i OVERVIEW OF GOVERNANCE REGIME

The corporate governance regime applicable to Brazilian listed companies is basically established by the Brazilian Corporation Law (Federal Law No. 6,404, of 15 December 1976, as amended), the rulings issued by the Brazilian Securities Commission (CVM), and the listing rules issued by the São Paulo Stock Exchange (BM&FBOVESPA) to each of its listing segments.2

In addition to the Law and rules mentioned above, listed companies are encouraged to follow the best practice recommendations provided in the Brazilian Corporate Governance Code for listed companies elaborated by GT Interagentes (the Interagents Working Group, which comprises 11 of the most important agencies concerned with the Brazilian capital markets) and issued on 16 November 2016. The Brazilian Corporate Governance Code adopts the ‘comply or explain’ approach. In addition, there are also codes issued by the Brazilian Institute of Corporate Governance and by the Brazilian Association of Listed Companies, which are among the entities that make up the Interagents Working Group. While these codes were previously important references for Brazilian listed companies, with the publication of the Brazilian Corporate Governance Code it is expected that they will become secondary references.

Of the BM&FBOVESPA listing segments, the Novo Mercado has the highest standards of corporate governance rules, followed by Level 2 and Level 1. There is also the BOVESPA MAIS, an organised over-the-counter market managed by BM&FBOVESPA and created as a way for small and medium-sized companies to access the capital markets. It falls under the authority of CVM, a federal independent agency reporting to the Ministry of Finance that supervises and enforces listed companies’ compliance with the Brazilian Corporation Law and the rules issued by CVM. This enforcement can result in the imposition of fines and restrictions on companies and their administrators.

BM&FBOVESPA is responsible for supervising compliance with its listing rules and has the authority to impose on companies and their administrators contractual fines and other sanctions, such as suspension and exclusion from trading in shares in the BM&FBOVESPA environment.

Most Brazilian listed companies do not have widely held stock, but in recent years there has been a trend for CVM to stimulate the participation of minority shareholders in the governance of companies, through the creation of a mechanism that enables all the shareholders to send their votes electronically prior to any shareholders’ meeting. Until 2016, implementation of this mechanism was not mandatory, but it will become mandatory for the main companies listed on BM&FBOVESPA in 2017, and for all companies in 2018.

CVM has also enacted rules in recent years to improve the quality and amount of information that a listed company must disclose to its investors, including Ruling No. 480, published at the end of 2009, which created the ‘reference form’, a document containing very detailed information about the company that must be updated at least once a year; and Ruling No. 481 (published simultaneously with Ruling No. 480), which sets forth the mandatory information that must be disclosed by listed companies on an ordinary basis and prior to each shareholders’ meeting. Both these rules have already been adjusted to incorporate improvements that CVM considered necessary and it is currently discussing additional changes to Ruling No. 480, including the means for companies to disclose their corporate governance practices pursuant to the comply or explain approach adopted in the Brazilian Corporate Governance Code.

Furthermore, BM&FBOVESPA launched the State-Owned Enterprise Governance Programme in September 2015 in response to the recent scandals and political use of state-owned companies by the government. The Programme aims to restore investor confidence in state-owned companies (which are significant elements of the Brazilian capital markets) by enhancing the corporate governance rules of these companies in the following ways: (1) through more clear disclosure of the company’s objectives, (2) through the creation of mechanisms to remove administrators who divert company activities from the stated objective, (3) through the establishment of detailed nomination criteria encompassing the qualifications and expertise of the administrators, and (4) through the commitment of the public controlling shareholder to comply with corporate governance best practice.

It should be interesting, during 2017, to observe (1) how the Brazilian capital markets react to the adoption of mandatory electronic voting for the main companies listed on BM&FBOVESPA; (2) whether listed companies will follow the rules provided in the Brazilian Corporate Governance Code elaborated by the Interagents Working Group; and (3) the changes that will be implemented by CVM in Ruling No. 480.

ii CORPORATE LEADERSHIP

i Board structure and practices

Brazilian listed companies are managed by a board of directors3 and by an executive office. Brazilian companies can also install a fiscal board, which does not have the nature of a managerial body but rather of a supervisory body.

Board of directors

The board of directors is a decision-making body with authority to establish the company’s business policy in general; to elect and dismiss officers; to set the duties and monitor the day-to-day managerial actions of the officers; to express an opinion on any matters to be submitted to the shareholders; and to approve the implementation by the executive office of specific matters prescribed by law or under the company by-laws. The authority of the board of directors established by the Brazilian Corporation Law cannot be delegated to other bodies.

