Publications

Category: Labor and employment

MTP/MS Interministerial Ordinance 17, published on April 1, amended Annex I of Joint Ordinance 20/20 to update the measures to be observed to prevent, control, and mitigate the risks of covid-19 transmission in work environments.

Among the main changes, we highlight the possibility of releasing the use of a protective mask in work environments where, by decision of the federal entity (state or municipality) where the company is located, the use of a protective mask is not mandatory in closed places.

With this change in the federal rule, it becomes possible for companies to stop requiring the use of masks by employees on their premises in states and municipalities that have local regulations that do not require the use of masks indoors.

Depending on local legislation, however, maintenance of masks in work environments may still be required. Below we look at the possible scenarios based on the new rules:

• If there is a local legislation that expressly releases the use of masks indoors, the employer can waive the requirement that its employees wear masks in the workplace in the respective locality.

• If the state/municipality has not released the use of mask in closed environments, the employer must follow the rules for mask use in closed environments defined by the state/municipality, observing the most restrictive rule.

• If the state/municipality issues a rule mandating that the measures established by federal ordinances must be followed or is silent about the release of the use of masks in closed places, the employer must follow the rules of Joint Ordinance 20/20, as amended by Interministerial Ordinance MTP/MS 17. Therefore, the use of masks should be required in shared environments or those in which there is contact with other employees or the public, when the health alert level in the state is at levels 3 or 4 in the preceding epidemiological week, according to the publication "Risk Assessment in the Covid-19 Scenario", in the Section "Epidemiological Status of Covid-19 by State and Regions/Brazil", available at the website of the Ministry of Health.

It should be noted that, regardless of whether local or federal legislation lifts the requirement to wear masks indoors, the employer may, at its sole discretion, continue to require employees to wear masks on its premises if it deems it necessary.

Interministerial Ordinance MTP/MS 17 goes into effect on the date of its publication (April 1st).

Category: M&A and private equity

Individuals and legal entities resident, domiciled or with headquarters in Brazil, as provided for in tax law, must report to the Central Bank of Brazil the assets and amounts held by them outside the country. The reporting is mandatory to those holding assets abroad amounting to or exceeding the equivalent of US$1 million on December 31, 2021. The assets and rights include corporate interests in companies, fixed-income securities, shares, real properties, deposits, loans investments, among others.

Furthermore, the individuals and legal entities mentioned above must also report quarterly to the Central Bank of Brazil the assets held abroad on March 31, June 30 and September 30 of each year, if the total value of such assets amounts to or exceeds the equivalent of US$100 million.

The report referring to December 31, 2021, must be delivered by means of the Brazilian Capital Abroad (CBE) reporting form on the Central Bank of Brazil website (www.bcb.gov.br), from February 15 through April 5, 2022, at 6 PM.

The manual containing detailed information about the reporting content and requirements is also available on the Central Bank of Brazil website.

The late delivery of the declaration, as well as the lack of reporting, or the submission of false, inaccurate or incomplete information, subjects the violator to a fine of up to R$250,000 imposed by the Central Bank of Brazil.

(CMN Resolution 4,841/20, CMN Resolution 3,854/10, BCB Circular 3,624/13, as amended, and Resolution BCB 131/21).

Category: Banking, insurance and finance

The audiovisual market, formerly dominated by record labels and producers and, more recently, also by streaming, has drawn the attention of institutional investors, generally focused on other sectors and segments. The predictability of royalties and revenue flow has attracted alternative asset investment firms and even traditional private equity firms, such as KKR, Pimco and Blackstone. In partnership with expert consultants, these players seek a range of intellectual property assets, including music catalogs, books, movies and even video games to add to their portfolios.^[1]

In case of music catalogues, singers and other copyright owners see several benefits and opportunities in these operations. For example, some seek to remake revenue stemming from the cancellation of shows during the pandemic years, while others intend to structure the transmission of their already consolidated assets and avoid disputes between heirs.

The frenzy for copyright investments should be no different in Brazil. The Brazilian recording industry, which already had annual revenues worth more than US$ 1 billion in the 1990s, has been recovering and remains the largest recording production in Latin America.^[2]

According to a report by the International Federation of the Phonographic Industry (IFPI), income from music produced in Brazil increased by 24.5% in 2020 alone – with a total of US$ 306.4 million generated. There was a significant growth in the reproduction of songs on streaming in the region.^[3]

In Brazil, the copyrights of lyrics and songs is protected by Law 9,610/98, which guarantees the author moral and property rights over his/her creations. Moral rights are personal and inalienable, while property rights may be licensed or disposed of to third parties, not unlike other forms of ownership. Legal protection is granted automatically, from the moment of creation of the protected work, and is independent of registration in a public agency.

For the exploitation of such rights and in order to receive royalties and other revenues, in addition to the possibility of licensing or assignment of copyright directly by the author or the new rightholder (for example, a record label that acquired the artist's property rights), it is market practice to link the artist or rightholder to a collective management association and the registration of his repertoire in that association.

Collective management associations act as agents of a group of artists and are centralized in the Central Office of Collection and Distribution (Ecad). Ecad is the main actor in collective copyright management, in charge of managing the payment of royalties. Users (such as streaming platforms, radio and TV stations, marketing producers, among others) report the execution of songs on their communication channels and make the respective payments to Ecad monthly, in case of continuous use, or eventual, as shows and events take place. Ecad, in turn, distributes the payments between authors, interpreters, record companies and other parties that have property rights over the work.

In the case of streaming platforms (currently the largest players in the market),^[4] Ecad has specific contracts with them^[5] whereby the platform undertakes to send Ecad a report detailing the songs played by its users. Such report is then processed by Ecad to confirm the royalty amounts to be paid by the platform. Once Ecad receives the royalty payments, it passes along to the holders of the property rights, whether artists or third parties to whom such rights have been transferred. The streaming platforms have made the receivables chain safer, but also contribute to reducing piracy and provide information and data on the potential profitability of these assets.

Investors considering copyright investments in Brazil should do a preliminary due diligence to confirm the ownership of rights (since copyrights in Brazil arise automatically and not from enrollment or record – as it is the case of real estate, patents or trademarks), and the status of the catalog of songs and the artist’s enrollment with collective management associations, as well as any disputes involving the artist or his musical catalog – especially those related to plagiarism or piracy.

It is also necessary to consider aspects related to the artist himself who owns the copyright, such as the involvement in illegal acts and/or with incidents that may compromise his image and reputation, since such actions may affect the distribution of his work and the collection of royalties. Investors should demand that the artist to give assurance about his past conduct and undertake to comply with applicable laws and indemnify investors for losses to which it gives cause. These provisions are rather common in M&A deals and do not differ substantially from contractual clauses and other provisions adopted by institutional investors in other investment deals.

The structuring of the investment is flexible and can occur through investment funds in credit rights or even with the creation of specific purpose companies focused on the management of copyright or with financing based on such rights. Once in the portfolio, the property rights themselves can be guaranteed in full, or even partially, for example, through the assignment of their receivables flow.

Despite the relevance of the Brazilian phonographic market and the growing wave of streaming in the region, which makes musical assets more attractive, this type of investment is still scarce in Brazil and should appeal to a large part of investors seeking alternative investments.

Other references:

https://www.privateequityinternational.com/why-music-rights-strike-a-positive-note/

https://www3.ecad.org.br/associacoes/Paginas/default.aspx

^[1] Asset manager Pimco joins song copyright investment frenzy. Available in: https://www.ft.com/content/01f54a76-24eb-4f5f-935b-c5f68389360f Accessed February 2022; KKR, Blackstone strike billion-dollar deals for music rights.  Available in: https://www.privatedebtinvestor.com/kkr-blackstone-strike-billion-dollar-deals-for-music-rights/ Accessed February 2022.

^[2]  Global Music Market Overview. International Federation of the Phonographic Industry (IFPI). Available in: https://gmr2021.ifpi.org/report. Accessed February 2022.

