (“CVM“) edited CVM Resolution No. 166 (“RCVM 166“) in order to make easier to disclosure publications required by Law No. 6404, of December 15, 1976, as amended (“Brazilian Corporate Law“) for small sized listed companies, considered as those whose annual gross revenues are lower than five hundred million reais (R$500,000,000.00).

RCVM 166 allows small sized companies to disclosure the publications required by the Brazilian Corporate Law and by CVM itself through Empresas.Net or Fundos.Net systems, with no additional charges. The publications will be considered to have been disclosed on the dates they were released on the aforementioned systems.

Regarding the publications carried out by third parties, as it is the case of a bid offer, provided for in article No. 258 of the Brazilian Corporate Act, the third party may send the applicable documents to the company, which will be responsible for the immediate publication in the Empresas.Net or Fundos.Net systems. If the company does not disclose the documents sent, the third party shall arrange its disclosure in a wide circulation newspaper published at the same place of the company’s headquarters.

According to João Pedro Barroso do Nascimento, current President of CVM, RCVM No. 166, which will come into effect on October 3, 2022, brings important modernization, which will make companies and the business environment more flexible and unburdened. It is a flexibilization that generates cost reduction.

RCVM 166 can be accessed in Portuguese through the link below:

https://conteudo.cvm.gov.br/export/sites/cvm/legislacao/resolucoes/anexos/100/resol166.pdf

_CVM regulates on rules of the Brazilian Corporate Law on plural voting and on the composition of the Board of Directors of listed companies

On September 20, 2022, CVM edited CVM Resolution No. 168 (“RCVM 168”), which seeks to regulate legal provisions introduced by Law No. 14.195/2021 in the Brazilian Corporate Law, regarding the composition of the board of directors of listed companies and plural voting on shareholders’ meetings.

Among the changes is the possibility of accumulating the positions of chief executive officer and of chairman of the board of directors in small sized companies whose annual gross revenues are less than five hundred million reais (R$500,000,000.00).

The RCVM 168 also determined that, pursuant to article 140, 2^nd paragraph of the Brazilian Corporate Law, it is mandatory for independent directors to participate in listed companies’ board of directors who cumulatively meet the following requirements::

• are registered in category A;
• have securities admitted for trade on the stock exchange market by an entity that manages an organized market; and
• have shares or Depositary Receipts outstanding.

Regarding the classification of members of the board of directors as independent, RCVM 168 adopted equivalent criteria as those covered in the Novo Mercado Regulation.

In addition, RCVM 168 also established that plural voting does not apply to shareholders’ meetings that resolve on related party transactions that must be disclosed pursuant to Appendix F of CVM Resolution No. 80, which addresses the related party transaction communication.

The changes will come into effect on October 3, 2022,  provided that the changes regarding the management of companies only apply to managers’ terms starting from January 1, 2023 on.

RCVM 168 can be accessed in Portuguese through the link below:

https://conteudo.cvm.gov.br/export/sites/cvm/legislacao/resolucoes/anexos/100/resol168.pdf

_The online version of the 2023’ reference form (Formulário de Referência) is now available

On August 28, 2022, CVM/SEP Letter No. 04/2022 was published by the CVM to inform listed and foreign companies about the continuity of the migration process of structured forms to online platform Empresas.Net system.

The measure promises to bring more agility in navigating the Empresas.Net system by eliminating the need to download and run the application on a computer.

In this regard, the test period of the new platform for sending the reference form (Formulário de Referência), FRe Online, began on September 1, 2022, and is now available on Empresas.Net system.

During the test period, companies may send CVM suggestions for improvements to enhance its navigation. This is extremely important since the use of the new platform will be mandatory from January 1, 2023.

FRe Online already reflects the new structure of the reference form established by CVM Resolution No. 59, which will come into force on January 02, 2023. If, on one hand, the resolution, among another measures, simplified the structure of the reference form by excluding some items, on the other hand it included the requirement for disclosure of new information, such as, for example, information related to ESG topics and practices.