The board of directors shall be composed of at least three members, but in the case of the companies listed in the Novo Mercado and Level 2 segments, the board must be composed of at least five members and at least 20 per cent of the members must be considered to be ‘independent’.4 The members of the board of directors are not required to be Brazilian residents.

The requirements for the appointment to occupy a position on the board of directors are established in the Brazilian Corporation Law. Generally speaking, the director must be someone with an unblemished reputation who has not been convicted in an administrative or judicial procedure in relation to corporate crimes or irregularities.

The board of directors can create specific committees (e.g., compensation, related-party transactions, and audit) to assist it in the management of the company. In this regard, listed companies must rotate their independent auditor every five years and must wait at least three years before rehiring the same auditor. However, if the listed company has installed a statutory audit committee, rotation can occur every 10 years instead of five.

In the event of a tender offer for the acquisition of the control of a listed company (Takeover TO), in principle, the board of directors of the listed companies is not under an obligation to make a statement as to whether or not it agrees with the terms and conditions of the Takeover TO.

If, however, the board of directors decides to make a statement on the Takeover TO, the statement must be disclosed to the market and must address such issues as: provision of information on all aspects necessary to allow an informed decision by the investor, especially with regard to the price being offered; and any material changes in the company’s financial condition since the date of the most recent financial statements or quarterly reports disclosed to the market.

In the case of companies listed on the Novo Mercado and Level 2 listing segments, the board of directors is required to prepare and disclose a reasoned opinion on the Takeover TO – in favour or against it – and to address the following topics:

  • a the suitability of and opportunities presented by the Takeover TO;
  • b the impact of the Takeover TO on the interests of the company;
  • c the offeror’s stated strategic plans for the company; and
  • d any other point of consideration the board may deem relevant.
Executive board

The executive board shall be composed of at least two officers. The officers of Brazilian listed companies can be elected and removed at any time by the board of directors.

Up to one-third of the board members may be elected for executive board positions held concurrently. Pursuant to the rules of the Novo Mercado, Level 2 and Level 1 listing segments, the offices of chairman of the board of directors and CEO cannot be held by the same individual. However, the holding of these positions concurrently is allowed, on an exceptional basis, for a maximum period of three years from the date that the company’s shares start to be traded on the special listing segment.

Among other duties, the executive board represents the company in dealings with third parties. The by-laws may establish that certain managerial decisions should be taken in executive board meetings only.

The by-laws will establish the number of officers permitted, the manner of their replacement, their term of office, and the assignments and powers of each officer. Officers will perform their duties separately, according to their assignments and powers, but in keeping with the other officers, and will not be held liable for any obligations assumed on behalf of the company as regards routine acts necessary for the company’s management.

If the by-laws are silent or there is no resolution adopted by the board of directors prescribing the officers’ duties, any officer may represent the company and take the actions necessary for its routine operations.

Compensation of the members of the board of directors and executive board

The shareholders’ meeting shall prescribe the aggregate or individual compensation of the members of the board of directors and executive board, including benefits of any kind and representation allowances, taking into consideration their responsibilities, the time devoted to their duties, their skills and professional standing, and the market value of their services. If the shareholders’ meeting approves the aggregate compensation to be paid to the company’s directors and officers, it will fall under the authority of the board of directors to approve the allocation of the compensation between the company’s directors and officers.

If the company’s by-laws sets forth a compulsory dividend equal to or above 25 per cent of the net profits, it may establish a share in the company’s profits to the benefit of the company’s directors and officers, provided that the total amount thereof does not exceed the annual compensation of the directors and officers, nor one-tenth of the profits, whichever is the lower. Nevertheless, directors and officers shall only be entitled to a share in the profits in a financial year for which the compulsory dividend is paid to the shareholders.

Detailed information on the compensation paid to the company’s directors and officers, including, but not limited to, the breakdown of the compensation (e.g., fixed and variable compensation), the minimum, lowest and average compensation paid, must be disclosed in the company’s reference form.

Fiscal board

The fiscal board is a supervisory body responsible for supervising the company’s directors and officers and providing information in this respect to the shareholders.

The fiscal board is a compulsory body, but need not operate on a standing basis. A non-permanent fiscal board must be instated upon the request of shareholders representing at least 10 per cent of the voting stock or 5 per cent of the non-voting stock.