^[3]  World music industry grows 7.4% in 2020; Published on March 23, 2021. Available in: http://www.ubc.org.br/publicacoes/noticia/17762/industria-fonografica-mundial-cresce-74-em-2020 Accessed February 2022.

^[4] The services of streaming correspond to 62.1% of the share of global income related to musical reproductions.

^[5] Ecad What Brazil hears. https://www3.ecad.org.br/em-pauta/Documents/O%20que%20o%20Brasil%20Ouve%20-%20Streaming.pdf.

Category: Capital markets

With the entry into force of Article 1 of Law 13.818/19 on January 1^st of this year, publications ordered by Law 6.404/76 (Brazilian Corporate Law) have gained new rules. The changes altered the Article 289 of the Brazilian Corporate Law and created a simpler and more flexible procedure, which meets the companies’ expectation for a modernized and less costly advertising regime, at least partially. To these changes, are added the recent amendments to the Brazilian Corporate Law promoted in 2021 by the Supplementary Law 182/21 (“Startups’ Legal Landmark”).

The most relevant change was to end the obligation of companies to carry out these publications in the official press vehicles of the Union, the states, or the Federal District. Pursuant to the new wording of Article 289, publications "shall be made summary form in a newspaper of general circulation edited^[1] in the place where the company's headquarters is located, and with simultaneous disclosure of the full content of the document on the page of the same newspaper on the Internet, which must provide digital certification of the authenticity of the documents kept on its page, issued by a certifying authority accredited under the Brazilian Public Keys Infrastructure (ICP-Brazil)".

The new wording applies to mandatory publications made from January 1^st, 2022, regardless of the period (fiscal year or quarter) to which they are referred. It covers, for example, the financial statements for the period ended December 31, 2021.

In relation to legal publications involving financial statements, Article 289 states that "the publication shall contain at least in comparison with the data of the previous fiscal year, information or overall values relating to each group and its classification of accounts or records, as well as extracts of the relevant information contemplated in the explanatory notes and opinions of the independent auditors and the supervisory board, if there is."

This became the general rule for the legal publications of publicly-held or closed companies, with certain exceptions related to the size of the company.

The Brazilian Securities Commission (CVM) issued its 39^th Guidance Opinion on December 20, 2021, in order to give further evidence to the publication requisites to be observed by the companies in the publications of the summarized financial statements. The document explains the procedures for the summary content of financial information, explanatory notes, reports by the independent auditors and the fiscal council – if in operation – for the disclosure of essential information. The summarized financial statements should be preceded by the following featured notices, in order to avoid doubts from readers:

• "The financial statements presented below are summarized financial statements and should not be considered in isolation for decision making. Understanding the financial and equity situation of the company requires reading the complete audited financial statements, prepared in accordance with corporate law and applicable accounting regulations"; and

• "The full audited financial statements, including the respective independent auditor's report, are available at the following electronic addresses:

1.  [insert the electronic address of the newspaper of general circulation in which the publication was made];
2.  [insert the company's electronic address, if Company registered in Category A];
3.  [insert CVM's electronic address]; and
4.  [insert B3's electronic address in the case of listed companies]".

As for other acts, however, such as the minutes of general meetings, there is no legal or regulatory provision regarding the acceptable level of information synthesis. The practice shall dictate certain reasonable standards, and it is up to each company to carefully assess the criteria it will adopt in its publications, including cases where the summary publication may, if necessary, not be justified.

Although there is not, in the current normative framework, a provision on the minimum content to be considered for the summary publication of the other documents listed in the Brazilian Corporate Law, this act should be understood as part of the set of information provided by the issuer to the market, which implies compliance with Articles 14 and 15 of CVM’s Instruction 480/09. Therefore, the document published in a summary form should include:

• the observation that this is summarized information and should not be considered in isolation for decision-making; and

• the electronic addresses of the newspaper of general circulation, CVM and B3 (in the case of listed company) where the full document is published.

Publications shall always be made in the same newspaper, chosen at a board of directors’ meeting. Any change shall be preceded by notice to shareholders in the statement of the minutes of the ordinary general meeting (AGO), pursuant to Article 289, third paragraph of the Brazilian Corporate Law.

