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Shareholders'rightsinprivateandpubliccompaniesinBrazil:
overview
Resourcetype:CountryQ&A

Status:Lawstatedasat01May2015

Jurisdiction:Brazil

AQ&Aguidetoshareholders'rightsinprivateandpubliccompanieslawinBrazil.
TheQ&Agivesanoverviewoftypesoflimitedcompaniesandshares,generalshareholders'rights,
generalmeetingofshareholders(callingageneralmeetingvotingshareholders'rightsrelatingtogeneral
meetings),shareholders'rightsagainstdirectors,shareholders'rightsagainstthecompany'sauditors,
disclosureofinformationtoshareholders,shareholders'agreements,dividends,financingandshare
interests,sharetransfersandexit,materialtransactions,insolvencyandcorporategroups.
AlexandreBertoldi,VaniaMarquesRibeiroMoyano,SofiaToledoPizaandRobertaBilottiDemange,
PinheiroNetoAdvogados

Contents
Typesoflimitedcompaniesandshares
Generalshareholders'rights
Generalmeetingofshareholders
Callingageneralmeeting
Voting
Shareholderrightsrelatingtogeneralmeetings

Shareholders'rightsagainstdirectors
Shareholders'rightsagainstthecompany'sauditors
Disclosureofinformationtoshareholders
Shareholders'agreements
Dividends
Financingandshareinterests
Sharetransfersandexit
Materialtransactions

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Insolvency
Corporategroups
Contributorprofiles
AlexandreBertoldi,ManagingPartnerandMemberoftheExecutiveCommittee
VniaMarquesRibeiroMoyano,Partner
SofiaToledoPiza,SeniorAssociate
RobertaBilottiDemange,SeniorAssociate

Typesoflimitedcompaniesandshares
1.Whatarethemaintypesofcompanieswithlimitedliabilityandshareholders?Whichisthe
mostcommon?Whichtypedoforeigninvestorsmostcommonlyuse?
AlthoughBrazilianlawprovidesforseveralformsofbusinessorganisations,theonlyonesthatenjoy
limitedliabilityare:
Limitedcompanies(sociedadeslimitadas),governedbyLaw10.406/02,asamended(BrazilianCivil
Code).
Jointstockcompanies(sociedadesannimas)governedbyLaw6.404/76,asamended(Corporations
Law).
Inbothcases,theliabilityofpartnersislimitedtotheamounttheycontributedtopayupthecompany's
capital.Inprinciple,thepartnersarenotheldliableforanyamountinexcessofthosecontributions,unless
illicitactshaveoccurred.However,unlikethepositionwithjointstockcompanies(whereshareholdersare
notheldliableforanysharessubscribedandnotpaidupbyothershareholders),thepartnersoflimited
companiescanbeheldliableforthesubscribedandunpaidcorporatecapitalofthecompany,including
thatwhichwassubscribedbyotherpartners.
Theequityheldinjointstockcompaniesisrepresentedbysharesandtheirownershipisevidencedinthe
shareregisterbook.Sharesdonotneedtohaveaparvalueandcanberepresentedbycertificates.The
equityheldinlimitedcompaniesisrepresentedbyquotas,andtheamountandrespectiveparvalueheld
byeachquotaholderisreflectedinthelimitedliabilitycompany'sarticlesofassociation.
BothtypesofcompanyareverycommonandwidelyadoptedinBrazil,byBrazilianresidentsandforeign
investors.Thechoicebetweenbothtypeswilldependmostlyonthelevelofcorporategovernance
required.Jointstockcompaniesoffertheopportunitytoadopthigherstandardsofcorporategovernance,
butarealsomorecomplexandcostly.
Recently,anothertypeofcompany,calledanindividuallimitedliabilitycompany(EIRELI)wascreatedin
Brazil.TheEIRELIissimilartoalimitedcompany,butdoesnotrequireaminimumoftwopartners.
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AlthoughtheBrazilianCivilCodedoesnotexpresslysetoutthatonlyindividuals(butnotlegalentities)are
allowedtobepartnersofEIRELIs,theadministrativeregulationonEIRELIshasestablishedthislimitation,
whichinpracticehasreducedtheuseofEIRELI.Currently,therearesomelegaldiscussionsandcourt
decisionsallowinglegalentitiestoholdparticipationinEIRELIs.Ifitbecomesuncontroversialthatan
EIRELIcanbeheldbylegalentities,webelievetheEIRELIwillbeagoodalternativeforforeigninvestors
thatseekasimpleandlowcoststructuretoinvestinBrazil.

2.Whataretheminimumsharecapitalrequirementsforcompanies?
Inprinciple,therearenominimumcapitalrequirementsfortheincorporationofcompaniesinBrazil,except
whenthelawspecifiesaminimumamountduetoaspecificcorporatepurposewhichwillbeperformedby
thecompany(forexample,financialinstitutions,undertheCentralBankrules,mustbeincorporatedwitha
minimumcapital).

3.Brieflysetoutthemaintypesofsharestypicallyissuedbyacompanyandthemainrights
theyprovide.Setouttheothermainfinancialinstruments(forexample,bonds)and
participationinstrumentsthatcanbeissuedbyacompany.
Sharescanbe:
Common.
Preferred.
Fruition.
Thetypeofsharewilldependonthenatureoftherightsconferredtoshareholders.Commonshares
entitleeachoftheirholderstoonevoteintheresolutionsofageneralmeeting.Preferredsharescangrant
theirholders:
Priorityinthedistributionoffixedorminimumdividends.
Priorityincapitalrepayment,withorwithoutapremium.
Cumulativeadvantagesconcerningbothitemsmentionedabove.
Preferrednonvotingshareswillbegrantedvotingrightsifthecompanyfailstodistributefixedorminimum
dividendsformorethanthreeconsecutiveyears.
Commonsharesinnonlistedcompaniescanbelongtodifferentclasses,dependingon:
Theirnonconvertibilityintopreferredshares.

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TherequirementthattheshareholderbeBrazilian.
Therighttovoteseparatelyfortheelectionofcertainofficersofthecompany.
Preferredsharesinlistedornonlistedcompaniescanbelongtooneormoreclasses,andcarryrightsthat
canincludetheabilitytoelectcertainmembersforthecompany'sadministrativebodies,evenifthose
preferredsharesaregrantedwithnoothervotingrights.
Fruitionsharesareshareswhichreplaceshares(commonorpreferred)thathavebeenfullyredeemed
(thatis,sharesredeemedbypaymentofthesumthatwouldbedueinthecaseofaliquidation).
Othersecuritiesthatcanbeissuedbyajointstockcompanyare:
Participationcertificates(partesbeneficirias).Nonparsecurities(onlyissuedbynonlisted
companies)thatconferontheirholderstherighttoparticipateinupto10%ofannualprofits.
Subscriptionwarrants(bnusdesubscrio).Negotiablesecuritiesthatcanonlybeissuedbya
companywithauthorisedcapital.Thesesecuritiesentitletheirholderstosubscribeforshareswhen
thecapitalisincreased,subjecttotheconditionsstatedonthecorrespondingcertificates.
Debentures(debntures).Securitiesthatgivetheirholderscreditrightsagainsttheissuing
company.Debenturescanbeconvertedintoshares,andwillbenecessarilysecuredbytheissuing
company.Unlessotherwisepermittedbylaw,thetotalamountofoutstandingdebenturescannot
exceedthecapitalofthecompany.

4.Whatistheminimumnumberofshareholdersinacompany?
Limitedandjointstockcompaniesmusthaveatleasttwopartners/shareholders,whichcanbeindividuals
orlegalentities.Partners/shareholdersdonotneedtobedomiciledinBrazil.Thesecompaniesmaybe
heldbyasinglepartner/shareholderforashortperiod,providedthattherequisitetwo
partners/shareholdersarereestablishedwithinaparticulartimeframe.
Therearetwoexceptionstothegeneralruleabove:
Thewhollyownedsubsidiary(subsidiriaintegral),whichisaspecifictypeofjointstockcompany
whosetotalcorporatecapitalisownedbyanotherBraziliancompany.
TheEIRELI,whichisalimitedcompanythatcanbeheldbyasinglepartner,butfacessomepractical
uselimitations(seeQuestion1).

Generalshareholders'rights
5.Whatarethegeneralrightsofallshareholders?Howcanshareholders'rightsbevaried(for
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example,additionalrightsattachingtoaclassofshares,orlimitationsonshareholders'
rights)?Aresuchvariationsgenerallyprovidedinthecompany'sbylawsandshareholders'
agreements?
TheCorporationsLawliststhebasicrightsofallshareholders,whichcannotbedeprivedbyeitherthe
company'sbyelawsorageneralmeeting(seeQuestion6).
Therightsofashareholdervaryinaccordancewiththetypeandclassofshares.Althoughthetypesof
sharesandbasiccharacteristicsofeachtype(asdetailedinQuestion3)areprovidedintheCorporations
Law,specificdetailsoneachclassofsharesareprovidedinthebyelaws.

6.Brieflysetouttherightsofminorityshareholdersandtheshareholdingrequiredtoexercise
suchrights.

Shareholders'basicrights
Theseareto:
Participateintheprofits.
Participateintheassetsofthecompanyinthecaseofitsliquidation.
Monitorthemanagementofthecompany.
Exercisethepreemptiverightinthesubscriptionofshares,participationcertificatesconvertibleinto
shares,debenturesconvertibleintosharesand/orsubscriptionwarrants.
Withdrawfromthecompanyinthecaseofcertainfundamentalchangesinthecompany.

Generalminorityshareholders'rights
Theseareto:
Requestthejudicialliquidationofthecompanyiftheofficersorthemajorityoftheshareholdersfailto
promoteliquidationproceedings,oropposeitincaseswherethedissolutionofthecompanyis
requiredbylaw.
Callageneralmeetingifmanagementdelaystocallsuchameetingformorethan60days,incases
providedforinthebyelawsorbytheCorporationsLaw.
Filederivativeactionsagainstofficersforlossescausedtothecompany,providedsuchanactionis
notfiledbythecompanywithinthreemonthsofageneralmeetingdecision.
Attendmeetingsofshareholdersanddiscussanymatterontheagenda.

Rightsofshareholdersrepresenting0.5%ofthetotalcapital
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Theseshareholdershavearighttorequestalistoftheaddressesoftheshareholderstowhichthe
companysendsproxysolicitationsforpowersofattorney,toenablethemtosendthemtheirownproxy
request.

Rightsofshareholdersrepresenting5%ormoreofthetotalcapital
Theseshareholdershavearightto:
Applyforacourtorderrequiringacompletedisclosureofcorporatebookswhenactsviolatethelaw
orthebyelaws,orintheeventofgroundstosuspectthatmanagementhascommittedserious
irregularities.
Requesttheinstatementandelectonememberoftheauditcommittee.
Requestcopiesofmanagementreports,accountsandfinancialstatements,andopinionsof
independentauditors,ifany.
Fileaderivativeactionagainstthecompany'sofficerstoclaimlossescausedtothecompanyundera
resolutionpassedatthegeneralmeeting,intheeventthatthegeneralmeetingdecidesnottofile
suchanaction.
Requestthattheauditcommitteefurnishinformationonthematterswithinitscompetence.
Requestthewindingupofthecompanybycourtaction,providedthecompanyisnotachievingits
corporateobjectives.
Suethecontrollingcompanytorecoverdamagescausedbybreachofitscontrollingshareholder
fiduciaryduties.
Callageneralmeetingwhenevertheofficersdonot,withineightdays:
complywiththeirjustifiablerequestthatameetingbecalled(indicatingthematterstobe
discussed)or
complywiththerequestthatameetingbecalledinordertoappointanauditcommittee.

Rightsofshareholdersrepresenting10%ormoreofthevotingcapital
Shareholderswithatleast10%ofthevotingcapitalcanrequesttheadoptionofcumulativevoting
proceduresintheelectionofthemembersoftheboardofdirectors,regardlessofwhetherornotsucha
procedureisprovidedforinthebyelaws.
Shareholdersrepresentingatleast10%ofthevotingcapitalcanfurtherelectonememberoftheaudit
committeeanditsalternative(replacement).
Theholdersofatleast15%ofthevotingcapital,or10%ofthenonvotingshares(excludingthecontrolling
shareholder)havetherighttoelectoneoftheboardmembers(ifthenecessarynumberofvotesisnot
obtainedby10%ofthesharecapitalinpreferredshares,orby15%ofthevotingcapital,theseclasses
canaggregatetheirsharecapitaltohavetherighttoelectoneboardmember).
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7.Howinfluentialareinstitutionalinvestorsandothershareholdergroupsinmonitoringthe
company'sactions(forexample,corporategovernancecompliance)?Listanysuchgroups
withsignificantinfluenceinthisarea.
ShareholderactivismisnotascommoninBrazilasitisinothercountries,especiallybecausethemajority
oflistedcompaniesinBrazilhaveadefinedcontrollingshareholder.However,inthelastfewyears,
minorityshareholders(mainlyinstitutionalinvestors)havebeengraduallymoreactive,whichhas
contributedtotherecentincreaseinthevoluntaryadoptionofstrictercorporategovernancepracticesby
listedcompaniesinBrazil.ThemaingroupsofinstitutionalinvestorswithinfluenceinthisareainBrazilare
assetmanagersandpensionfunds,andthemostactiveBrazilianassociationofminorityshareholdersis
AMEC(AssociationofInvestorsintheCapitalMarkets).

Generalmeetingofshareholders
Callingageneralmeeting
8.Doesacompanyhavetoholdanannualshareholders'meeting?Ifso,when?Whatissues
mustbediscussedandapproved?Whichdecisionsmustbeapprovedbytheshareholders
inageneralmeeting?
Brazilianjointstockcompaniesarerequiredtoholdanannualshareholders'meeting(ordinarygeneral
meeting)to:
Verifythemanagementaccounts.
Examine,discussandvoteonfinancialstatements.
Electseniormanagersandmembersofthefiscalboard(ifnecessary).
Resolveontheallocationofthenetprofits,distributionofdividendsandmonetaryadjustmentto
corporatecapital.
Theordinarygeneralmeetingmusttakeplacewithinfourmonthsoftheyearend.
TheCorporationsLawsetsoutalistofmattersthatareexclusivelywithintheremitofthegeneralmeeting:
Amendmenttothebyelaws.
Electingordischargingthecompany'smanagementandauditcommitteemembersatanytime.
Receivingtheannualaccountsofthemanagementandresolvingonthefinancialstatements
presentedbythem.

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Authorisingtheissuanceofdebentures.
Suspendingtheexerciseofrightsbyashareholder.
Resolvingontheappraisalofassetscontributedbyanyshareholdertothecompany'scapital.
Authorisingtheissuanceofparticipationcertificates.
Resolvingonthetransformation,merger,consolidation,spinoff,windingupandliquidationofthe
company,electinganddismissingliquidators,andexaminingtheliquidators'accounts.
Authorisingthemanagerstoadmitbankruptcyofthecompanyandtofilefordebtrehabilitation.
Partnersoflimitedcompaniesarealsorequiredtoapprovemanagementaccounts.Inthecaseofalimited
companywhichhasmorethantenpartners,sucharesolutionmustbetakeninanassembly,whichmust
takeplacewithinfourmonthsoftheyearend.Othermattersthatmustbesubjecttopartners'approval
are:
Appointment,dismissalandcompensationofseniormanagers.
Amendmenttothearticlesofassociation.
Merger,consolidationandwindingupofthecompany,orcessationoftheliquidationstatus.
Appointmentanddismissalofliquidators,anddecisionsontheiraccounts.
Filingfordebtrehabilitation.

9.Canageneralmeetingbeheldbytelecommunicationmeansorwritten/electronicapproval?
UndertheCorporationsLaw,shareholders'meetingsmustbeheldlive,inthecompany'sheadquarters,
unlesspreventedbyforcemajeure.However,inlimitedcompaniesitispossibletohavewrittenresolutions
ofthepartnersinsteadofpartners'meetings,ifallpartnersdecideinwritingonamatterthatwouldbethe
objectofapartners'meeting.

10.Whatarethenotice,information,andquorumrequirementsforholdinggeneralmeetings
andpassingresolutions?

Callnotice
Callnoticesmustbepublishedinthepressonatleastthreeoccasionsandcontaininformationonthe
place,dateandtimeofthemeeting,aswellastheagenda(anyproposedamendmenttothebyelaws
mustbeexpresslyidentified).
Fornonlistedcompanies:

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Thefirstcallofageneralmeetingmustbemadeatleasteightdaysinadvanceofthedateof
publicationofthefirstnotice.
Asecondcallnoticemustbepublishedatleastfivedayspriortothemeeting.
Forlistedcompanies:
15days'advancenoticewillapplytothefirstcall.
Eightdays'advancenoticewillbeallowedforthesecondcall.
Therequirementtohaveacallnoticecanbewaivedifallshareholdersarepresentatthemeeting(in
whichcase,themeetingwillheldtobevalidlycalled).

