BRAZIL Law and Practice Contributed by: Felipe Barreto Veiga, Rafael Teixeira, Gabriel Abdalla and Pablo Arana, BVA – Barreto Veiga Advogados
• entry through primary issuances, such as capital increases or subscription agreements; and • shareholders’ agreements granting governance rights and/or featuring call/put options and other preagreed exit mechanics. Any stakebuilding strategy must comply with applica - ble disclosure obligations, market abuse and insider trading restrictions, and (as relevant) rules governing tender offers and trading during sensitive periods. 4.2 Material Shareholding Disclosure Threshold For publicly held companies, an investor (or group acting together) that reaches or crosses, upward or downward, the thresholds of 5%, 10%, 15% (and so on, in 5% increments) of a type or class of shares must promptly notify the company, and the company must transmit the information to the CVM (and, as applicable, to the relevant trading venues). In addition, the filing must generally disclose the pur - pose of the stake, the number and type or class of shares, and any agreements affecting voting or the purchase or sale of the issuer’s securities. The rules also apply to certain rights over shares and equity derivatives, with specific aggregation mechanisms depending on whether the derivative is physically or cash settled. 4.3 Hurdles to Stakebuilding Listed companies may adopt additional governance mechanisms in their bylaws, including: • “poison pill” provisions (bylaw-based mandatory tender offers triggered upon reaching specified ownership thresholds); • enhanced disclosure and transparency require - ments (eg, additional reporting to the issuer and market, to the extent consistent with applicable rules); and • governance arrangements in shareholders’ agree - ments (eg, voting arrangements and call/put options), noting that enforceability may be subject to statutory limits and disclosure requirements. However, companies cannot waive or replace the stat - utory and CVM-mandated disclosure regime applica -
ble to publicly held companies; bylaw provisions may supplement, but not override, mandatory reporting obligations. Other practical hurdles to stakebuilding commonly include insider trading and market abuse restric - tions, trading limitations during sensitive periods, and – where there is co-ordination between parties in a notifiable transaction – the need to avoid pre-closing conduct that could be viewed as gun jumping (includ - ing premature integration or undue influence prior to CADE clearance). 4.4 Dealings in Derivatives Derivatives linked to shares of publicly traded com - panies are permitted, provided that they comply with securities regulations and market rules. However, derivatives may trigger disclosure obliga - tions if they provide economic exposure equivalent to share ownership. 4.5 Filing/Reporting Obligations Securities Disclosure (CVM) Derivatives are generally permitted, but they may trig - ger (or become relevant to) mandatory disclosure in at least three common situations: • Relevant shareholding disclosures (public com - panies): Where equity derivatives give an investor economic exposure and/or rights that are treated as equivalent to holding (or being able to acquire) shares, they may need to be aggregated with direct holdings for purposes of the applicable disclosure thresholds and content requirements. • Trading disclosures by controllers/insiders and related persons: CVM rules governing trading while in possession of non-public information and related disclosure obligations can capture derivative transactions referenced to the issuer’s securities, depending on the facts and the persons involved. • Material fact (relevant act/fact) disclosure: If the derivative strategy is part of a broader transac - tion (eg, change of control, takeover steps or other market-sensitive events), it may also need to be assessed under the material fact disclosure frame - work.
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