Sources of corporate governance rules and practices

Primary sources of law, regulation and practice

What are the primary sources of law, regulation and practice relating to corporate governance? Is it mandatory for listed companies to comply with listing rules or do they apply on a ‘comply or explain’ basis?

Brazil is a civil law country (as opposed to common law jurisdictions), where certain regulations and best practices are not incorporated into the country’s pyramidal body of law.

As a general rule, companies adhere to the following laws:

  • The Corporations Law (Law No. 6,404/1976), which specifically governs corporations and may supplementarily govern limited liability companies (LLCs). This law regulates shareholder rights, board structures, duties and responsibilities, among others.
  • The Civil Code (Law No. 10,406/2002), which governs an extensive amount of civil law topics, including a specific section on all existing corporate structures under Brazilian law and simple corporate governance rules applicable to these structures.
  • The Securities Law (Law No. 6,385/1976), which created the Brazilian Securities Commission (CVM), the regulatory body that governs the securities exchange market, its surveillance, as well as providing specific guidelines and rules pertaining to listed companies.
  • The Financial System and Institutions (Law No. 4,595/1964), which establishes the legal framework of financial institutions in Brazil and its governing entity, the Monetary Council (CMN), which is responsible for providing the guidelines with which these institutions must comply.

The set of regulations and best practices below, although in some cases not as enforceable as the aforementioned laws, are also widely adopted and disseminated in Brazil:

  • CVM rulings, opinions, joint committee decisions and directive releases. Highly enforceable and mandatory for listed corporations;
  • B3 - Brasil, Bolsa e Balcão listing rules and corporate governance guidelines applicable according to the companies’ listing segment in the Brazilian exchange market (Novo Mercado, Level 2, Level 1, Bovespa Mais, and Bovespa Mais Level 2). Highly enforceable and mandatory for listed corporations; and
  • the Brazilian Institute of Corporate Governance (IBGC) Code of Best Practices (guidelines and recommendations) and the Brazilian Financial and Capital Markets Association (ANBIMA) guidelines (market self-regulation).

Corporations and LLCs are the most common and widely used corporate structure in Brazil. LLCs are governed by the Civil Code and may choose to be supplementarily governed by the Corporations Law. Corporations are entirely governed by the Corporations Law.

The answers to the questions below primarily refer to corporations, considered as more sophisticated entities and subject to stricter corporate governance surveillance.

Responsible entities

What are the primary government agencies or other entities responsible for making such rules and enforcing them? Are there any well-known shareholder groups or proxy advisory firms whose views are often considered?

The primary government agencies or entities responsible for making and enforcing corporate governance rules are:

  • CMN: although it has no supervisory powers, it is responsible for issuing the general guidelines and rules to be observed by CVM;
  • CVM is responsible for business conduct, market regulation and surveillance of listed companies, and has powers to investigate, impose sanctions, as well as prohibit improper market conduct;
  • the Council of Appeal of the Financial System is responsible for judging appeals filed against sanctions rendered by CVM; and
  • B3 Market Arbitration Court (CAM) is responsible for settling corporate disputes related to the securities market. CAM is applicable to listed companies with specific corporate governance rules under the Novo Mercado, Level 2 and Bovespa Mais listing segments.

In Brazil, except for a few investors associations, there are no well-known shareholder groups or proxy advisory groups whose views are often considered.

Rights and equitable treatment of shareholders

Shareholder powers

What powers do shareholders have to appoint or remove directors or require the board to pursue a particular course of action? What shareholder vote is required to elect or remove directors?

Listed corporations and those with authorised capital (even if not listed) must mandatorily have a board of directors. In other cases, the board of directors is optional and is usually adopted only when there is more than one group of shareholders (eg, joint ventures, corporations that receive private equity investment). All corporations, however, must have a board of executive officers.

If the corporation has a single-tier board structure (board of executive officers only), their members will be appointed and removed by the shareholders. If the corporation has a double-tier board structure, the board of directors will be elected and removed by the shareholders and the board of officers will be elected and removed by the board of directors.

Shareholders may freely appoint and remove directors (or officers, as the case may be) by majority vote. The by-laws of closely held corporations may set higher quorums for board elections.

Shareholder decisions

What decisions must be reserved to the shareholders? What matters are required to be subject to a non-binding shareholder vote?

