Lira Renardini Padovan and Eloisa Maria Tavares Chipoletti,lawyers from "Araújo e Policastro Advogados", published a chapter of "Getting the Deal Through: Corporate Governance 2009". The articleprovides an overview of Brasilian corporate control, transparency, disclosure, D&O responsabilities, recent statutory provions and some trends.


About the edition :

Getting the Deal Through is delighted to publish the fully revised and updated eighth edition of Corporate Governance, a volume in our series of annual special reports providing comparative international analysis in key areas of law and policy for corporate counsel, cross-border legal practitioners and business people. Corporate Governance 2009 addresses the most important issues facing corporations in relation to all their stakeholders. This publication examines various issues including the rights of shareholders, corporate disclosure and transparency, responsibility of the board and corporate control. In the format adopted throughout the series, the same key questions are answered by leading practitioners in 42 jurisdictions worldwide. New jurisdictions this year include China, Cyprus, Norway, Panama, Peru, Russia and Ukraine.


About the article :

1. What are the primary sources of law, regulation and practice (company law, securities law & regulations, listing rules, voluntary codes) relating to corporate governance?

The primary sources relating to corporate governance are:

• the Corporations Law, Act No. 6,404/76 (the CL), as amended by Acts Nos. 9,457/97; 10,303/01 and 11,638/07 (the latter basically introduced more transparency and more requirements for the disclosure of information in financial statements of publicly-held corporations which are more in line with the rules and recommendations adopted by the International Accounting Standards Board);

• the Securities Law, Act No. 6,385/76, as amended (the SL); and

• the Civil Code, special part, book II.

The Securities and Exchange Commission (Comissão de Valores Mobiliários, CVM) issues various regulations in connection with the securities market that affect corporate governance practice. State stock exchanges and over-the-counter markets are formed under the supervision of the CVM and they issue special rules on corporate governance in connection with the public distribution of securities. There are also rules concerning pension funds that determine the types of investments that may be made in corporations that adopt certain standards of corporate governance. Although Brazil is a federation, laws on corporations are enacted on a national basis.

As for regulations affecting public companies, the São Paulo Stock Exchange (BOVESPA) has created distinctions between categories of listed shares by means of the ‘New Market’ and Levels 1 and 2 of Corporate Governance (the CG Levels). Both of these apply to companies that have opted to be bound by more stringent corporate governance and disclosure rules than those imposed by the CL and CVM rules. The New Market and the CG Levels are grounded in the same basic principles and they all seek to facilitate the disclosure system for better supervision of management and controlling shareholders’ activities. BOVESPA issued updated regulations of the New Market and the CG Levels in February 2006, which are undergoing revision. An upcoming publication of a timetable on the matter is expected to be disclosed between April and June 2009.

The main voluntary codes or models that address corporate governance matters are the CVM Recommendations on Corporate Governance, the Code of Self-Regulation for Primary and Secondary Offerings, launched by ANBID (the National Association of Investment Banks), and the Brazilian Code on Corporate Governance, launched by the Brazilian Institute on Corporate Governance (IBGC), which is undergoing revision. The IBGC is an entity specially designed to study and foster good policies on corporate governance in Brazil. Basically, the above-mentioned Code of Self-Regulation for Primary and Secondary Offerings is mandatory for entities that are part of ANBID as well as for any entity that expressly chooses to adhere to such code by means of execution of a deed of adherence.

Finally, companies’ by-laws can contain provisions on corporate governance as long as such provisions are not in violation of the law.

2. What are the primary government agencies or other entities responsible for making such rules and enforcing them? Are there any well-known shareholder activist groups whose views are often considered?

