_Election of members for the Board of Directors and Fiscal Council of Usiminas appointed by CSN
On April 27, 2016, the Brazilian Antitrust Authorities (Court of Administrative Council for Economic Defense – “CADE”) authorized Companhia Siderúrgica Nacional (“CSN”), by majority vote, to elect members of the Board of Directors and Fiscal Council of its competitor Usinas Siderúrgicas de Minas Gerais S.A. (“Usiminas”) in the Ordinary Shareholder’s Meeting of Usiminas that took place on April 28, 2016 (“AGO Usiminas”). CSN is a shareholder of Usiminas since 2014.
This decision eases the restrictions imposed to CSN regarding the Performance Commitment Agreement (Termo de Compromisso de Desempenho) entered by and between CSN and CADE, which had previously suspended all politic rights of the shares issued by Usiminas that are held by CSN and only allowed CSN to exercise their economic rights. The main explanation for the revision of those restrictions imposed by CADE was the worsening of the financial and corporate situation of Usiminas.
TWO MEMBERS OF CADE POSITIONED THEMSELVES AGAINST THE GRANTING OF csn’S REQUEST, ARGUING THAT THE ORIGINAL DECISION INTENDED TO PREVENT ANY RISK OF ACQUISITION OF COMPETITIVELY SENSILBLE INFORMATION OF USIMINAS BY CSN, AS WELL AS ANY INFLUENCE OF CSN OVER THEIR DIRECT COMPETITOR. HOWEVER, BY THREE VOTES AGAINST TWO, CSN’S REQUEST WAS GRANTED.
The investiture of the members elected by CSN in office was conditioned upon the signing of a term of commitment (Termo de Compromisso) with CADE, to ensure the independence of the professionals. The term of commitment requires that the elected members (i) comply with the Usiminas Bylaws and BM&FBovespa corporate governance rules; (ii) act with independency and transparency in the compliance with their fiduciary duties; and (iii) deliver to Usiminas quarterly reports detailing their activities.
At Usiminas AGO all members appointed by CSN for the Board of Directors and Fiscal Council of Usiminas were elected.
After Usiminas AGO, Usiminas shareholder Nippon Steel obtained from the Courts in Minas Gerais a preliminary injunction to render without effect the election of the members of the Board of Directors and Fiscal Council appointed by CSN. Such preliminary injunction was withdrawn on May 16, 2016 by absence of potential damage.
For further information on CADE’s decision and Usiminas AGO, please access the following links:
http://www.cade.gov.br/assuntos/sessoes/sessoes-pasta-geral/atas-de-julgamento/atas-de-sessoes-ordinarias-de-julgamento/atas-de-sessoes-ordinarias-de-julgamento-2016/ata-da-84a-soj.pdf
http://sei.cade.gov.br/sei/institucional/pesquisa/documento_consulta_externa.php?0T283Hon5_jwyYTHYXMAtTlfrWkiYotEnjqpovMDCQo62FTMP-DaniUl9eEARbSldbMHYmWOBzjp_WxCQ03BAw
http://v4-usiminas.infoinvest.com.br//ptb/5167/Ata%20AGO%202016_com%20Anexos_.pdf
_Brazilian Securities and Exchange Commission (CVM) punishes managers and controlling shareholder for establishing irregular compensation
In a recent decision, CVM condemned managers and the controlling shareholder of a publicly held corporation for approving excessive compensation for the managers during consecutive years.
It regards a publicly held corporation, whose management was composed by three members of the Board of Directors and two members of the Board of Officers and four of them were part of the family that indirectly controlled the company.
CVM’s Superintendence of Company Relations (“SEP”) verified that the compensations defined by the Board of Directors of the company were excessive based on surveys by the Brazilian Institute of Corporate Governance (IBGC – Instituto Brasileiro de Governança Corporativa). In addition, SEP understood that the compensation approved was inconsistent with the services provided by each manager, since the Chairman of the Board of Directors received a higher compensation than the Chief Executive Officer.
Notwithstanding the CVM final decision, the majority of their members agreed the inconsistency with market practices regarding the determination of the compensation of the members of the Board of Directors does not mean necessarily a violation of Article 152 of Law 6.404/76 (“Brazilian Corporation Law”). This rule grants managers room for appreciation regarding the definition of compensation structure and value, which allows the company to recruit and retain good professionals, having power to set the value of the compensation higher than market standards, if this is in the Company’s interest.
Therefore, this rule requires members of the Board of Directors to be careful when establishing their own compensation, subject to characterization of misuse of power or, depending on the circumstances, lack of loyalty. The caution must be higher when the manager is also a controlling shareholder or a related party thereto, as it was the case here.
CVM also agreed, by majority of votes, based on the elements of evidence presented, that the decision-making process conducted by the directors of the company in this case was not consistent with the conduct required from them.
The controlling shareholder was responsible for taking part in the deermination of the excessive compensation, in violation of Article 152 of the Brazilian Corporation Law, not only for not taking any action to correct the deviations in the compensation, which were repeated for years, but also for approving the global compensation of the managers over the years in question, already knowing that the portion allocated to the directors was exorbitant.
IN LIGHT OF THIS, CVM APPLIED AN INDIVIDUAL FINE FOR EACH DEFENDANT IN THE AMOUNT OF R$500 THOUSAND FOR EACH YEAR IN WHICH THE DETERMINATION OFMANAGEMENT COMPENSATION WAS IRREGULAR.
CVM decision can be fully accessed at the link below:
http://www.cvm.gov.br/export/sites/cvm/sancionadores/sancionador/anexos/2016/20160421_PAS_RJ20145099.pdf
_Change of IOF tax rate in foreign exchange transactions
On May 02, 2016, Decree 8.731 was published and, among other changes, it modifies the tax rate for the Tax on Credit, Exchange and Insurance or Securities Transactions (IOF) for certain Transactions. This decree:
- reduces to zero the IOF tax rate levied on the settlement of foreign exchange simultaneous transactions for the entry of resources in Brazil, arising from a change of status of the foreign investor from a foreign direct investor (Law No. 4.131/1962) to an investor in negotiable secutiries at the stock exchange (Resolution CMN No. 4.373/2014), that was previously 0.38%; and
- increases to 1.10% the IOF tax rate levied on the settlement of foreign exchange transactions for the acquisition of foreign currency in cash, that was previously 0.38%.
Decree 8.731 can be accessed at:
