BRAZIL Law and Practice Contributed by: Felipe Barreto Veiga, Rafael Teixeira, Gabriel Abdalla and Pablo Arana, BVA – Barreto Veiga Advogados
8. Duties of Directors 8.1 Principal Directors’ Duties
8.4 Independent Outside Advice In the context of significant transactions, boards cus - tomarily seek external advice in order to support their deliberations and discharge their fiduciary duties. This typically includes: • legal opinions; • fairness opinions issued by financial advisers; • independent valuation reports; and • accounting and tax advice, depending on the structure and complexity of the transaction. In delisting transactions, the preparation of an inde - pendent appraisal report is generally required, serving as a reference for determination of the offer price and as an additional safeguard for minority shareholders. 8.5 Conflicts of Interest Conflicts of interest, particularly in the context of related-party transactions and squeeze-out proce - dures, have been subject to scrutiny by the CVM and to judicial review. Regulatory practice has increasingly placed empha - sis on enhanced transparency, robust procedural safeguards and the adoption of independent review mechanisms designed to preserve the integrity of the decision-making process and protect minority share - holders. 9. Defensive Measures 9.1 Hostile Tender Offers Hostile tender offers are legally permissible in Brazil but remain relatively uncommon in practice. The structure of the Brazilian market, which is pre - dominantly characterised by concentrated ownership and the presence of defined controlling sharehold - ers, significantly limits the feasibility and frequency of unsolicited or hostile bids. 9.2 Directors’ Use of Defensive Measures Defensive measures are permissible under Brazilian law; however, directors must at all times observe their fiduciary duties and may not implement such meas -
Directors are subject to fiduciary duties owed to the company, notably the duties of care and loyalty, and must act in the best interests of the corporate entity. These obligations require directors to perform their functions with diligence, informed judgement and independence, always prioritising the company’s interests over personal or third-party considerations. Under Brazilian law, such duties are owed primarily to the company as a distinct legal person, even though board decisions may have direct or indirect effects on shareholders and other stakeholders. Brazilian courts and regulators generally afford deference to board determinations under a business judgement ration - ale, particularly where directors have acted in good faith and diligently, on an informed basis and without conflicts of interest. 8.2 Special or Ad Hoc Committees In transactions where conflicts of interest may arise, including related-party transactions or acquisitions led by a controlling shareholder, it is customary for the board to establish an independent or special commit - tee composed of disinterested members. The establishment of such committees is intended to strengthen the integrity of the decision-making process, safeguard procedural fairness and mitigate potential liability exposure, particularly in circumstanc - es where the transaction may be subject to enhanced scrutiny by shareholders or regulatory authorities. 8.3 Business Judgement Rule Brazilian courts generally recognise a standard of def - erence comparable to the business judgement rule, provided that directors act in good faith and diligently, on an informed basis and free from conflicts of inter - est. In this context, judicial scrutiny is typically directed at the integrity of the decision-making process, with emphasis on procedural propriety rather than on reas - sessing the substantive merits of the underlying busi - ness decision.
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