On September 17, 2015 the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM) issued two Instructions: (i) ICVM 567 that regulates the trading by listed companies of shares of their own issue and derivatives; and (ii) ICVM 568 that aims to maintain an informational regime regarding the negotiation of relevant business in listed companies that is consistent with the rules of ICVM 567.

I. Scope of the Regulation

The provisions of ICVM 567 apply to the trading: (i) of shares of the listed company by its affiliates and controlled companies; and (ii) by the listed company, its affiliates and controlled companies of subscription bonuses and any other securities referenced in shares issued by them.

II. Treasury Shares

When trading shares of its own issue a listed company can only: (i) acquire shares to be held in treasury or to be cancelled; and (ii) dispose of the shares acquired pursuant to item (i) and held in treasury. The shares held in treasury will be referred to herein as "treasury shares".

The listed companies cannot keep treasury shares issued in quantities exceeding 10% of each species or class of shares in circulation on the market. This provision does not apply to: (i) the redeemed or forfeited shares, under the terms of article 45, paragraph 31, and article 107, paragraph 42, of Law No. 6,404 of December 15, 1976 (the Brazilian Corporation Law – BCL); and (ii) the acquisitions made by the company in connection with the public offering of shares, which will be governed by specific rules.3

The above-mentioned percentage (10%) comprises: (i) the shares issued by the listed company held by its affiliates or controlled companies; and (ii) the shares issued by the listed company which correspond to the economic exposure assumed because of derivatives or deferred settlement agreements entered into by the company itself or its affiliates or controlled companies.

The number of shares referred to in derivatives instruments conferring economic exposure to shares issued by the company itself cannot be compensated with the number of shares referenced in derivatives instruments that produce inverse economic effects. The shares referred to in derivatives instruments must be computed independently of such contracts providing for financial settlement or through the delivery of shares.

Shares in circulation are all those representing the capital of the company except for the shares held directly or indirectly by the controlling shareholder, by persons linked thereto (related persons), and by the administrators. Related person is the individual or legal entity, fund or universality of rights that represents the same interest of the person or entity to which he/she/ it is linked.

The treasury shares do not have voting rights or cash proceeds of any nature. This does not prevent the treasury shares: (i) to receive bonus in shares; and (ii) to be object of reverse stock split or division of shares. Furthermore, the treasury shares must be disregarded in the calculation of quorum for installation and resolution at shareholders´ general meetings provided for by the BCL and the applicable securities market regulations issued by CVM.

III. Authorization to Trade

As a general rule, the trading by the listed company of shares of its own shares may be approved by the Board of Directors (Conselho de Administração), except in the following cases in which the transaction will only be effective if previously approved by the Shareholders' General Meeting:

  1. when more than 5% of species of class of shares in circulation is negotiated outside the organized securities markets in less than 18 months, even if made through several isolated transactions;
  2. if the transaction is made outside the organized securities markets at a price more than 10% higher than the market price in the case of acquisition, or more than 10% lower in the case of sale (the "Thresholds"). The term "market price" means the average quotation weighted by the volume in the last 10 trading sessions on that the shares have been negotiated, counted backwards from the date of signature of the contract of purchase or sale of shares by the listed company;
  3. when the purpose of the transaction is to change or preserve the composition of the share control or the administrative structure of the company; or
  4. if the business counterpart of the transaction made outside the organized securities markets is a related party to the company, as defined by the applicable accounting rules.

The by-laws can: (i) prohibit the listed company to trade its own shares; or (ii) provide new events that it will require the prior approval of the Shareholders' General Meeting.

If the transaction is the purchase or sale of derivatives, the following additional rules must be observed:

  1. If the price of liquidation of the derivative contract is known at the time of signing the contract, the comparison with the market price will be based on such price, increased or reduced by eventual premiums and other amounts paid to or received by the company by or from the business counterpart;
  2. If the price of liquidation of the derivative contract is unknown at the time of signing the contract, the transaction will require the prior approval of the Shareholders' General Meeting. Such approval will only be waived: (a) if the contract limits the price of liquidation to the Thresholds in relation to the market price at the moment of the signing or liquidation of the contract; or (b) the contract provides that the payments made or received by the company are determined based on the variation of the quotation of the share between certain periods, and the price of the shares in the initial term of each of these periods shall correspond to the Thresholds.

There are also other cases in which the prior approval of the Shareholders' General Meeting is waived as follows:

  1. disposal or transfer of shares to administrators, employees and service providers of the listed company or its affiliates or controlled companies arising out of: (a) the exercise of stock options under stock options plan; or (b) other models of remuneration based on shares; and
  2. public offering of secondary distribution of treasury shares or securities convertible or exchangeable into treasury shares.

The stock options plan or other models of remuneration based on shares must: (i) contain the parameters of calculation of the exercise price of the stock options or the calculation of the price of shares, as the case may be; and (ii) be approved by the Shareholders ' General Meeting.

IV. Restrictions

The trading by the listed company must be liquidated within 18 months as from the date of the approval of the transaction by the Shareholders' General Meeting or the Board of Directors.