It is assumed that the wording of Article 289, third paragraph of the Brazilian Corporate Law encompasses any change brought about by the company. Considering that not publishing in the official press vehicles is a change in disclosure, the Superintendence of Business Relations (SEP) understands that it is sufficient for the company to update the registration form, in item "Disclosure Channels", and provide a notice to shareholders clarifying the change, motivated by the amend to the legislation. We emphasize that, if the company's articles of association contain specific rules for legal publications (in other words, indicates that publications will be carried out in the official press), it will also be necessary to amend the articles of association in order to adapt it to the new Brazilian Corporate Law rules.

The Articles 294, 294-A and 294-B of the Brazilian Corporate Law – as the wording given by Startups’ Legal Landmark – establish certain special regimes for closed and publicly traded companies depending on the amount equivalent to their revenues, as an exception to the new general rule provided for in Article 289 of the Brazilian Corporate Law.

Pursuant to the Article 294 of the Brazilian Corporate Law, closed companies with annual gross revenues of up to R$ 78 million are exempt from publishing in a printed newspaper, and can publish them exclusively electronically. Ordinance 12.071/21 of the Ministry of Economy, in turn, established that this disclosure should be made both on the company's own website and in the Balance Sheet Center of the Public System of Digital Bookkeeping (“SPED”). The net worth and the number of shareholders of the company, previously provided for in the amended article, are no longer criteria for the exemption from publication.

The Normative Ruling of DREI/ME 112 (IN DREI 112), of January 20, 2022, has altered the Normative Ruling of DREI 81 (IN DREI 81), of June 10, 2020, which provides for the general standards and guidelines of the Public Registry of Companies. The objective is to adapt IN DREI 81 to the new rules on publications ordered by the Brazilian Corporate Law. The Companies Registration Manual, which corresponds to the Annex V of IN DREI 81, has been already changed, especially in items 17 and 17.1, Section I, Chapter II, which specifically deals with publications ordered by the Brazilian Corporate Law and publications of closed companies with annual gross revenue of up to R$ 78 million, respectively.

The new wording given by IN DREI 112 reinforces that companies must carry out their publications exclusively in a newspaper of general circulation (printed and digital), edited in the place where its headquarters is located, and clarifies that it is not up to the local Board of Trade to analyze the merit of publications held in summary form in the printed newspaper,  except in the case of the financial statements in summary form, which shall contain the minimum provided for in Article 289, item II of the Brazilian Corporate Law.

For registration purposes, IN DREI 112 also clarifies that compliance with the requirement regarding the annual gross revenue must be measured upon presentation of a statement by the company. The SPED will allow the issuance of documents proving the authenticity, inalterability and date of publication of the acts. Furthermore, according to IN DREI 112, the specific provisions on electronic publications do not apply to the controller of a group of companies or affiliated thereto, referred to in Article 265 of the Brazilian Corporate Law.

Smaller publicly-held companies, that is, those with annual gross revenues of less than BRL 500 million, may also be exempted from the formalities provided for in Article 289 of the Brazilian Corporate Law regarding publications ordered by law – but this will depend on specific regulation of CVM, as established in Article 294-A, item IV, of the Brazilian Corporate Law.

To summarize the rules applicable to legal publications provided in the Brazilian Corporate Law, as introduced by the Startups’ Legal Landmark and Law 13.818/19, we present the following resume:

We also point out that the provisions of the Brazilian Civil Code on publications of simple and limited-liability companies have not been changed – in the few cases where they are required, such as capital reductions, mergers and incorporations. In principle, those companies remain obliged to use the official press vehicles in such cases, which creates a clear legislative imbalance. Micro and small-sized legal entities, on the other hand, remain exempt from the publication of any corporate act, pursuant to Supplementary Law 123/06.

The new publication rules introduced by Law 13.818/19 have caused doubts to companies about the possibility of publishing their financial statements in full content in the newspaper. It is also unclear whether this would disown the company from publishing it in newspaper's website. In other words, would it be possible for companies to choose publishing the full content of financial statements in the printed newspaper? And if so, would they be exempted from publishing on the newspaper's website?

