Today is the last day of the deadline for submitting suggestions at the public hearing of the Brazilian Securities and Exchange Commission (CVM) regarding changes in the minimum percentages of equity participation for a shareholder of a corporation to file a lawsuit against the officers and directors and the parent company without the provision of collateral.
Launched in October of this year, SDM Public Hearing Notice No. 07/19 opened this discussion seeking to improve the mechanisms for protection of investors and minority shareholders and eliminate obstacles aimed at development of the Brazilian capital markets.
Currently, suits for civil liability against the officers and directors of a given company may be brought by the company itself, after resolution at a general meeting, or by shareholders representing at least 5% of the capital stock. The purpose of these lawsuits is to redress losses caused directly to the Company's equity that, in certain cases, result in damages to shareholders.
In turn, suits for liability against the parent company may be filed, without provision of collateral, by shareholders representing 5% or more of the capital stock or, with the provision of collateral, by any shareholder, in cases where it is believed that the parent company is required to compensate damage it has caused to the company for acts in violation of the duties and responsibilities of the controlling shareholder, which include, for example, the duty to use controlling power to guide the company in the fulfillment of its corporate purpose and in compliance with its social function and responsibility for the non-abusive exercise of the power of control.
The authorization for the CVM to change the minimum percentages required for the exercise of these rights is in the Brazilian Corporations Law itself, provided that two requirements are met: only reduction, not increase, of the percentages provided for by law, and this reduction occurs through the setting of a percentage scale based on the value of the capital stock.
According to the CVM's draft rulemaking instruction, the companies will be divided into ranges of capital stock, which will correspond to certain minimum percentages. Accordingly, the percentage of 5% of the capital stock for the filing of a suit against the officers and directors and the parent company will be applied only to companies with capital stock from 0 to R$ 100,000,000.
Capital stock range (in R$)
Capital stock minimum percentage
0 to 100,000,000
100,000,001 to 1,000,000,000
1,000,000,001 to 5,000,000,000
5,000,000,001 to 10,000,000,000
In addition to suggestions regarding the scale proposed by the CVM in the two cases cited, the federal authority will also receive comments on changes in the minimum percentages of equity interest in the case of requesting to see the company's books, convening a general meeting of shareholders, requesting information from officers and directors, setting up an audit committee, and requesting information from the audit committee. The authority has not proposed specific changes to these items in the draft presented and expects suggestions from the public at the public hearing.
According to a survey by the CVM Economic Analysis and Risk Management Advisory Committee in the report “Critérios para a participação de acionistas em assembleias de companhias de capital aberto” [“Criteria for Shareholder Participation in Meetings of Publicly-Held Companies,” of December of 2018, the proposed scale will affect 77.78% of Brazilian publicly-held companies.
With the approval of the rulemaking instruction, a shareholder holding a smaller shareholding than the one provided for in the CVM’s scale for the range of the company in which it invests will continue to have to provide collateral when filing suit against the parent company.
 Action provided for in paragraph 4 of article 159 of Law No. 6,404/76.
 Action provided for in paragraph 1, “a”, of article 246 of Law No. 6,404/76.
 CEREZETTI, S. C. N., Regulação do Mercado de Capitais e Desenvolvimento [“Capital Market and Development Regulations”], in C. Salomão Filho (coord.), Regulação e Desenvolvimento: Novos Temas [“Regulation and Development: New Topics”], São Paulo, Malheiros, 2012, pp. 190-228.
 The duties and responsibilities of the controlling shareholder are set forth in articles 116 and 117 of Law No. 6,404/76.
 As provided for in article 291 of Law No. 6,404/76.
 Available at: http://www.cvm.gov.br/export/sites/cvm/menu/acesso_informacao/serieshistoricas/estudos/anexos/Criterios_para_a_participacao_de_acionistas_em_assembleias_de_companhias_de_capital_aberto.pdf