The CVM has jurisdiction to issue and enforce regulations in connection with the CL and SL, as well as to give formal opinions and impose penalties on companies and directors or officers for breach of duty of care and duty of loyalty, failure to disclose information, and conflicts of interest, among others. The CVM is designed, inter alia: to ensure the proper functioning of the exchange and over-the-counter markets; to ensure public access to all relevant information about securities traded and the companies that issue them; to ensure that all market participants adopt fair trading practices; to stimulate savings and investment in securities; and to promote the expansion and efficiency of the securities market and the capitalisation of publicly held companies in Brazil. The CVM has been very active in the issuance of guidelines and rules designed to better corporate governance, especially on its 2008 acts relating to the preparation of financial statements of publicly-held corporations in light of International Accounting Standard (the IAS) and International Financial Reporting Standards (the IFRS), such as those on disclosure of information on related parties.

The National Pension Fund Association (ABRAPP) is a notable activist group that has been playing an important role in enforcing and improving the rules on corporate governance, as is BOVESPA, which created the New Market and the CG Levels mentioned in question 1.

3. What powers do shareholders have to appoint or remove directors or require the board to pursue a particular course of action?

Shareholders are entitled to appoint directors and remove them from office by means of shareholders’ meetings.

Shareholders should not encroach directly on directors’ management powers.

Shareholders, therefore, do not have the means to require the board to pursue specific courses of action other than by oversight, disclosure rules and other mechanisms of control, except by means of a valid shareholders’ agreement.

A valid shareholders’ agreement is now clearly an effective vehicle to make its provisions binding against members of the board. The CL establishes that either the absence or the abstention from voting at board meetings of any members of the board appointed under the terms of the shareholders’ agreement entitles the other members of the board appointed in the same way to vote, consistent with the shareholders’ agreement, in place of the board member who has not voted due to absence or abstention. In addition, votes at board meetings that violate a shareholders’ agreement shall not be counted. Specifically in connection with the latter comments, which result from application of article 118(8) and (9) of the CL, the IBGC has recently issued a guideline letter in order to shed a light on how to harmonise the acts and decisions of directors in view of certain provisions that may exist in shareholders’ agreements. The concepts fostered by the guideline letter might be applied not only to public corporations, but also to close corporations and limited liability companies.

4. What decisions must be reserved to the shareholders?

In general, the CL gives the following powers to the shareholders’ meeting:

• to change the by-laws;

• to appoint and remove directors and members of the auditing committee;

• to review on an annual basis the managers’ accounts and approve financial statements;

• to authorise the issue of debentures, except for specific situations involving debentures issued by publicly held corporations, in which case the board of directors may undertake this task;

• to table the exercise of shareholders’ rights in case of non-compliance with obligations required by law or the by-laws;

• to resolve on the valuation of assets for capital contribution;

• to resolve on mergers, amalgamations, spin-offs, dissolution and conversion into another type of company; and

• to authorise the board and the officers to admit bankruptcy and file for corporate reorganisation.

5. To what extent are disproportionate voting rights or limits on the exercise of voting rights allowed?

Under the CL, a corporation can issue classes of shares with voting rights, limited voting rights or no voting rights. Each common share gives the right to one vote at shareholders’ meetings, multiple votes being prohibited in any class of shares. Preferred shares with limited or no voting rights are restricted to 50 per cent of the issued stock. The CL establishes that, if the company does not distribute the fixed or minimum dividends to preferred shareholders within the term provided for in the by-laws (which can never be more than three fiscal years), such preferred shareholders will have the right to vote at shareholders’ meetings.

6. Are there any special requirements for shareholders to participate in general meetings of shareholders or to vote?

Under the CL, all shareholders can participate in shareholders’ meetings, including those without voting rights. Shareholders may participate in person or via a representative. In the first case, shareholders shall evidence their position as shareholders and, in the second case, the attorney-in-fact must be a shareholder or administrator of the company or lawyer appointed for a one-year term. Financial institutions may be appointed as the attorney-in-fact of publicly held corporations.

7. Are shareholders able to require meetings of shareholders to be convened, resolutions to be put to shareholders against the wishes of the board or the board to circulate statements by dissident shareholders?