Quorumforholdingmeeting
Ageneralmeetingwillbeopened:
Onfirstcall,withthepresenceofshareholdersrepresentingatleast1/4ofthevotingcapital.
Onsecondcall,withanynumberofshareholders.
Anextraordinarygeneralmeetingconvenedtoamendthebyelawswillonlybeopenedonthefirstcallin
thepresenceofshareholdersrepresentingatleast2/3ofthevotingcapital.

Quorumforpassingresolutions
Asageneralrule,resolutionsofageneralmeetingwillbepassedbyamajorityofvotes,abstentionsnot
beingtakenintoaccount.Thebyelawsofanonlistedcompanycanincreasethequorumrequiredfor
certainresolutions,providedtheyspecifytherelevantmatterswhichrequirehigherquorums.
However,thefollowingmattersrequiretheapprovalofshareholdersrepresentingatleast1/2ofthevoting
shares,unlessthebyelawsofanonlistedcompanyprovidesforahigherquorum:
Creationofpreferredsharesorincreaseinanexistingclassofpreferredshares,withoutmaintaining
theexistingratiototheotherclassesofpreferredshares,unlessalreadyprovidedfororauthorisedby
thebyelaws,
Changeinthepriorities,advantagesandconditionsofredemptionorauthorisationofoneormore
classesofpreferredshares,orthecreationofamorefavourednewclass.
Reductionofthecompulsorydividend.
Consolidationofthecompany,oritsmergerintoanothercompany.
Participationinagroupofcompanies.
Changeintheobjectsofthecompany.
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Endingofthestateofliquidationofthecompany.
Creationofparticipationcertificates.
Spinoffofthecompany.
Dissolutionofthecompany.
TheBrazilianSecuritiesExchangeCommission(ComissodeValoresMobilirios)(CVM)canauthorisea
reductionofthequorumaboveinthecaseofalistedcompanywhosesharesarewidelyheldandwhose
lastthreegeneralmeetingswereattendedbyshareholdersrepresentinglessthan1/2ofthevotingshares.

Voting
11.Whatarethevotingrequirementsforpassingresolutionsatgeneralmeetings?
SeeQuestion10forthevotingrequirementstopassaresolutionatgeneralmeetings.
Eachcommonsharegrantsitsholderonevoteinthegeneralmeeting.Theonlyexceptionisthe
cumulativevotingprocedurewhichcanapplytotheelectionofthemembersoftheboardofdirectors(see
Question6).
Writtenresolutionsofshareholdersarenotallowed,butshareholderscandelegatetheirvotetoother
shareholdersbymeansofaproxy.
Shareholderscangrouptheirshares.Usually,sharesaregroupedto:
Exercisetherighttocallageneralmeeting.
Receiveinformation.
Initiatethecumulativevotingprocedure.

12.Arespecificshareholderapprovals/resolutionsrequiredbystatuteforcertaincorporate
actions?Whatvotingrequirementsandmajoritiesapply?
SeeQuestion8forthelistofmattersthataretheexclusiveauthorityofthegeneralmeeting,as
determinedbytheCorporationsLaw.
Othermatterscanbereservedtotheshareholders'meetingasestablishedinthecompany'sbyelaws.
SeeQuestion11forvotingrequirementsandmajorities.

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Shareholderrightsrelatingtogeneralmeetings
13.Canashareholderrequireageneralmeetingtobecalled?Whatlevelofshareholdingis
requiredtodothis?Canashareholderaskacourtorgovernmentbodytocallorintervene
inageneralmeeting?
Ageneralmeetingmustbecalledbytheboardofdirectors(ifany)ortheexecutiveofficersasdetermined
inthecompany'sbyelaws.Generalmeetingscanalsobecalledby:
Theauditcommittee,inthecasesprescribedbylaw.
Anyshareholder,whenevertheofficersdelaythecalltoresolveonamatterrequiredbylaworthe
byelawsformorethan60days.
Shareholdersrepresentingatleast5%ofthecapital,wheneverthecompany'sofficersdonot,within
eightdays,complywiththeirjustifiablerequestthatameetingbecalled,indicatingthematterstobe
discussed.
Shareholdersrepresentingatleast5%ofthevotingcapital,or5%ofnonvotingshareholders,
wheneverthecompany'sofficersdonot,withineightdays,complywiththerequesttocallameeting
inordertoappointanauditcommittee.
AshareholdercanobtainassistancethroughthecourtsortheBrazilianSecuritiesExchangeCommission
(ComissodeValoresMobilirios)(CVM)tointerveneinageneralmeeting,orcauseageneralmeetingto
beheld,inspecificcases.

14.Canashareholderrequireanissuetobeincludedandvotedonatageneralmeeting?
Whatlevelofshareholdingisrequiredtodothis?Canashareholderrequireinformation
fromtheboardaboutthemeeting'sagenda?
Inprinciple,anyshareholdercanrequireanissuetobeincludedandvotedonatageneralmeeting.
However,ifthecompany'sofficersdonotattendtotherequestofashareholdertoincludeadetermined
issueinageneralmeeting,onlytheshareholdersthathaveatleast5%ofthecapitalcancallageneral
meetingdirectly(seeQuestion13).
Shareholdersareallowedtorequestmoreinformationaboutthemeetingagendafromtheboard.

15.Doshareholdershavearighttoresolveinageneralmeetingonmatterswhicharenoton
theagenda?

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Shareholderscanresolveonamatternotincludedontheagendaonlyifallshareholdersarepresentata
generalmeetingandagreewithresolvingonthematterthatwasnotincludedontheagenda.

16.Canashareholderchallengearesolutionadoptedbyageneralmeeting?Isacertain
shareholdinglevelrequiredtodothis?Whatisthetimelimitandproceduretochallengea
generalmeetingresolution?
Shareholderscanchallengearesolutionadoptedbyageneralmeetingiftheresolutiondoesnotcomply
with:
Thelaw.
Thecompany'sbyelaws.
Ashareholders'agreement.
Inthesecases,thereisnominimumshareholdinglevelrequired.
TheCorporationsLawdoesnotestablishanyspecificmechanismfortheshareholderstochallengethe
resolutionsadoptedbythegeneralmeeting,butsetsoutthatthestatuteoflimitationsforproceedingsto
annulresolutionsatageneralmeetingsetsatimelimitoftwoyears.

Shareholders'rightsagainstdirectors
17.Whatistheproceduretoappointandremoveadirector?
Theappointmentandremovalofadirectoriswithinthecompetenceoftheannualgeneralmeeting,which
musttakeplaceduringthefirstfourmonthsofeveryyear,andisapprovedbythemajorityofthe
shareholderspresentatthemeeting(exceptforthespecialrightsofpreferredandminorityshareholdersto
electonemembereach).
Exceptwhenotherwiseprovidedforinthebyelaws,intheeventofavacancyinapositionontheboardof
directors,areplacementwillbeappointedbytheremainingboardmembers,andwillserveuntilthenext
generalmeeting.Shouldvacanciesoccurinthemajorityofpositions,ageneralmeetingmustbecalledto
holdanewelection.

18.Canshareholderschallengearesolutionoftheboardofdirectors?Isthereaminimum
shareholdingrequiredtodothis?
TheCorporationsLawdoesnotestablishaspecificmechanismforshareholderstochallengethe

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resolutionsoftheboardofdirectors,butasageneralrule,adulycalledandconvenedgeneralmeetingis
empoweredtodecideallmattersrelatingtotheobjectsofthecompany,andtoadoptsuchresolutionsasit
deemsnecessaryfortheprotectionofthecompanyasanongoingconcern.

19.Brieflysetoutthemaindirectors'dutiestothecompanyanditsshareholders.Whatisthe
potentialliabilityofdirectorstotheshareholders?Cantheirliabilitybelimitedorexcluded?
Onwhatgroundscanshareholdersbringlegalactionagainstthedirectors?
Directors'fiduciarydutiescanbesummarisedasfollows:
Dutyofdiligencetofulfilthecompany'spurpose.
Dutyofloyalty.
Dutyofconfidentiality.
Dutytodiscloseanypersonalconflictofinterestsituation.
UndertheCorporationsLaw,adirectorwillnotbepersonallyliablefordamagescausedbyactsperformed
inthenormalcourseofbusiness,inthebestinterestofthecompany,andundertheprovisionsoflawand
thebyelaws.However,iftheactperformedbythedirectorisnotinlinewiththeseprovisions,hecanbe
heldpersonallyliableforthedamagescausedtothecompany,totheshareholdersandtothirdparties.
Itshouldbenotedthatadirectorwillalsobeheldpersonallyliablefortheactsperformedbyhisfellow
directorsiftheydonotexpresslystatetheirdisagreementwiththatdirector'sdecision,andiftheydonot
ensurethatsuchdisagreementisregisteredintheminutesofthemeetingduringwhichthedecisionwas
taken.Thisliabilitywillalsoapplywhereadirectordoesnotcommunicatetothenextmanagementlevelin
writingtheirdissentingvote,oranyinformationwithregardtoirregularitiesthatarewithintheirknowledge.
Byaresolutionadoptedinageneralmeeting,thecompanycanbringanactionforcivilliabilityagainstany
manager(directorsorofficers)forthelossescausedtothecompany'sproperty.Anyshareholdercanbring
thissuitifproceedingsarenotinstitutedbythecompanywithinthreemonthsfromthedateofthe
resolutionofthegeneralmeeting.Shouldthegeneralmeetingdecidenottofilealiabilitysuit,itcanbe
broughtbyshareholdersrepresentingatleast5%ofthecapitalstock.
Anydamagesrecoveredbyaliabilitysuitbroughtbyashareholderwillaccruetothecompany,butthe
companywillreimbursetheshareholderforallexpensesincurred(uptotheapplicablelimit).
Thisliabilitysuitdoesnotprecludeanyactionavailabletoanyshareholderorthirdpartydirectlyharmed
bytheactsofamanager.