The new wording of Article 289 of the Brazilian Corporate Law contains divergent interpretations on this issue. From a perspective, it would be possible to interpret that companies must carry out the publications of their financial statements in a newspaper of general circulation in a summarized way, with simultaneous disclosure of the full content on the website of the same newspaper; alternatively, it can be interpreted that the publication in a printed newspaper, in a summarized way, is optional. In this case, companies that chose to publish financial statements the full content on printed newspaper would be free to make any disclosure on the newspaper's website, either in full or in summarized form.

Although CVM’s 39^th Guidance Opinion treats the changes introduced by Law 13.818/19 to the Brazilian Corporate Law as a possibility that allows companies to carry out publications in the printed newspaper in a summarized way, conservatively, and until there is a definitive position of CVM on this regard, we understand that the companies should carry out their legal publications in a summarized way in newspapers of general circulation, with the simultaneous disclosure of the full content on the  same newspaper’s website.

Even if, unfortunately, the changes in the Brazilian Corporate Law were not broader, they represented an important advance in terms of cost reduction and simplification of the bureaucratic procedures of legal publications, and contributed to simplify the scenario of the information regime of Brazilian companies. We hope that, in the future, legal publications will be carried out exclusively through digital means, as a definitive step of modernization and cost reduction for companies, without prejudice to the wide access to this information which are indispensable to the market.

^[1] We understand that, if the newspaper of general circulation chosen is not effectively edited in the locality of the company's headquarters, this fact should not, in any way, prevent the registration of publications by the local Boards of Trade, whenever and when the newspaper meets the distributive criterion, according to the guidance given to the local Boards of Trade in Circular Letter SEI No. 3153, of the National Department of Business Registration and Integration, of November 23, 2020.

Category: Capital markets

In the Administrative Procedure SEI 19957.005011/2020-67 (RJ2020/04610) initiated by SRE (Superintendância de Registro de Valores Mobiliários) to determine the liability of the company and its officer for realizing a public offer of collective investment agreements (CIC) in the hotel sector without prior registration or waiver before CVM, the company and its officer were sentenced to the penalty of warning by CVM collegiate. Both would have violated art. 19, caput and §5, I, of Law 6,385/76 and the arts. 2^nd and 4^th of CVM Instruction No. 400.

Collective investment agreements and their use in the hotel sector

Pursuant to art. 19, caput, of Law 6,385/76, public securities issues without prior registration before CVM are prohibited. Without discussing the theoretical difference between public issues (as mentioned by law) and public offerings, CVM should focus on any public offers that appeal to popular savings. In this sense, §5 of art. 19 confers powers to CVM to define other situations that may be considered public issues for registration purposes - in this context, ICVM 400 was edited.

According to art. 2, IX, of Law 6,385/76, as amended by Law 10,303/01, securities are subject to the law regime for publicly offered contracts when "grant the right to participate, partnership or remuneration, including resulting from the provision of services, in cases in which income comes from the effort of the entrepreneur or third parties". After this change in the early 2000s, a list of securities, such as shares, debentures, subscription bonuses and others, was included in the law - in addition to a more generic hypothesis to be applied in cases that do not fit the others.

The concept of collective investment agreements was imported from the well-known U.S. case SEC v. W. J. Howey Company tried in 1946.^[1] The case related to the offering of pieces of land for orange cultivation with the optional contracting of cultivation services and management of the property.

Considering the very broad and generic definition, CVM has historically faced contracts of this nature in various sectors, such as ostrich breeding,^[2] participation in the rights of football players,^[3] cryptocurrencies,^[4] condo-hotel enterprises, among others.

In that sense, "the characterization of a given product as a collective investment agreement does not depend on the prior position of CVM, but on its adequacy to the requirements of the so-called Howey Test"^[5] which basically consists of verifying the following aspects:

• Is there an intention to make an investment?
• Has the investment been formalized by means of a contract?
• Do the investment agreements have a collective nature (that is, was the agreement carried out by several investors)?
• Was the investment made with profit expectation?
• Does the profit arising from the investment result from the efforts of the entrepreneur or third parties (that is, not from the investor itself)?