In principle, the shareholders’ meeting is called by the board of directors or, when there is no board, by the officers of the corporation. The shareholders’ meeting may also be convened by:

• the auditing committee in two specific situations defined in the CL (in which cases the auditing committee in fact has the obligation, not the right, to call the meeting);

• any shareholder, when management has delayed the calling of the shareholders’ meeting, as provided for by law or the company’s by-laws, for more than 60 days;

• shareholders representing at least 5 per cent of the corporate capital when the managers have not responded, within eight days, to the request presented by such shareholders; and

• shareholders representing at least 5 per cent of the voting capital or 5 per cent of the shareholders with no voting rights when managers have not responded to the request for installation of the auditing committee within eight days.

With respect to public corporations, the CVM has the authority to decrease the above percentages, but never to increase them. As to closely held corporations, the company’s by-laws may also establish a lower percentage. There is no provision under the CL authorising the calling of the shareholders’ meeting by judicial courts or the CVM.

The last two items above present situations in which minority shareholders have a voice in the calling of shareholders’ meetings. The managers cannot deny the request once the formal requirements provided for by law have been met by the shareholders. In such cases, the managers must call the meeting, which itself will serve as the forum to discuss whether the call was abusive, improper or otherwise problematic.

Although shareholders cannot require the board of directors to circulate the dissident shareholders’ statements, such statements must be listed in the minutes of the corresponding shareholders’ meeting and duly signed by the attending parties.

8. Do controlling shareholders owe duties to the company or to non-controlling shareholders? If so, can an enforcement action against controlling shareholders for breach of these duties be brought?

The controlling shareholder should look to the corporation’s objectives.

Controlling shareholders have duties and obligations as regards the corporation and the other shareholders and stakeholders in general; and must respect their interests and rights.

In terms of enforcement, the subject matter for any claims against the controlling shareholders covers abuse of power, as defined in the CL and in the CVM regulations.

9. Can shareholders ever be held responsible for the acts or omissions of the company?

Shareholders are liable up to the amount equivalent to their paid-in capital contribution, except for the liabilities imposed in cases of piercing the corporate veil.

As a general rule, shareholders are held liable for their own acts, not for acts or omissions of the company. In addition to the above liabilities of the controlling shareholder and of the shareholders who abuse their voting powers, managers, who are sometimes also shareholders, may be held liable for acts exercised with neglect or malice or in violation of the law or the company’s by-laws.

10. Are anti-takeover devices permitted?

Some defensive tactics against takeovers are often adopted by corporations and these include supermajority voting requirements for shareholders’ meetings, company reorganisations, shareholders’ agreements with provisions that restrict the increase of capital or transfer of shares, among other actions.

11. Are restrictions on the transfer of fully paid shares permitted, and if so what restrictions are commonly adopted?

In general terms, contractual restrictions on the transfer of fully paid shares are permitted, such as, for instance, the right of first refusal or restrictions for the purchase and sale of shares, which are often included in shareholders’ agreements. Under the CL, the by-laws of a closely held corporation can impose restrictions on the transfer of nominative shares as long as such restrictions are specifically regulated and do not ultimately prevent negotiation of such shares or submit the relevant shareholders to the will of the board of directors, officers or the majority of the shareholders.

For the acquisition of control of a public corporation, the CL requires the purchaser to undertake the obligation to make a public offer for the acquisition of the voting shares pertaining to the remaining shareholders in such a way as to ensure such minority shareholders a minimum price equal to or higher than 80 per cent of the price paid for each share of control of the corporation. The rules applicable to such public offers are set by specific regulations issued by the CVM. Under the Brazilian Code on Corporate Governance issued by the IBGC, the transfer of control should be made with full disclosure as regards the purchase price and the sale conditions should apply to all the shareholders. Finally, under the CVM Recommendations on Corporate Governance, the ‘tag-along’ provision should give equal treatment to all classes or types of shares and the price paid to the minority voting shares should also be extended to preferred shares with limited or no voting rights.

12. Are compulsory share repurchase rules allowed? Can they be made mandatory in certain circumstances?

In general, corporations cannot compulsorily repurchase their shares, except in the following circumstances: the redemption of shares by using a surplus to buy the redeemed shares; the acquisition of shares to be cancelled or kept as treasury stock, upon compliance with certain restrictions; or the sale of treasury stock.