The full CVM Letter No. 04/2022 and the Empresas.Net System can be accessed in Portuguese through the following links:

CVM Letter:

https://conteudo.cvm.gov.br/legislacao/oficios-circulares/sep/oc-sep-0422.html

Empresas.Net System website

https://www.rad.cvm.gov.br/ENET

_the september│2021 edition of our Newsletter has the following highlight:

– Amendments related to companies’ management in the Brazilian Corporation Law carried out in 2021

_Amendments related to companies’ management in the Brazilian Corporation Law carried out in 2021

Throughout 2021, several amendments were made in the Law No. 6,404, of December 15th, 1976 (“Brazilian Corporation Law”) that resulted in the modification of rules related to companies’ management, in addition to other corporate matters.

In June 2021, the Supplementary Law No. 182 of 2021 (“Supplementary Law 182/21”), known as the Legal Framework for Startups, was published, with the aim to modernize the business environment in Brazil and influence innovative investments. In August 2021, the Law No. 14,195 of 2021 (“Law 14,195/21”) was published, resulting from the conversion process of the Provisional Measure No. 1,040 of 2021 (“MP 1,040/21”), issued by the Federal Government earlier this year, in order to simplify and improve the mechanisms related to companies and investments in Brazil.

In general terms, the main changes made to the rules relating to the management of companies were:

• Accumulation of positions: The prohibition for publicly held companies of the accumulation of the position of Chairman of the Board of Directors and the position of Chief Executive Officer or main executive officer of the company was introduced by MP 1.040/21 and established with the publication of Law 14,195/21. The Brazilian Securities and Exchange Commission (“CVM”) may issue rule that exempts such prohibition for smaller-sized companies, as provided in article 294-B of the Brazilian Corporation Law (Article 138, paragraphs 3rd and 4th of the Brazilian Corporation Law).
• Independent Directors: The Law 14,195/21 extended the mandatory participation of independent directors in the composition of the Board of Directors to all publicly held companies, under the terms and conditions defined by CVM, which previously was previously applicable only to publicly-held companies listed in the Novo Mercado and Level 2 segments of B3 S.A. – Brasil, Bolsa e Balcão (Article 140, paragraph 2nd, of the Brazilian Corporation Law).
• Composition of the Board of Officers: Previously, if was mandatory for the Board of Officers to be composed of at least two members. However, with the publication of the Supplementary Law 182/21, the Board of Officers can be composed of only one member (Article 146, caption, of the Brazilian Corporation Law).
• Foreigners in the Management: The Law 14,101 allowed the election of foreign natural individuals to the composition of the Board of Officers, which was previously allowed only for the Board of Directors. In this case, the investiture of the manager residing or domiciled abroad must be subject to the constitution of a representative residing in Brazil, with powers to, at least three (3) years after the end of the manager’s term of office, receive: (i) summons in actions filled against such member based on the corporate legislation; and (ii) summons and subpoenas in administrative proceedings filled by CVM, in the case of exercise of management position in a publicly-held company (Article 146, caption and paragraph 2nd, of the Brazilian Corporation Law).

CVM has still not comment on the matters that are assigned to it to issue supplementary instructions.

The full texts of the Supplementary Law 182/21 and the Law 14,195/21 can be accessed through the links below:

http://www.planalto.gov.br/ccivil_03/leis/lcp/Lcp182.htm

http://www.planalto.gov.br/ccivil_03/_ato2019-2022/2021/lei/L14195.htm

_the September│2020 edition of our Newsletter has the following highlights:

– Brazilian Securities and Exchange Commission fines managers for using assets of publicly held company for private purposes

– Brazilian Securities and Exchange Commission judges proceeding regarding the disclosure of guidance

– São Paulo’s Board of Trade regulates the use of electronic signatures in corporate acts

_ Brazilian Securities and Exchange Commission fines managers for using assets of publicly held company for private purposes

The Administrative Sanctioning Process of the Brazilian Securities and Exchange Commission (“CVM”) No. 19957.010904/2018-18 (RJ2018/8378) aimed to determine the responsibility of (i) the Chairman of the Board of Directors of a publicly held company for using an aircraft owned by the company for private purposes, in breach of the provisions set forth in article 154, Paragraph 2, paragraph “b” of the Brazilian Corporate Law (which prohibits the use of company assets, for personal reasons, without prior authorization from the general shareholders’ meeting or the board of directors);  and (ii) the Chief Executive Officer for failing to comply with his duty of diligence (article 153 of the Brazilian Corporate Law) considering that he granted authorization for the aircraft use for personal reasons, as well as did not implement control mechanisms to ensure that the company’s assets and services were only used in accordance with its objectives.