In case these elements are present, the collective investment agreement is understood as a security.

Regulatory time milestones on condo-hotels

The use of collective investment agreements in hotel developments has been recognized, at least since the 1980s, when there was a significant increase in hotel rooms in the country.^[6] By condo-hotels, one should understand the hotel development organized through a building condominium (condomínio edilício).

Provisional Measure 1,637/98 indicated collective investment agreements as a securities species. Despite this, for many years, these contracts were treated exclusively from the perspective of their real estate nature and subject to the specific rules of real estate development and the Brazilian Civil Code. In 2001, as already mentioned, collective investment agreements were included in the securities list, but, given its peculiarities, it was not quickly assimilated by the market as such.

On December 12, 2013, CVM issued a market warning regarding the characterization of condo-hotels as securities. From then on, the position of the commission on the subject became clear and CVM began to supervise the condo-hotels' enterprises in a stronger way. CVM Resolution 734, published on March 17, 2015, regulated the subject and established requirements for the exemption from registration of this modality of agreement.

In general, the collegiate considers that events prior to the market alert shall not be subject to CVM Resolution 734 and its penalties. However, in relation to events between the market alert and the issuance of CVM Resolution 734, there is an uncertainty with relation to their submission to the resolution and its penalties. Therefore, the conduct shall be analyzed in light of the circumstances of the case.

Subsequently, on August 27, 2018, CVM Instruction 602 was issued and revoked CVM Resolution 734 (“ICVM 602”). Currently, ICVM 602 regulates:

• the requirements of the application for registration of the offer;
• rules on the content of the offer and the corresponding advertising material;
• the criteria for exemption from registration of the distribution, among other topics, such as the role of hotel operators.

The role of hotel developers and operators

It is important to highlight the difference between developers and hotel operators in relation to the collective investment agreements offering.^[7] In general, developers are identified as responsible for public offerings. On the other hand, the operators, as responsible for the management of the business operation, are relevant to the offer, because the success of the enterprise depends on the management executed by them. However, the operator may not be involved in the offer of the condo-hotel, which is the reason why, in principle, CVM understands that the operator is not an offeror.

CVM's understanding of hotel operators has already been different. Originally, the operator was assigned the role of co-offeror. Since 2017, however, operators have not been included in the stop orders related to irregular offers, and decisions have further explored the difference in roles played by operators in the offers. CVM Instruction 602 defines "offeror" as the developer or any person who performs public distribution acts of the hotel collective investment agreements. The instruction also imposes on the operator the obligations to cooperate in the preparation of the documents of the offer and to report accounts but does not establish obligations relating to the distribution of securities itself.

As described, the collective investment agreements in the hotel industry is quite recurrent in the decisions of the Commission and, therefore, it is important to pay attention to the elements that define such contract, so that legal and regulatory measures are properly observed.

Business models recently analyzed by the collegiate

On October 30, 2018, SRE submitted a formal consult^[8] to CVM collegiate in the application for registration of an offer of a hotel collective investment agreement formulated pursuant to ICVM 602. The business model included the purchase and sale commitments for 141 autonomous units that could be disposed entirely or in ideal fractions (up to four per autonomous unit).

The technical area of CVM understood that the offer of collective investment agreements of autonomous units (resulting from the formation of the building condominium) would be covered by ICVM 602. However, the offer of collective investment agreements for the ideal fractions would imply the formation of a voluntary condominium, a regime expressly excluded from the scope of ICVM 602.

In the analysis of the consultation, the collegiate, following the vote of the rapporteur, understood that "the provisions of CVM Instruction 602 apply to the public offering of collective investment agreements under this case [i.e., ideal fractions of autonomous unit], since the hotel development would be structured in the form of an building condominium, in accordance with the terms provided for in Articles 1,331 to 1,358 of the Civil Code, and would comply with the rules established in the Incorporation Law (Law 4,591/64). [...] Article 3 of said instruction should be interpreted to exclude from the legal regime public offerings of collective investment agreements of hotel enterprises not subject to the Incorporation Law or to the discipline of building condominiums".