The CVM has special rules for the repurchase of shares by public corporations and some of the cases are subject to prior approval by the CVM.

13. Is the predominant board structure for listed companies best categorised as one-tier or two-tier?

Public companies must have a board of directors, officers and an auditing committee. Closely held corporations need not have a board of directors, although they usually do, nor is a permanent auditing committee required.

14. What are the board’s primary legal responsibilities?

The board of directors is responsible for, inter alia:

• the establishment of the businesses of the corporation;

• the appointment and removal of officers, according to the limitations of the company’s by-laws;

• the calling of shareholders’ meetings whenever it deems appropriate;

• the issuance of opinions on the management’s accounts;

• the supervision of the officers’ functions, by requesting information, clarification, copies of corporate books and other material; and

• appointing and removing the independent auditors, where this applies.

15. Whom does the board represent and to whom does it owe legal duties?

Under the CL, the board represents the corporation and has duties to the shareholders that appointed its members in the same way as it has duties to other shareholders and to the corporation.

16. Can an enforcement action against directors be brought on behalf of those to whom duties are owed?

Upon prior approval by the shareholders’ meeting, enforcement actions against directors, officers and members of the auditing committee can be brought by the company on its own account. In the event that the suit or claim is not brought by the company within three months of the shareholders’ meeting, any shareholder may file a derivative suit.

If, however, the shareholders’ meeting resolves not to file suit, then any shareholders representing at least 5 per cent of the corporate capital can bring a derivative suit.

17. Do the board’s duties include a care or prudence element?

The board (as well as the officers) owes the company and its shareholders a duty of care; that is, directors must discharge their duties with the degree of diligence and care that an ordinarily prudent person would exercise in a similar position under similar circumstances.

Board members also owe a duty of loyalty, which encompasses the obligation not to disclose confidential or strategic information of the corporation (unless it is material information required to be disclosed by listed companies), as well as the obligation not to usurp corporate opportunities for their own benefit or at the expense of the corporation, among other duties. Should the board act negligently with malice or in violation of the law or the corporation’s by-laws, its members can be held personally liable for the damages caused to the company, its shareholders and any other third parties.

The CVM has recently issued a guideline opinion that covers concrete standards for administrators’ role of publicly-held corporations in mergers or mergers of shares involving a controlling company and companies it controls or companies under one same control. Such opinion contributes to the specification of what the fiduciary duties of administrators are in such transactions, thus facilitating the conduction of such transactions at arm’s length.

18. To what extent do the duties of individual members of the board differ (for example, if their skills and experience are different)?

All directors owe the same duties to the corporation and to the shareholders regardless of their background and skills, although one could argue that directors who serve on certain committees can be subject to higher standards in respect of their specific knowledge.

19. To what extent can the board delegate responsibilities to management, a board committee or board members, or other persons?

The board of directors is charged with establishing the policies and businesses of the corporation and can delegate to the officers the day-to-day responsibilities that fall within the parameters of these policies, provided that such delegated powers are not the same specific powers delegated to the board by law. The board can also establish that specific matters are better analysed and supervised by tailor-made committees, even though the decision-making power continues to rest with the board.

20. Is there a minimum number of 'non-executive' or 'independent' directors required by law, regulation or listing requirement? If so, what is the definition of 'non-executive' and 'independent directors' and how do their responsibilities differ from executive directors?

There is no minimum number of independent directors required by law, regulation or listing requirement in Brazil, although the IBGC and the CVM recommend that most of the directors be independent. Under the CL and the CVM regulations, the directors shall not hold a position in any company that might be considered a competitor of the relevant corporation and they shall not have interests that conflict with those of the corporation.

21. Do law, regulation, listing rules or practice require separation (or joining) of the functions of board chairman and CEO? If flexibility on board leadership is allowed what is generally recognised as best practice and what is the common practice?

The CL does not have provisions that require the separation of the functions of the chairman of the board and the CEO; it simply establishes that up to a third of the members of the board can serve as officers.