The investigations by the Superintendence of Corporate Relations (Superintendência de Relações com Empresas – SEP) began due to news published in the media stating the Chairman of the Board of Directors had traveled with his family in an aircraft owned by the company. The company claimed that the use of the airplane was essential to safeguard the personal safety of its chairman, a measure that would be in line with the company’s interests. Furthermore, it argued that the travel expenses were minimal, and that the approval of the management accounts at the ordinary shareholders’ meeting had already released the company’s managers from their responsibilities regarding this matter. As for the authorization to use the airplane, they informed there were non-formalized procedures regarding its use and that it was not reasonable to expect the CEO to bear the responsibility to establish internal controls for matters of “minor nature”.

The prosecution, however, understood that neither the use of the company’s airplane was necessary nor the only way to guarantee the safety of the chairman, who could bear the costs of such trip or, at least, reimburse such incurred expenses. In addition, the use of the aircraft was not considered as part of the management’s indirect compensation, therefore could not be considered as a benefit given to the company’s executives. They also recalled that the company had previously informed that there were no formal procedures for the use of the company’s airplanes and that the CEO personally granted authorization for their use, which is why he should be held responsible for the improper use of such assets.

In the vote of the reporting director, President Mr. Marcelo Barbosa, he reinforced the following topics:

• the approval of the management accounts does not exclude CVM’s punitive right, this only applies to civil claims;
• the use of the airplane could not be considered as a benefit granted to company’s executives, as it was not part of their indirect compensation;
• a prior specific authorization of the general shareholders’ meeting or of the board of directors to use the airplane was not proven in the records, according to the provisions of article 154, § 2, item “b” of the Brazilian Corporate Law. In this case there was only an authorization by the CEO;
• no plausible justification was provided for why the company should bear the expenses of the chairman’s trip;
• the low amount involved in the use of the airplane could not rule out the illicit act performed by such managers, under the terms of said article 154, §2, item “b” of the Brazilian Corporate Law;
• the creation of internal controls is part of the CEO’ powers, according to the company’s bylaws and is also essential in order to fulfill the duty of diligence, mainly due to the difficulties inherent in the inspection of the company’s management acts;
• considering the highly procedural nature of the duty of diligence, especially in the inspection field, it is important that adequate records of internal processes are maintained, and when in need of consultation, such record should show the diligent conduct. In this case, the procedure described by the company did not provide for requirements, nor did it generate records capable of demonstrating the convergence of the manager’s act with the best interests of the company, a situation which disfavors the creation of an environment averse to acts in deviation of purpose.

Finally, CVM’s Board, unanimously and following the reporting director’s vote, decided to condemn:

• the chairman to a penalty fine in the amount of R$400.000,00 for the non-compliance with the provisions of article 154, § 2, item “b”, of the Brazilian Corporate Law, for using the airplane owned by the company for private purposes; and
• the CEO to a penalty of (i) fine in the amount of R$400.000,00 for the non-compliance with the provisions of article 154, § 2, item “b”, of the Brazilian Corporate Law, for authorizing the use of the referred airplane by the chairman; and (ii) fine in the amount of R$300.000,00 for the non-compliance with the provisions of article 153 of the Brazilian Corporate Law, for disrespecting the duty of diligence due to the lack of adoption of procedures and caution required in the management of publicly-held companies when making decisions regarding the implementation of controls and allowing the use of the company’s airplanes.

More information regarding PAS CVM 19957.010904/2018-18 (RJ2018/8378) can be accessed, in Portuguese, at the link below:

http://www.cvm.gov.br/export/sites/cvm/noticias/anexos/2020/20200721_PAS_CVM_SEI_19957_010904_2018_18_voto_presidente_marcelo_barbosa.pdf

_ Brazilian Securities and Exchange Commission judges proceeding regarding the disclosure of guidance

On August 18, 2020, CVM judged the Administrative Sanctioning Process SEI 19957.011190 / 2019-38 (RJ2019 / 9652), established by SEP to ascertain the responsibility of a member of the board of directors for disclosing guidance , which had not yet been disclosed to the market, in breach of article 155, § 1 of the Brazilian Corporate Law and article 8 of CVM Resolution No. 358/2002.