However, due to the peculiarities and risks involved in the formation of a voluntary condominium resulting from the offer of collective investment agreements on the ideal fractions, it is necessary that the offeror discloses "relevant information on the operation of voluntary condominiums and the specific risks incurred in this type of investment".

Shortly thereafter, on April 22, 2019, SRE formulated a new formal consult^[9] to CVM collegiate in the context of a complaint that originated in the sale of fractions of time in condominium under the multi-property regime (time sharing). In this condominium modality, the owner of the multi-property is entitled to a fraction of the time to use and enjoy the property and its facilities, also used by other holders according to the fractions of time allocated to each of them.

The properties on which multi-ownership is established may also "be integral parts of an enterprise in which there is a system of leasing of the fractions of time in which the holders can or are obliged to lease their fractions of time exclusively through a single administration, sharing among themselves the revenues of the leases regardless of the effective occupation of each autonomous unit".^[10]

In the assessment of the consult, CVM collegiate, following the rapporteur's vote, established the following criteria to verify whether the disposal of time fractions linked to Pool or not a collective investment agreement subject to the public offering regime:

• The mere acquisition of a real estate unit, either under the general regime or in the multi-property regime, for the purpose of investment is not sufficient to attract the securities regime. This happens when, among other elements, the profit perspective is associated with the efforts of the entrepreneur or another third party;

• The mere fact that the investor is required to take certain measures is not necessarily sufficient to drive away the securities regime. The collective investment contract can be characterized even when the efforts of third parties are not exclusive, if they are, in the end, preponderant and decisive for the profit expectation;

• When the acquisition of the real estate property or the temporal fraction is subject to the execution of a contract by means of which that unit or fraction is placed in a rental mandatory pool, that is understood as a collective investment agreement;

• When the sale of real estate and the pool are not inseparable – and this inseparability needs to be analyzed not only from the legal but also economic aspect – other elements should be considered to verify whether or not the offer involves a collective investment agreement. In particular, attention should be paid to the motivation of investors in acquiring the properties and the emphasis given by the seller on the promotion of investment; and

• If real estate property is sold for the primary purpose of personal use, there is no collective investment contract offer.

Given the versatility of the structures that can be explored with condo-hotels and, also, the recent understanding of CVM on the offer of hotel collective investment agreements, prior to the launch of new estate projects, it is necessary to analyze whether the contractual arrangements that formalize the purchase of the property by the interested parties are considered a collective investment agreements. If that is the case, the agreements shall be submitted to the public offering regime, pursuant to ICVM 602 or ICVM 400, depending on the case.

^[1] SEC v. W. J. Howey Company, 328 US 293 (1946).

^[2] CVM PAS No. 23/04, rel. Dir. Wladimir Castelo Branco Castro, j. September 28, 2006.

^[3] CVM PA RJ 2014/11253, j. June 30, 2015.

^[4] CVM PAS 19957.003406/2019-91, rel. Dir. Gustavo Gonzalez, j. October 27, 2020.

^[5] PAS CVM 19957.006343/2017-63, winning vote dir. Gustavo Gonzalez, j. May 7, 2019 (free translation).

^[6] For reference, PAS CVM 19957.004122/2015-99, rel. Dir. Gustavo Borba, j. April 12, 2016 ("Oliva Case") and PAS CVM 19957.008081/2016-91, rel. Dir. Gustavo Borba, j. April 10, 2018 (on historical aspects of CVM's position in the supervision and regulation of collective investment agreements offers of condo-hotel).

^[7] For reference, PAS CVM RJ 2017/2255, rel. Dir. Gustavo Gonzalez, j. 08/28/2018, PAS CVM RJ 2018/324, rel. Dir. Gustavo Gonzalez, j. 10/30/2018, PAS CVM 2017/4412, rel. Dir. Pablo Renteria, j. 10/30/2018, PAS CVM RJ 2017/4779, rel. Dir. Marcelo Barbosa, j. 11/12/2018 (on differentiation of responsibility of the operator and developer in the offer of condo-hotels).