Common practice has shown that it is usual for board members to also be officers of the same corporation.

Since the board of directors oversees the officers’ activities, the CVM Recommendations on Corporate Governance, in line with the worldwide trend in this area, advises that the chairman’s and the CEO’s positions be occupied by different individuals to prevent conflicts of interest.

22. What board committees are mandatory? What board committees are allowed? (Specify for what functions.) Are there mandatory requirements for committee composition (eg, independence)?

According to the CL, publicly held companies must have an auditing committee (Conselho Fiscal) whose attributes are set forth in the law and the company’s by-laws. The auditing committee must be composed of a minimum of three and a maximum of five members, to be appointed at the shareholders’ meeting.

Members of the auditing committee cannot:

• hold a position in any company that might be deemed a competitor of the corporation;

• have interests that conflict with those of the corporation;

• be directors, officers or employees of the corporation, of a controlled company or of the same group of the corporation; or

• be a relative (up to the third degree) or spouse of a director or officer of the corporation.

Furthermore, some corporations have set up an advisory board (conselho consultivo), which falls into the category of the allowed board committees, to assist the board of directors and officers in the establishment of policies and day-to-day measures.

23. Is a minimum or set number of board meetings per year required by law, regulation or listing requirement?

There is no minimum number of board meetings established by law, regulation or listing requirements, but the Brazilian Code on Corporate Governance suggests that the board meet as many times as necessary to take care of the corporation’s business, but not more than once per month to prevent excessive interference in the officers’ powers.

24. Is disclosure of board practices required (committee structure, number of meetings, attendance, etc) by law, regulation or listing requirement?

Board practices need not be disclosed. Nevertheless, the board must disclose relevant and material information that concerns the corporation (see question 30).

25. Is there any law, regulation, listing requirement or practice that affects the remuneration of directors, the length of directors' service contracts, loans to directors or other transactions between the company and any director?

Board practices need not be disclosed. Nevertheless, the board must disclose relevant and material information that concerns the corporation (see question 30).

25. Is there any law, regulation, listing requirement or practice that affects the remuneration of directors, the length of directors' service contracts, loans to directors or other transactions between the company and any director?

The CL establishes that the shareholders’ meeting will fix the remuneration of the directors, taking into account their background, skills, responsibilities, position, reputation, etc. The Brazilian Code on Corporate Governance is more detailed and suggests a system of checks and balances designed to avoid the waste of corporate assets, but with fair remuneration and incentives to good directors.

The CL establishes that the company’s by-laws shall determine the length of the directors’ terms, which cannot be longer than three years, re-election being permitted.

There are no provisions under the CL specifically applicable to loans to directors. The Brazilian Code on Corporate Governance recommends that the extension of loans between the company and any related parties should be prohibited and this directive is consistent with the US Sarbanes-Oxley Act provisions. In addition, the Brazilian law that regulates financial institutions (Act No. 4,595/64) prohibits loans to directors, officers, members of the consulting and auditing committees and related parties.

In respect of transactions between directors and the corporation, the CL provides that any transaction in which the director has interests that conflict with those of the corporation, and any other situation that implies a conflict of interest, must be disclosed to the other directors at the board’s meeting. The New Market and the CG Levels of BOVESPA demand the disclosure of information of all contracts between the company and its directors made within one year and whose total amount is equal to or greater than 200,000 Brazilian reais or greater than 1 per cent of the net worth of the corporation. CVM Resolution No. 560 of 11 December 2008 (Resolution 560) regulates special requirements of related parties’ disclosure of Information in the financial statements of publicly-held corporations, one of the situations of a related party being a person who is member of the administration of the corporation or of its controlling shareholder. Such special requirements cover information on compensation package of employees and administrators (board members or officers/managers).

26. How is the remuneration of the most senior management determined? Is there any law, regulation, listing requirement or practice that affects the remuneration of senior managers, loans to senior managers or other transactions between the company and senior managers?

