On September 20th, 2022, the Brazilian Securities Commission (CVM) issued Rule No. 168/2022, which modifies CVM Rules Nos. 59/2021 and 80/2022 to regulate aspects of voting rights of dual-class common stocks and composition of the board of directors of publicly-held companies (“CVM Rule No. 168/2022”).

CVM Rule No. 168/2022 is the result of the Public Hearing No. 09/2021, promoted by the Superintendency of Market Development (SDM) of the CVM, during which a proposal was put forward to regulate the legal provisions of the Brazilian Federal Law No. 6,404/1976 (Brazilian Law of Corporations) introduced by the Brazilian Federal Law No. 14,195/2021, namely: 

(i) art. 110-A, § 12, numeral II, of the Brazilian Law of Corporations: attributes powers to the CVM to determine the criterion for relevance of transactions with related parties when multiple voting rights will not be applied;

(ii) art. 138, §§ 3 and 4, of the Brazilian Law of Corporations: attributes powers to the CVM to make exceptions for small corporations regarding the prohibition of a single person serving as chairman of the board of directors and chief executive officer (or the equivalent); and

(iii) art. 140, § 2, of the Brazilian Law of Corporations: attributes powers to the CVM to establish the provisions on the obligatory participation of independent members of the board of directors of publicly-held companies and their terms in office.

In these respects, in light of the manifestations from the market participants received during Public Hearing No. 09/2021, CVM Rule No. 168/2022 was drafted with the following main provisions:

(i) establishes that multiple voting rights of dual-class common stocks shall not be applied at general shareholder meetings that deliberate on transactions with related parties that must be disclosed under the terms of Annex F of CVM Rule No. 80/2022 (which contains the obligation to disclose certain transactions between related parties by issuers of securities);

(ii) waives the prohibition of accumulation of the position of chief executive officer (or equivalent) and chairman of the board of directors of publicly-held companies classified as small (with annual gross revenue less than BRL 500,000,000.00, under the terms of Art. 294-B of the Brazilian Law of Corporations); and

(iii) establishes the obligatory participation of independent members of the board of directors only for corporations that cumulatively satisfy the following requirements: (a) are registered in category A; (b) have securities registered for trading in an organized exchange; and (c) have issued shares or certificates of deposit of shares. Besides these aspects, the CVM Rule No. 168/2022 specifies that the number of independent directors in such situations must correspond to at least 20% of the total number of directors.

With respect to this last point, it should be noted that the initial proposal by the CVM submitted to the Public Hearing No. 09/2021 specified the need for independent directors of any corporation (regardless of the listing of securities for trading). The alteration in the final version of CVM Rule No. 168/2022 was due to the manifestations presented by market participants.

CVM Rule No. 168/2022 has taken effect on October 3rd, 2022.

More information, along with the full text of CVM Rule No. 168/2022, can be found at the CVM’s website (www.gov.br/cvm).