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June 30th, 2023
The Publicly Traded Companies Newsletter aims to provide information on the main media news, trends, cases and legislation concerning Traded Companies matters, in Brazil and abroad. This material is for informational purposes and should not be used for decision making. Specific legal advice can be provided by our lawyers.
Enjoy reading!
Traded Companies Team
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION
UPDATES
CVM approves amendment and effectiveness period extension for Deliberation 877
At a meeting held on August 01, 2023, the Collegiate Board of the Securities and Exchange Commission of Brazil (“CVM”) decided, unanimously and in line with the opinion of the Sandbox Committee (“CDS”), to approve the request to amend CVM Deliberation 877, of December 27, 2023, as amended (“CVM Deliberation 877”). The amendment to CVM Deliberation 877 temporarily authorizes Start Me Up Crowdfunding Sistemas para Investimento Colaborativo Ltda. (“SMU”) to carry out regulated activities within the scope of CVM’s Regulatory Sandbox.
The implemented changes result from:
The incorporation and management of organized securities markets will be carried out by Estar, whereas bookkeeping services will continue to be carried out by SMU.
The effectiveness period of CVM Deliberation 877 was extended until August 31, 2024.
ACCESS THE PRESS RELEASE ABOUT THE COLLEGIATE BOARD’S MEETING No. 27, OF AUGUST 01, 2023.
CIRCULAR LETTERS
CVM publishes new guidelines on automatic registration procedures of public offerings for the distribution of securities
On July 04, 2023, CVM’s Superintendence of Securities Registration (“SRE”) issued CVM/SRE Circular Letter 7/2023 (“Circular”), with further guidelines relating to the registration of public offerings for the distribution of securities and information on the automatic registration procedure, as established in CVM Resolution No. 160, of July 13, 2022, as amended (“CVM Resolution 160”).
In addition, the Circular also provides information about the changes implemented in the Offering Registration System (“SRE System”) in order to adapt to the conclusion of the 180-day transition period, as defined in article 23 of CVM Resolution No. 161, of July 13, 2022 (“CVM Resolution 161”). These changes aim to ensure compliance with the rules established in CVM Resolution 161 upon submission of electronic applications for automatic registration.
Among the new aspects, it is worth highlighting the SRE System update, which allows institution representatives to select the condition in which the participant will carry out the offering (lead placement agents, full placement agents, securitizers, portfolio manager or restricted placement agents).
Additionally, the Circular provides guidance on technical support, highlighting that the submission of documents outside the SRE System, for offerings carried out automatically, is not compliant with CVM Resolution 160. Thus, sensitive transactions regarding the market’s initiation date must take into account the service hours of the system’s technical support (Monday to Friday, from 8 a.m. to 8 p.m.) to solve possible technological problems without compromising regulatory compliance.
Another new feature introduced by this Circular is the provision of instructions on the submission of Electronic Applications for offerings involving different series distributed at different times.
ACCESS THE CVM/SRE CIRCULAR LETTER 7/2023 IN FULL.
CVM creates new associations in the E-NET System for international companies
The Superintendence of Company Relations (“SEP”) released CVM/SEP Circular Letter 1/2023 (“Circular”), addressed to international companies, in order to establish new associations for the submission of documents through the Empresas.NET System (“E-NET”). From now on, international companies registered in category “A” on CVM and defined as investment entities, according to the definition of accounting standards, must use two specific categories to provide the information requested in art. 8, Annex J, of CVM Resolution 80. The categories are:
These categories aim to simplify and streamline the document delivery process in the E-NET system, allowing for a more efficient organization that meets the needs of international companies.
READ THE CVM/SEP CIRCULAR LETTER 1/2023 IN FULL.
CVM publishes new guidelines on automatic registration procedures of public offerings for distribution of securities
The Superintendence of Securities Registration (“SRE”) released CVM/SRE Circular Letter 8/2023 (“Circular”), which provides for the reorganization of the Offering Registration System (“SRE System”) and its implications on access procedures of institution representatives to the CVM.
The changes in the SRE System were implemented after the end of the transition rule established for the registration of public offering placement agents. In order to implement the changes, new access dynamics were introduced for the representatives of the institutions. These representatives must now act as master users for each specific type of participant or receive user access/function from the corresponding master user.
Some officers are appointed as master users for certain participants, such as:
The registration of intermediaries as placement agents requires that the Officer in Charge of the Intermediation of Public Distribution Offerings delegate access to the “Lead Placement Agents of offerings registered in the SRE System” function, even for those who already had previous access on behalf of the institution, and there is no automatic migration of delegated permissions in the CVMWEB environment.
READ THE CVM/SRE CIRCULAR LETTER 8/2023 IN FULL.
PUBLICATIONS
New CVM study discusses waiver of audit committee requirement for small and medium-sized companies
On July 10, 2023, CVM launched a study entitled “Review of the obligation of an Audit Committee for small and medium-sized companies”. The study, developed by CVM’s Office of Economic and Risk Management Analysis (“ASA”), used the regulatory impact analysis (“RIA”) methodology to assess the possibility of waiving or modulating the Audit Committee in companies considered smaller, according to Complementary Law No. 182, of June 01, 2021, which allows for the waiver of the Audit Committee via general meeting for companies with annual gross revenue of up to BRL 500 million.
The study analyzed the direct benefits and costs of the Audit Committee and its representation of minority shareholders, and compared corporate governance practices in other jurisdictions, such as the United States, France, Germany, the United Kingdom, Italy and Portugal.
The purpose is to reduce regulatory costs for smaller companies while keeping the protection of minority shareholders. Within this context, three alternatives have been proposed:
The study found that 86% of the companies opted for a temporary Audit Committee and only 10.7% had a permanent Audit Committee, excluding companies from the obligation to maintain it, according to the regulation. The average annual cost of an Audit Committee in a smaller company is around BRL 250,000.00, which is close to its average annual regulatory cost.
After analyses, the recommendation of the study is that the third alternative be applied, waiving the obligation of an Audit Committee and allowing for the election of a member of the Board of Directors by minority shareholders. However, the study highlights that the Audit Committee, as structured in Brazil, is complementary to other governance structures and can be beneficial to companies.
The study’s suggestions and recommendations do not have a defined deadline to be implemented or discussed through public consultation. The study’s main intention is to generate a debate on the topic and obtain contributions to improve discussions.
READ THE STUDY ON THE OBLIGATION OF AN AUDIT COMMITTEE IN FULL.