The fiscal board is composed of three to five members and a like number of alternates. The conditions for election and impairment of fiscal board members (who must be Brazilian residents) are prescribed by law.

The fiscal board has the authority to, among other things:

  • a monitor the actions of the company’s officers and directors and verify their compliance with their legal and statutory duties;
  • b review and give an opinion on the board of directors’ annual report;
  • c review and give an opinion on proposals of the management to the shareholders’ meeting relating to changes in capital, issuance of debentures or warrants, investment plans or capital budgets, dividend distribution and certain corporate reorganisations;
  • d report any error, fraud or criminal act and suggest measures useful to the company to any officer or member of another administrative body and, if these fail to take any necessary steps, to act to protect the corporation’s interest and report to the shareholders’ meeting;
  • e review the balance sheet and other financial statements periodically prepared by the company; and
  • f examine the financial statements for the fiscal year and give an opinion about them.

The fiscal board’s authorities can be neither delegated nor attributed to any other body of the company.

ii Directors

As mentioned above, the board of directors is a decision-making body of the company, but the daily routine of administration of the company shall fall to the executive board. All the members of the board of directors, including the outside or independent members, must receive in advance of the meetings of the board of directors information about the matters that will be discussed and put to the vote.

Brazilian legislation does not expressly state that the directors have the right to visit the company’s facilities and its subsidiaries, or that the directors should have free access to the lower management of the company. However, considering that among the duties provided for the board of directors in the Brazilian Corporation Law it is established that the board of directors shall ‘supervise the performance of the officers, examine the books and records of the company at any time, request information on contracts signed or about to be signed, and take all other necessary action’, it is expected that the directors shall have free access to the company, its subsidiaries and its lower management.

Pursuant to the Brazilian Corporation Law, the directors have the following duties and obligations:

  • a a duty of diligence, employing the same care and diligence that every diligent and honest person employs in its own business;
  • b to act within the scope of their duties without misuse of power, refraining from the performance of gratuitous or non-authorised acts and from the receipt of personal advantage by reason of the performance of their duties;
  • c even if elected by a certain group or class of shareholders, they have the same duty to the company as everyone else, and must not, even in the defence of the interests of those who elected them, fail to fulfil these duties;
  • d a duty of loyalty;
  • e to act without conflict of interest, not intervening in any transaction where they have an interest conflicting with that of the company; and
  • f a duty of information.

As regards the liability of the directors, the directors shall not be held personally liable for the obligations assumed on behalf of the company as a result of a regular act of management. However, the directors shall be held liable in civil lawsuits for the losses that they cause owing to acts of negligence or fraudulent intent and in violation of the law or the company’s by-laws.

Note that the directors shall not be liable for unlawful acts performed by other directors, unless they are involved with these directors, or they neglect to perceive them or if, having knowledge of them, fail to act to prevent their performance. However, directors are held jointly liable in the case of decisions taken by the board of directors.

In this particular, we note that each of its members is personally liable for any act of omission or negligence of the board of directors, and a dissident director shall express his or her disagreement regarding the resolutions taken through the clear and written register in the minutes of the meeting of the competent administration body, to release him or herself from any eventual civil liability. The director who agrees with the performance of acts that violate the law or the company’s by-laws shall be held jointly liable for the losses resulting from said act.

The members of the board of directors are elected by the shareholders, who can dismiss them at any time. The shareholders representing at least one-tenth 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.

The term of office of the directors must be defined in the by-laws, but it cannot exceed three years, although re-election is permitted. In the case of companies listed in the Novo Mercado, Level 2, Level 1 and BOVESPA MAIS listing segments, the term of office cannot exceed two years, although again re-election is permitted.

The requirements for the appointment to occupy a position on the board of directors are established in the Brazilian Corporation Law. Generally speaking, the director must be someone with unblemished reputation, who has not been convicted in an administrative or judicial procedure in relation to corporate crimes or irregularities. Furthermore, unless waived in a shareholders’ meeting, individuals who hold positions in companies that may be regarded as market competitors of the company, or who have any interests that conflict with those of the company, cannot be elected as board member.

As regards conflicts of interest, a director shall not take part in any corporate transaction in which he or she has an interest that conflicts with an interest of the company, nor take part in the decisions made by the other directors on the matter. He or she shall disclose his or her disqualification to the other directors and shall cause the nature and extent of his or her interest to be recorded in the minutes of the meeting of the board of directors.

