André Martin, Camila Montagna and Leonardo Baroni
On June 2 this year, the Government, through the Ministry of Finance, sent Bill 2925/2023 for analysis by the members of the National Congress.
The Bill proposes to change Law 6.385/1976, which regulates the securities market, and the Brazilian Corporations Law (Law 6.404/1976), aiming to provide more transparency in arbitration proceedings and to establish a system for the private protection of investors’ rights in the securities market.
The Ministry of Finance states that the Bill contributes to raising the standards of corporate governance in the Brazilian capital market. The proposal, in this sense, has been seen as positive by managers and investors, although it is observed that some changes should be treated with some caution in order not to encourage “legal excesses”.
Check out a comparative between the current texts of the Laws and the texts changed by the Bill, should it be approved in its present terms.
How does it work today?
- Divergences between shareholders and the company or between controlling shareholders and minority shareholders can be resolved through arbitration (Article 109, paragraph 3, Law 6.404/1976);
- Legal responsibility claims against administrators or controlling shareholders can be terminated by an agreement with the company without prior deliberation of the shareholders’ meeting;
- The approval of the financial statements and accounts in a general meeting exonerates the directors and auditors from liability, except in the case of error, intent, fraud or simulation (Article 134, paragraph 3, Law 6404/1976);
- Shareholders representing (i) 5% or more of the share capital or (ii) any shareholder that provides a bond for costs and attorney’s fees in case of dismissal may file a lawsuit against the controlling shareholder that causes damages to the company. Shareholders representing 5% or more of the share capital may also file a lawsuit against the administrator that causes damages to the company (Articles 159, paragraph 4 and 246, paragraph 1, items ‘a’ and ‘b’, Law 6.404/1976);
- If the controlling shareholder is convicted for causing damages to the company, it must pay a 5% premium to the plaintiff, calculated over the amount of the compensation (Article 246, paragraph 2, Law 6.404/1976);
- The full disclosure of the company’s books may be judicially ordered at the request of shareholders representing at least 5% of the share capital, if acts in violation of the law or bylaws are argued, or if there is suspicion of serious irregularities practiced by the company’s bodies. The CVM (Securities and Exchange Commission of Brazil) may reduce this percentage for publicly traded companies in proportion to the share capital and analysis of other parameters (Articles 105 and 291, Law 6.404/1976).
What will change if the Bill is approved?
- The divergences involving the company, its shareholders and also the administrators may be solved through arbitration. In addition, when it comes to publicly traded companies, the arbitration procedures must be public and regulated by CVM (Article 109, paragraph 3 and others, Law 6.404/1976);
- The General Shareholders’ Meeting will have exclusive competence to authorize transactions that terminate proceedings held against administrators or controlling shareholders, and will grant veto power to shareholders representing 10% of the voting capital, a percentage that may be reduced by the CVM in publicly traded companies, depending on the company’s capital shares and other parameters to be analyzed (Articles 122, item XI, and paragraph 2, and 291, item I, Law 6404/1976);
- The approval of the financial statements and accounts in a general meeting does not exonerate directors and auditors from liability, unless the general meeting decides so (Article 134, paragraph 3 and paragraph 3-A, Law 6404/1976);
- Shareholders representing 5% (or more) of the share capital may file a lawsuit against the administrator and/or the controlling shareholder that causes damages to the company, in closed companies. In case of publicly traded companies, shareholders representing 2.5% or R$ 50,000,000.00 of the company’s capital shares may file a lawsuit against the administrator and/or controlling shareholder that cause damages to the company (Articles 159, paragraph 4, items I and II, and 246, paragraph 1, items I and II, Law no. 6.404/1976);
- If the administrator or controlling shareholder is convicted for causing damages to the company, he must pay a 20% premium to the plaintiff, calculated over the total amount of the compensation (Articles 159, paragraph 5º-A and 246, paragraph 2, Law 6.404/1976);
- The full display of the company’s books can be judicially ordered at the request of shareholders representing at least 5% of the capital stock, without revision of the percentage by the CVM (Article 105, Law 6.404/1976).