20.Aredirectorssubjecttospecificruleswhentheyhaveaconflictofinterestrelatingtothe

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company?Arethererestrictionsonparticulartransactionsbetweenacompanyandits
directors?Doshareholdershavespecificrightstobringanactionagainstdirectorsifthey
breachtheserules?
Amanager(directororofficer)isprohibitedbythelawfromtakingpartin:
Anycorporatetransactioninwhichtheyhaveaninterestthatconflictswithaninterestofthe
company.
Thedecisionsmadebytheothermanagersonthematterinwhichtheyhaveaconflictofinterest.
Theymustdisclosetheirdisqualificationtotheothermanagersandmustensurethatthenatureandextent
oftheirinterestisrecordedintheminutesoftheboardofdirectorsorexecutiveofficemeeting.
Notwithstandingtheabove,amanagercanonlycontractwiththecompanyonarm'slengthterms.Any
businesscontractedotherthaninaccordancewiththisruleisvoidable,andthemanagerconcernedwillbe
compelledtotransfertothecompanyallthebenefitswhichtheymayhaveobtainedinsuchbusiness.
SeeQuestion19inrelationtoliabilitysuitsagainstmanagers.

21.Doestheboardhavetoincludeacertainnumberofnonexecutive,supervisoryor
independentdirectors?
TheonlyruleprovidedbytheCorporationsLawinrelationtothecompositionoftheboardofdirectorsis
thatonlyupto1/3ofitsmemberscanalsoserveasexecutiveofficers.
However,inordertobelistedinhighercorporategovernancesegments,companiescanvoluntarily
undertaketoabidebycorporategovernancepracticesandtransparencyrequirementsinadditiontothose
alreadyrequestedbytheCorporationsLawandtheBrazilianSecuritiesExchangeCommission(Comisso
deValoresMobilirios)(CVM)rules,whichincludehavingatleast20%oftheboardcomposedof
independentmembers.

22.Dodirectors'remunerationandservicecontractshavetobedisclosed?Isshareholder
approvalofdirectors'remunerationrequired?
UndertheCorporationsLaw,thegeneralmeetingwillestablishtheaggregateorindividualamountofthe
management(directorsandofficers)compensation,includingbenefitsofanykindandrepresentation
allowances,takingintoconsideration:
Theirresponsibilities.
Thetimedevotedtotheirduties.
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Theircompetenceandprofessionalstanding.
Themarketvalueoftheirservices.
ListedcompaniesmustcomplywiththeBrazilianSecuritiesExchangeCommission(ComissodeValores
Mobilirios)(CVM)rulesonthedisclosureofcompensationpolicyandbenefitstoitsseniormanagement,
whichingeneralallowsthepresentationofcompensationinformationonanaggregatebasis.Financial
institutionsmustabidebyCentralBankregulationsoncompensationpolicytoensureitisconsistentwith
riskmanagementpolicy.

Shareholders'rightsagainstthecompany'sauditors
23.Whatistheproceduretoappointandremovethecompany'sauditors?Whatrestrictions
andrequirementsapplytowhocanbethecompany'sauditors?
UndertheCorporationsLaw,theselectionanddischargeofindependentauditorsisamatterreservedto
theboardofdirectors.
Forlistedcompanies,theBrazilianSecuritiesExchangeCommission(ComissodeValoresMobilirios)
(CVM)rulesestablishthedutiesandresponsibilitiesofauditorsandsetsouttheactivitiesthatcannotbe
pursuedbyauditors(suchasrenderingconsultancyservicestoanauditedcompany)whichmayresultin
thelossofitsindependenceandobjectivityandholdingparticipationintheauditedcompanyorits
affiliates.TheCVMrulesalsosetoutrulesforthemandatoryrotationofauditors(generally,everyfive
years,withreappointmentallowedonlyafterthreeyears).

24.Whatisthepotentialliabilityofauditorstothecompanyanditsshareholdersiftheaudited
accountsareinaccurate?Cantheirliabilitybelimitedorexcluded?
UndertheCorporationsLaw,thecompany'sofficersareresponsibleforpreparingthefinancialstatements
basedontheaccountingrecordsofthecompany.Thedutyofauditorsislimitedtotheverificationofthe
suitabilityofaccountingstatementswithregardtothefinancialstandingoftheauditedcompany,butitis
necessarythatthosestatementspreparedbytheofficersactuallyrepresentthefinancialandequity
standingofthecompany.Inotherwords,theliabilityofauditorsislimitedtotheissuanceofopinionson
thepreparedstatements.
Theliabilityofauditorscanbeofaciviloradministrativenature.Thecivilliabilityofauditorsisgovernedby
theBrazilianCivilCodeanddependsonproofof:
Anactionoromissionthatviolatesacontractualorextracontractualdutyinaculpablemanner.
Damage.

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Achainofcausationbetweenthedamageandtheactionoromissionthatcausedsuchdamage.
Theadministrativeliabilityresultsfromaviolationoftheadministrativerules,suchastheBrazilian
SecuritiesExchangeCommission(ComissodeValoresMobilirios)(CVM)rules,theCentralBank,and
theFederalandRegionalAccountingCouncils.
Thereisnospecificcriminaloffencedirectedtotheauditingprofession,andthereforeanycriminalliability
willonlyariseundertheusualcriminaloffences,providedforinthePenalCodeandrelatedregulations.

Disclosureofinformationtoshareholders
25.Whatinformationaboutthecompanydothedirectorshavetoprovideanddisclosetoits
shareholders?Whatinformationanddocumentsareshareholdersentitledtoreceive?
Alldocumentsrelatedtothematterssubjecttotheapprovalofthegeneralmeetingmustbeavailableto
theshareholdersatthecompany'sheadquartersatthetimethatthegeneralmeetingiscalled.
Onemonthbeforethedateoftheannualgeneralmeeting,themanagersmustmakeavailabletothe
shareholders(including"totake"copies):
Themanagementreportonthecompany'saffairsandmajoradministrativeeventsofthelastfinancial
year.
Copiesoftheaccountsandfinancialstatements.
Theopinionoftheindependentauditors(ifany).
Theauditcommittee'sopinion,includingdissentingopinions(ifany).
Otherdocumentsrelatingtomattersincludedontheagenda.
Thecompanymanagers(oratleastoneofthem)andtheindependentauditor(ifany)mustbepresentat
thegeneralmeetingtodealwithanyrequestbyshareholdersforclarification,butthemanagerscannot
voteasshareholdersorasproxiesonthedocumentsmentionedabove.
Shouldthegeneralmeetingrequirefurtherclarification,itcanpostponetheresolutionandorderan
investigation.Subjecttoawaiverbytheshareholderspresentatthemeeting,theresolutioncanalsobe
deferredifamanager,amemberofthestatutoryauditcommitteeortheindependentauditorfailstoattend
themeeting.
Everyshareholderisentitledtoobtainacopyoftheminutesofthegeneralmeeting.Inaddition,any
shareholderowningatleast0.5%ofthesharecapitalhastherighttorequesttheaddressesofthe
shareholdersforthepurposesofexercisingtheproxyrights.
Inadditiontotherighttoinspecttheaccountingdocumentsassetoutabove,attherequestof
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shareholdersrepresentingatleast5%ofthecapitalstock,afulldisclosureofthecompany'sbookscanbe
orderedbythecourtwhenever:
Actscontrarytolawortothebyelawsoccur.
Thereisagroundedfearofseriousirregularitiescommittedbyanyofthecompany'smanagement
bodies.

26.Whatinformationaboutthecompanydothedirectorshavetodiscloseundersecurities
laws(whereapplicable)?
UnderBrazilianSecuritiesExchangeCommission(ComissodeValoresMobilirios)(CVM)rulingNo.
358,managersmustdisclose:
Anymaterialfactoractrelatedtothecompanyitself.
Theirownershipandnegotiationsinvolvingsecuritiesofthecompany,orofitslistedcontrolling
companiesorsubsidiaries.
ThemanagerswilldisclosethisinformationtotheInvestorRelationsOfficerandtheInvestorRelations
OfficerwillreleasethisinformationtotheCVMandtothemarket,asapplicable,withinthetermsprovided
bylaw.
Thereisnoexhaustivedefinitionof"materialactorfact"andtheInvestorRelationsOfficerwilldetermineif
certaininformationshouldbeconsideredamaterialfactoractfordisclosurepurposes.Anyactorfactthat
maycauseamaterialeffecttothefollowingmatterswillbedeemeda"materialfactoract"andwillbe
subjecttodisclosure:
Themarketpriceofthesecuritiesissuedbytherelevantcorporationorbackedonthem.
Investors'decisionstobuy,sell,orpreservethosesecurities.
Investors'decisiontoexerciseanyrightsinherenttotitleholdersofsecuritiesissuedbytherelevant
corporationorbackedonthem.
TheCVMhasprovideda(nonexhaustive)listofsomeexamplesofmaterialsactsandfacts,which
include:
Executionofagreementsorcontractsregardingthetransferofthecontrolofthecompany,evenif
underconditionalprovisions.
Changesinthecontrolofthecompany,includingexecution,amendmentstoorcancellationof
shareholders'agreements.
Execution,amendmentsto,orcancellationofshareholders'agreementsinwhichthecompanyisa

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partyoranintervenientparty,orofshareholders'agreementsthathavebeenregisteredinthe
relevantbooksofthecompany.
Admissionordepartureofshareholdersmaintainingcontractsoroperationalcollaboration
arrangementsregardingfinancial,technologicaloradministrativeissueswiththecompany.
Authorisationforlistingsecuritiesissuedbythecompanyinanydomesticorforeignmarket.
Decisiontogoprivate,ortopromotethecancellationofthecompany'sregisterasalistedcompany
withtheCVM.
Incorporation,mergerorspinoffinvolvingthecompanyitselforlinkedcorporations.
Transformationordissolutionofthecompany.
Materialchangesinthecompany'sassets.
Materialchangesinthecompany'saccountingcriteria.
Renegotiationsofdebts.
Approvalofstockoptionsplans.
Changestotherightsandprivilegesofthesecuritiesissuedbythecompany.
Splits,reversesplitsortheissueofsharedividends.
Acquisitionofsharesforthepurposeofincreasingtreasurystocksorforcancellationpurposes,and
theresaleoftheacquiredshares.
Amountofprofitsorlossesandthedistributionofdividends.
Executionorterminationofcontracts,orfailuretocloseadeal,whentheexpectationfortheclosingis
publiclyknown.
Amaterialproject'sapproval,alterationorabandonment,aswellasadelayinitsimplementation.
Starting,retakingorsuspendingthemanufacturingorcommercialisationofproductsorofservices
rendered.
Discoveries,changesordevelopmentsregardingtechnologyorcompanies'resources.
Modificationofdisclosedprojectionsofthecompany.
Reorganisationarrangements,bankruptcy,oranylawsuitthatmateriallychangescompany'sfinancial
situation.
Inaddition,undertheSecuritiesLaw,themanagersofthecompanymustdisclosetotheshareholdersat
theshareholdersordinarygeneralmeeting,attherequestofshareholdersrepresentingatleast5%ofthe
corporatecapitalofthecompany:
Theamountofsecuritiesofthecompany(orofcompaniesfromthesameeconomicgroup)thatthey
havedirectlyorindirectlyacquiredordisposedduringthepastfiscalyear.
Thestockoptionspurchasedorexercisedduringthepastfiscalyear.
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Thebenefitsoradvantagesreceiveddirectlyorindirectlybythecompanyorbycompaniesofthe
sameeconomicgroup.
Themainconditionsoflabouragreementsenteredwithmanagersandhighlevelexecutives.
Anymaterialactorfactrelatedtotheactivitiesofthecompany(includingthosethatmayhavea
materialeffectorinfluenceon):
thecompany'sshareprice.
adecisionoftheinvestorswithrespecttothesaleorpurchaseofcompany'ssecurities.
adecisionoftheinvestorswithrespecttoanyofitsrightsasasecurities'holderofthecompany.

Wherethemanagersbelievethatthedisclosureofcertaininformationcouldbedetrimentaltotheinterests
ofthecompany,theycandecidenottodiscloseit(thoughtheywillstillbeatriskofbeingheldliablebythe
CVMfortheomission).
Untilthereleaseofmaterialactsorfactsthatmanagersmayhavehadaccesstoasaresultoftheir
positionsinthecompany,managersandtheirsubordinateshaveanobligationtotreatsuchinsider
informationconfidentially.

27.Isthereacorporategovernancecodeinyourjurisdiction?Dodirectorshavetoexplainto
shareholdersinthecompany'sannualreportiftheyhavenotcompliedwithit(complyor
explainapproach)?
Thereisnogeneralandmandatorycorporategovernancecodeapplicabletoalllistedcompanies.There
arecorporategovernancecodesforcertainmarketsegments,forexample,themarketsegmentwithinthe
SaoPaoloExchange,formerlyknownastheBOVESPA,whichmergedwiththeBrazilMercantileand
FuturesExchangein2008tocreatetheBM&FBovespaExchange,theNovoMercado,hasitsown
corporategovernancecode,andisregulatedbytheNovoMercadoRules.However,thesecodesarenot
applicabletocompaniesthathavenotadheredtothesespecificmarketsegments.
Nevertheless,therearesomecodesandgovernanceorientationsissuedbyregulatorsandothercapital
marketorganisationsthat,despitenotbeingmandatory,havebeencreatedforthepurposesofcreatinga
bettercapitalmarketsenvironmentintermsofcorporategovernance.Forexample,theBrazilianInstitute
ofCorporateGovernance(InstitutoBrasileirodeGovernanaCorporativa)(IBGC)issueditsmostupto
dateeditionofitscorporategovernancecodeandbestpracticesin2009,andtheCommitteeof
OrientationforInformationDisclosurefrequentlyissuesseveralorientationsinrespectofbestdisclosure
practicesforlistedcompanies.Companiesusuallyfollowtheorientationprovidedbytheseentities,butthis
isnotmandatoryunlessrequiredbycompany'sinternalgovernancerulesorbythemarketsegmentthe
companyispartyto.

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28.Whatinformationcanshareholdersrequestfromtheboardaboutthecompany?Onwhat
groundscandisclosureofcompanyinformationberefused?Areshareholdersentitledto
inspectthecompany'sbooksandsimilarcompanydocuments?
Shareholdersareallowedtorequestclarificationsinrespectofanyaspectinvolvingthecompanyitselfor
ofanymeasuretakenbythemanagementofthecompany.Where,foranyreason,themanagement
believesthatthedisclosureofcertaininformationcouldbedetrimentaltothecompany,themanagement
canrefusedisclosureanditsactionwillbethensubjecttotheevaluationoftheBrazilianSecurities
ExchangeCommission(ComissodeValoresMobilirios)(CVM).
Inadditiontotherightofshareholdersrepresentingatleast5%ofacompany'scorporatecapitalto
requestcopiesofmanagementreports,accountsandfinancialstatements,andopinionsofindependent
auditors(ifany),theshareholdersrepresentingatleast5%ofacompany'scorporatecapitalcanapplyfor
acourtorderrequiringthecompletedisclosureofthecorporatebooksinthecaseofaviolationofthelaw
orthebyelaws,orintheeventthattherearegroundstosuspectthatmanagementhascommittedserious
irregularities(seeQuestion24).

Shareholders'agreements
29.Brieflysetoutthemainprovisionsofatypicalshareholders'agreement.
Shareholders'agreementsregulatingthepurchaseandsaleofshares,therightoffirstrefusaltoacquire
shares,theexerciseofvotingrightsortheexistingcontrollingpowerswillbeobservedbythecompany
whentheyhavebeenfiledatthecompany'sheadquarters.
Thechairmanofthemeetingorofthecompany'sdecisionmakingboardmustnotratifyorcountasvalida
votecastinviolationofashareholders'agreementwhichisonfile.
Thedurationofshareholders'agreementscanvaryenormously,butusuallytheyhavelongtermduration
(tento20years),ortheylastforaslongastherelevantshareholderscontinuetoownacertain
percentageofthecompany'scorporatecapital.

30.Aretherecircumstanceswhereshareholders'agreementscanbeenforceableagainst
thirdparties?
Commitmentsorburdensresultingfromshareholders'agreementscanonlybeenforcedagainstathird
partyaftertheagreementhasbeendulyregisteredintheregisterbooksofthecompanyandonshare
certificates(ifany).

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31.Doshareholders'agreementshavetobepubliclydisclosedorregistered?
Shareholders'agreementsoflistedcompaniesarepubliclyavailablethroughtheBrazilianSecurities
ExchangeCommission's(ComissodeValoresMobilirios)(CVM's)website.Shareholders'agreements
ofprivatelyheldcompaniesarefiledatthecompany'sheadquartersandwillonlybemadeavailableto
interestedpartiesuponthatpartymakingajustifiablerequesttoseethem.

Dividends
32.Howcandividendsbepaidtoshareholdersandwhatproceduresandrestrictionsapply?
Isitpossibletoexcludeorlimittherightofcertainshareholderstodividends?Isthe
paymentofinterimdividendsallowed?
Acompanycanonlypaydividendsfromtheyearendnetprofits,theaccruedprofitsandtheprofit
reserves.Advancesondividendsarenotallowed.Withoutprejudicetocriminalprosecution,the
managementandauditcommitteememberswillbejointlyliableforreimbursementtothecompanyofthe
amountdistributedasdividendsinbreachofthisrule.
Shareholderswillnotberequiredtorepaydividendsreceivedingoodfaith.Badfaithisheldtooccurwhen
dividendsaredistributed:
Withoutthepreparationofabalancesheet.
Notinaccordancewiththeresultsdisclosedbytherelevantbalancesheet.
Anygeneralmeetingresolutionorprovisioninthebyelawsthatexcludestherightofanyshareholderto
thedividendsisvoid.However,therighttodividendsisnotspecifictoacertainpercentageoftheprofits.
Therefore,differentclassesofsharescanhavedistinctdividendrelatedrights.Inthecaseoflimited
liabilitycompanies,thearticlesofassociationcanallowthedisproportionaldistributionofprofits.
Beforeanyotheruse,5%oftheyearendnetprofitmustbesetasidetoalegalreserve,whichcannot
exceed20%ofthecompany'scapitalstock.Thelegalreserveisintendedtosecurethecapitalstockand
canonlybeusedtooffsetlossesortoincreasethecorporatecapitalofthecompany.
Paymentsofinterimdividendsareallowedundercertainspecificcircumstances.Forthepaymentof
interimdividends:
Itismandatoryforthecompanytopreparespecificbalancesheets.
Thecompanymustbeauthorised(bystatutoryprovisionsorbyitsownbyelaws)topreparebalance
sheetscomprisingtheinterimperiods.
Thebyelawsofthecompanymustgrantpowerstothemanagementtodeclareandpayinterim

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dividends.
Thetotalamountofdividendspaidineachsemesterofafiscalyearmustnotexceedtheamountofthe
capitalreservesofthecompany.Inadditiontothat,thebyelawsofthecompanycanauthorisethe
managementtodeclareinterimdividendsfromaccumulatedprofitsorprofitsreservesprovidedinthelast
annualorsemiannualbalancesheets.

Financingandshareinterests
33.Canshareholdersgrantsecurityinterestsovertheirshares?
Yes,shareholderscangrantsecurityinterestsovertheirshares.Theformalitiesgoverningthe
effectivenessofthesecurityinterestcanvary(dependingonthesecurityinterestgrantedandthetypeof
shares),buttheformalitiesusuallyrequiretheannotationofthesecurityinterestinthecompany'sregister
books.
Apledgeofshareswillbeeffectivebyrecordingtherespectiveinstrumentinthesharesregisterbook.A
pledgeofbookentryshareswillbeeffectivebyenteringtherespectiveinstrumentinthebooksofthe
financialinstitution,andasimilarentrymustalsobeevidencedonthedepositaccountstatementprovided
totheshareholder.
Thecompanyorfinancialinstitutionisalwaysentitledtorequestacopyofthepledgeinstrumentforits
files,andinordertoensuretheaccuracyoftheannotations.

34.Arethererestrictionsonfinancialassistanceforthepurchaseofacompany'sshares?
TheBrazilianGovernmentenactedLawNo12.249/10toregulatethincapitalisationinBrazil.Under
currentBrazilianlegislation,thedebt/equityratiostobeusedforthepurposesofdeterminingthe
limitationsforinterestpaymentdeductionsunderthethincapitalisationrulescanvary,dependingonthe
placeinwhichtheforeigncreditorisresidentordomiciled,asprovidedbelow:
Relatedpartiesnotresidentinataxhavenjurisdiction.Asageneralrule,thedebt/equityratiois
"twoforone"forloantransactionsenteredintobetweenaBrazilianlegalentityandaforeignrelated
partynotresidentinataxhavenjurisdictionorfavourabletaxregime.Thistestmustbemadeintwo
steps:
withrespecttoaspecificcreditor
withrespecttoallloanswithrelatedparties.
Foreignpartiesresidentintaxhavensandfavourabletaxregimejurisdictions.Asageneral
rule,thedebt/equityratiois0.3tooneforloantransactionsenteredintobetweenaBrazilianlegal

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entityandaforeignpartyresidentinataxhavenorfavourabletaxregimejurisdiction(irrespectivelyof
notbeingrelatedtotheBrazilianparty).Inthissense,undertheapplicabletaxlegislation,interest
paymentsmadetoaforeignpartyresidentinataxhavenorfavourabletaxregimejurisdictionarenot
deductibleforcorporatetaxationpurposesifthedebtraisedbytheBrazilianentitywiththeforeigntax
haven/favourabletaxregimepartieshappenstoexceed30%oftheequityvalue(networth)ofthe
Brazilianentity(inthiscase,onlytheinterestappliedovertheprincipalamountofthedebtthat
exceedsthe"0.3toone"ratioforallthedebtborrowedfrompartiesresidentinataxhavenor
favourabletaxregimejurisdictionisnotdeductible).

Sharetransfersandexit
35.Arethereanyrestrictionsonthetransferofsharesbylaw?Canthetransferofsharesbe
restricted?Whataretherightsofshareholdersinthecaseofanissueofnewshares(pre
emptionrights)?
Sharesoflistedcompaniescanonlybetradeduponpaymentofatleast30%oftheirissueprice.Non
compliancewiththisprovisionwillrendertheactvoid.Inaddition,dependingonthecorporategovernance
segmentthatthecompanyispartyto,controllingshareholdersandmanagementcanhave100%oftheir
sharessubjecttoasixmonthlockupperiodafterthefirstpublicissuanceofsharesuponenrolmentwith
thatgovernancesegment,and40%oftheirsharessubjecttoadditionalsixmonthlockupduringthe
followingsixmonthperiod.
Thebyelawsofnonlistedcompaniescanimposerestrictionsonthetransferofregisteredshares,
providedthatthoserestrictionsaredefinedindetailanddonotprecludetheirnegotiabilityorsubjectthe
shareholdertodiscretionarydecisionsofthecompany'smanagementbodiesormajorityshareholders.A
restrictiononthetransferofsharescreatedbyanamendmenttothebyelawswillonlyapplytoshares
whoseownershaveexpresslyconsentedtosucharestriction,andmustberegisteredintheshares
registerbook.
Shareholdershavepreemptiverightsinthesubscriptionofnewsharesinproportiontothenumberof
sharestheyown.Thebyelawsorageneralmeetingwillestablishaperiodofnotlessthan30daysforthe
shareholderstoexercisetheirpreemptiverights.Thebyelawsofalistedcompanyauthorisingcapital
increasescanprovidefortheissuanceofshares,convertibledebenturesorsubscriptionwarrants(without
grantingtheexistingshareholdersthepreemptiverights,orwithanexercisetermshorterthan30days),
providedthatthesesecuritiesareplacedbymeansofeither:
Asaleinastockexchangeorpublicsubscription.
Anexchangepublictenderofferfortheacquisitionofcorporatecontrol.

36.Canminorityshareholdersalterorrestrictchangestothecompany'ssharecapital
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structure?
Minorityshareholderscannotalterorrestrictchangestothecompany'ssharecapitalstructure.Minority
shareholderscanhavepreemptiveandwithdrawalrights(seeQuestion39)inthecaseofcertain
corporatetransactions,buttheyhavenorightstoalterorrestrictchangestothecompany'ssharecapital
structure.

