Contributed by Bruno von Dreifus, associate from Trench Rossi Watanabe*


As the Brazilian economy continues to be affected by political uncertainties, securities market players and the Brazilian capital markets regulator (Comissão de Valores Mobiliários or CVM) have seized the opportunity to promote the growth of corporate governance practices in the Brazilian securities market.

As part of this wave, the main securities market associations in Brazil formed a working group with the participation of the CVM and the Brazilian Bank for Economic Development (BNDES) as observers and on 16 November 2016, published the Brazilian Corporate Governance Code (Código Brasileiro de Governança Corporativa – Companhias Abertas—the “Code”). The Code promotes various recommendations to listed companies, including composition and periodic reviews of the management, independence in the running of the business, protection of minority investors and ethics and compliance.

On 8 June 2017, the CVM, took the opportunity to recognize the importance of the Code. It concluded its public hearing and enacted Rule 586, incorporating as part of the mandatory annual filings of category A listed companies a report on the adherence of listed companies to the recommendations of the Code, following the “adopt or explain” disclosure model.

Following on this development, on 26 June 2017, the São Paulo Stock Exchange (previously known as BM&FBovespa and now as B3) concluded the process for the revision of the Novo Mercado Rules, the listing rules of the special listing segment of B3 aimed at companies that are willing to adopt improved corporate governance practices.

Although some of the changes proposed to the Novo Mercado Rules by B3 were rejected (such as mandatory tender offers upon the acquisition of a specific threshold), the new listing rules were approved. The new listing rules bring changes such as mandatory auditing committees, improvement of the minimum requirements of codes of conduct (including with compliance and ethics requirements) and additional mandatory policies such as on related parties transactions, appointment of managers and management of risks.

These new listing rules are still undergoing internal approval before coming into force. B3 will consider an adjustment period for market participants.

*In cooperation agreement with Trench Rossi Watanabe, a Brazilian law firm.