_Brazilian Securities and Exchange Commission (CVM) punishes members of the Board of Directors for an irregular capital increase

In a recent decision, CVM punished members of the Board of Directors of a publicly-held corporation due to irregularities regarding a capital increase that was approved in 2008.

The members of the Board of Directors approved the purchase of assets from their controlling shareholder and from a subsidiary thereof and the price paid for these assets was converted into a loan agreement, which credit was used to pay up the capital increase. The execution of the purchase agreement and of the loan agreement was understood by CVM as a deception to carry on a capital increase in assets  without complying with the applicable rules.

THEREFORE, CVM CONSIDERED THAT THE DEFENDANTS ACTED FRAUDULENTLY AGAINST THE LAW AND SENTENCED THEM TO PAY AN INDIVIDUAL FINE OF R$500 THOUSAND.

The decision can be accessed at: http://www.cvm.gov.br/noticias/arquivos/2015/20151215-2.html#clarion

_Brazilian Federal Revenue Services discloses the deadline for the repatriation of funds

The Brazilian Federal Revenue published on March 15, 2016 Normative Ruling 1.627/16 (“NR 1.627”), which regulates the Special Regime of Monetary and Tax Settlement (RERCT). Pursuant to NR 1.627, the final deadline to join the RERCT is October 31, 2016.

The NR can be accessed at: http://normas.receita.fazenda.gov.br/sijut2consulta/link.action?visao=anotado&idAto=72224

For more information on the RERCT, please access our Newsletter dated January 2016 at: [incluir link newsletter Janeiro em inglês]

_Granting of a preliminary court order regarding the obligation of large limited liability companies to publish financial statements

In the State of Minas Gerais, the Federal Regional Court of the 1^st Region decided, within the scope of a preliminary court order filed by a large limited liability company, that the Board of Trade of the State of Minas Gerais (“JUCEMG”) shall no longer require the publishing of the company’s financial statements in the official press or any other newspaper as a requirement to register corporate documents of the plaintiff before JUCEMG.

The plaintiff had filed a Writ of Mandamus due to the refusal of JUCEMG to register the minutes approving the management accounts based on the argument that the financial statements should have been published in the official press and in private newspaper, pursuant to Normative Ruling JUCEMG 03/2010. In the Writ of Mandamus, the plaintiff argued this request represents a mis-interpretation of Article 3 of Law 11.638/2007, which extended the provisions regarding preparation of financial statements set forth in Law 6.404/76 (“Brazilian Corporation Law”) to large limited liability companies, without, however, imposing the mandatory publication of this financial information.

The court agreed with the plaintiff’s arguments and added that, differently from corporations, in which the publication of financial statements is justified by their own nature, in order to give disclosure and visibility to management acts, the disclosure of the financial statements of a limited liability company, even large ones, can be made to partners by any means admitted by law, “there being no legal support and reasonability in demanding that the disclosure of such acts to the partners of a limited liability company be made by publishing them in the official or private press.

FINALLY, THE COURT CONCLUDED THAT, IN ADDITION TO NOT BEING COVERED BY LAW 11.638/2007, THE MANDATORY PUBLICATION OF FINANCIAL STATTEMENTS BY LIMITED LIABILITY COMPANIES, REGARDLESS THEIR SIZE, IS CONTRARY TO LEGAL NATURE OF THESE CORPORATE ENTITIES, LACKING REASONABILITY.