In Brazil, all shareholder votes are binding. Non-binding shareholder votes do not apply.

The following decisions are reserved to shareholders:

  • amendment to the by-laws;
  • election and removal of directors or officers;
  • annual approval of the company’s accounts and financial statements;
  • issuance of debentures;
  • suspension of shareholder rights;
  • valuation of shareholders’ assets for the purpose of paying-up share capital;
  • issuance of founder shares or participation certificates;
  • merger, spin-off, dissolution or liquidation, and appointment of the liquidator, as well as approval of the liquidator’s accounts; and
  • bankruptcy or financial reorganisation.
Disproportionate voting rights

To what extent are disproportionate voting rights or limits on the exercise of voting rights allowed?

As a general rule, each common share is entitled to one vote. Preferred shares are usually non-voting but are granted certain dividend and liquidation preferences. The by-laws may limit the number of votes a shareholder is entitled to and plural voting is not allowed, regardless of the type of share. The by-laws may also grant holders of preferred shares the right to vote on a number of topics, such as company valuation, its merger or spin-off, among others.

Some form of disproportionate or limited voting may occur under some circumstances. For instance, electing board members, holders of common shares that own at least 10 per cent of the share capital may cast multiple votes proportionally to the number of board members being elected. Also, shareholders of listed companies holding 15 per cent of voting shares or 10 per cent of non-voting shares or shares with restricted voting rights have the right to elect a board member and his or her substitute in a separate election at a shareholders’ meeting.

Shareholders’ meetings and voting

Are there any special requirements for shareholders to participate in general meetings of shareholders or to vote? Can shareholders act by written consent without a meeting? Are virtual meetings of shareholders permitted?

Shareholders duly invested in their capacity have no special requirements to participate in general meetings or votes and may be represented by proxy. The appointed proxy must be a lawyer, a shareholder or a director or officer.

The Corporations Law does not expressly authorise resolutions to be passed by written consent but, in practice, closely held corporations do act by written consent by having shareholders representing 100 per cent of the shares sign the relevant meeting minutes.

Total virtual meetings are still not allowed, but proxy voting and remote voting has been increasingly adopted in listed companies. In 2015, CVM established a distant voting mechanism to be gradually adopted by listed companies, which is currently mandatory for all traded corporations.

Shareholders and the board

Are shareholders able to require meetings of shareholders to be convened, resolutions and director nominations to be put to a shareholder vote against the wishes of the board, or the board to circulate statements by dissident shareholders?

Yes, shareholders are able to require meetings to be convened. As a general rule, meetings are called by the directors or officers, but may be called by the shareholders when directors or officers fail to do so under the events required by law or upon the shareholders’ request to approve certain matters.

Resolutions and director nominations may be put to vote against the wishes of the board. Shareholders’ meetings will approve resolutions or director nominations or dismissals pursuant to the quorum established by law or by-laws.

Listed companies adopting the recent remote voting procedures must grant certain minority shareholders the right to request the introduction of matters in the shareholders’ meeting agenda. This request may not be unreasonably denied.

There are no specific provisions in the Corporations Law granting shareholders the right to require the board to circulate statements by dissident shareholders. Nevertheless, minutes of shareholders’ meetings record all matters put to vote, including the votes of dissident shareholders. Dissident shareholders may also submit a written voting statement to be filed by the corporation.

Controlling shareholders’ duties

Do controlling shareholders owe duties to the company or to non-controlling shareholders? If so, can an enforcement action be brought against controlling shareholders for breach of these duties?

Controlling shareholders have a duty to use their power to fulfil the company’s business goals. The Corporations Law lists a number of acts that are considered an abuse of power by controlling shareholders, such as conflict of interest voting, voting against the company’s best interest, election of notoriously unqualified managers, approval of irregular accounts, and approval of amendments to by-laws intended to harm minority shareholders. These acts are subject to enforcement action and also subject the controlling shareholders to liability for damages.

Shareholder responsibility

Can shareholders ever be held responsible for the acts or omissions of the company?

As a general rule, shareholders’ responsibility is limited to the issue price of subscribed shares held by each shareholder in the corporation.