The remuneration of the most senior management is determined on a market basis or in any such a way to attract or provide an incentive to good officers. There is no law, regulation, listing requirement or practice that affects the remuneration of senior managers. The rules applicable to the loans and other transactions between directors, officers and the corporation also apply to transactions involving senior managers (see question 25).

The IBGC recommends that the remuneration of officers in general be somehow linked to results by means of reasonable and coherent incentives, aimed at achieving better performance of the corporation and giving value to shareholders. The remuneration policy should be transparent and officers should not be involved in the decision-making process regarding the remuneration package. Finally, the IBGC generally states the principles for establishment of the remuneration policy, which should be ‘sufficiently attractive, although without excess, and always have in mind the aggregation of potential value to the shareholder’ (free translation).

Resolution 560 provides for certain requirements relating to the disclosure of information regarding the compensation package of employees and administrators of publicly-held corporations (board members or officers/managers), as mentioned in the last part of question 25.

27. Is directors' and officers' liability insurance permitted or common practice? Can the company pay the premiums?

The Private Insurance Agency (SUSEP) has regulated the insurance market for civil responsibilities on the ‘claims made basis’, a regulation that provides for insurance that covers the civil responsibilities of directors and officers for acts or facts resulting from the exercise of their official position. This insurance is known as D&O insurance (directors’ and officers’ insurance) and it allows the payment of its costs by the company.

D&O insurance has been increasing substantially in response to the rise in the number of lawsuits and claims filed against directors and officers.

28. Are there any constraints on the company indemnifying directors in respect of liabilities incurred in their professional capacity? If not, are such indemnities common?

No, there are no express constraints on indemnification for directors or officers for liabilities arising from the exercise of their official positions. There are a small number of cases where companies have established policies for advancing expenses and indemnifying directors and officers as a way of attracting and keeping high-calibre, loyal professionals.

The structuring of the advancing of expenses and indemnification should be approached with great care to avoid systems that might turn out to be harmful to the company, since the indemnification structure represents a shift of the burden from the executive to the company as regards the cost of any obligations resulting from some lawsuits or from particular consequences of the director’s or officer’s acts. Whenever such a shift of costs diverts certain legal or regulatory sanctions, the structure of the systems for advancing expenses and indemnification should be revised accordingly.

29. What role do employees play in corporate governance?

The CL currently provides for the participation of employees’ representatives in the board of directors, but practice shows that employees have no direct or significant participation in corporate governance matters in Brazil.

30. Are the corporate charter (or articles of incorporation) and by-laws of companies publicly available? If so, where?

Yes, articles of incorporation, by-laws and other corporate acts are publicly available at the Commercial Registry of each state (Act No. 8,934/94). As for public companies, there is also mandatory registration with the stock exchanges and with the CVM.

31. What information must companies publicly disclose? How often must disclosure be made?

With regard to the CVM regulations, some of the information that public companies are required to disclose includes: financial statements (including information on related parties’ relationships and transactions) and, if applicable, consolidated statements, accompanied by the annual report and opinion from an independent auditor, within at least three months of the fiscal year-end or on the date of publication of the financial statements in the press; summaries of the decisions taken at the shareholders’ meeting within one day after it has taken place; minutes of the shareholders’ meeting within 10 days after it has taken place; and quarterly financial information to be presented 45 days from the end of each fiscal quarter. The public corporations listed in the New Market and the CG Levels of BOVESPA are subject to rules of disclosure that are more stringent than those summarised herein.

Furthermore, public corporations need to disclose material facts that may involve strategic information. Any fact relating to the corporation’s business that is likely to affect the decision of investors to buy or sell securities of the corporation is deemed to be a material fact. Material facts are broadly defined. Some of the facts considered by the CVM as material are:

• resolutions approving stock option plans;

• modifications to forward-looking statements published by the company;

• performance, termination or frustration of any contract where there is an expectation in the market with regard thereto;

• approval, modification, abandonment or any delay in implementation of projects;

• the commencement, taking-over or interruption of the manufacturing or commercialisation of a product or service;

• the discovery, change or development of technology and other resources;

• execution of, or changes to, the shareholders’ agreement;

• spin-offs, mergers or amalgamation of the company or affiliated companies;

• changes in accounting policies;

• renegotiation of debt; and

• filing of suits that might adversely affect the financial situation of the company.