37.Whenareshareholdersrequiredtonotifychangestotheirshareholdingtoaregulatory
authority?
Inalistedcompany,shareholdersthatreacha5%stakeofacertaintypeorclassofshareissuedbythe
companymustsubmitcertaininformationabouttherelevantshareholder,thesecuritiesowned,the
purposeofthetransaction,amongotherthings,totheInvestorRelationsOfficer,whowillsubmitthe
informationtotheBrazilianSecuritiesExchangeCommission(ComissodeValoresMobilirios)(CVM).
Thesameinformationmustbesubmittedbyshareholdersholding5%ormoreofacertaintypeorclassof
share,eachtimethattheirstakechangesbyanincreaseoradecreaseof5%.
Inaddition,thecontrollingshareholderofapubliclyheldcompany,aswellastheshareholders(orgroupof
shareholders)thathaveelectedaboardofdirectorsorauditcommitteemember,mustmakeprompt
disclosureofanychangeintheownershipintereststhattheyholdtotheCVMandtotheStockExchanges
ororganisedoverthecountermarketsinwhichthepubliclyheldcompany'ssecuritiesarelisted,inthe
mannerandontheconditionsestablishedbytheCVMtothatend.
Shareholdersofnonlistedcompaniesgenerallydonothavethesereportingobligations,exceptwhenthe
changestotheirshareholdingrelatetoatransactionwhichrequirestheapprovalofthecompetition
authorities.

38.Cancompaniesbuybacktheirshares?Whichlimitationsapply?
Asageneralrule,companiesarenotallowedtotradetheirownshares.Thisprohibitiondoesnotapplyto:
Redemption,repaymentoramortisationoperationsprovidedforbylaw.
Sharesacquiredtobeheldinthecompanytreasuryorcancelled,inanamountuptotheoutstanding
balanceofprofitsorreserves(thestatutoryreserveexcepted),andwithoutentailingareductioninthe
corporatecapital.
Thedisposalofsharesacquiredunderthesecondbulletpointabove,andheldintreasury.
Thepurchaseofshareswhen,itbeingresolvedthatthecapitalwillbereducedthroughacash
redemptionofpartofthesharevalue,theirstockexchangepriceislessthanorequaltotheamount
toberepaid.

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Listedcompaniescanpurchasesharesissuedbythemselves,forcancellationorholdingintreasuryfor
furtherdisposal,ifauthorisedbyitsbyelawsandprovidedthatthetotalamountofpurchasedsharesdoes
notexceed10%ofeachclassofoutstandingshares(includingexistingsharesheldintreasuryby
controlledandassociatedcompanies).
Thepurchasepriceofthesharescannotexceedthemarketvalue.Whileheldintreasury,theshareswill
havenorightstodividendsortovote.

39.Whatarethemainwaysforashareholdertoexitfromthecompany?Canshareholders
requiretheirsharestoberepurchasedbythecompany?Canshareholdersberequiredto
exitthecompanyincertaincircumstances?Howarethesharesvaluedinthiscase?
Inlistedcompanies,themainwayforshareholderswhicharenotpartofthecontrollinggrouptoexitfrom
thecompanyisbysellingthesharesinthestockmarket.Forshareholderswhicharepartofcontrolling
groupsoflistedcompanies,orshareholdersofnonlistedcompanies,themainwaystoexitaretheexit
alternativesbuiltintherelevantshareholders'agreements,suchasmandatoryIPOfollowonsorput
options.Otherthanthat,theexitsareviabilateraltransactionswithpotentialacquirers.
Therearecertainlimitedcircumstanceswhereshareholderscanrequiretheirsharestoberepurchasedby
thecompany:
Inthecaseofadelistingtenderofferfiledbythecompany.
Upontheapprovalbythegeneralmeetingofcertaintransactionsinrelationtowhichtherelevant
shareholderhasvotedagainst.Thesetransactionsarethefollowing:
creationofpreferredsharesorincreaseinanexistingclassofpreferredshares,without
maintainingtheexistingratiototheotherclassesofpreferredshares,unlessalreadyprovided
fororauthorisedbythebyelaws
changeinthepriorities,advantagesandconditionsofredemptionorauthorisationofoneor
moreclassesofpreferredshares,orthecreationofamorefavourednewclass
reductionofthecompulsorydividend
consolidationofthecompany,oritsmergerintoanother
participationinagroupofcompanies
changeintheobjectsofthecompany
spinoffofthecompany
mergerofshares.

UndertherulesoftheBrazilianCivilCode,aquotaholdercanbeexpelledfromalimitedliability

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partnershipwhenitputsthecontinuedexistenceofthepartnershipatriskthroughactsofevident
seriousness.TheSociedadeSimplesrules,whichcancomplementthelimitedliabilitypartnershiprules,
additionallyincludesthedefaultofthepartner'sobligations,superveningincapacity,andwhenthepartner
isdeclaredbankruptasgroundsforexpellingaquotaholder.Inthesesituations,thevalueofthepartner's
quotawillbecalculatedbasedonthenetworthofthepartnershiponthedateoftheexit.
TheCorporationsLawissilentaboutthereasonstoexpelashareholder.However,courtprecedentsand
Brazilianscholarsacceptthatexpulsionispossibleinordertopreservethecompany'sactivities.The
groundsforexpulsionarerelatedtoadefaultoftheshareholder'sobligationsandputtingthecontinued
existenceofthecompanyatriskthroughactsofevidentseriousness.Inaddition,therelationshipbetween
theshareholdersmustnotonlybebasedonfinancialinterestbutmustalsoinvolvesomepersonal
involvement.Thereisnospecificruleaboutthevaluationofthesharesanditisassessedonacaseby
casebasis.

Materialtransactions
40.Whatrightsdoshareholdershaveinthecaseofmaterialtransactions,suchasasaleofall
orsubstantiallyallofthecompany'sassets,andacompanyreorganisationsuchasa
mergerordemerger?
Themainprotectionthatshareholdershaveinthecaseofmaterialtransactionsisthewithdrawalright
coveredinQuestion39.ThisrightisavailableonlyinrelationtothetransactionslistedinQuestion39,
exceptifotherwisesetoutinthecompany'sbyelaws.Thewithdrawalrightisalsosubjecttocertain
limitationssothatitbenefitsonlytheadverselyaffectedshareholdersanddoesnottocovershareholders
oflistedcompanieswhoseshareshaveliquidityanddispersioninthemarket.
Inaddition,shareholdersoflistedcompaniescanbenefitfromthemandatorytenderofferswhichare
requiredincasesofdelisting,increaseofownershipstakebythecontrollingshareholderandtransferof
control.
Otherthanthesestatutoryrights,shareholderscanhaveotherprotectionsbuiltintotherelevantbyelaws
ofthecompanies,suchasvetorights,qualifiedmajoritiestoapprovecertaintransactionandpoisonpills.

41.Whatrightsdoshareholdershaveifthecompanyisconvertedintoanothertypeof
company(considerifapplicable,aEuropeanCompany(SE))?
UnderArticle221oftheCorporationsLaw,thetransactionbymeansofwhichonecompanyischanged
fromonetypeintoanotheriscalledtransformation,anditrequirestheunanimousconsentofthepartners
orshareholders,exceptwhereotherwiseprovidedbythebyelawsorarticlesofassociation,inwhichcase
thedissentingpartnerorshareholderwillhavetherighttowithdrawitsshares.Thewithdrawalrightcanbe
waivedbythepartnersinthearticlesofassociation.
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Insolvency
42.Whatrightsdoshareholdershaveifthecompanyisinsolvent?
Theshareholdersrepresentingatleasthalfoftheissuedvotingcapitalcanapprovethedissolutionand
liquidationofthecompanyinageneralmeeting.
Ageneralmeetingcandecidethat,priortocompletingtheliquidationandafterallcreditorshavebeen
paid,thecompanyassetsbeapportionedamongtheshareholdersassuchassetsareascertained.After
allcreditorshavebeenpaidorguaranteed,ageneralmeetingcanapprove,bythevoteofshareholders
representingatleast90%oftheshares,specialconditionsfortheapportionmentofremainingassetsby
attributingassetstotheshareholdersatbookvalueoranyothervalueitmayestablish.Shoulda
dissentingshareholderprovethatthespecialapportionmentconditionsfavourthemajoritytothedetriment
oftheportionwhichwouldhavebeenattributedtohimifsuchconditionsdidnotexist,theapportionment
mustbesuspended(ifnotperfected)or,ifperfected,themajorityshareholdersmustindemnifytheminority
shareholdersforanyprovedloss.

43.Canshareholdersputthecompanyintoliquidation?Whatistheproceduretodothis?
Yes,shareholdersrepresentingatleasthalfoftheissuedvotingcapitalcanapprovethedissolutionofthe
companyinageneralmeeting.Inthenonlistedcompanies,thebyelawscanestablishahigherapproval
quorum.Exceptifotherwisesetoutinthebyelaws,itiswithinthegeneralmeeting'scompetenceto
establishthemethodofliquidation,andappointtheliquidatorandtheauditcommitteetoserveduringthe
periodofliquidation.

