New CVM Regulation for Fixed-Income Investor Meetings

On May 14, 2020, the Brazilian Securities Commission (“CVM”) issued Regulation No. 625 (“CVM Regulation 625”), which regulates participation and remote voting at meetings of debentures, real estate receivables certificates, agribusiness receivables certificates and commercial promissory note holders, however, is not applicable to meetings of holders of instruments whose indenture expressly prohibits remote participation and voting.

In accordance with the latest regulatory developments brought about by CVM Regulation 622 of 2020, which amended CVM Regulation 481, that regulates the rules of shareholder meetings of Category A listed companies, authorized to negotiate shares on the stock exchange (except for the rules applying to digital meetings, which may be adopted by publicly-traded companies), the new rule is another measure adopted by CVM, in response to the Covid-19 pandemic, to regulate the partially or exclusively digital meetings of said securities. The exclusively digital meeting is defined as one in which investor participation and voting may only occur through electronic systems, whilst the partially digital meeting is one that accepts such participation and voting through electronic systems as well as through the traditional face-to-face format.  In both meetings, depending on the provisions of the call notice, investors may carry out the voting instruction prior to the meeting and, if they wish to vote at the meeting, in which case the previous vote received should be disregarded.

When the meeting considers at least one of the remote participation alternatives, the call notice must contain the requirements set forth in Article 3 of CVM Regulation 625, including the applicable rules and procedures for voting instruction prior to the meeting, if admitted, and the rules and procedures for participation and voting through electronic systems. In any case, the information may be disclosed in a brief manner in the call notice, provided that the complete information is made available on the CVM’s website and that of the issuer or fiduciary agent.

For meetings held exclusively digitally, it will be considered as conducted at the issuing company´s headquarters when the indenture does not indicate another location, while it is also worth mentioning that, regardless of the call formalities, in the event of the attendance of all the holders of the securities at matter, the meeting will be considered as regular.

In order to be admitted to the meeting, the investors must present the documents required in the call notice, ensuring that the holder is aware of the documents he/she must provide for his/her access and exercise of rights.  The regulation also provides for the form of presentation of such documents and the timing of their presentation.  For the first point, they may be presented in the traditional face-to-face form, or by means of a digital protocol, in the terms indicated in the respective notice of convocation.  Regarding the second point, the call notice may request prior deposit, being able, in the case of participation by electronic system, to require the holder to make the deposit up to two days in advance. Nevertheless, with the exception of the possibility of requiring prior deposit as mentioned, in all other cases, the holder or his/her representative may participate in the meeting, without prior deposit, upon presentation of the required documents up to the time stipulated for the opening of the proceedings.

Under the terms of CVM Regulation 625, only the issuer or the trustee may call the digital meeting, which must diligently ensure that the electronic system used guarantees: “(I) – the registration of presence of the debentures holders and the respective votes; (II) – the possibility of presentation and simultaneous access to documents presented during the meeting that have not been previously made available; III – the possibility of communication between debentures holders; and IV – the full recording of the meeting”.

Pursuant to article 8 of CVM Regulation 625 and under the terms of the Brazilian Corporations Law (Federal Law No. 6404 of 1976, as amended), both the holder who attends the meeting, or is represented at it, and the holder whose remote vote is valid and who has registered his/her presence in the adopted electronic participation system, are considered present at the meeting. It is the responsibility of the president or secretary of the meeting to control attendance, by means of digital certification or by other means that ensures the correct identification of participants.

Furthermore, the minutes shall contain a breakdown of the number of votes in favor, against or in abstention from each proposal, the provision of which in the text or in the attached material being optional.

Finally, the regulation:

i. establishes that the information and documents provided to investors must be clear and true, so as not to lead the holder to error;

ii. also establishes that the person in charge of the call is responsible for the accuracy of the facts and compliance with its provisions;

iii. brings CVM powers regarding the procedures for requesting information, documents or clarifications about the meetings; and

iv. amends CVM Regulations 583 and 476, in order to make reference to the provisions of the referred CVM Regulation 625.