LISTED COMPANIES NEWSLETTER | Provisional Measure that changes Brazilian Corporate Law published
Provisional Measure No. 1,040, dated 3.29.2021 (“MP 1,040”), published this week, aims to facilitate and simplify the business environment and improve Brazil’s position in the World Bank’s Doing Business ranking, which today is 124th among 190 countries concerning ease of doing business.
MP 1,040 brought much news in several fields, including important changes in the law 6.404/76, as amended (“Brazilian Corporate Law”) concerning listed companies. We present below the main changes regarding such entities:
- Change in article 122 of the Brazilian Corporation Law – New powers for the general meeting:
- Authorize the managers to file for bankruptcy (similar to Chapter 7 in US) and to file for Chapter 11 reorganization (similar to Chapter 11 in US). In case of urgency, it can be conducted exclusively by the officers and board members (administrators) with the agreement of the controlling shareholder, and a subsequent general meeting must be called for deliberation.
- Decide, in the case of listed companies, on:
(a) the sale/disposal or contribution to another company of assets, if the value of the transaction corresponds to more than 50% of the value of the company’s total assets included in the last approved balance sheet; and
(b) the execution of related party transactions that meet the criteria of relevance to be defined by the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM).
- Change in art. 124 of the Brazilian Corporation Law – Changes in the call for the general meetings:
- The general meetings of a listed company must respect the prior period of 30 days for the first call and 8 days for the second call.
- CVM issued Resolution No. 25 on March 30, 2021, creating a transition rule, so that listed companies can continue to observe the minimum advance notice period of 15 days for calling general meetings, provided that such meetings is called prior to April 30, 2021.
- Change in art. 124 of Brazilian Corporation Law – CVM and general meeting:
- The Brazilian Securities Commission may, at its sole discretion, upon a reasoned decision by its Board of Commissioners, at the request of any shareholder, and after hearing the company, declare which relevant documents and information to the resolution of the general meeting were not made available to shareholders in a timely manner and determine the postponement of the meeting for up to 30 days, counting from the date on which said documents and information were made available to shareholders.
- Change in art. 138 of Brazilian Corporation Law – Prohibition of cumulation of positions in listed companies:
- Starting on March 24, 2022 (360 days of publication of MP 1,040), the position of chairman of the Board of Directors and the position of chief executive officer of listed companies cannot be accumulated by the same individual. Brazilian Securities Commission may exempt this prohibition for companies with lower revenues.
- Change in art. 138 of Brazilian Corporation Law – Composition of the Board of Directors:
- Listed companies must have independent directors on their Board of Directors, under terms to be set forth by the Brazilian Securities Commission.
MP 1,040 enter in force immediately and is valid for 60 days, extendable for another 60 days if the voting is not completed in the two houses of the National Congress.
For more information, please contact the Listed Companies team.
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