On October 29th, 2024, the Brazilian Securities and Exchange Commission (CVM) issued CVM Resolution No. 215/2024, which establishes the new regulatory framework applicable to takeover bids and CVM Resolution No. 216/2024, which made specific amendments to other regulations issued by the CVM in order to make them compatible with the new provisions of CVM Resolution No. 215/2024 (“Resolutions”).
The Resolutions were preceded by Public Consultation SDM No. 05/2023, in which market agents had the opportunity to send suggestions and comments on the subject. For more information on this Public Consultation, we refer to Newsletter Moreira Menezes, Martins Advogados No. 111 (December 2023).
Included in the CVM’s 2024 Regulatory Agenda, CVM Resolution No. 215/2024 establishes the new regulatory regime for takeover bids carried out by publicly traded companies, and it revokes CVM Resolution No. 85/2022 and CVM Resolutions No. 751/2016 and 756/2016, which previously addressed the matter.
Among the main changes introduced by CVM Resolution No. 215/2024, the following stand out:
(i) takeover bid by increase of stake: CVM Resolution No. 85/2022 currently states that a takeover bid by increase of stake must be carried out whenever the controlling shareholder or a person linked to them acquires shares representing more than 1/3 of the total outstanding shares of each type and class.
CVM Resolution No. 215/2024 changed the regulatory criteria, stipulating that a takeover bid for an increase in shareholding must be carried out whenever the acquisition of outstanding shares by the controlling shareholder or a person linked to them leads to a reduction in the total number of outstanding shares of the same class and kind to a level of less than 15%.
It will also become mandatory to carry out a takeover bid for an increase in shareholding in any case of acquisition of new shares by the controlling shareholder or a person linked to him when the percentage of outstanding shares of the type and class acquired already corresponded to less than 15% before the acquisition in question;
(ii) quorum for approval of the takeover bid for deregistration: the deregistration of shares on the regulated securities markets can only be granted by CVM if it is preceded by a takeover bid for deregistration, carried out by the controlling shareholder or by the company itself, for all the shares issued by the company.
In this regard, Resolution CVM No. 85/2022 determines that shareholders holding more than 2/3 of the shares eligible for the takeover bid must expressly agree to the cancellation of the issuer’s registration or accept the takeover bid.
CVM Resolution No. 215/2024 maintained this provision, but included an exception that makes the quorum more flexible, reducing it to a simple majority of eligible shares when the number of shares in circulation is less than 5% of the company’s share capital.
(iii) automatic exemption from valuation report: in view of the existence of several CVM precedents to the effect that the preparation of a valuation report is not required in order to establish the price of the shares subject to a takeover bid, CVM Resolution No. 215/2024 now provides for the possibility of waiving the need to prepare a valuation report, in which case, as an alternative to preparing a report, the price of the shares subject to the takeover bid may be determined:
(a) based on a legal transaction entered into between unrelated parties no more than 12 months prior to the date of application for registration of the takeover bid, which involves at least 20% of the company’s share capital and which is not associated with another legal transaction as a result of which the parties have obtained an advantage or will obtain other financial consideration;
(b) based on the highest unit price achieved by the share of the same type and class as the shares subject to the takeover bid on the stock exchange where there has been the highest volume of trading of shares issued by the company in the last 12 months, provided that the requirements set out in CVM Resolution No. 215/2024 are complied with;
(c) based on the price that the offeror of the takeover bid is willing to pay, provided that (c.1) the takeover bid for deregistration is unified with the takeover bid for the acquisition of control and (c.2) the number of shares whose acquisition is necessary for the success of the takeover bid for the acquisition of control is equal to or greater than 20% of the share capital; or
(d) based on the price at which the shareholders holding more than 1/3 of the outstanding shares have committed to sell such shares in the takeover bid, provided that such commitment to sell is not associated with another legal transaction as a result of which the parties have obtained an advantage or will obtain other financial consideration.
CVM Resolution No. 215/2024 also stipulates that the exemption from preparing a valuation report as provided in the Resolution does not affect the shareholders’ right to seek a review of the price of the shares.
(iv) exemption from auction: in the light of CVM precedents, CVM Resolution No. 215/2024 now expressly provides for exemption from contracting an auction to carry out a takeover bid when the takeover bid (a) is aimed at fewer than 100 shareholders or (b) is aimed at fewer than 1,000 shareholders and the cost necessary to carry out the auction corresponds to more than 10% of the total value of the takeover bid (considering as “cost necessary to carry out the auction” the amount charged by the organized securities market management entity responsible for operating it);
(v) responsibilities of the intermediary: currently, CVM Resolution No. 85/2022 establishes that the takeover bid must be intermediated by a securities broker or distributor or a financial institution with an investment portfolio. In addition, this Resolution states that the intermediary must: (a) guarantee the financial settlement of the takeover bid and the payment of the purchase price in the event of the exercise of the put option by the remaining shareholders after the end of the takeover bid; and (b) fulfill duties of diligence with regard to the information provided to the market during the takeover bid, establishing that it is the intermediary’s responsibility to assist the offeror during the offer.
Since CVM Resolution No. 215/2024, the obligation to guarantee the financial settlement of the takeover bid has been segregated from the other obligations of the intermediary and may be assumed by another institution;
(vi) automatic registration procedure: according to CVM Resolution No. 215/2024, the registration of a takeover bid may follow two different procedures: the automatic registration procedure or the ordinary registration procedure.
The ordinary registration procedure will apply to offers that must be submitted for prior registration with the CVM (mandatory takeover bids and voluntary takeover bids with an exchange for securities).
The automatic procedure, on the other hand, will apply to voluntary takeover bids that do not involve an exchange of securities. In these cases, the takeover bid will be registered automatically, without any prior analysis by the CVM, as long as the requirements of CVM Resolution No. 215/2024 are met.
It is worth noting that, in providing for mandatory takeover bids, CVM Resolution no. 215/2024 also changed the term “voluntary takeover bid” to “optional takeover bid”; and
(vii) confidential consultations: finally, CVM Resolution No. 215/2024 establishes a procedure for carrying out confidential consultations on specific cases involving takeover bids, by means of a request submitted by the issuer to the Securities Registration Superintendence.
In order for requests for confidentiality to be considered, the consultant must submit the specific data necessary to analyze the case in question. Confidential treatment will not be granted to merely theoretical queries.
In addition, the consultant must present a justification for the confidentiality, including, under the terms of Law No. 12.527/2011, the reasons why its disclosure could represent a competitive advantage to other economic agents or jeopardize the legitimate interests of the consultant, the company issuing the shares that are the object of the takeover bid or third parties.
CVM Resolution No. 216/2024, in turn, amended CVM Resolutions No. 13/2020, 20/2021, 44/2021 and 77/2022 to bring them into line with the provisions of CVM Resolution No. 215/2024.
The Resolutions will come into force on 01.07.2025.
More information, as well as the full Resolutions, can be found on the website of the Brazilian Securities and Exchange Commission (www.gov.br/cvm).
