The Ministry of Finance sent to the Brazilian Congress Bill No. 2.925/23, which is considered one of the most important amendments to the Corporation Law (Law No. 6.404 of December 15, 1976 – “Corporation Law”) of the last two decades. In addition to amending the Corporation Law, the bill also proposes amendments to Law 6.385/76, which created the Brazilian Securities Commission (CVM).

One of the main changes proposed is the possibility that investors (shareholders and debentureholders) file civil class actions against managers and controlling shareholders of companies. Currently, investors may only file individual civil actions. This provision is inspired in the Consumer Protection Code (Law No. 8.078 of September 11, 1990) and in the Corporation Law itself.

The amendments proposed in the bill include the possibility that investors file civil liability actions against those managers who caused losses to their assets, without the need for approval at the shareholders’ meeting.

In addition, the shareholders may bring individual actions, provided that they represent 2.5% of the company’s capital stock or fifty million Reais (R$50,000,000.00) in shares. This amendment seeks to facilitate the liability of managers, eliminating the holding of a shareholders’ meeting, but requiring publicity of the action. The bill also provides that the plaintiff shall receive a premium of twenty percent (20%) of the indemnity claimed, including the attorneys’ fees, which shall be negotiated between the investors and the counsel.

Another important change is the proposal to make corporate arbitrations involving publicly-held companies public. The confidentiality of these arbitrations shall be regulated by the Brazilian Securities Commission (“CVM”), which shall define the situations in which confidentiality may be admitted.

The bill also strengthens CVM’s inspection powers by means of amendments to Law No. 6.385 of December 7, 1976. This will allow the CVM to obtain new means to produce evidence in administrative proceedings, including, without limitation, by means of the power to request the Courts to carry out searches and seizures of documents to be used in proceedings against managers, in addition to the access to investigations and proceedings instituted by other bodies.

This proposal is part of a set of microeconomic reforms that have the objective to combat low productivity in Brazil. Markets with lower investor protection are believed to have a higher cost of capital. The bill is a result of studies and discussions carried out by a workgroup composed of the Organization for Economic Cooperation and Development (OECD) and by the CVM, which where conducted by the Economic Policy Office of the Ministry of Finance.

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For more information on the above or other matters, please contact Maristela SA Rossetti (mar@rraa.com.br) or Gilberto Rossetti (gmr@rraa.com.br).

This article is based on publicly available information and given for informational purposes only. It is not intended as legal advice foreign subsidiary as a comprehensive analysis of the matters referred to herein.