The proceeding originated from investigations carried out by SEP, due to an article published in a newspaper which presented some statements of the director regarding the company’s guidance for the year. On the same date of said publication, the company disclosed a material fact confirming the existence of internal documents that foresaw the estimative mentioned by the director and, after being questioned by SEP, the company informed that the director had received a presentation and attended a board of directors’ meeting in which said presentation was presented.

The director stated that the disclosure of confidential information was made at a meeting in response to statements issued by an entrepreneur (with no apparent ties to the company), due to his institutional duty.

However, according to the vote of the reporting director, President Mr. Marcelo Barbosa, there is no basis in the information and documents provided in the case which support the allegations of the director. At that time, the market did not have enough information to create assumptions about said company’s guidance.

IN HIS VOTE, MR. BARBOSA REINFORCED THAT GUIDANCE, DUE TO ITS NATURE, HAS THE POTENTIAL TO INFLUENCE IN THE DECISION TO INVEST IN A COMPANY, WHICH IS WHY CVM ESTABLISHES APPROPRIATE RULES AND PROCEDURES FOR THEIR DISCLOSURE AND/OR MODIFICATION, SHOULD THE COMPANIES CHOOSE TO DO SO, IN ORDER TO AVOID INFORMATIONAL ASYMMETRIES.

In this case, it was proved that the guidance disclosed was a confidential and relevant to the market, considering that it was related to the reduction of the company’s EBITDA for said year. Therefore, the Company properly disclosed a material fact regarding this matter, on the same day the article was published, which corroborates the reporting director’s understanding of breach of the director’s duty of confidentiality.

In this sense, CVM’s Board decided, unanimously and following the reporting director’s vote, to convict the director to a fine of R$100,000.00, due to the non-compliance with article 155, § 1, of the Brazilian Corporate Law, combined with article 8 of CVM Resolution No. 358/2002.

More information regarding PAS CVM SEI 19957.011190/2019-38 (RJ2019/9652) can be accessed, in Portuguese, at the link below:

http://www.cvm.gov.br/noticias/arquivos/2020/20200818-3.html

_ São Paulo’s Board of Trade regulates the use of electronic signatures in corporate acts

On August 20, 2020, Resolution No. 01 of the Board of Trade of the State of São Paulo (“Resolution No. 01”) was published, which explains the form of presentation and filing of corporate acts which are electronically signed, in line with the provisions of SEI Circular Letter nº 2563/2020/ME also published in August. Pursuant to Resolution No. 01, the following signature classifications will be accepted: (i) qualified electronic signature, which uses an eCPF digital certificate, standard ICP-Brasil; (ii) advanced electronic signature, which shall be associated with the signatory in an unequivocal way and shall indicate its temporality; and (iii) personal signature. Corporate acts which contain simple electronic signatures shall not be accepted, and, those which do not comply with the levels and parameters presented in Resolution No. 01, will not be eligible for registration either. Finally, while the full digital system is not implemented, all corporate acts may be scanned, signed by the parties or attorneys-in-fact, provided that they have specific powers and the grantor’s notarized signature.

Further information on Resolution No. 01 (in Portuguese) and SEI Circular Letter No. 2563/2020/ME (in English) can be accessed through the links below, respectively:

http://www.institucional.jucesp.sp.gov.br/downloads/deliberacao_%2001_2020_assinatura_19_08.pdf

https://www.cdoadv.com.br/en/publicacoes/august-2020/

_ the September │ 2019 edition of our Newsletter has the following highlights:

– Considerations regarding Capitalization of Retained Profits by Companies

– STJ excludes quotaholders of a dissolved company as defendants in an enforcement proceeding

– CVM expands the possibility of distant voting by shareholders

_ Considerations regarding Capitalization of Retained Profits by Companies 

Pursuant to articles 194 to 196 of the Law n° 6.404/76 (“Brazilian Corporation Law”), if there is a remaining balance of net profits of the fiscal year after the due legal destination, subject to the provisions of each company’s bylaws, it shall necessarily be (i) allocated to statutory reserves, if applicable; (ii) retained for the execution of the capital budget, if previously approved by the company’s general meeting; or (iii) distributed to shareholders as additional dividend, pursuant to article 202, paragraph 6 of the Brazilian Corporation Law. Profits which were retained in the reserves may be allocated, upon the company’s general meeting’s decision, to the stock capital, except for the unrealized profits and the contingency reserves.

The capitalization of profits provided for in article 169 of the Brazilian Corporation Law corresponds to a type of capital increase with the company’s own resources without increase of its assets. The Brazilian Securities and Exchange Commission (“CVM”) and the legal doctrine understands that, unlike capital increases upon the issuance of new shares, in which there is an effective inflow of funds to the company’s equity, the capital increase through capitalization of profits constitutes a reallocation of values that already exist in the balance sheet.

Therefore, if new shares are issued as a result of the capitalization of profits, they are conferred only as an update of the shareholder’s interest in the company.

Finally, the legal doctrine states that the company’s management is responsible for proposing the capital increase through capitalization of profits or capitalization of reserves. Such proposal shall be approved in the shareholders general meeting by the absolute majority of votes, excluding blank votes. In case of an authorized capital company, the deliberation may be taken by the board of directors, pursuant to the terms of the company’s bylaws.

_ STJ excludes quotaholders of a dissolved company as defendants in an enforcement proceeding

On April 2^nd, 2019, the Superior Court of Justice (“STJ”) decided on REsp nº 1.784.032 (“Special Appeal”), filed against a judgment that held quotaholders of a limited liability company (“Company”) as defendants in an enforcement proceeding against the Company.

Originally, the Company was the defendant of an indemnifying motion and, before the court’s decision, with the consequent constitution of an execution instrument, the quotaholders decided to dissolve the Company regularly, in accordance with the procedures provided for in the Brazilian Civil Code regarding the termination of limited liability companies. In the dissolution, the quotaholders did not receive any asset or liabilities of the Company. With the Company conviction, the creditor initiated the enforcement proceeding and, as the Company was extinct, it requested the quotaholders inclusions as defendants.

Considering that the Company was regularly extinct, without proof of fraud, misuse of purpose or property confusion, the quotaholders filed the Special Appeal to reverse the decision which included them as defendants, since the rules regarding civil or procedural succession, applicable at the time of the extinguishment of the legal entity, were not observed by the ordinary instances.

By unanimity of votes of the members of the 3^rd Chamber of the STJ, the Reporting Justice excluded the quotaholders as defendants in the enforcement proceeding, according to the following arguments:

• within the scope of civil obligations, “lifting the corporate veil” of the legal entity, which cannot be confused with its extinguishment, is only possible when there is proof of the abusive use of the legal entity, whether due to misuse of its purpose or demonstration of property confusion;

• the original court, when applying the disregard of the legal entity, admitted the succession of the Company, which was the original defendant of the indemnifying motion, determining the replacement of the Company by its quotaholders, without complying with legal procedures for granting the claimed succession. In addition, the extinguished Company was a typical limited liability company and its liquidation did not result in assets sharing, because there was no net equity, neither assets nor liabilities by the time of the Company termination; and

• the succession by quotaholders was not applicable, since, according to article 1.052 of the Brazilian Civil Code, after the capital stock is fully paid, quotaholders of limited liability companies are not responsible for the company’s losses. Therefore, once the company is dissolved and the disputing legal entity is extinguished, without the distribution of remaining assets, there is no viability for the claim of redirecting the enforcement of the execution instrument against the company’s former quotaholders.

Additional information regarding the Special Appeal can be accessed in Portuguese at:

https://ww2.stj.jus.br/processo/revista/inteiroteor/?num_registro=201803219004&dt_publicacao=04/04/2019

_ CVM expands the possibility of distant voting by shareholders

On September 3^rd, 2019, CVM issued the Normative Ruling No. 614/2019 (“ICVM 614”), which changes a specific matter of the Distant Voting Bulletin (“Bulletin”).

Currently, when filling out the Bulletin, shareholders shall choose between (i) requiring the separate election of members of the board of directors and voting in the candidate of their choice; or (ii) participating in the general election of the members of the board of directors, including through the multiple voting procedure.

According to the new wording of the Bulletin, which will be effective on January 1^st, 2020, shareholders may state their voting intention to both situations described above. However, the votes regarding the general election of members of the board of directors shall only be valid if the quorum required for the separate election is not reached, within the terms of article 141, paragraph 4, of the Brazilian Corporation Law.

More information regarding ICVM 614 can be accessed in Portuguese at:

http://www.cvm.gov.br/legislacao/instrucoes/inst614.html