BRAZIL Law and Practice Contributed by: André Menescal Guedes, Raissa Freire de Almeida and Bruno Paiva, André Menescal Advogados
ance practice and B3 listing rules encourage direc- tors to consider environmental, social and governance (ESG) impacts, recognising that long-term corporate value depends on broader stakeholder relationships. 9.2 Special or Ad Hoc Committees Brazilian boards frequently establish special or ad hoc committees to assist in the evaluation of M&A trans- actions, especially when potential conflicts of interest arise. While not mandatory by law, this governance practice has become common among listed compa- nies and those adhering to higher B3 governance seg- ments such as Novo Mercado. Committees typically review transaction terms, over- see fairness opinions and co-ordinate independent due diligence. They enhance the credibility of the board’s recommendation and serve as an additional safeguard for minority shareholders. When control- ling shareholders or related parties are involved in the transaction, the formation of an independent commit- tee is considered best practice and may be requested by the CVM to ensure procedural fairness. Their conclusions are not legally binding but provide a valuable record of diligence and independence, which can reduce potential liability for directors and support regulatory or judicial review if the transaction is later contested. 9.3 Role of the Board In Brazilian public companies, the board of directors must play an active and informed role in evaluating, negotiating and approving M&A transactions. The board is expected to safeguard the company’s inter- ests, verify that the proposed transaction serves a legitimate business purpose, and ensure equal treat- ment of shareholders. While management typically conducts negotiations, the board is responsible for approving key terms, disclosing material information and issuing a recommendation to shareholders. Boards may actively defend the company against hos- tile or undervalued offers, provided that their actions
align with fiduciary duties and aim to maximise long- term corporate value. Defensive tactics – such as seeking alternative bids or restructuring assets – must be proportionate and transparent. Shareholder litigation challenging board decisions has increased, particularly in related-party transactions and delistings. Courts and the CVM scrutinise wheth- er directors exercised proper diligence and obtained independent advice. Buyers should therefore expect rigorous governance procedures and possible delays while the target ensures full regulatory compliance. Given this environment, directors rely heavily on spe- cialised legal and financial advisers to substantiate their decisions and to demonstrate that the transac- tion process met standards of fairness, transparency and procedural integrity. 9.4 Independent Outside Advice In business combinations, Brazilian directors com- monly engage independent legal, financial and tech- nical advisers to ensure informed and defensible deci- sion-making. The most frequent external input is a fairness opinion issued by a qualified financial adviser assessing whether the transaction’s economic terms are fair from a financial standpoint. Legal counsel plays a crucial role in reviewing govern- ance procedures, disclosure duties and related-party considerations under CVM and B3 rules. Environmen- tal and regulatory advisers are often retained in the energy and infrastructure sectors to confirm compli- ance with concession and licensing requirements. The use of independent advice helps directors dem- onstrate diligence and mitigate liability risks. This doc- umentation also serves as evidence that the board’s decision was based on a reasoned assessment, an increasingly important factor in regulatory investiga- tions or shareholder suits. In complex or high-value transactions, the cost of such advice is viewed as an essential governance investment rather than an optional safeguard.
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