The Brazilian Securities and Exchange Commission
("CVM") enacted on September 25th, 2014 the CVM Rule No.
551 ("CVM Rule 551/14"), which, among others, amended CVM
Rule No. 476, as of January 16th, 2009, allowing public offerings
of certain equity securities distributed with restricted placement
efforts.
Such new rule was subject to a public hearing stated in January
2014, having the main purpose of improving the regulatory
environment in order to allow smaller companies to access the
capital markets and finance through public share issuance.
CVM Rule 551/14 included – among others – the following
items in the list of securities that may be offered with restricted
placement efforts: (i) stock; (ii) debentures convertible into or
exchangeable for stock; (iii) warrants; and (iv) certificates of
securities issued within the Level III Sponsored BDR Program.
Moreover, CVM Rule 551/14 increased the number of investors that
may be contacted, from 50 to 75, as well as the limit of investors
entitled to subscribe or acquire the securities from 20 to 50
investors. Such limits are also applicable for securities which
were already stated in CVM Rule 476/09.
It is important to point out that foreign investors contacted
through sales efforts outside the Brazilian territory do not count for purposes of the above
limits. Former stockholders that exercise priority or preemptive
rights are also excluded from the limits indicated above.
As a general rule, securities offered with restricted placement
efforts are only negotiated among qualified investors (such as
financial institutions, insurance companies, investment funds for
qualified investors and individuals and companies which have
investments over BRL 300,000.00, which shall subscribe or acquire a
minimum of BLR 1,000,000.00 in the offer). However, CVM Rule 551/14
established an exception to such rule in case of a settlement of a
public offering of stock of the same type and class registered
before CVM or after 18 months since the admission for negotiation
of securities of the same class and type in the stock
exchange.
This limitation is also applied for securities issued by pre
operational companies, those that have not generated revenues
resulting from their operations in annual financial statements or,
if any, in consolidated annual financial statements prepared
pursuant to the rules issued by the CVM and audited by an
independent auditor registered with the CVM. Nevertheless, such
restriction ceases to apply when, cumulatively, the issuing company
becomes operational, after 18 months since the end of the offer and
18 after the admission for negotiation of securities in the stock
exchange.
Another relevant aspect of the new regulation is the possibility of
offer with exclusion of the preemptive rights or with preemptive
rights with less than 5 days term, provided that priority right is
granted to former shareholders in the subscription of 100% of the
issued securities, proportionally to their stake; or the totality
of shareholders waives the priority right.
Thus, with the changes brought by CVM Rule 551/14, we believe that
a major additional step was taken towards the development of the
Brazilian Capital Market.
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.
