The Brazilian Securities and Exchange Commission (CVM) has initiated the process of a public hearing for the preparation of a new regulatory instruction whose objective is to establish rules for holding of general meetings of debentureholders (AGD) by digital means.
The rule covers only debentureholders' meetings related to public issues and held by publicly-held companies. Private debentures and public offerings conducted by companies that are not registered with CVM are not included, even if such issues were done with restricted placement efforts, pursuant to CVM Instruction 476. The instruction does not address other publicly distributed real estate securities, such as CRIs (Real Estate Receivables Certificates), CRAs (Agribusiness Receivables Certificates), and promissory notes.
The approach of the new rule proposed is similar to that of CVM Instruction No. 622, which regulated the holding of digital meetings for publicly-traded companies in Brazil and whose main aspects were dealt with here on the Legal Intelligence portal.
Such measures are part of the package of rules issued by CVM to tackle some of the challenges imposed by the covid-19 pandemic. The public hearing notice highlights that the wording proposed is preliminary and that both the new instruction and CVM Instruction 622 will be subject to a broader review within CVM's planning to promote improvements to the changes implemented by them. The objective is to promote an evolution towards the adoption of digital mechanisms that had already been demanded by the market and were accelerated by the pandemic.
As determined by CVM Instruction 622 for the notices convening shareholders' meetings, the draft of the new instruction provides that notices convening shareholders' meetings must contain guidelines for debentureholders regarding the procedures for participation and voting through digital means. Also in the same line of CVM Instruction 622, the draft proposed by CVM provides that the company may require prior submission of documentation from debentureholders who wish to participate in the AGD remotely and that a digital protocol be made available for this purpose (another possibility is to submit the documentation at the time of the AGD, in the event of participation in person).
Seeking to incorporate a mechanism similar to the ballot paper used by publicly-traded companies in their shareholders’ meetings, as provided for in CVM Instruction 481, the agency proposes in the draft of the new rule that the debentureholders' vote may also be exercised by means of the sending of a vote instruction. In this case, the company or the fiduciary agent of the issuance shall make the template document available to send the vote instruction, so that the debentureholder may exercise it using already known options such as "approve", "reject", or "abstain".
Both the issuer and the fiduciary agent, as applicable, shall be responsible for providing the means for remote voting. On this point, it is worth highlighting article 10 of the draft instruction, which provides for the responsibility of the issuer's Investor Relations director, or the fiduciary agent, as the case may be, for the information and documents made available to debentureholders for the exercise of their voting rights.
Also similar to CVM Instruction 622, a provision was inserted into the draft that, exceptionally, AGDs convened before the entrance into force of the new instruction may be held digitally, provided that the remote voting procedure is described in a material fact released by the company, in the case of meetings convened by the issuer, or in a release by the fiduciary agent addressed to all debentureholders, at least five days in advance of the holding of the AGD.