The acquisition of shares of its own issue by the listed company is prohibited when: (i) it comprises shares held by the controlling shareholder; (ii) it is held on organized securities markets at prices higher than the market prices; (iii) it is in progress the period of public offering of shares of its own issue; or (iv) it requires the use of higher resources than those available4.

The available resources are: (i) all reserves of profit or capital, except the following: (a) legal reserve; (b) reserve for realizable profits; (c) special reserve of non-distributed compulsory dividend; and (d) fiscal incentives reserve; and (ii) the result already performed of the fiscal year in progress, segregating the destinations to the reserves mentioned in item (i).

The existence of the available resources must be verified by the Executive Officers (Diretoria) on the basis of the latest financial statements disclosed prior to the effective transfer of ownership to the company of shares of its own issue. The financial statements used for this purpose may be the annual statements, the intermediate statements and those reflected in the forms of quarterly information (formulários de informações trimestrais - ITR) submitted to CVM.

Only the administrators can approve the acquisition of shares or, if applicable, propose its approval by the Shareholders' General Meeting, if they have taken the necessary steps to ensure that: (i) the financial situation of the company is compatible with the settlement of the acquisition in its maturity without affecting the fulfillment of the obligations assumed with creditors nor will affect the payment of fixed or minimum compulsory dividends; and (ii) in the event that the existence of available resources have been verified on the basis of intermediate financial statements or reflected in the ITR, there is no predictable facts able to lead to significant changes in the amount of such resources throughout the remainder of the fiscal year.

The company must divest or cancel the treasury shares whenever it finds that the balance of available resources has been exceeded, as determined in its disclosed latest financial statements. The sale of the treasury shares must occur within six months after the disclosure of the financial statements that were the basis for the calculation of the excess.

The limitations provided for in ICVM 567 to trading shall apply without prejudice to the provisions of CVM available on: (i) the creation of artificial conditions of demand, supply or price, price manipulation, fraudulent operations and unfair practices; (ii) the prohibitions and conditions for stock-trading of listed companies while the pending material information has not yet been disclosed to the market; and (iii) the public offerings of acquisition and distribution of securities.

Subject to the requirements of the BCL, in exceptional and duly justified situations, and provided that it has been previously consulted, CVM may approve the trading of shares of its own issue by a listed company under conditions other than those provided for in ICVM 567.

V. Relevant Business

ICVM 568 defines "relevant business" as a business or group of businesses through which the direct participation of certain persons exceeds a certain level, up or down. These persons are the direct or indirect controlling shareholders and the shareholders who elect members of the Board of Directors or of the Audit Committee (Conselho Fiscal), as well as any individual or legal entity or group of persons acting together, or representing the same interest, which carry out the relevant negotiations. The levels established in the regulation are 5%, 10%, 15%, and so on, of species or class of shares representing the share capital of the listed company.

Any relevant business must be informed by these persons to the company within five days after it happens and the company will have to report immediately such business to CVM and, as the case may be, to the stock exchange or organized over-the counter market entity in which the securities of the listed company are admitted to trading.

VI. Conclusion

The new measures adopted by CVM give more transparency to the transactions outlined above and confer more responsibility to shareholders and administrators when these transactions are made.

Whenever the company trades shares of its own issue, it must inform the reasons to adopt such procedure. In addition, as it is required from its officers, directors and controlling shareholders, the company must disclose monthly the quantity and price of the traded shares during such period.

The Board of Directors will also have to assess whether the company has financial conditions to support the transaction. The ITR can be used to evaluate if there are resources available for the share repurchase.


1. According to article 45 of the BCL, refund is an operation whereby, in the cases provided for by law, a corporation pays a shareholder the value of his shares, if he dissents from a decision of a general meeting and paragraph 3 of article 45 provides that if the by-laws has established the evaluation criteria for the purpose of refund, the refund value shall be determined by three experts or evaluation corporation (the valuers), in a report which shall indicate the evaluation criteria and the basis of comparison used, and these shall be supported by documentary evidence as to the property valued. The valuers shall be liable for any damage caused to the corporation, shareholders and third parties, by their negligence or fraud in valuing the property.

2. Article 107 of the BCL determines that once a shareholder is deemed in arrears, the corporation may at its option: (i) bring proceedings to levy execution against the shareholder and those jointly liable with him  for the collection of the amounts due; the subscription offer and the notice of call being accepted as extra-judicial instruments as required by the Brazilian Code of Civil Procedure; or (ii) order that the shares be sold on a stock exchange for the account of, and at the risk of, the shareholder. Pursuant to paragraph 4 of article 107, if the corporation is unable to obtain payment in full in respect of any share through any of the procedures provided by this article, it may declare the share to be forfeit and appropriate all payments made, paying them up from profits or reserve accounts, other than the legal reserve; if the corporation has insufficient profits or reserves, it shall have a period of one year in which to place the forfeited shares, at the end of which, if no buyer has been found, a general meeting shall consider a resolution to reduce the capital by a corresponding amount.

3. This matter is governed by CVM Instruction No. 408, of December 7, 2009, as subsequently amended.

4. This also applies to physical liquidation derivative contracts referenced on shares issued by the company.

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.