BRAZIL Law and Practice Contributed by: Rodrigo Casarotti, Alexandre David, Ricardo Melaré and Gabriela Claro, /asbz
As regards the form of financial statements of compa- nies generally, Brazilian companies classified as large- sized companies (that is, those exceeding certain thresholds of total assets or gross revenue), regard- less of their corporate type, must prepare their finan- cial statements in accordance with the accounting framework of the Corporations Law. That framework has been revised to converge with international stand- ards and is now largely aligned with IFRS as adopted in Brazil, through local accounting pronouncements. Listed issuers remain subject to audited financial statement obligations under IFRS-aligned Brazilian standards; pro forma information may be required in specific cases under CVM rules. 10.4 Disclosure of Transaction Documents Private M&A documents (share purchase/investment agreements and schedules) are generally not publicly filed; only resulting corporate acts (by-law amend- ments, minutes) go to the commercial registry. In public deals/offers, core documents must be filed/ disclosed in specific cases – OPA documents and sup- porting materials; for statutory reorganisations, proto- cols/justifications, appraisal reports and shareholders’ resolutions. Underlying contracts are not automatical- ly public; the CVM may request them where necessary for registration. Shareholding-threshold disclosures (eg, 5%) require a standard position/intention notice, not the filing of underlying purchase agreements. Directors owe fiduciary duties of diligence and loyalty, and must act in the company’s best interests ( inter- esse social ). In M&A, this means informing themselves adequately on structure, valuation and risk allocation, including IP/software/data assets, key talent depend- ence, platform resilience/scalability and sectoral regu- lation (eg, LGPD and cybersecurity). Loyalty requires managing conflicts, excluding con- flicted individuals from deliberations and ensuring arm’s-length approval. 11. Duties of Directors 11.1 Principal Directors’ Duties
Directors of listed companies have broader disclosure and inside-information obligations under corporate and securities laws. Duties are owed primarily to the company; Brazilian law recognises the company’s social function/interest, allowing boards to consider stakeholder impacts insofar as they are relevant to long-term value and sustainability. 11.2 Special or Ad Hoc Committees There is no uniform market practice, given limited public company M&A volume. Conflicts are common- ly managed by disclosure and abstention (conflicted directors refrain from receiving certain information, leave meetings and do not vote). In larger/sensitive transactions – especially related- party or controller-involved deals – boards some- times create ad hoc committees of non-conflicted/ independent directors to review and support recom- mendations as a governance best practice. Clean teams may be established for diligence where competitively sensitive information is involved; these are management/adviser-led rather than led by board committees. 11.3 Board’s Role Most combinations require shareholder approval; the board is expected to act within fiduciary duties to safeguard the corporate interest. In material deals, the board typically supervises negotiations, assesses the transaction and issues a reasoned recommenda- tion. The board may seek improved terms, authorise exploration of alternatives or set process parameters consistent with law, CVM/B3 rules and by-laws. Its unilateral ability to block a transaction supported by requisite shareholder majorities is limited in the absence of specific by-law provisions (eg, poison pills or enhanced quorums). Litigation specifically challenging board recommen- dations is less frequent than in some markets and tends to arise in contentious cases, typically alleging fiduciary breaches, conflicts, process flaws or inad- equate disclosure, before courts, the CVM or arbitra- tion where by-laws so provide. Buyers should ensure conflicts are identified/managed, deliberations are
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