Notwithstanding compliance with the conflict of interest provision, the director may only contract with the company at arm’s length. Any business contracted other than on an arm’s-length basis is voidable, and the director concerned shall be compelled to transfer to the company all benefits that he or she obtains through such business.

iii DISCLOSURE

The Brazilian Corporation Law has adopted the principle of full disclosure when it comes to acts or facts related to the company that may be considered relevant. The disclosure of material events is a duty of the company’s investor relations officer, who may be held personally liable for damages arising as a result of non-disclosure.

CVM Ruling No. 358/2002, which sets forth the general disclosure rules for listed companies, defines ‘material event’ broadly, as any decision arising from a controlling shareholder, a general shareholders’ meeting or a management body of a publicly held corporation, or any other act or event of a policy, management, technical, business, economic or financial nature in connection with its business that could considerably influence the trading price of the securities issued by or related to the company; the decision by investors to buy, sell or keep those securities; and the decision by investors to exercise any rights they have as holders of securities issued by or related to the company.

At the end of 2009, CVM enacted CVM Rulings Nos. 480/2009 and 481/2009, modifying, respectively, the rules regarding the disclosure of information by publicly held companies and the presentation of documents and information before meetings are held. The main change in disclosure issues was the introduction of the reference form, which basically compiles corporate, contractual, financial or economic, governance, and human resources information about the company. The reference form must be updated at least once a year, or in a shorter period upon the occurrence of certain events that demand an update of the information provided in the reference form.

Of the changes to Ruling No. 480 currently under consideration by CVM, one proposal is the introduction of a requirement for a disclosure document for listed companies – the ‘Brazilian Corporate Governance Code: Listed Companies Information’ (the Listed Companies Information). According to the latest draft of the ruling, this information would be disclosed by listed companies on an annual basis, within the first six months after the end of each fiscal year, and would be updated on the date of the filing for a request for the registration of any public offer. The Listed Companies Information would indicate, in relation to each recommendation of the Brazilian Corporate Governance Code, whether the company was compliant, and if not, would provide an explanation for the non-compliance.

As to financial reporting, listed companies must disclose their financial statements, together with the management report, the independent auditors’ report and the opinion of the fiscal board, if installed, at least one month in advance of the ordinary shareholders’ meeting.5

Listed companies must also disclose the standard form of financial statements (DFP), within the first three months after the end of each fiscal year. The DFP is an electronic form created in CVM’s electronic system that must be completed using information obtained from the annual financial statement.

Listed companies shall also disclose, on a quarterly basis, the quarterly information form, which is also an electronic form, and which must be completed using the company’s quarterly financial information; it must contain the report of the special review issued by the independent auditor.

In addition to disclosing their financial statements in Portuguese, companies listed in the Novo Mercado and Level 2 listing segments must also disclose them in English.

Regarding one-on-one meetings, companies listed in the Novo Mercado, Level 2 and Level 1 listing segments are required to hold, at least once a year, a public meeting with analysts and other third parties, to disclose information about their financial and economic situation, projects and expectations.

iv CORPORATE RESPONSIBILITY

Pursuant to the Brazilian Corporation Law, all publicly held companies must prepare on an annual basis, within their financial statement, a value-added statement, which could be considered as the balance statement of the company’s ‘social account’. This statement provides information on the overall wealth produced by the company, on the allocation of resources to those areas of the company that contributed to the generation of that wealth (such as employees, financiers, shareholders, the government and others) and on the unallocated portion of that wealth. In addition, some companies seek certification from institutes such as the Ethos Institute, the Brazilian Institute of Social and Economic Analysis and the Global Reporting Initiative, but such certification is not mandatory for listed companies.

Another aspect of this ‘social accounting’ is evidenced in the code published by the Brazilian Financial and Capital Markets Association (ANBIMA) regarding public offerings, which sets forth that companies must include in their reference form information on social responsibility and cultural incentives, and on any projects in those areas implemented by the company. Thus, although the ANBIMA code does not require their existence, if the company has any social responsibility policies in place, these should be disclosed in the reference form.

Furthermore, a new anti-corruption law has been in place since 29 January 2014, and this introduced administrative and civil liability of legal entities for illicit acts committed in relation to local and foreign public officials. However, there is as yet no whistle-blowing legislation in force in Brazil.

v SHAREHOLDERS

i Shareholder rights and powers

Each common share shall have the right to one vote in shareholders’ meetings and it is not possible to have shares with multiple voting rights. Brazilian companies can, however, issue preferred shares, which can be issued without voting rights (although companies listed in the Novo Mercado are required to issue only common shares).