In exceptional cases of fraud and commingling of assets, the law expressly allows third parties to pierce the corporate veil whenever corporate assets are insufficient to cover the company’s debts and obligations. Shareholders that practise any acts in violation of the law or by-laws, whether for self-advantage or the advantage of a third party, will be held jointly liable alongside the directors or officers for the performance of these unlawful acts.

Corporate control

Anti-takeover devices

Are anti-takeover devices permitted?

Yes. The Corporations Law sets forth tag-along rights in the event of listed corporations’ change of control. In the event of a direct or indirect takeover of a listed corporation, the acquirer is obligated to conduct a public offering for all voting shares at a price per share equivalent to 80 per cent of the price per share to be paid by the acquirer to the controlling shareholder. For listed corporations in the Bovespa Mais, Novo Mercado and Level 2 segments, price per share must be the same as the price paid to the controlling shareholder (100 per cent tag-along rights) and the tender offer must be extended to all remaining shareholders.

Some corporations with widespread capital ownership and no defined controlling shareholder insert ‘poison pills’ in their by-laws with the purpose of preventing control takeovers. Basically, if an acquirer intends to purchase more than a certain percentage of shares, as limited by the by-laws, the acquirer must conduct a tender offer for the remaining shareholders. This has caused considerable controversy in Brazil. The IBGC Code of Best Practice recommends taking the utmost care in the adoption of poison pills to ensure that they do not prevent non-hostile takeover from happening.

Issuance of new shares

May the board be permitted to issue new shares without shareholder approval? Do shareholders have pre-emptive rights to acquire newly issued shares?

The board may only issue new shares without shareholder approval if the company’s by-laws set forth an authorised capital amount and grant the board powers to do so.

Shareholders have pre-emptive rights to acquire newly issued shares, proportionally to the number of shares they hold. The law grants shareholders at least 30 days to exercise their pre-emptive rights. Pre-emptive rights may be excluded by listed corporations in case of public placements on the stock market.

Restrictions on the transfer of fully paid shares

Are restrictions on the transfer of fully paid shares permitted and, if so, what restrictions are commonly adopted?

Transfer restrictions may apply in the event shareholders are bound by a shareholders’ agreement, such as drag-along and tag-along rights, put and call options, lock-up provisions and right of first refusal. Shares subject to a shareholders’ agreement cannot be traded on the stock market.

Compulsory repurchase rules

Are compulsory share repurchases allowed? Can they be made mandatory in certain circumstances?

In general, corporations may not trade with their own shares, with certain exceptions provided by law, such as redemption, amortisation or repurchases for treasury or cancellation of shares. Listed corporations are subject to additional requirements determined by the CVM.

Redemption and amortisation may be compulsory if so determined by the by-laws or by the shareholders’ meeting. Redemption or amortisation that does not cover all shares of the same class shall be carried out by drawing lots.

Dissenters’ rights

Do shareholders have appraisal rights?

Yes. Subject to few exceptions, dissenting shareholders are entitled to withdraw from the corporation and be reimbursed in the event of:

  • transformation of the company into a different corporate structure (eg, from corporation to LLC);
  • merger or spin-off;
  • share merger;
  • inclusion of an arbitration clause in the by-laws;
  • creation of preferred shares and changes to their advantages and conditions;
  • reduction of the mandatory dividend;
  • a change in the company’s corporate purpose; or
  • if the company becomes part of a conglomerate.

Generally, share value will be based on the company’s net worth and may only be below this amount if the reimbursement is based on the company’s economic value, when authorised in the by-laws.

Responsibilities of the board (supervisory)

Board structure

Is the predominant board structure for listed companies best categorised as one-tier or two-tier?

See question 3.

In listed companies, a two-tier board structure is mandatory.

The board of directors is the collective decision-making body responsible for the company’s general guidelines and how it conducts its business, whereas the board of officers is responsible for executing and carrying out decisions approved by the directors. In any case, the corporation will be legally represented before third parties by the signature of officers only.

Directors may also act as officers (at most one-third of the directors).

Board’s legal responsibilities

What are the board’s primary legal responsibilities?

