BRAZIL Law and Practice Contributed by: Rafael Lacerda, Eric Nahum, Rômulo Martins and Fernando Oliveira, Lacerda Diniz Advogados
Information rights typically include: • monthly or quarterly financial statements; • detailed management reports; • appointment of an independent external auditor; and • the right to conduct specific audits when needed. 9.2 Shareholder Liability Brazilian law adopts separate corporate personality between shareholders and companies, with notable exceptions relevant to private equity. Piercing the cor - porate veil may occur in cases of abuse evidenced by purpose deviation or asset commingling, though it is rarely applied to funds in the absence of proof of specific misconduct. Sector-specific risks include: • joint and several labour liability within an “eco - nomic group”; • consumer liability where there is effective control; • environmental liability where the corporate struc - ture obstructs remediation; and • tax liability extending personally to managers or officers for acts ultra vires or in violation of law. These risks are commonly mitigated through interme - diate holding companies, clear operational separation, robust compliance programmes at the portfolio level, and D&O insurance. In Brazil, private equity exits over the past 12 months have taken place through a range of structures beyond the traditional private sales to corporates or other financial sponsors and IPOs. The most notable development has been the increased use of delistings and take-private transactions conducted through ten - der offers, a trend exemplified by the Cielo transac - tion in August 2024. With the IPO window effectively closed, sponsors have turned to this mechanism as a practical and timely path to liquidity. Another relevant route has been partial sell-downs, particularly through follow-on offerings and acceler - ated block trades on B3, which allow funds to crystal - 10. Exits 10.1 Types of Exit
lise returns in stages while avoiding the complexities of a full IPO. Although still at an early stage in the local market, general partner-led secondary transac - tions and continuation funds have started to emerge, reflecting international practice and providing an alternative to more conventional exit routes. Recapi - talisations, such as dividend recaps, remain relatively uncommon due to the high cost of local debt, but there has been selective uptake supported by the growth of private credit markets – a trend reinforced by the enactment of the Legal Framework for Collat - eral (Law No 14,711/2023). As regards dual-track and triple-track processes, gen - uine dual-track exits – where an IPO and a sale pro - cess are prepared and run concurrently – have been rare in the current environment. While sponsors occa - sionally prepare for both options in parallel, the lack of IPO activity has meant that most of these processes conclude as private sales. Triple-track processes, combining a sale, an IPO and a recapitalisation, are even more unusual in Brazil. Where considered, the recapitalisation track generally plays the role of a fall- back option, supported by private credit financing rather than a fully competitive third pathway. On rollover and reinvestment practices, the prevailing market custom remains a clean break, with private equity sellers typically seeking to exit fully at the time of sale, particularly in transactions with corporates. Nevertheless, in sponsor-to-sponsor deals and strate - gic combinations, it is increasingly common for sellers to roll over a minority stake. This allows them to cap - ture future upside and to bridge valuation gaps, while aligning interests with the new controlling investor. Such rollovers are normally accompanied by govern - ance protections, including board representation and veto rights over reserved matters, as well as economic protections such as earn-outs or ratchet mechanisms. From a regulatory perspective, delistings and tender offers continue to be subject to the public offer frame - work overseen by the CVM and B3, requiring an offer to the free float in order to complete the transaction. Importantly, the tender offer regime will be updated by CVM Resolution No 215, which will come into force on 1 October 2025. This new framework replaces Resolu - tion No 85 and is expected to reinforce funding cer -
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