Publications

Category: Infrastructure and energy

The financing of infrastructure projects in Brazil has been undergoing important changes in recent years, caused, among other factors, by redefinition of the role of the National Bank for Economic and Social Development (BNDES) in this type of transaction.

On the one hand, Law No. 12,431/11 boosted the financing of large infrastructure projects and restructured the payment of large construction projects by issuing debt securities (incentivized debentures). The greatest attraction with this type of financing is the tax exemption it provides when it is intended for priority projects, that is, those regulated by Decree No. 8,874/16.

BNDES, on the other hand, has taken up less space in infrastructure investments: around 1% of GDP, much less than in 2008-2017, when this share reached 5% of GDP.

Brazil's political and economic crisis and the restrictions imposed on BNDES in granting new financing led to a shrinking of the bank's operations and made more room for the capital markets to issue incentivized debentures.

According to Anbima’s bulletin (the Brazilian Association of Financial and Capital Markets Entities), the total fundraising of Brazilian companies via the capital markets reached R$ 144.5 billion in the first half of this year, exceeding the average of R$ 122.5 billion for the same period in the last seven years. Another highlight was the large jump in issuances of infrastructure debentures: from R$ 4.6 billion in 2016 to R$ 21.6 billion in 2018.

At the moment, there are prospects for further changes in Law No. 12,431/11 and transactions with a certain degree of innovation. Long-term issues related to Law No. 12,431 are beginning to emerge in the market, some of them even for the purpose of prepaying long-term bank debts that did not compete with the capital markets.

There are reports that a draft bill that would positively amend the text of Law No. 12,431/11 is practically ready to, among other modifications, increase from 24 to 60 months the time limit for reimbursement of expenses that may be covered by the issuance of incentivized debentures.

With these changes, it is expected that these long-term securities will increasingly be used to finance large infrastructure projects in Brazil.

Category: Labor and employment

With technological advances, work done at home offices or locations other than the place of business, has multiplied, which has reinforced the importance of adopting legal guidelines and measures to give greater predictability and security to parties involved in this type of working relationship.

Seeking to regulate such relationships, Law No. 13,467/2017 (the Labor Reform) added to the CLT (Consolidated Labor Laws) articles 75-A to 75-E regarding teleworking, defined as the provision of services by an employee “predominantly outside the premises” of the employer, through the use of information and communication technologies which, by their nature, do not constitute outside work,” pursuant to article 75-B of the CLT.

Despite various advantages for employer and employee, including reduced commuting time, commuting costs, and possibly infrastructure costs, teleworking is very much questioned due to the risk of employer liability for accidents suffered by employees while working, even when outside the company's premises.

It is important to highlight that this work regime is subject to the same rules as are applied to services provided by employees within the company’s establishment, including workplace safety rules.

In the case of work done within the employee's home, there is no doubt that the concept of the work environment needs to be expanded and also applied to the worker's private environment, which must be in accordance with the legally established health and safety rules.

Although the work is performed outside the company's physical space, that is, away from its immediate control, it is important to clarify that the CLT, in its article 75-E, obliges employers to expressly and ostensibly instruct employees with respect to precautions against occupational diseases and accidents.

Although it is possible to abstractly hold companies liable for proven damage to teleworkers, the difficulty in proving both a causal link and the employer's fault is undeniable. That is: not all accidents should be treated the same. Case law, for example, tends to regard mishaps during working hours as an occupational accident, but it is important that each case be reviewed taking into account the activities performed at the employee's residence.

In order to avoid accidents and contribute directly to employee health, it is recommended that the company develop a “Workplace Health and Safety Standards Manual,” which will serve as a reference for good practices and provide employees with information about the rules to be followed and the risks to which they are subjected.

The standards should be available for consultation by employees with easy and unrestricted access. Regularly, to demonstrate their concern with this topic, employers should reinforce the importance of compliance with the standards, preferably by updating the training provided. They should also require employees to expressly and in writing state that they are aware of and commit to abide by the rules established, which may include issues such as:

1. Use of ergonomic equipment (provided by the company or purchased by the employee), such as ideal type and height of chair and correct type of headphones;

2. Prohibition on the use of splitters and extension cords to avoid short or shock by contact with equipment;

3. Responsibility for setting up the office in the employee's home environment, or at least clear information on the rules and procedures to be followed; and

4. Adequate training regarding the practices to be maintained in order to fulfill occupational health and safety regulatory standards.