The board of directors’ primary legal responsibilities are:

  • to establish the company’s general guidelines and how it conducts business;
  • to elect and dismiss the officers, as well as establish their duties, pursuant to law and the by-laws;
  • to oversee the officers’ management;
  • to call a shareholders’ meeting when deemed necessary or to approve the company’s annual accounts and management reports;
  • to render an opinion on acts or agreements to be executed by the officers, on behalf of the company, if the by-laws so require;
  • to approve the issuance of shares or warrants, if permitted under the by-laws;
  • to authorise the sale of non-current assets, real property liens and guarantees to third-party obligations, unless the by-laws set forth otherwise; and
  • to elect and dismiss independent auditors.

The board of officers’ primary legal responsibility is to conduct the corporation’s day-to-day management. Specific duties may be determined by the by-laws and the board of directors. As long as it is within their powers and in accordance with by-laws’ provisions, officers may constitute proxies to act on behalf of the corporation.

Board obligees

Whom does the board represent and to whom does it owe legal duties?

As a general rule, a director or an officer must always perform his or her duties in the company’s best interest. The Corporations Law expressly assigns board members the following duties:

  • Diligence and care: to act with the same duty and care that he or she would act under if conducting his or her own business affairs.
  • Loyalty: to maintain the company’s business as confidential, not disclosing any business information that may be used to obtain a personal or third-party advantage.
  • Inform: in listed corporations, board members must disclose the amount of the corporation’s (or related companies’) securities that he or she holds and report to the market relevant information that may affect the purchase or sale of the company’s securities.
  • Conflict of interest: to refrain from intervening in any transaction that conflicts with the corporation’s interest.

Hierarchically and in simplistic terms, the board of directors is subordinated and owes legal duties to the shareholders whereas the board of officers is subordinated and owes legal duties to the directors.

Enforcement action against directors

Can an enforcement action against directors be brought by, or on behalf of, those to whom duties are owed?

An enforcement action can be brought against directors or officers for damages caused to the corporation. The company is the primary legitimate party for filing such action upon its approval at a shareholders’ meeting by majority vote. If the action is not approved by the shareholders’ meeting, any shareholder holding at least 5 per cent of the capital stock may file it directly.

Care and prudence

Do the board’s duties include a care or prudence element?

See question 17.

Board member duties

To what extent do the duties of individual members of the board differ?

The duties set forth by law apply to all individual board members, regardless of their skills and experience. See question 17.

In listed corporations, duties may be restricted by the corporation’s by-laws, which may establish specific attributions and responsibilities for specific management members.

Delegation of board responsibilities

To what extent can the board delegate responsibilities to management, a board committee or board members, or other persons?

No board member’s legal duties and responsibilities may be delegated to another board or management body, either created by law or the by-laws. However, corporations may, upon the officers’ signature, appoint proxies to act on their behalf.

Non-executive and independent directors

Is there a minimum number of ‘non-executive’ or ‘independent’ directors required by law, regulation or listing requirement? If so, what is the definition of ‘non-executive’ and ‘independent’ directors and how do their responsibilities differ from executive directors?

The Corporations Law does not set any minimum number of independent directors.

However, in the Novo Mercado segment at least 2 or 20 per cent (whichever is higher) of the listed corporations’ board members must be independent. A director is deemed independent if he or she:

  • has no ties to the corporation, other than an equity interest;
  • is not a controlling shareholder, spouse or close family member (to the second degree) of a controlling shareholder, nor has any ties to any company or entity related to a controlling shareholder;
  • has not been an employee or officer of the corporation, or of the controlling shareholder, or of a subsidiary of the company in the past three years;
  • is not a direct or indirect supplier or buyer of goods or services, to an extent that would imply loss of independence;
  • is not an employee or senior manager of any company that is a service or product provider or consumer of the corporation to an extent that would imply loss of independence;
  • is not a spouse or close family member (to the second degree) of any senior manager of the corporation; and
  • is not entitled to any payment by the corporation other than the consideration earned as director.

The IBGC Code of Best Practice recommends the majority of the board to be composed of independent directors.

Board size and composition

How is the size of the board determined? Are there minimum and maximum numbers of seats on the board? Who is authorised to make appointments to fill vacancies on the board or newly created directorships? Are there criteria that individual directors or the board as a whole must fulfil? Are there any disclosure requirements relating to board composition?

The Corporations Law determines the board to have a minimum of three members, but there is no maximum number set by law. The number of members, or a range between a minimum and maximum number of members, must be set forth in the by-laws.

