BRAZIL Law and Practice Contributed by: Felipe Barreto Veiga, Rafael Teixeira, Gabriel Abdalla and Pablo Arana, BVA – Barreto Veiga Advogados
Competition/Merger Control (CADE) From an antitrust perspective, derivatives can matter in two main ways: • Merger filing risk (substance over form): CADE’s definition of a reportable transaction is broad and includes acquisitions “directly or indirectly” via shares, via securities convertible into shares, or by contract or other means – so derivative-like instru - ments that effectively confer control or significant influence can raise notification questions depend - ing on structure and thresholds. • Gun-jumping/pre-closing conduct: Even if a deriva - tive does not amount to a notifiable acquisition by itself, CADE may scrutinise arrangements that create de facto influence, facilitate co-ordination, or involve sensitive information exchange before clearance – especially where parties are competi - tors or vertically related. 4.6 Transparency Upon reaching the applicable shareholding disclo - sure thresholds in a publicly held company, investors must disclose the purpose of the acquisition and their intentions regarding the issuer, including whether they intend to: • change control or influence management; • modify the capital structure; • pursue a delisting (where applicable); or • promote operational or corporate restructuring. This transparency is particularly important in the con - text of tender offers and situations that may lead to a change of control.
There is generally no obligation to disclose initial approaches or early-stage discussions, provided that the matter remains confidential and the information has not become material in the circumstances. Privately held companies are not subject to an equiva - lent public disclosure regime. 5.2 Market Practice on Timing Market practice generally tracks the applicable legal requirements. In practice, however, listed compa - nies often take a more cautious approach and may disclose developments earlier if there are market rumours, information leaks, or unusual trading activ - ity or price movements that suggest confidentiality can no longer be preserved. 5.3 Scope of Due Diligence • regulatory compliance; • commercial contracts; • financial agreements; • real estate and environmental matters; • data protection (LGPD/GDPR compliance); • ESG-related exposures; • compliance; and • antitrust. The scope varies depending on deal size, sector and risk profile. 5.4 Standstills or Exclusivity The legal due diligence typically covers: • corporate and governance matters; • tax compliance and contingencies; • labour liabilities; • litigation; Exclusivity provisions are common in private trans - actions, particularly once a non-binding offer (NBO), term sheet or memorandum of understanding (MOU) is executed and the buyer is incurring meaningful dili - gence and structuring costs. This kind of provision is important to ensure that purchasers do not take part in a competitive bidding process. Standstill provisions are more typical in public-com - pany contexts, especially where a potential bidder is granted access to sensitive information and the par -
5. Negotiation Phase 5.1 Requirement to Disclose a Deal
For public companies, disclosure is required when the transaction involves a material fact and either (i) a binding agreement is executed or (ii) negotiations reach a stage where the information becomes mate - rial to investors and confidentiality can no longer be reliably maintained.
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