In addition, the Brazilian Corporation Law sets forth that it is possible to include in the company’s by-laws a provision restricting the number of votes by each shareholder. Nevertheless, the companies listed in the Novo Mercado and Level 2 listing segments are not permitted to include in their by-laws any provision restricting the number of votes of shareholders to a percentage below 5 per cent of the stock capital, except in a few cases provided in the listing rules.

In theory, shareholders should not have the ability to influence the directors’ decision-making. In this regard, a specific article of the Brazilian 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 have elected or indicated him or her.

Nevertheless, the Brazilian Corporation Law also contain a provision stating that the votes of directors can be bound by a shareholders’ agreement. Therefore, the Brazilian Corporation Law recognises that the directors can receive instructions from the shareholders on how to vote in board meetings.

The shareholders’ meeting has exclusive authority to:

  • a amend the by-laws;
  • b elect or discharge the company’s senior management and fiscal board members;
  • c receive the annual accounts of the senior management and resolve on the financial statements presented by them;
  • d suspend the exercise of rights by a shareholder;
  • e resolve on the appraisal of assets contributed by any shareholder to the company’s capital;
  • f authorise the issuance of participation certificates;
  • g resolve on the transformation, merger, consolidation, spin-off, winding-up and liquidation of the company; elect and dismiss liquidators; and examine the liquidators’ accounts; and
  • h authorise the senior managers to admit bankruptcy of the company and to file for debt rehabilitation.

As for 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, under the circumstances below:

  • a in the case of the creation of preferred shares or 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 upon one or more classes of preferred shares, or creation of a new and more favoured class;
  • b 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;
  • c 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;
  • d the approval of the ‘merger of shares’ entitles shareholders of both companies involved to withdraw; and
  • e 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 Shareholders’ 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 Brazilian Corporation Law list some examples of what would be considered an abuse of power, which include, among others, the following:

  • a to guide a company towards an objective other than in accordance with its stated objects, or harmful to national interests, or to 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
  • b to arrange 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 American depository receipts in the US market. A good example would be Petrobras, the Brazilian oil and gas company, which recently faced several lawsuits filed with the New York courts by mutual funds, owing to losses stemming from the money-laundering and corruption schemes that have recently become public.

iv Takeover defences
Shareholder and voting rights plans, and similar measures

Brazilian Corporation Law and CVM Ruling No. 361 requires as a condition for 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 common in listed companies. The typical Brazilian poison pill requires the acquirer of an equity interest above a given threshold to make a tender offer to all shareholders for a punitive price. The use of poison pills must, however, 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.

CVM has already pronounced against provisions that penalise or prevent shareholders from voting against the exclusion of poison pills on a case-by-case basis in a definitive manner. Furthermore, the rules of the Novo Mercado listing 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 shareholders
Mandatory and best practice reporting to all shareholders

The company must disclose to all of its shareholders, through its website, as well as on the CVM and BM&FBOVESPA 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 right in shareholders’ meetings.

It is a 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 the company’s results. It is also usual for the companies to hold meetings or calls with analysts to discuss the company, to enable the analysts to issue their reports on the company.

Whenever the 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.

The 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 15 days in advance.6

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 auditors 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, 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 not mandatory for companies up until 2016, but as from 2017 it will be mandatory for the major companies listed on BM&FBOVESPA and, as from 2018, for all listed companies.

vi OUTLOOK

We expect that the biggest trends in the next few years in Brazil will be the escalation of proxy voting and the battle over the implementation by listed companies of the practices provided in the Brazilian Corporate Governance Code, since CVM Ruling No. 480, currently under discussion, will, if enacted, require companies to publish justification for any non-compliance with the Code in their Listed Companies Information.

Footnotes

1 Marcelo Viveiros de Moura is a partner and Marcos Saldanha Proença is a senior associate at Pinheiro Neto Advogados.

2 Note that BM&FBOVESPA and the companies listed in the Novo Mercado segment are currently discussing changes to the Novo Mercado’s listing rules.

3 Closely held companies are not required to have a board of directors.

4 This specific rule regarding independent board members is currently under discussion by BM&FBOVESPA and the companies listed in the Novo Mercado segment, as part of the proposed changes to the listing rules of the Novo Mercado.

5 The ordinary shareholders’ meeting must be held within the first four months after the end of each fiscal year.

6 For some specific matters the call notice must be published 30 days in advance.