The purpose of the measures is to protect employers in the event of legal claims in which employees allege ignorance of the rules or technical inability to comply with them. In the event of a labor claim due to an accident, it will be up to employees to demonstrate that they did not receive adequate training in seeking to hold an employer liable.

Category: Environmental

In response to the rupture of the Brumadinho dam (MG) on January 25th of this year, changes under study and already approved in the legislation aim to tighten the regulations of dams in Brazil. On June 25th, for example, the Chamber of Deputies approved three bills providing for specific regulations on environmental disasters caused by dams.

Bill No. 2,787/19 seeks to amend Federal Law No. 9,605/98, which deals with criminal and administrative environmental sanctions, in order to set forth the elements for the crime of ecocide (large-scale environmental destruction) and the criminal conduct of persons responsible for disaster relating to ruptures of dams in general. The bill also intends to increase the maximum fine for environmental administrative infractions from R$ 50 million to R$ 1 billion.

The second bill approved (2,791/19) is intended to significantly amend Federal Law No. 12,334/10, which established the National Dam Safety Policy, and seeks to prohibit the construction or elevation of mining by the upstream method and the implementation of mining dams whose rupture scenario studies identify communities in Self-Rescue Zones (ZAS). The bill also intends to create a specific administrative infraction for breach of the rule, with a fine that may vary from R$ 2 billion to R$ 1 billion.

The amendments aim to: (i) extend the obligations of entrepreneurs and provide for their liability not only for dam safety, but also for damages resulting from their rupture, leakage, or malfunction and, regardless of fault, for the repair of such damages; (ii) increase the obligations and requirements of the Dam Safety Plan and the Emergency Action Plan (PAE) - preparation of a PAE will be mandatory for all dams classified as medium and high risk or medium and high potential associated damage and for all those intended for the accumulation or final or temporary disposal of mining tailings; and (iii) allow the supervisory body to demand from entrepreneurs the presentation of a bond, insurance, surety, or other financial or real guarantees for the reparation of damages to human life, the environment, and public property.

If the bill is approved, supervisory agents will be required to set up a communications channel to receive complaints and information related to dam safety, and an accreditation system for individuals and legal entities that may certify dam safety.

Bill No. 2,788/19, in turn, establishes the National Policy for Persons Affected by Dams (PNAB), whose provisions apply to the environmental licensing of dams and to emergencies arising from the leakage or rupture of such a structure, whether already occurred or imminent. For the purposes of the future law, the text defines (i) dams as being those regulated by Law No. 12,334/10 and others that, by their construction, affect local populations; and (ii) affected populations as being those suffering at least one of the ten situations provided for, such as loss of possession or ownership of property, loss of productive capacity of the land, or alteration of water quality that impairs supply.

The text of the bill lists the rights of the population affected by dams, including: (i) reparation through compensation; (ii) collective resettlement; (iii) independent technical advice paid for by the entrepreneur to guide residents; (iv) emergency assistance in the event of accidents or disasters in order to ensure that living standards are maintained until families have recovered; (v) compensation for individual and collective moral damages; and (vi) equivalent housing for those in the affected area. In addition, the bill intends to remove from the Consolidated Labor Laws (CLT) a provision that limits compensation to workers for moral damages arising from the labor relationship.

Entrepreneurs will also be required to finance and implement the Program for the Rights of Populations Affected by Dams (PDPAB), which aims to ensure the rights established in the PNAB. A national consultative and deliberative board will be responsible for monitoring, overseeing, and evaluating the formulation and implementation of the PNAB.

The three bills followed for consideration by the Federal Senate. Their approval in the Chamber of Deputies demonstrates the intense action of the Brumadinho External Disaster Commission, formed to monitor and inspect the existing dams in Brazil and the investigations related to the disaster that struck the municipality in Minas Gerais. At least three other bills are still pending approval by the Chamber of Deputies.

Category: Labor and employment

Trade union dues were created in the 1940s in order to strengthen the trade union movement. This was a mandatory amount due from the worker to the professional trade union of his category, even if he were not affiliated to it, and corresponded to the remuneration of a normal work day.