32. Do shareholders have an advisory or other vote regarding executive remuneration?

The shareholders’ meeting is competent to deliberate about the executive remuneration. The CL establishes the parameters for the fixation of such remuneration, taking into consideration the executive’s responsibilities, the time dedicated to their functions, their qualification and professional good standing and the market value of their services.

33. Do shareholders have the ability to nominate directors without incurring the expense of proxy solicitation?

The shareholders do not need to incur the expense of proxy solicitation in case of a valid shareholders’ agreement. A valid shareholders’ agreement is now clearly an effective vehicle to make its provisions binding against members of the board. The CL establishes that either the absence or the abstention from voting at board meetings of any members of the board appointed under the terms of the shareholders’ agreement entitles the other members of the board appointed in the same way to vote, consistent with the shareholders’ agreement, in place of the board member who has not voted owing to absence or abstention. In addition, votes at board meetings that violate a shareholders’ agreement shall not be counted.

Are there any new updates or trends in this jurisdiction?

The main development in corporate governance regulation in 2008 was unquestionably Act No. 11638/07 (Act 11638), which amended the CL to introduce greater transparency and further requirements for disclosure of information in financial statements of publicly-held corporations, more in line with the rules and recommendations of the International Accounting Standards Board, as well as certain requirements for valuation and accounting of assets and liabilities of companies to be merged or subject to spin-off. Because of Act 11638, the CVM has issued several new regulations relating to financial statements information, including some mentioned in this chapter, as well as others on how public corporations are to report transactions in foreign currency and on the criteria for preparation and presentation of the so-called statement of added value (Demonstração do Valor Adicionado).

Act 11638 also made applicable to any large Brazilian company, whether a closed corporation or a limited liability company, the obligations set forth on the CL for bookkeeping, preparation of financial statements and independent auditing of financial statements. For such exclusive purposes, the statutory provision defines large company as the entity or group of entities under a common control and that has total assets higher than 240 million reais or annual gross income higher than 300 million reais). The Brazilian boom of IPOs has been affected by the crisis and very few transactions are expected to take place in the near future. One may consider as possible consequences of that a slowdown in the process of fostering of corporate governance in Brazil and a diminution of new adhesions to the standards of corporate governance established in the New Market and the CG Levels of BOVESPA.

There has also being ongoing concern with mechanisms to ensure more transparency in the obligations of companies in connection with the reporting of financial contracts, especially in light of the impact in the financial statements of companies involved in derivatives transactions.

The CVM has recently appointed a new officer for the Committee of Economic Affairs, who will likely focus on: the creation of new mechanisms that might be required for more transparency in the market, especially in view of the derivatives transactions; more regulation over the market upon making the laws currently in force more effective and clear; more regulations over investment players.


About the authors :

Lira Renardini Padovan is Bachelor of Laws (LL.B.) at São Paulo University Law School (1997), Master of Laws (LL.M. program) at Columbia University School of Law, New York, NY (2002); admitted to Brazilian Bar in 1998 and admitted to New York State Bar in 2005; Coordinator of ABDI Committee on Mercosur / WTO / International Treaties (May 2005 - April 2006); Vice-coordinator of ABDI Committee on Mercosur / WTO / International Treaties (1999 - May 2005); Worked with Curtis, Mallet-Prevost, Colt & Mosle LLP, New York, NY, as foreign associate (February 2001-July 2001); Member of the Brazilian Institute of Studies of Energy Law – IBDE; Member of the Institutional Matters Committee of Columbia Latin American Business and Law Association - CLABLA (August 2001 – May 2002); Member of Brazilian Association of Computer and Telecommunications Law - ABDI (since 1999).

Eloisa Maria Tavares Chipoletti is Bachelor of Laws at Mackenzie University Law School (2008), admitted to Brazilian Bar Association in 2009.