All questions


i Shareholder rights and powers

Pursuant to a change that was introduced in the Brazilian Corporation Law in 2021, it is now possible to have a class of ordinary shares with plural votes, or super voting shares, whereby such plural vote may not exceed 10 votes per common share.

The company's by-laws must stipulate the end of the term of the plural voting condition, which could be the occurrence of a certain event, or a specific term. Nevertheless, the initial term cannot exceeds seven years, but it can be renewed for any term (provided that a certain quorum is observed for the approval of the renewal and the holders of shares of the class whose plural vote is intended to be renewed are excluded from voting).

The super voting shares will be automatically converted into common shares without plural voting in the event of

  1. transfer, in any capacity, to third parties (except if the seller indirectly remains as the sole holder of such shares and in control of the political rights conferred by them; if the third party holds the same class of shares with plural voting sold to it; or if the transfer takes place under the fiduciary ownership regime for the purpose of setting up a centralised deposit); or
  2. the shareholders' agreement or contract, between holders of the super voting shares and shareholders who are not holders of super voting shares, provides for the joint exercise of voting rights.

In addition, Brazilian companies can issue preferred shares, which can be issued without voting rights (although companies listed in the Novo Mercado segment are required to issue only common shares).

In theory, shareholders should not have the ability to influence directors' decision-making. In this regard, a specific article of the Corporation Law sets forth that a director shall use his or her powers to achieve the company objectives and to support its best interests, even if these interests are contrary to those of the shareholder, or group of shareholders, who elected or indicated him or her. Nevertheless, the Corporation Law also contains a provision stating that the votes of directors can be bound by a shareholders' agreement. Therefore, the Corporation Law recognises that directors can receive instructions from shareholders on how to vote in board meetings.

The shareholders' meeting has exclusive authority to:

  1. amend the by-laws;
  2. elect or discharge the company's senior management and fiscal board members;
  3. receive the annual accounts of the senior management and resolve on the financial statements presented by them;
  4. suspend the exercise of rights by a shareholder;
  5. resolve on the appraisal of assets contributed by any shareholder to the company's capital;
  6. authorise the issuance of participation certificates;
  7. resolve on the transformation, merger, consolidation, spin-off, winding up and liquidation of the company; elect and dismiss liquidators; and examine the accounts of liquidators; and
  8. authorise senior managers to admit bankruptcy of the company and to file for debt rehabilitation.

As regards the rights of dissenting shareholders, certain fundamental changes in the company entitle the shareholders who have not voted in favour of the resolution to withdraw, by refund of their shares, in the following circumstances:

  1. in the event of the creation of preferred shares or an increase of an existing class without maintaining its ratio in relation to the other classes, and change of a preference, a privilege or a condition of redemption or amortisation conferred on one or more classes of preferred shares, or creation of a new and more favoured class;
  2. the spin-off of the company only triggers the right to withdraw if it results in a change in the corporate purposes – except when the spun-off company is transferred to a corporation with a main line of business that coincides with the line of business of the spun-off company – a reduction in the mandatory dividend or participation in a group of corporations;
  3. the reduction of the compulsory dividend in any specific fiscal year, change of corporate purpose and insertion of an arbitration clause in the by-laws;
  4. the approval of the merger of shares, which entitles shareholders of both companies involved to withdraw; and
  5. a shareholder who has not voted in favour of the acquisition by the listed company of which he or she is a shareholder of the control of a business corporation is entitled to withdraw if the purchase price exceeds 1.5 times the greatest of:
    • the average quotation of the shares on the stock exchange during the 90 days prior to the contracting date;
    • the net value of each share or quota, the assets and liabilities having been valued at market prices (liquidation value); and
    • the net profit of each share or quota, which may not exceed 15 times the annual net profit per share during the past two fiscal years, monetarily adjusted.
ii Shareholder duties and responsibilities

The controlling shareholder has the duty to use its controlling power to make the company accomplish its purpose and perform its social role, and shall have duties and responsibilities towards the other shareholders of the company, those who work for the company and the community in which it operates, the rights and interests of which the controlling shareholder must loyally respect and heed.

The controlling shareholder shall be liable for any damage caused by acts performed in abuse of its power. The Corporation Law lists some examples of what would be considered an abuse of power, which include, among others:

  1. guiding a company towards an objective other than in accordance with its stated objectives, or that is harmful to national interests, or induce it to favour another Brazilian or foreign concern to the detriment of the minority shareholders' interests in the profits or assets of the company or of the Brazilian economy; and
  2. arranging for liquidation of a viable company or for the transformation, merger or division of a company to obtain, for itself or for a third party, any undue advantage to the detriment of the other shareholders, of those working for the company or of investors in the company.

