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November 2015

 

_CVM applies fine to former investor relations executive officer due to the lack of disclosure of material facts

In a recent decision, the Brazilian Securities and Exchange Commission (CVM) sentenced the former investor relations executive officer of a publicly-held corporation to pay a fine of R$ 600,000.00 due to the lack of timely disclosing material information regarding the progress of negotiations to sell relevant corporate assets in view of atypical oscillations of share prices.

In this opportunity, CVM Board reinforced its understanding that the disclosure of material facts must occur gradually, as the negotiations evolve, being the corporation also responsible for disclosing the uncertainties surrounding the transaction under discussion.

Besides, CVM acknowledged as an extenuation the fact that the former officer had issued a Market Notice (Comunicado ao Mercado) on the matter; however, pursuant to CVM, the disclosure of market notices does not replace the need of proper disclosure, and, depending on the case, the issue of a material fact release.

THE DISCLOSURE OF A MARKET NOTICE DOES NOT REPLACE THE  NEED OF PROPER DISCLOSURE, AND, DEPENDING ON THE CASE, THE ISSUE OF A MATERIAL FACT RELEASE .

For more information about this decision, access:

http://www.cvm.gov.br/noticias/arquivos/2015/20151027-1.html

_challenges in wealth and succession planning

The possibility of a raise in the tax rate of the Brazilian Estate and Donations Tax (ITCMD) to 20%, which has been highly debated in the last months, has been encouraging the search for wealth and succession planning solutions.

The concern of the families regarding the impact of this tax rate elevation in their assets is, indeed, extremely valid and opportune once, the anticipated implementation of such a wealth or  succession planning may result in the possibility of benefiting from the current ITCMD rates.

In a wealth and succession planning, it is possible to create investment funds, trusts and holdings, to implement donations in order to anticipate inheritance and also to transfer wealth through a will, among other measures.

ON THE OTHER HAND, IT IS NECESSARY THAT THIS PLANNING IS ACCOMPANIED BY A CAREFUL STUDY OF THE DETAILS ON A CASE BY CASE BAIS, INCLUDING IN RELATION TO THE TYPES OF ASSETS HELD AND WHICH STRUCTURE IS BEST SUITED FOR EACH OF THEM.

In the case of assets composed of corporate interests, for example, the creation of a holding has its appeal, because it allows the relation between the partners to be thoroughly detailed from a political and economic point of view. Besides, the holding allows the segregation of family issues from the issues regarding the daily administration of the controlled companies, reducing the impact of disputes within the controlling family on the companies operations.

The donation with withhold of usufruct rights by the donor, on its turn, may be an alternative or a complementation to the creation of a holding. With it, it is possible to anticipate the effects of the apportionment of assets without needing to rely on judicial procedures of probate, and to keep economic and/or political rights inherent to the corporate interests donated by withholding the usufruct rights. Please note that the donation anticipates the payment of part of the ITCMD on the donated assets.

A sensible issue in case of donations is what happens to the asset in case of adverse situations, such as premature death, divorce or insolvency of the heir. In this case, it is possible to protect the assets with the following clauses: reversion, incommunicability and the restraint of mortgage.

WE REITERATE THAT THERE IS NO PRE-DETERMINED FORMULA FOR WEALTH AND SUCCESSION PLANNING. THEREFORE, THE PRECAUTION OF STRUCTURING AND IMPLEMENTING THIS KIND OF PLANNING IN A DETAILED AND CUSTOMIZED WAY PROVIDES MORE SAFETY IN THE FUTURE AND MITIGATES POTENTIAL IMPASSES AND DISSAGREEMENTS AMONG THE PARTIES INVOLVED.

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