Corporategroups
44.Istheconceptofacorporategrouprecognisedunderspecificlegislation?
TheCorporationsLawprovidesthatthecontrollingcompanyanditscontrolledcompaniescanforma
groupbyanagreementtocombineresourcesoreffortstoachievetheirrespectivepurposesorto
participateinjointactivitiesorundertakings.ThecontrollingcompanyorleadermustbeBrazilianandmust
directlyorindirectlyexercisepermanentcontrolovertheaffiliatedcompanies,byvirtueofbeingthe
controllingshareholder,orbyagreement.Therelationshipbetweenthecompanies,theadministrative
structureofthegroupandthecoordinationorsubordinationoftheofficersoftheaffiliatedcompanies
mustbeagreedwithinthegroup,buteachcompanywillmaintainaseparatelegalidentityandseparate
assetsandliabilities.
Additionally,Brazilianlabour,socialsecurityandtaxlawsprovideforabroaderconceptofcorporate
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group,wheretheonlyrequirementisforthecompaniestobeundercommoncontrolormanagement.In
thiscase,thecompaniescanbeconsideredaspartofacorporateandeconomicgroupandcanbeheld
jointlyliableforcertainobligations.

45.Doesacontrollingcompanyhaveanydutiesandliabilitytotheshareholdersofthe
companyitcontrols?Whataretherightsofcompanyshareholdersifthecontrolling
companycarriesoutactionsthatareprejudicialtotheshareholders?
Acontrollingshareholder(whetheracompanyoranindividual)isanindividualoralegalentity,oragroup
ofindividualsorlegalentitiesjoinedbyavotingagreementorundercommoncontrol,which:
Possessrightswhichpermanentlyassureitamajorityofvotesinresolutionsofgeneralmeetingsand
thepowertoelectamajorityofthecompanydirectorsandofficers.
Inpractice,usesitspowertodirectthecorporateactivitiesandtoguidetheoperationsofthe
departmentsofthecompany.
Acontrollingshareholdermustuseitscontrollingpowertomakethecompanyaccomplishitspurposeand
performitssocialrole,andwillhavedutiesandresponsibilitiestowardstheothershareholdersofthe
company,thosewhoworkforthecompanyandthecommunityinwhichitoperates,therightsand
interestsofwhichthecontrollingshareholdermustloyallyrespectandheed.
Acontrollingshareholderwillbeliableforanydamagecausedbyactsperformedinabuseofitspower.An
abuseofpowercantakeanyofthefollowingforms:
Toguideacompanytowardsanobjectiveotherthaninaccordancewithitsobjectsclauseorwhichis
harmfultonationalinterests,ortoinduceittofavouranotherBrazilianorforeignentitytothe
detrimentoftheminorityshareholders'interestsintheprofitsorassetsofthecompanyorofthe
Brazilianeconomy.
Toprovidefortheliquidationofaviablecompanyorforthetransformation,mergerordivisionofa
companyinordertoobtain,foritselforforathirdparty,anyundueadvantagetothedetrimentofthe
othershareholders,ofthoseworkingforthecompanyorofinvestorsinthecompany.
Toprovideforastatutoryamendment,anissueofsecuritiesoranadoptionofpoliciesordecisions
whicharenotinthebestinterestsofthecompanybutareintendedtocausedamagetotheminority
shareholders,tothoseworkingforthecompanyortoinvestorsinthecompany.
Toelectacompanyofficerorauditcommitteememberknowntobeunfitforthepositionor
unqualified.
Toinduce,orattempttoinduce,anyofficerorauditcommitteemembertotakeanyunlawfulaction,
or,contrarytotheirdutiesunderthelawandunderthebyelaws,andcontrarytotheinterestsofthe
company,toratifyanysuchactioninageneralmeeting.

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Tosigncontractswiththecompanydirectly,throughathirdpartyorthroughabusinessinwhichthe
controllingshareholderhasaninterest,incorporatingunfairorinequitableterms.
Toapprove,orcausetobeapproved,irregularaccountsrenderedbycompanyofficersasapersonal
favour,ortofailtoverifyacomplaintwhichitknows,orshouldknow,tobewellfounded,orwhich
givesgroundsforareasonablesuspicionofirregularity.
Tosubscribeforshareswithpaymentinassetsoutsidethescopeoftheobjectsofthecompany.
Acontrollingcompanywillbeobligedtocompensateanydamageitmaycausetoacontrolledcompanyby
anyactsinfringingthedutiessetoutabove.
Proceedingsforcompensationcanbebroughtby:
Shareholdersrepresenting5%ormoreofthecapital.
Anyshareholder,providedheguaranteespaymentofthelegalcosts.
Ifthecontrollingcompanyisheldresponsible,inadditiontopayingcompensationandcosts,itmustpay
anindemnityinrespectoflawyers'feesof20%ofthecompensationawardedandafurtherpremiumof
5%totheclaimant.

46.Whatarethelimitationsonowningreciprocalshareinterestsincompanies?
Asageneralrule,theCorporationsLawprohibitscrossholdingsbetweenacompanyanditsaffiliatesor
controlledcompanies.However,thisprohibitionwillnotapplytothecasesinwhichacertaincompany
holdsequityinterestsinanotherundertheconditionsonwhichthelawauthorisesacquisitionofitsown
shares(seeQuestion38).Inthiscase,withinsixmonthsthecompanymustdisposeofthesharesor
quotasexceedingtheamountofprofitsorreserves,wheneverthesearereduced.
Thesharesofthecontrollingcompanywhichareownedbythecontrolledcompanywillhavetheirvoting
rightssuspended.Thissamerulewillapplytotheacquisitionofsharesoflistedcompaniesbytheir
affiliatesandcontrolledcompanies.
Whencrossholdingsderivefromamerger,consolidationorspinoff,orfromacquisitionbythecompanyof
acontrollinginterestinanothercompany,thisfactmustbementionedinthereportsandfinancial
statementsofbothcompaniesandmustbeeliminatedwithinoneyear.Inthecaseofaffiliates,unless
otherwiseagreed,thesharesorquotasacquiredmostrecentlyor,whenacquiredonthesamedate,those
representingalesserpercentageofthecapitalstock,mustbedisposedof.
Managersofacompanycanbeheldjointlyliablefortheacquisitionofsharesorquotasresultingincross
holdingsinbreachofthelaw.

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Contributorprofiles
AlexandreBertoldi,ManagingPartnerandMemberoftheExecutiveCommittee
PinheiroNetoAdvogados
T(+5511)32478568
F(+5511)32478600
Eabertoldi@pn.com.br
Wwww.pinheironeto.com.br
Professionalqualifications.LLB,UniversidadedeSoPaulo,BrazilMBA,UniversityofGlasgow,
Scotland
Areasofpractice.Mergersandacquisitionscorporateprivateequitycapitalmarketsbankingand
finance.

VniaMarquesRibeiroMoyano,Partner
PinheiroNetoAdvogados
T(+5511)32478762
F(+5511)32478600
Evmoyano@pn.com.br
Wwww.pinheironeto.com.br
Professionalqualifications.LLB,PontifciaUniversidadeCatlicadeSoPaulo,BrazilLLM,
UniversityofChicago,USA
Areasofpractice.Mergersandacquisitionscorporateprivateequitycapitalmarketsanddebt
restructuring.

SofiaToledoPiza,SeniorAssociate
PinheiroNetoAdvogados
T(+5511)32478782
F(+5511)32478600
Espiza@pn.com.br
Wwww.pinheironeto.com.br
Professionalqualifications.LLB,UniversidadedeSoPaulo,BrazilGraduatedinBusiness
AdministrationbyFundaoGetlioVargas,EscoladeAdministraodeEmpresasdeSoPaulo,
BrazilMBA,FundaoGetlioVargas,EscoladeAdministraodeEmpresasdeSoPaulo,Brazil

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Areasofpractice.Mergersandacquisitionsprivateequityandcorporatematters.

RobertaBilottiDemange,SeniorAssociate
PinheiroNetoAdvogados
T(+5511)32476209
F(+5511)32478600
Erdemange@pn.com.br
Wwww.pinheironeto.com.br
Professionalqualifications.LLB,UniversidadedeSoPaulo,BrazilLLM(BankingandFinance),
BostonUniversity,USA
Areasofpractice.Mergersandacquisitionscorporateprivateequityprojectfinancebankingand
finance.

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PublicmergersandacquisitionsinBrazil:overview

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