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Listed Companies Newsletter | December 2023
January 15th, 2024
The Listed Companies Newsletter provides information on the main regulations, decisions and news concerning listed companies and capital markets. This material is for informative purposes only, and should not be used for decision-making. Specific legal counseling may be provided by our legal team.
CVM launches public consultation on review of regulation applicable to takeover bids
On December 06, 2023, the Brazilian Securities and Exchange Commission (“CVM”) launched a public consultation to review the regulations governing takeover bids. The proposal aims to simplify and streamline the process, introducing significant changes, such as new criteria for takeover bids involving shareholding increase and the establishment of specific registration procedures. The president of the CVM, João Pedro Nascimento, emphasizes the need for a more democratic and transparent market.
The public consultation encompasses two drafts: Draft “A” introduces comprehensive changes, while Draft “B” provides specific adjustments to CVM Resolution 77. Contributions can be submitted by March 07, 2024, to the following e-mail address: firstname.lastname@example.org. In addition, a study on fractional limits concluded that the current limits of 1/3 and 2/3 for acquiring outstanding shares have been proven effective. The study is available for access.
CVM’s 2024 Regulatory Agenda prioritizes FIAGRO regulations, portability and shareholders’ meetings
On December 07, 2023, the CVM launched its 2024 Regulatory Agenda, highlighting regulatory priorities for 2024. The main topics include the specific regulation of the Investment Fund in Agroindustrial Productive Chains (“FIAGRO”) and rules for the portability of securities. The president of the CVM, João Pedro Nascimento, emphasized the need for more democratic, inclusive and sustainable capital markets. Topics such as digital influencers, retail products and qualified investors are among the public consultations planned.
The CVM will also remain attentive to legislative demands, including ongoing bills. The CVM highlighted significant advances in 2023, such as the Regulatory Framework for Investment Funds and Investment Advisors. The agenda for 2024 includes holding civil servant exams to bolster the CVM’s activities.
CVM publishes regulation making documents issued by CPC mandatory for listed companies
On December 27, 2023, the CVM issued Resolution 197, which approves and requires the Review of Technical Pronouncements No. 24 (RCPC 24), issued by the Brazilian Accounting Pronouncements Committee (“CPC”), from listed companies. This regulation aims to align the accounting practices of listed companies with the standards of the International Accounting Standards Board (“IASB”), incorporating changes to the International Tax Reform – Pillar Two Model Rules and Supplier Finance Arrangements.
The resolution entered into force on December 29, 2023, with specific dates for changes in accounting periods. A regulatory impact analysis was not conducted due to the nature of the changes. For further information, see CVM Resolution 197.
CVM advises on integrating ESG factors into suitability procedures
On December 26, 2023, the CVM published CVM/SIN/SMI Joint Circular Letter 1/2023, informing that, when evaluating the profile of investors, regulated agents should consider the possibility of environmental, social and governance (“ESG”) products, given the increasing importance of these products in the market.
It is worth highlighting that intermediaries need to ensure, on a best-efforts basis, that recommended securities comply with ESG targets, in order to avoid practices that are harmful to clients, such as greenwashing, which consists of the false impression purposely caused by companies that, in practice, are not having a positive impact on the environment, but are merely benefiting from ecological propaganda. The letter is part of the CVM’s Sustainable Finance Plan.
Innovation and diversification at the heart of B3’s growth strategy
On December 12, 2023, during B3 Day, B3’s CEO Gilson Finkelsztain characterized the five years after the merger as a period of innovation and growth, as B3’s revenue reached almost BRL 10 billion in 2023. The strategy for 2024 is focused on innovation, diversification and bolstering the core business, highlighting the importance of technology and restructuring to leverage data operations. Regarding the fixed income market, the emphasis is on expanding opportunities and increasing the participation of individuals in the stock exchange, through new channels and educational initiatives.
Brazilian Financial and Capital Markets Association (“ANBIMA”)
Activities of public offering coordinators and securitization companies obtain self-regulation rules
On December 26, 2023, Anbima announced updates to the Public Offerings Code, which includes public offering coordinators and securitization companies, establishing the best practice rules and offering a more principle-based guidance. The changes aim to establish a minimum governance procedure, including guidelines for identifying conflicts of interest and qualifying the technical team. Now, coordinators and securitization companies are subject to specific obligations to ensure transparency and disclosure of information to investors. Anbima seals were created to identify institutions that follow self-regulation procedures. The code has been updated after 25 years, and enters into force on February 09, 2024, including aspects such as trustees, expansion of securities and guidelines for public offerings of closed-end funds. A new document has been drafted for offerings aimed exclusively at professional investors, in line with CVM Resolution 160.
Diversity: allies play an essential role in companies’ equality and inclusion agenda
On December 07, 2023, the Anbima Diversity and Inclusion Network held a workshop entitled “The role of allies”. The workshop highlighted the importance of raising awareness and involving employees, especially white, heterosexual men in senior positions, in the diversity and inclusion agenda. The workshop also made a distinction between allies, who actively support under-represented groups, and sympathizers. The current challenge is to engage middle management to ensure equality in hiring and development processes.
Allies must use their influence to create opportunities, combat exclusionary acts and foster empathetic environments, encouraging diversity and inclusion for the collective benefit and sustainability of the labor market. Examples of successful practices include the implementation of specific diversity targets and indicators in leadership and the engagement of senior management in team plurality strategies.
Suzano (“SUZB3”) acquires forest assets for BRL 1.8 billion
On December 23, 2023, Suzano S.A. (“Suzano”) entered into purchase and sale agreements for the entire equity interest in Timber VII SPE S.A. and Timber XX SPE S.A. (“Targets”), under the management of BTG Pactual Timberland Investment Group, LLC (“Transaction”). The Targets own approximately 70,000 hectares of land in the state of Mato Grosso do Sul, where Suzano’s operations are located, of which 50,000 hectares are useful, and part of which are eucalyptus plantations of different ages.
The main terms and conditions of the Transaction were:
(i) the acquisition price of the Transaction was set at BRL 1.82 billion, to be paid in cash on the closing date of the Transaction, with provisions for 2024, and can be converted into dollars in the event that the closing takes place after March 31, 2024;
(ii) the acquisition price can be adjusted according to the position of the Targets on the closing date; and
(iii) the Transaction will still be subject to approval by the Administrative Council for Economic Defense.
Eletrobras (“ELET3”) concludes acquisition of FIPs and SPEs for BRL 574 million
On December 21, 2023, Centrais Elétricas Brasileiras S/A (“Eletrobras”) completed the acquisition of 51% of the Private Equity Investment Fund (“FIP”) Milão in the Special Purpose Companies (“SPEs”) Vale do São Bartolomeu S.A. and Triângulo Mineiro Transmissora S.A.
The amount paid by Eletrobras, through its wholly-owned subsidiary, Furnas Centrais Elétricas S.A. (“Furnas”), amounted to BRL 574 million (equity value), after appropriate adjustments, resulting from the advancement and improvement during the financial year and of put option terms granted by Furnas in favor of FIP Milão in 2013.
Once the transaction is concluded, Eletrobras will consolidate annual allowed revenues from both transmission companies of approximately BRL 103 million (2023-2024), Earnings before Interest, Taxes, Depreciation and Amortization – EBITDA) of BRL 93 million (2022) and concession terms until 2043.