There are no specific duties provided in Brazilian legislation for institutional investors, and there is no code of best practice for shareholders.

iii Shareholder activism

Shareholder activism is not well developed in Brazil. Recent years, however, have seen a growing amount of shareholder activism, especially by some fund managers, but shareholder activism is still not part of the culture of the Brazilian capital markets.

The Brazilian companies most exposed to shareholder activism are those that have issued US depository receipts in the US market. A good example would be Petrobras, the Brazilian oil and gas company, which faced securities class actions filed with the New York courts by US investors owing to losses stemming from money laundering and corruption schemes that have become public knowledge; Petrobras announced in January 2018 that it had signed an agreement to settle the class action in an amount of US$2.95 billion. Owing to this settlement, some minority shareholders have filed lawsuits in Brazil asking for a similar indemnification in Brazil, but it is unlikely that they will receive an indemnification from Petrobras in this amount, since the Brazilian legislation and judicial environment do not provide for minority shareholders to receive indemnifications in these proportions.

iv Takeover defencesShareholder and voting rights plans, and similar measures

The Corporation Law and CVM Ruling No. 361 require as a condition for the effectiveness of the direct or indirect disposal of a controlling interest in a listed company that the acquirer make a mandatory public tender offer (tag-along TO) for the acquisition of all the voting shares that are not part of the controlling block.

The tag-along TO must ensure minority shareholders the receipt of at least 80 per cent of the value paid per voting share included in the controlling block. For companies listed on the Novo Mercado listing segment, the amount to be paid in the tag-along TO shall correspond to 100 per cent of the value paid per voting share included in the controlling block.

Another defence to be considered is the use of poison pills, which Brazilian legislation does not prevent companies from putting in place, and they are used in some listed companies. The typical Brazilian poison pill requires the acquirer of an equity interest above a given threshold to make a TO to all shareholders for a punitive price. However, the use of poison pills must be established in the by-laws of the company. As a consequence, only the shareholders' meeting, which has exclusive authority to amend the by-laws, is empowered to put poison pills in place.

The CVM has already pronounced against provisions that penalise or prevent shareholders from voting against the exclusion of poison pills case by case in a definitive manner. Furthermore, the rules of Novo Mercado do not allow companies that want to trade their shares on the Novo Mercado to have poison pills in their by-laws.

v Contact with shareholdersMandatory and best practice reporting to all shareholders

Companies must disclose to all their shareholders, through their websites, as well as on the CVM and B3 websites, certain ordinary and extraordinary reports or information, such as the reference form, financial statements, minutes of the shareholders' meetings and documents necessary for review by shareholders to be able to exercise their voting rights in shareholders' meetings.

It is common practice in listed companies to hold a conference call with investors right after the release of the annual or quarterly financial statement to discuss a company's results. It is also usual for these companies to hold meetings or calls with analysts to discuss the company to enable the analysts to issue their reports on the company. Companies listed in the Novo Mercado segment must give a public presentation about the information disclosed in their quarterly earnings results or financial statements within five business days of their release.

Whenever a company holds a meeting with a specific shareholder to discuss a material fact that has not been disclosed, it is usual to have this shareholder sign a non-disclosure agreement, and the shareholder would be subject to a blackout period during which it would be unable to trade in the company's shares, until the material information is disclosed to the market.

Call notices for the shareholders' meetings of publicly held companies must be published at least three times, with the first call notice being published, as a general rule, at least 21 days in advance.8

Publicly held companies are required to disclose on the same day as the first publication of the call notice the manual of the shareholders' meeting, which contains detailed information about the matters to be discussed and the management proposal for each of the matters that will be voted on.

The supporting documentation for the ordinary shareholders' meeting (e.g., financial statements, management report, independent auditor's report and opinion of the fiscal board) must be disclosed to the shareholders 30 days in advance of the date of the meeting.

In 2015, the CVM enacted a ruling on attendance and distance voting at shareholders' meetings of publicly held companies, whereby shareholders would be able to present proposals of deliberations to be voted on, and to vote on the deliberations of the shareholders' meeting, subject to certain requirements. Implementation of this proxy voting system was mandatory for the major companies listed on B3 as of 2017, and has been mandatory for all listed companies as of 2018.