^[8] For reference, PROC. SEI 19957.009425/2018-41, rel. Pablo Renteria, j. on 30.10.2018.

^[9] For reference, PROC. SEI 19957.009524/2017-41, rel. Gustavo Gonzalez, j. on 04.22.2019.

^[10] Art. 1.358-R, § single, of the Civil Code.

Category: Labor and employment

Executive Order No. 1,108, published on March 28, substantially modified the rules on teleworking established by the Brazilian Consolidated Labor Laws (CLT).

Among the main changes, we highlight the following:

• Equivalence between home office and teleworking

Remote work performed not predominantly outside the employer's premises (home-office) is now considered equivalent to teleworking / remote work: from now on, the provision of services outside the employer's premises, whether or not predominantly, with the use of information and communication technologies, which, by their nature, do not themselves qualify as external work, are characterized as a teleworking or remote working arrangement; teleworking and remote work are now equivalent for all purposes.

• Tracking of working hours

From now on, only teleworking employees who provide services by production or tasks (i.e., employee who are paid based on production/tasks) are exempt from tracking working hours. In other words, employers with more than 20 employees must track the working hours of all employees who are not exempt, including of employees working in a teleworking arrangement who were not hired by production/tasks.

• Contractual provision

The provision of services in the form of teleworking must be expressly established in the individual employment agreement: due to the equivalence between a home office arrangement and teleworking, a home office arrangement must now also be regulated by individual agreement or internal policies with individual assent by employees.

• Interns and apprentices

Adoption of a teleworking arrangement for interns and apprentices is now expressly allowed: here, the law has reached what already happens in practice.

• Union framework

Employees in a teleworking arrangement are subject to the provisions established in local legislation and in collective bargaining agreements applicable to the territorial basis of the employer’s establishment to which the employee is registered: with this, the executive order now expressly provides that, when the location where services are provided is not relevant, labor union representation follows the location of the employer's establishment, in line with the understanding of Brazilian case law.

• Teleworking abroad

Brazilian laws apply to employment agreements of employees hired in Brazil who choose to work remotely outside Brazil, except for the provisions of Law 7,064/82, unless otherwise agreed upon by the parties: with this, the executive order minimizes the risk of international remote work constituting international temporary transfers, preventing potential disputes involving this matter.

The executive order also brought in some clarifications on teleworking:

• attendance, even if habitually, at the employer's premises to carry out specific activities, which require presence at the workplace, does not denature the teleworking arrangement.

• employees subject to a teleworking arrangement may provide services per hour (hourly or monthly), per production, or per task.

• individual agreements may provide for timetables and means of communication between employee and employer, as long as legal rest periods are ensured.

• employers must give priority to employees with disabilities and employees with children up to four years of age in the allocation of teleworking or remote work.

• the employer will not be responsible for expenses resulting from return to on site work if the employee has chosen to work remotely outside the location established in the agreement, unless otherwise agreed upon between the parties.

• time spent using technological equipment and the necessary infrastructure, and software, digital tools, or internet applications used for teleworking, outside the employee's regular working day, does not constitute time available to the employers, time as standby, or time on-call, unless there is a provision in an individual agreement or in a collective bargaining agreement: for teleworking activities that require employees to be on standby or on-call, it would be possible to agree on payment of amounts without denaturing the teleworking arrangement and exceptions from tracking of working hours of employees who work by production/task.

• a teleworking arrangement is not the same as or equivalent to occupation of a call center or work as a telemarketing operator.

Although the executive order produces legal effects from the date of its publication, its transformation into law requires approval by the Brazilian Congress.

Due to the substantial changes introduced by the executive order, companies that have already implemented teleworking, home office, or remote work policies must reassess and adjust their practices to adapt them to the new rules.

Employers' obligations under the executive order will lose their effect if the executive order is not converted into law. Contractual agreements made during the term of the executive order will be effective beyond termination thereof.

Machado Meyer Advogados will continue monitoring the evolution of the matter and potential developments thereunder.