BRAZIL Law and Practice Contributed by: André Menescal Guedes, Raissa Freire de Almeida and Bruno Paiva, André Menescal Advogados
Brazilian Corporate Law (Law No. 6,404/1976) and CVM regulations to consolidate ownership. After acquiring control through a tender offer, a share- holder that reaches at least 90% of the voting shares of a publicly traded company may initiate an OPA for delisting (tender offer for cancellation of registration) to acquire the remaining free-float shares. This pro- cess requires approval by at least two-thirds of the holders of free-float shares that participate in the del- isting meeting. Once approved and completed, the company’s registration with the CVM and listing on B3 can be cancelled, effectively allowing the controlling shareholder to become the sole or near-sole owner. Alternatively, the controlling shareholder may pur- sue a corporate merger or incorporation of shares, exchanging minority shares for consideration in cash or stock, provided that the transaction complies with fairness and valuation requirements and does not vio- late minority rights. While full squeeze-outs are exceptional in Brazil, these mechanisms offer a practical route for consolidating ownership after a control acquisition, subject to robust procedural and valuation safeguards. 4.9 Requirement to Have Certain Funds/ Financing to Launch a Takeover Offer Brazilian regulations do not require “certain funds” in the same sense as some common law jurisdictions. However, bidders must demonstrate financial capabil- ity to complete the transaction when launching a ten- der offer. The offeror is legally responsible for ensuring full payment of the consideration to shareholders once the offer becomes effective. In practice, the buyer itself makes the offer, while a financial institution authorised by the Central Bank of Brazil ( Banco Central do Brasil ). and accredited by the CVM acts as intermediary and settlement agent. This intermediary must confirm the bidder’s finan- cial capacity and guarantee the proper execution of payments through an escrow account or equivalent mechanism. If external financing is required, the bidder may announce the offer conditional upon obtaining such
financing, provided that the terms and conditions are clearly disclosed in the offer document and that the financing process is at an advanced stage. Neverthe- less, conditional offers are uncommon because Bra- zilian regulators and market practice favour certainty of funds to protect minority shareholders and market stability. Therefore, while it is not legally mandated, bidders generally secure committed or near-committed financ- ing before launching an offer to ensure credibility and avoid potential liability for non-performance. 4.10 Types of Deal Protection Measures Deal protection measures are permissible in Brazil but must be carefully structured to comply with fiduci- ary duties and minority shareholder protections. The most common protections include break-up fees, matching rights and non-solicitation clauses, which are designed to give bidders a degree of transactional certainty without unduly restricting competitive offers. Break-up fees are enforceable when proportionate and clearly disclosed. They are typically limited to 1%–3% of deal value, compensating the bidder for expenses if the target withdraws its recommendation or accepts a superior proposal. Excessive penalties may be challenged as abusive or contrary to the pub- lic company’s duty to maximise shareholder value. Matching rights allow the initial bidder to match com- peting offers within a specified period. These are com- mon in negotiated control transactions but must be structured to ensure that the target’s board can still consider superior bids objectively. Non-solicitation and confidentiality provisions are standard and aim to prevent active solicitation of competing offers while allowing the board to respond to unsolicited superior proposals. “Force the vote” provisions, by contrast, are rare, as Brazilian govern- ance rules emphasise the board’s continuing fiduciary discretion and shareholder autonomy. In all cases, the CVM may review deal protections to ensure that they do not inhibit market transparency or fairness in takeover processes.
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