This compulsory system had already been criticized by the majority of legal scholarship, according to which application of the freedom of association and the autonomy of trade unions required a change in the method of collecting trade union dues in order to make them voluntary and to encourage positive union actions on the part of trade unions vis-à-vis their category.

Law No. 13,467/17 (the Labor Reform) eliminated the obligatory nature of the dues, whose collection is now subject to prior and express authorization by the worker, pursuant to article 579 of the Consolidated Labor Laws (CLT). However, some gaps in the amended text of the CLT have generated room for different interpretations regarding the need for the worker’s authorization to deduct the dues: a first current believes that the authorization must be individual, given exclusively by the worker himself; the second current believes that the union may convene a general meeting to vote to authorize the discount relating to the dues of its affiliated workers; and the last current believes that the trade union may convene a general meeting to vote on the authorization of the discount related to the trade union dues of the workers of the category it represents, valid even for those not affiliated with the entity.

Some trade unions took advantage of possible interpretations of the law, as well as the principle of prevalence of what is negotiated over what is legislated (also implemented by the Labor Reform) to negotiate conditions with employers that would allow for the compulsory discounting of dues, which was seen by the Ministry of Economy as affront to the Labor Reform.

To put an end to the controversies, on March 1st the federal government promulgated Executive Order No. 873/19, also known as the Trade Union Contribution MP, with the main purpose of stipulating the mandatory individual authorization of workers and payment via bank slip. This would eliminate the possibility for trade unions to obtain authorization for compulsory discounting via a general meeting.

Because it was not converted into law within the period established in the Federal Constitution, MP 873/19 lost its effectiveness, on June 28. The original text of the Labor Reform on the subject thus again entered into force, bringing in legal instability on the issue.

Despite this situation, the Federal Supreme Court (STF) has established an understanding similar to the one stipulated by the executive order, that is, that authorization to discount trade union dues must be provided individually by the worker.

On June 28, Justice Luis Roberto Barroso granted an injunction in the record of Case No. 35.540, suspending an order by the 48th Labor Court of Rio de Janeiro for the company Claro to deduct trade union dues from the payroll of its employees, regardless of prior individual authorization, on the understanding that the charge may be authorized by a general meeting of the category.

In granting the injunction sought by Claro in the labor claim filed, Justice Barroso stressed that the Federal Supreme Court had already decided in the judgment of Direct Action of Unconstitutionality No. 5.794 that the provisions of the Labor Reform that establish the end of compulsory dues were constitutional. The Justice stressed that the power of general meetings to approve the collection of trade union dues is inconsistent with the new regime and interpreted that, under the law, prior and express authorization by workers is mandatory and cannot be replaced by the will of the general meeting of the category.

Although not classified by the STF as being a topic with general repercussion, the decision is a further guideline for companies regarding the STF's tendency in interpreting the matter, which, for the moment, is in line with the terms of MP 873/19, now no longer in force.

Category: Banking, insurance and finance

Law No. 12,414/11, as amended and regulated by Decree No. 9,936/19, regulated the formation and consultation of databases with information on performance, mandating, in its article 12, paragraph 3, that the National Monetary Council (CMN) adopt complementary measures and standards on the provision of information by institutions authorized to operate by the Central Bank of Brazil (BC).

In this sense, CMN Resolution No. 4,737, issued on July 29, addresses the following topics:

1. the provision of information to database managers registered by the BC;

1. the obtainment of and the scenarios for cancellation of the registration as database managers in the BC; and

1. the designation and qualifications required for the positions of officer responsible for database management and officer responsible for information security policy.

Provision of information. With respect to item “a” above, the resolution requires financial institutions and other institutions authorized to operate by the BC to provide registered database managers with the information that makes up the history of transactions conducted with their customers, including: (i) credit transactions; (ii) leasing transactions; (iii) self-financing transactions through consortium groups; and (iv) other transactions with characteristics of credit extension.

For the purposes of the new standard, information on the history of a particular transaction, as well as on amounts involved, form of payment, and installments paid by the customer is considered.

The provision of data on the transactions performed does not imply breach of the bank secrecy provided for in Complementary Law No. 105/01, provided that the (registered) customer has expressly requested its inclusion to the database manager. It is important to highlight that both financial institutions and other institutions authorized to operate by the BC and database managers must comply with the provisions of Law No. 13,709/18, as amended (General Personal Data Protection Law), concerning the parameters applicable to the use of personal data.