The board of listed corporations in the Novo Mercado segment must have at least five members, of which 2 or 20 per cent (whichever is higher) must be independent members.

The IBGC Code of Best Practice recommends an odd number of members, between five and 11.

The size of the board may vary according to the size, sector, maturity level and complexity of the corporation, capital distribution (defined control or not), whether committees need to be created and other needs.

In case of a vacancy on the board of directors, the other board members may appoint the substitute to occupy the position until the following shareholders’ meeting.

The by-laws must determine how board of officers’ vacancies are filled.

The Corporations Law requires that board members to:

  • have a good reputation;
  • have not been convicted of any bankruptcy offence, fraud, bribery, corruption, misappropriation of public funds or embezzlement, crimes against the national economy or public property, nor subject to any criminal sanction that precludes access to public office;
  • not occupy any position in a competing company, unless this is waived by a shareholders’ meeting;
  • not have a conflicting interest with the corporation, unless this is waived by a shareholders’ meeting; or
  • in the case of listed companies, have not been declared by CVM to be unable to occupy a board seat.

Although not imposed by law, the IBGC Code of Best Practice recommends the board to be composed of members with diverse expertise, cultural backgrounds, age and gender so as to ensure a more plural, qualified and effective decision-making process.

Board members and officers must provide the company with a domicile address where they can receive service of process concerning their acts. In the case of listed corporations, they must also inform their share ownership (number, type and class).

Composition of the board of directors and of the board of officers is public, as the corporate documents that appoint their members are filed with the Board of Trade and published in local and official newspapers.

For listed corporations, composition of the board, including curriculum vitae of all managers, must also be disclosed to CVM and B3 within five months of the fiscal year’s end and whenever a public offering takes place. CVM also requires listed corporations to disclose all board dismissals and resignations.

Board leadership

Is there any law, regulation, listing requirement or practice that requires the separation of the functions of board chair and CEO? If flexibility on board leadership is allowed, what is generally recognised as best practice and what is the common practice?

The Corporations Law does not require the separation or joining of the functions of chair and CEO, allowing some flexibility to corporations in general.

However, the IBGC Code of Best Practice recommends the separation of those functions and, according to the IBGC, the CEO should not be a member of the board of directors (but should participate in the meetings when invited).

For listed corporations in the Novo Mercado and Levels 1 and 2 segments, separation is mandatory (except on an exceptional and transitional basis, in case of vacancy).

Board committees

What board committees are mandatory? What board committees are allowed? Are there mandatory requirements for committee composition?

Except for certain listed companies, there are no mandatory board committees, but large corporations usually set committees, either in the by-laws or by means of internal rules of the board of directors. The most frequent committees are: audit, human resources and remuneration, risk, finance, strategy and governance.

Committees have advisory functions and no decisive power. Their recommendations are not binding on the decisions of the board.

Corporations that decide to set committees usually follow the IGBC guidelines, which recommend that committees:

  • should preferably be formed by board members only;
  • should have at least three members, and must have at least one expert in his or her area of expertise (if there is no specialist, external experts should be invited);
  • should have a chair that preferably does not exercise the same position on another committee; and
  • should not comprise the corporations’ executives, although they may be invited to some meetings.

Listed companies in the Novo Mercado segment must mandatorily have an audit committee, responsible for evaluating and monitoring internal audit activities and compliance. The committee must have at least three members and their own internal regulation and rules approved by the board. The company must annually disclose an audit committee’s report summarising the committee’s main meetings and topics discussed, as well as the main recommendations presented by the committee to the board.

Board meetings

Is a minimum or set number of board meetings per year required by law, regulation or listing requirement?

There is no minimum number of board meetings required, but at least one, to approve the annual financial statements to be submitted to the shareholders’ meeting, must be held.

The Corporations Law and usually the by-laws set a list of matters that require board approval and, therefore, extraordinary board meetings are quite often convened to resolve those matters.

The IBGC Code of Best Practice recommends that the chair propose an annual schedule with the dates and subject matter of the ordinary meetings, the frequency of which should not be greater than once a month.

Board practices

Is disclosure of board practices required by law, regulation or listing requirement?

Several rules applicable to the board of directors are set in the by-laws and, therefore, are public. That includes number of members, term of office, appointment of the chair, procedures in case of vacancy, meeting mechanism (call, resolution quorums, virtual meetings, minutes of meetings).

