On June 22, 2020, the Brazilian Securities and Exchange Commission (CVM) issued CVM Instruction No. 627, which establishes a scale of reduced minimum percentages of the required shareholding to exercise certain rights provided for under Federal Law No. 6.404/76, as amended (“Brazilian Corporations Law”), in accordance with its Article 291, which allows the CVM to reduce the minimum percentage for the exercise of the rights provided therein.
The Regulation covers the reduction of the minimum percentages of required shareholding for a shareholder to request:
i. Complete inspection of the books of the corporation whenever acts contrary to the law or to the bylaws occur, or when there are grounds to suspect that serious irregularities have been committed by the management, in accordance with Article 105 of the Brazilian Corporations Law.
ii. A shareholders’ general meeting to be called, whenever the officers do not, within eight days, comply with their justifiable request that a meeting should be called, indicating the matters to be discussed, in accordance with item “c” of the sole paragraph of Article 123 of the Brazilian Corporations Law.
iii. The disclosure, by management, of certain information provided for in paragraph 1 of Article 157 of the Brazilian Corporations Law, in particular the number of securities held by the management and issued by the corporation, by controlling entities or within the same group, as well as the stock options granted or exercised, during the previous fiscal year, including other material information related to compensation, and to acts or facts concerning the activities of the corporation.
iv. Civil liability lawsuit against the management for the losses caused to the corporation, in the case that the shareholders’ general meeting resulted in adecision not to file such proceeding, in accordance with paragraph 4 of Article 159 of the Brazilian Corporations Law.
v. Additional information from the statutory audit committee on matters within its competence, in accordance with paragraph 6 of Article 163 of the Brazilian Corporations Law.
vi. Indemnification lawsuit against a controlling corporation for damages caused to a controlled entity, by breach of the duties and obligations attributed to the controlling shareholder, without providing a guarantee for the legal costs, in accordance with item “a” of paragraph 1 of Article 246 of the Brazilian Corporations Law.
Prior to the issuance of CVM Instruction No. 627, the abovementioned rights could only be exercised by shareholders representing at least 5% (five percent) of the capital stock of the corporation. As of the entering into effect of the new Regulation, the following percentages shall apply for the exercise of such rights, in accordance with the capital stock of the corporation:
Range of Capital Stock (BRL)
|Minimum Percentage %|
|0 to 100,000,000|
100,000,001 to 1,000,000,000
|1,000,000,001 to 5,000,000,000|
5,000,000,001 to 10,000,000,000
The system adopted herein is similar to that provided for in CVM Instruction No. 165, of December 11, 1991, as amended, which sets the minimum percentages to request the multiple voting process, in accordance with Article 141 of the Brazilian Corporations Law:
Range of Capital Stock (BRL)
|Minimum Percentage to Request Multiple Voting Process|
0 to 10,000,000
|10,000,001 to 25,000,000|
25,000,001 to 50,000,000
|50,000,001 to 75,000,000|
75,000,001 to 100,000,000
The complete content of the new Regulation can be found at the following link: CVM Instruction No. 627.