The modernization of disclosure of company information has finally gained momentum in Brazil. Published on August 5, Executive Order (MP) No. 892/2019 substantially changed the framework for legal publications by corporations.

This is a subject that has been much discussed over the last few years, especially because of the exponential evolution of the internet and the means of access to information on companies currently used by their shareholders and the market in general.

While companies are eager to reduce their costs with publishing in newspapers, which in reality no longer fulfill the purpose of disseminating information to the market, printed media, which charge considerable amounts for the service, insist that the dissemination of information in newspapers still has a purpose.

The fact is that MP 892 extinguishes the need to publish, both in the official gazettes and in printed newspapers published in the locality of company headquarters, of all acts whose publication is mandated by Law No. 6,404/1976 (the Brazilian Corporations Law). The measure also establishes that, based on the regulations of the Brazilian Securities and Exchange Commission (CVM), in the case of publicly-held companies, and per the Minister of State, in the case of privately-held companies, legal publications are made exclusively on the websites of the CVM and the market management entities on which securities issued by the companies are admitted for trading.

In practice, MP 892 simplifies the administrative and corporate routine of companies, especially publicly-held companies, generating savings and faster disclosure of relevant information to the market in general. MP 892 also states that digital publications mandated by it may not be charged fees by the CVM and/or B3.

The measure updates a norm from the 1970s to conform with the current reality and seems to us to be beneficial to the Brazilian market in every respect. However, special attention needs to be paid to the effectiveness of MP 892, as the definitive implementation of the purely digital publishing system still needs regulations. The text states in its article 5 that only on the first day of the month following the issuance of the regulations shall the changes promoted take effect.

MP 892 will be effective for a maximum of 60 days, renewable for the same period, and will lose its validity if not converted into law by the Brazilian Congress. Statements by the Speaker of the Chamber of Deputies in reaction to the publication of MP 892 suggest that there may be adjustments and a transitional regime may be proposed.

Accordingly, until the regulations are issued, the old rules that require publication in the newspapers for various acts of companies, such as corporate reorganization, issuance of securities, and convening of shareholders' meetings, will still be in force. Failure to comply with the old rules may lead to administrative and judicial litigation regarding the validity of the acts in question.

Although the CVM’s regulation on the publication of relevant information is already considerably aligned with the objective of MP 892, it is necessary to await the new regulations in order to be able to evaluate what the impacts will be for publicly-held companies’ disclosure policies and the receptivity of the market to the new regime.

Depending on the rules established, MP 892, if converted into law, has the potential to encourage increase in the number of corporations in industries in which this type of company has never predominated precisely due to the existence of higher additional costs.