Provisional Measure No. 1,040, published on March 30 of this year, promotes legislative changes with the aim of fostering the business environment and improving Brazil's position in the ranking Doing Business, developed by the World Bank.
Among the changes, Provisional Measure 1,040 included provisions in the Brazilian Corporate Law with new rules on the protection of minority shareholders, applicable primarily to publicly-held companies. It is expected that, with such measures, the business environment will become more attractive to investors.
We sumup the following the main changes in Law No. 6404/76 made by Provisional Measure 1.040:
- Expansion of matters of competence of the general meeting of publicly held companies
With the inclusion of item X in Article 122, it becomes the obligation of publicly-held companies to deliberate at the general meetings on:
- the disposal or contribution to another asset company, if the value of the transaction corresponds to more than 50% of the value of the total assets of the company contained in the last approved balance sheet; and
- the conclusion of transactions with related parties that meet the criteria of relevance to be defined by the Brazilian Securities and Exchange Commission (CVM).
- Change of the rule of convening the general meeting of publicly held companies
The new wording of article 124, §, item II, indicates that, for publicly held companies, the minimum period in advance for the first call has become 30 days. Furthermore, pursuant to the amendment to paragraph I, § 5, art. 124, the CVM may "declare which documents and information relevant to the resolution of the general meeting were not timely made available to shareholders and determine the postponement of the meeting for up to 30 days, from the date of availability of such documents and information to shareholders".
Because of Article 9 of CVM Instruction No. 481, several companies already convened the ordinary general meetings in advance. This article recommends that, in cases of ordinary general meetings , publicly held companies provide shareholders with the relevant documentation for the resolution of the meeting at least 30 days in advance. Thus, Provisional Measure 1,040 extends this rule to any and all meetings, whether ordinary or extraordinary.
Despite recognizing the benefits of such a change for the capital market, CVM issued CVM Resolution No. 25 on March 30 of this year, with the intention of improving the transition process and adaptation to the provisions of Provisional Measure 1,040. Thus, publicly held companies may continue to follow the minimum period of 15 days in advance for the first call for general meetings, provided that they have already been or are convened by April 30 of this year.
The permission given by CVM Resolution 25, which entered into force on the date of its publication, aims to avoid a possible disagreement between the new minimum period in advance for the convening of general meetings and that established in Article 132 of Law No. 6,404/76. It was then approved that:
- the 30-day period provided for in item II of § 1 of Article 124 of Law No. 6,404/76 shall be applied to the general meetings convened from May 1, 2021; and
- the general meetings already convened or those that may be convened by April 30, 2021 may observe the period of 15 days in advance of the first call".
- Prohibition of the accumulation of positions
Pursuant to Article 138, §3, publicly held companies may not allow the accumulation of the positions of chairman of the board of directors and chief executive officer of the company. The standard is already provided for in the B3 regulation of companies listed on the Novo Mercado and, from the publication of Provisional Measure 1,040, reaches all publicly held companies, regardless of B3's listing segments. Paragraph 4 of the same article indicates that CVM may exceptional the seal in lower billing companies.
- Independent directors
The participation of independent directors in the composition of the board of directors of publicly held companies became mandatory with the inclusion of §2 in Article 140. This standard is already provided for in the B3 regulation of companies listed in the Novo Mercado and, from the publication of Provisional Measure 1.040, reaches all publicly held companies, regardless of B3's listing segments.
Because it is a Provisional Measure, the rule has a maximum term of 60 days, extendable for the same period, and will lose its effectiveness if it is not transformed into law by the National Congress.