To become effective before third parties, minutes of board meetings must be filed with the Board of Trade and published in local and official newspapers (in the case of listed corporations, they are also disclosed on CVM’s and B3’s websites). Minutes of meetings may only contain a summary of the resolutions passed.

The Reference Form that is annually filed before CVM by listed corporations contains more detailed information on the board structure, composition and practices.

Remuneration of directors

How is remuneration of directors determined? Is there any law, regulation, listing requirement or practice that affects the remuneration of directors, the length of directors’ service contracts, loans to directors or other transactions or compensatory arrangements between the company and any director?

The shareholders’ meeting must annually approve the global or individual remuneration of all managers (board of directors and board of officers). Shareholders usually approve a global cap for the year, which must provide for fixed and variable compensation and benefits. Individual remuneration is usually set by the board of directors under the global cap approved by the shareholders’ meeting, according to human resources policies, career plans and recommendations from the remuneration committee, if installed. The IBGC Code of Best Practice does not recommend variable remuneration for directors. Variable remuneration is exceptionally accepted in the case of family businesses or companies whose corporate governance policies are on their initial phase.

Listed corporations must disclose more detailed information on management’s remuneration in the Reference Form annually filed before CVM.

The by-laws must determine the term of office of directors and officers, which must not exceed three years, re-election admitted. Listed corporations are subject to stricter rules: the term of office of all directors must be unified and limited to two years, re-election admitted.

Directors and officers may not borrow money or assets from the corporation nor use its assets, services or take advantage of their position for their own benefit or for the benefit of a company in which they have an interest or of a third party, without the prior approval of a shareholders’ meeting or of the board of directors. Also, directors and officers may not receive any type of direct or indirect personal advantage from third parties, without the by-laws or a shareholders’ meeting so authorising.

Remuneration of senior management

How is the remuneration of the most senior management determined? Is there any law, regulation, listing requirement or practice that affects the remuneration of senior managers, loans to senior managers or other transactions or compensatory arrangements between the company and senior managers?

See question 28.

D&O liability insurance

Is directors’ and officers’ liability insurance permitted or common practice? Can the company pay the premiums?

D&O insurance is permitted and common practice among larger companies (premiums are quite expensive for small and medium-sized companies). D&O was regulated by the Brazilian Insurance Agency in October 2016. According to said regulation, the company pays the insurance premium at no cost to the directors and officers.

Indemnification of directors and officers

Are there any constraints on the company indemnifying directors and officers in respect of liabilities incurred in their professional capacity? If not, are such indemnities common?

There are no constraints, provided directors and officers act in the ordinary course of business and in due compliance of the law and of the by-laws.

Given that managers in Brazil (mainly officers) can quite frequently be involved as a defendant in lawsuits brought against companies (tax and labour claims in particular), companies generally assume responsibility for the debt and hold their directors and officers harmless.

Exculpation of directors and officers

To what extent may companies or shareholders preclude or limit the liability of directors and officers?

A director or an officer is not personally liable for the commitments he or she undertakes on behalf of a corporation in the ordinary course of business. However, he or she will be liable for losses caused to the corporation in case he or she acts with negligence or wilful misconduct or in violation of the law or of the by-laws. There is no possible exculpation through amendments of the by-laws or other shareholder action.

A director or an officer is not liable for unlawful acts of the other directors or officers, except if acting in connivance with them, or if he or she neglects to investigate such acts or if, despite being aware of those unlawful acts, he or she fails to act to prevent them.

A dissenting director or officer may be exempt from liability when he or she records his or her dissent in the meeting minutes of the rele­vant management body (board of directors or board of officers), or when he or she immediately informs the other directors or officers, or the shareholders’ meeting, about his or her dissent in writing.

In listed corporations, manager liability may be restricted to mana­gers who, under the by-laws, have specific responsibility for the performance of such duties.


What role do employees have in corporate governance?

The Corporations Law expressly sets forth that a corporation has a social role and, to that effect, all managers (directors and officers) may authorise reasonable gratuitous acts to the benefit of the employees or of the community to which the corporation belongs.

The by-laws may require the board to have an employee representative, chosen by employees, but this is not customary practice, except for state-owned corporations and for some privatised corporations, in which case the employees’ representative seat on the board is mandatory.

