Brazil: The Adoption Of the Mergers And Acquisitions Committee In Brazil

Another important measure is being taken in Brazil which affects merger and acquisition (m&a) transactions in our jurisdiction involving publicly-held corporations (companhias abertas).

On June 27, 2012, an agreement for the creation of the Mergers and Acquisitions Committee (Comitê de Fusões e Aquisições - CAF) was signed by the Brazilian Securities, Commodities and Futures Exchange (BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros - BVMF) and three other class entities, namely: (i) the Association of Capital Markets Investors (Associação de Investidores no Mercado de Capitais - AMEC); (ii) the Brazilian Association of Entities of the Financial and Capital Markets (Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais - ANBIMA); and (iii) the Brazilian Institute of Corporate Governance (Instituto Brasileiro de Governança Corporativa - IBGC). Only the Brazilian Association of Publicly-Held Corporations (Associação Brasileira das Companhias Abertas – ABRASCA) decided not to adhere to this initiative for the time being1.

The Brazilian CAF is a voluntary self-regulatory organization, inspired in the UK Takeover Panel model, aimed at assuring the equitable treatment of publicly-held corporations´ shareholders during public tender offers (ofertas públicas de aquisição de ações – OPAs) and corporate restructuring (operações de reorganização societária).  This new organization is expected to be established and start operating in the month of October of 2012. The central objective of CAF is to guarantee that the m&a transactions be executed in equitable conditions.

The Self-Regulation Code for Mergers and Acquisitions (Código de Autorregulação de Aquisições e Fusões), hereinafter simply referred to as Code, which wording is still being discussed, represents a composite of principles and rules regarding the CAF´s operation. Operational aspects and those relative to the financing of CAF are also being defined.

CAF will be formed by members elected by its founding entities (BVMF, AMEC, ANBIMA and IBGC) and part of the members shall be independent. When called upon, CAF´s mission will be to opine and decide upon complaints regarding any public tender offer for the acquisition of shares (OPA), and regarding every type of takeover (incorporação), stock takeover (incorporação de ações), merger (fusão) and spin-off with takeover (cisão com incorporação)  involving publicly-held corporations.

It is important to note that the Code will not substitute the legal and regulatory provisions applicable to m&a transactions that are within its ambit. CAF shall also not substitute the role of the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM) regarding such transactions. The transactions submitted to CAF shall already be presumed legitimate by CVM.

Companies may adhere to CAF in two different manners. First, the company can include a provision in its bylaws (estatuto social) accepting to submit to CAF each and every of its public tender offers and corporate restructuring transactions. Second, if involved in a certain m&a transaction, the company can opt to take such specific transaction before CAF on an individual basis.

When applying the Code, CAF shall privilege the principles rather than the rules themselves. Therefore, if and when faced with a concrete case, CAF may open an exception as regards the application of a specific rule if CAF understands that the principle can be observed through a less onerous means, such as determining the adoption of other measures not expressly foreseen in the Code.

There are two main rules which are at the front of the applicable legislation currently in force and shall apply to the transactions reviewed by CAF.

The first rule is that a public offer is mandatory whenever a significant stake is achieved, in order to assure that an investor or group of investors that obtains a significant equity participation in the company (which may vary between 20% to 30% of the capital, according to the criteria contemplated in the company´s bylaws) makes a buy offer to all the shareholders.

The second rule is the right of minority shareholders to a counter-report in corporate restructuring transactions involving related parties.

Furthermore, the rules do not permit the existence of different terms of exchange between shares of the same type and class in corporate restructure transactions, unless: (i) the holders of the less favored share type or class approve the adoption of differentiated terms of exchange; or (ii) CAF waives this rule in a case where the difference is based on the market price for equities.

CAF will not judge the merit of the values or the convenience of the transactions that are submitted to it, nor rule on and inspect competition issues, which are the responsibility of the relevant government organizations. The Brazilian antitrust agency responsible for authorizing acts of economic concentration which meet certain thresholds is the Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica – Cade). If the m&a transaction involves financial institutions and other similar entities authorized to operate in Brazil by the Central Bank of Brasil (Banco Central do Brasil – Bacen), then it must be submitted to the prior approval of Bacen.

Footnote

1 According to the ABRASCA Vice-President Luis Espínola, there is a strong reluctance on the part of its members (the publicly-held corporations) regarding the criteria to be adopted by CAF for the pricing of the shares, because the companies do not accept that the price take into account the market value of the shares to be sold, which will be equivalent to the best price determined during the last 12 months before the tag along provision. ABRASCA believes that this will be unfair and represents a disincentive for the shareholder to acquire a relevant stake of the company and that the shares should be negotiated according to their economic value. Another possibility would be to submit the investor´s proposal to the consideration of the company´s Board (Conselho de Administração) and/or the General Shareholders´ Meeting for approval. A consensus was not yet achieved in this regard. BVMF will try to persuade ABRASCA to join CAF.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Walter Stuber
Adriana Maria Gödel Stuber
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions