In 2000, the Bovespa introduced three special listing segments, known as Level 1 and 2 of Differentiated Corporate Governance Practices and New Market (Novo Mercado), aiming at fostering a secondary market for securities issued by Brazilian companies with securities listed on the Bovespa, by prompting such companies to follow good practices of corporate governance. The listing segments were designed for the trading of shares issued by companies voluntarily undertaking to abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law. These rules generally increase shareholders’ rights and enhance the quality of information provided to shareholders.
To be listed on the Novo Mercado, in addition to the obligations imposed by current Brazilian law, an issuer must meet all of the following requirements:
- issue only common shares;
- grant tag-along rights to all shareholders in connection with a transfer of control of the company, the acquirer being required to hold a public offer for acquisition of the shares to the other shareholders, at the same price per share paid for the controlling block;
- ensure that shares of the issuer representing at least 25% of its total capital are effectively available for trading;
adopt offering procedures that favor widespread ownership of shares whenever making a public offering;
comply with minimum quarterly disclosure standards;
- follow stricter disclosure policies with respect to transactions made by controlling shareholders, directors and officers involving securities issued by the issuer;
- submit any existing shareholders’ agreements and stock option plans to the B3;
- disclose a schedule of corporate events to the shareholders;
- have a board of directors comprised of at least five members with a term limited to one year;
within two years after listing shares on the Novo Mercado, prepare annual financial statements in English, including cash flow statements, in accordance with international accounting standards, such as U.S. GAAP or International Financing Report Accounting Standards (IFRS);
- adhere exclusively to the arbitration rules of the B3, pursuant to which the B3, the company, the controlling shareholder, the management and the members of fiscal council, if any, agree to resolve by arbitration any dispute or controversy related to the Novo Mercado listing rules;
- hold public meetings with financial analysts and any other interested third parties at least once a year to present information regarding its financial and economic position, projects and prospects; and
- if a decision to delist from the Novo Mercado is made, the issuer’s controlling shareholder must launch a tender offer for the acquisition of all outstanding shares at a minimum price to be established based on an independent appraisal.
americanas sa shares guarantee their holders the following rights:
- the right to participate in the distribution of profits (at least 35% of the adjusted net income);
- the right to participate, in proportion to ownership interest in americanas sa’s share capital, in the distribution of any residual assets in the event of the Company’s dissolution;
- the right to preemptive rights in relation to the subscription of shares, convertible debentures or subscription bonuses, except in the circumstances described in the Brazilian corporation law;
- the right to inspect, in the manner set forth in the Brazilian corporation law, the management of corporate business, and;
- the right to sell their shares in the circumstances defined by the Brazilian corporation law.
The Brazilian securities markets are regulated by the CVM, which has regulatory authority over the stock exchanges and securities markets, by the National Monetary Council and by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions.
The Brazilian securities markets are governed by the principal law governing the Brazilian securities markets, by the Brazilian Corporation Law, and by regulations issued by the CVM, the CMN and the Central Bank. These laws and regulations provide for, among other things, disclosure requirements, restrictions on insider trading and price manipulation and protection of minority shareholders. However, the Brazilian securities markets are not as highly regulated and supervised as U.S. securities markets.
According to the Brazilian Corporate Law, the corporation is classified as open, if the securities issued by it are admitted to trading on the Brazilian securities market or, closed, if there is no public trading of its securities in the Brazilian securities market. All public companies must be registered with the CVM and are subject to regulatory and information disclosure requirements.
A company registered with the CVM may trade its securities on the B3a or on the Brazilian over-the-counter market. Registration with B3 and CVM is required for a company to have its shares listed on B3. Shares of companies listed on B3 cannot be traded simultaneously on the Brazilian over-the-counter market. The shares of a company listed on B3 can also be traded in private transactions, subject to several limitations.
The Brazilian over-the-counter market, organized or not, consists of negotiations between investors, through a financial institution authorized to operate in the Brazilian capital market, registered with the CVM. No special requirement, other than registration with the CVM, is necessary to trade publicly-held securities on the non-organized over-the-counter market. CVM requires the respective intermediaries to deliver notice of all trades carried out on the Brazilian over-the-counter market.
The trading of securities on B3 may be interrupted at the request of the issuing company before the publication of a material fact. Trading may also be suspended at the initiative of B3 or CVM, based on or due to, among other reasons, indications that the company has provided inadequate information regarding a material fact or has provided inadequate responses to inquiries made by CVM or by B3.
CVM Instruction 358 provides for the disclosure and use of information on material acts or facts relating to publicly-held companies, regulating the following:
- establish the concept of a material fact that gives rise to reporting requirements. Material facts include decisions made by the controlling shareholders, resolutions of the general meeting of shareholders and of management of the Company, or any other facts related to the Company’s business (whether occurring within the Company or otherwise somehow related thereto) that may influence the price of its publicly traded securities, or the decision of investors to trade such securities or to exercise any of such securities’ underlying rights;
- specify examples of facts that are considered to be material, which include, among others, the execution of shareholders’ agreements providing for the transfer of control, the entry or withdrawal of shareholders that maintain any managing, financial, technological or administrative function with or contribution to the Company, and any corporate restructuring undertaken among related companies;
- oblige the officer of investor relations, controlling shareholders, other executive officers, members of its board of directors, members of the audit committee and other advisory boards to disclose material facts;
- require simultaneous disclosure of material facts to all markets in which the corporation’s securities are admitted for trading;
require the acquirer of a controlling stake in a corporation to publish material facts, including its intentions as to whether or not to de-list the corporation’s shares, within one year;
- establish rules regarding disclosure requirements in the acquisition and disposal of a material stockholding stake, and;
restrict the use of insider information.