Board and director evaluations

Is there any law, regulation, listing requirement or practice that requires evaluation of the board, its committees or individual directors? How regularly are such evaluations conducted and by whom? What do companies disclose in relation to such evaluations?

Neither the Corporations Law, CVM regulations nor listing rules require any evaluation of the board, its committees or individual directors.

The Corporations Law establishes that directors shall be held liable for losses caused to the corporation as a result of unlawful practices.

Notwithstanding the lack of legal requirement, the IBGC Code of Best Practice recommends that the boards (directors and officers) be evaluated. This evaluation may be carried out by board members, assisted by executives, other stakeholders or external advisers. The scope of the evaluation should include the board itself, as a collective body, committees (if installed), chair, board members individually and governance secretariat (if any). The IBGC Code does not provide a specific period to conduct board evaluations, but recommends the board (and CEO in the case of officers) to disclose information on the evaluation process and provide a summary of the main identified issues to be improved, as well as corrective measures implemented, so as to allow shareholders to have a proper understanding of its operations.

Disclosure and transparency

Corporate charter and by-laws

Are the corporate charter and by-laws of companies publicly available? If so, where?

Corporations’ by-laws and minutes of shareholders’ meetings are filed before the Board of Trade and published in local and official newspapers. If intended to become effective before third parties, the board of directors’ or board of officers’ meeting minutes must be filed before the Board of Trade (copies of all documents filed before the Board of Trade are available to the public and may be requested by any third party). Therefore, strategic and sensitive matters discussed at board meetings may to a certain extent be kept confidential if the minutes of these meetings are not filed.

Company information

What information must companies publicly disclose? How often must disclosure be made?

Besides the corporate documents that become public once filed before the Board of Trade (see question 35), listed corporations have several disclosure requirements set by CVM and B3, such as:

  • audited financial statements accompanied by a summary of the annual report and statement of the officers responsible for requesting the financial statements, to be disclosed on the date publicly made available to the public or at most within three months (for Brazilian corporations) or four months (for foreign corporations) of the end of the fiscal year;
  • quarterly accounting information to be submitted within 45 days of the end of each quarter;
  • Reference Form (CVM form with complete information on the company) filed within five months of the end of the fiscal year - to be updated throughout the year in case of certain changes;
  • releases on relevant facts that may impact the corporation’s shares trade price, upon occurrence;
  • minutes of shareholders’ meetings, board meetings and corporate acts in general, upon occurrence; and
  • report on the CG Code of Conduct within seven months of the end of each fiscal year.

The Reference Form is a listed corporation’s most comprehensive public document, and along with the financial statements, is the primary reference to understand a company’s business. It addresses, among other issues:

  • financials;
  • risk factors and risk management policies;
  • company’s history;
  • operations, activities, products, markets;
  • assets;
  • management discussion and analysis;
  • projections (not mandatory);
  • management structure as provided in the by-laws or internal policies;
  • management remuneration;
  • human resources;
  • share control structure and economic group;
  • transactions with related parties and applicable policies;
  • capital stock;
  • issued securities; and
  • trading and disclosure policies.

Hot topics


Do shareholders have an advisory or other vote regarding remuneration of directors and senior management? How frequently may they vote?

The shareholders’ meeting must annually approve all managers’ global or individual remuneration, including directors and officers.

See question 28.

Shareholder-nominated directors

Do shareholders have the ability to nominate directors and have them included in shareholder meeting materials that are prepared and distributed at the company’s expense?

Shareholders representing at least 10 per cent of the voting capital may request that a multiple voting procedure be adopted to entitle each share to as many votes as there are board members and to give each shareholder the right to vote cumulatively for only one candidate or to distribute his or her votes among several candidates.

Also, shareholders of listed companies, holding 15 per cent of voting shares or 10 per cent of non-voting shares (or shares with restricted voting rights) have the right to elect a board member, in a separate election at a shareholders’ meeting. If neither the holders of voting shares nor the holders of non-voting shares achieve the relevant minimum percentages, they may aggregate their shares to jointly elect a director, provided they jointly achieve 10 per cent.

According to CVM regulations, remote voting procedures at the shareholders’ meeting of traded corporations called to elect board members must grant shareholders (holding a minimum percentage of shares that varies according to the corporation’s capital stock) the opportunity to indicate candidates and to include them in the shareholders’ meeting materials, at the corporation’s expense.

Shareholder engagement

Do companies engage with shareholders? If so, who typically participates in the company’s engagement efforts and when does engagement typically occur?

Most Brazilian companies, including listed ones, have a defined controlling shareholder (or a group of shareholders bound by a shareholders’ agreement). Widespread and decentralised corporate control is still an exception in Brazil. In this sense, controlling shareholders still have a considerable influence in the corporation’s management decisions and, to some extent, boards are still tied to majority shareholders’ guidelines. But minority shareholders, particularly institutional investors, have been increasingly active and engaged, demanding greater transparency.

Listed corporations must have an investor relations (IR) officer, appointed by the board of directors among the senior management members. The IR officer is legally responsible for disclosing to investors, to CVM and to stock exchanges transparent, timely and reliable information on the corporation’s businesses. Larger corporations typically have a structured IR department, coordinated by the IR officer. Shareholder engagement typically occurs during the annual meeting season, upon disclosure of the annual financial statements and in preparation for board elections. Larger corporations often organise conference calls with investors and market analysts to discuss and explain the corporation’s results.

Sustainability disclosure

Are companies required to provide disclosure with respect to corporate social responsibility matters?

Yes, for listed companies. A new ruling issued by CVM in June 2017 (CVM Ruling No. 586/2017) requires listed companies to disclose and report on their corporate governance policies, as set forth in the CG Code of Conduct. The CG Code of Conduct was prepared by 11 market entities that compose the Interagent Study Group and was incorporated by CVM in the aforementioned ruling. This code of conduct provides a list of corporate governance principles to be adopted by listed companies (on a ‘comply or explain’ basis), with emphasis on their compliance by management boards (directors and officers). Among these principles are obligations relating to: the environment (eg, report on how the companies’ activities impact the environment and how these impacts are monitored); and diversity and gender (eg, report on the companies’ recruitment and selection policies and how these take into account gender and diversity). The Reference Form annually disclosed by listed companies must also report on environmental policies on a comply or explain basis. For the time being, there are no disclosure requirements specifically relating to human rights.

CEO pay ratio disclosure

Are companies required to disclose the ‘pay ratio’ between the CEO’s annual total compensation and the annual total compensation of other workers?

See question 28.

There are no requirements to disclose the CEO’s annual total compensation with regard to the annual total compensation of other workers. However, for listed companies, the Reference Form has strict and detailed management compensation (directors and officers) disclosure requirements, such as:

  • description of the compensation policy and elements that compose it (including higher and lower compensation paid to senior management);
  • performance indicators;
  • how compensation is structured to reflect the performance indicators; and
  • stock option and retirement plans.
Gender pay gap disclosure

Are companies required to disclose ‘gender pay gap’ information? If so, how is the gender pay gap measured?

Companies are not required to disclose ‘gender pay gap’ information. If measured, this type of information is usually obtained through survey and research conducted by specialised consulting or human resources firms.

Update and trends

Recent developments

Please identify any new developments in corporate governance over the past year (including any significant proposals for new legislation or regulation, even if not yet adopted). Please identify any significant trends in the issues that have been the focus of shareholder interest or activism over the past year (without reference to specific initiatives aimed at specific companies).

Although there have been no relevant changes in corporate governance regulation in the past year, corporate governance best practices have been increasingly adopted as a minimum compliance measure by corporations. Adequate governance processes are seen as minimal tools for adequate compliance processes. And compliance is the major focus of companies in the current Brazilian scenario.

There has also been much discussion about the extent of managers’ liability for losses caused by companies to third parties. Brazil has faced recent environmental disasters caused by large mining companies, and the discussion about the personal responsibility of directors and officers in the civil, criminal and administrative spheres dominated the news. Although legislation has provided for personal accountability of directors and officers for some time, in practice only more recently have directors and officers been effectively punished.

It is important to highlight the increase in inspections. In the past year, CVM doubled the number of inspections and punishments of corporations and their directors and officers, especially in cases of non-compliance with disclosure obligations by directors and officers. In such cases, CVM imposes fines and personal penalties on the directors and officers involved, who are personally responsible for violating their legal obligations.