The standard also establishes that, upon transfer or sale of a transaction, the institution responsible for providing the data is the one that keeps the accounting record of the transaction among its assets, as provided for in current regulations.

Registration of managers and qualifications required. Resolution No. 4,737/19 defines the requirements for database managers to obtain a registration with the BC, including the designation of the officer responsible for database management and the officer responsible for information security policy. They will hold their positions for a maximum term of four years, renewable for equal periods.

Officers must meet a number of requirements under the new resolution for them to be able to perform their duties, including, but not limited to: (i) having an unblemished reputation; (ii) not being prevented by special law, or convicted of a bankruptcy crime, tax evasion, malfeasance, active and passive corruption, graft, embezzlement, crimes against the popular economy, the public faith, property, or the National Financial System, or sentenced to criminal punishment that prohibits, even temporarily, access to public office; (iii) not being declared unqualified for or suspended from the exercise of the positions of audit committee member, member of the board of directors, executive officer, or managing partner in financial institutions and other institutions authorized to operate by the BC; and (iv) not being declared bankrupt or insolvent.

Both officers must also have technical qualifications commensurate with the duties of their positions, proven on the basis of academic background, professional experience, or technical knowledge specific to their occupations.

The conditions listed above shall also be observed by members of controlling groups, in the case of a database manager organized as a corporation or limited liability company, except for managers controlled exclusively by institutions authorized to operate by the BC. For the purposes of the CMN's resolution, a controlling group is a group that holds partner rights corresponding to the majority of the voting capital of a corporation or 75% of the capital stock of a limited liability company.

Registration of database managers may be rejected by the BC if circumstances that affect the reputation of the members of the controlling group and/or the officers appointed are found. Another scenario for rejection is omission or provision of documents, data, or information that is incorrect or in disagreement with the applicable standards, considering the circumstances of each specific case and the public interest.

Resolution No. 4,737/19 also provides for situations for cancellation of the registration of database managers, which may occur in the event of: (i) non-compliance with the conditions set forth in the standard in question; (ii) omission or provision of documents, data, or information that is incorrect or in violation of legal or regulatory standards; or (iii) absence of appointment of a substitute for the duties of officer responsible for database management or a officer responsible for information security policy, 45 days after the discharge of an officer responsible for these functions. In all cases, database managers will be given a deadline to respond to the cancellation of their registration.

Category: Corporate

The modernization of disclosure of company information has finally gained momentum in Brazil. Published on August 5, Executive Order (MP) No. 892/2019 substantially changed the framework for legal publications by corporations.

This is a subject that has been much discussed over the last few years, especially because of the exponential evolution of the internet and the means of access to information on companies currently used by their shareholders and the market in general.

While companies are eager to reduce their costs with publishing in newspapers, which in reality no longer fulfill the purpose of disseminating information to the market, printed media, which charge considerable amounts for the service, insist that the dissemination of information in newspapers still has a purpose.

The fact is that MP 892 extinguishes the need to publish, both in the official gazettes and in printed newspapers published in the locality of company headquarters, of all acts whose publication is mandated by Law No. 6,404/1976 (the Brazilian Corporations Law). The measure also establishes that, based on the regulations of the Brazilian Securities and Exchange Commission (CVM), in the case of publicly-held companies, and per the Minister of State, in the case of privately-held companies, legal publications are made exclusively on the websites of the CVM and the market management entities on which securities issued by the companies are admitted for trading.

In practice, MP 892 simplifies the administrative and corporate routine of companies, especially publicly-held companies, generating savings and faster disclosure of relevant information to the market in general. MP 892 also states that digital publications mandated by it may not be charged fees by the CVM and/or B3.

The measure updates a norm from the 1970s to conform with the current reality and seems to us to be beneficial to the Brazilian market in every respect. However, special attention needs to be paid to the effectiveness of MP 892, as the definitive implementation of the purely digital publishing system still needs regulations. The text states in its article 5 that only on the first day of the month following the issuance of the regulations shall the changes promoted take effect.

MP 892 will be effective for a maximum of 60 days, renewable for the same period, and will lose its validity if not converted into law by the Brazilian Congress. Statements by the Speaker of the Chamber of Deputies in reaction to the publication of MP 892 suggest that there may be adjustments and a transitional regime may be proposed.

Accordingly, until the regulations are issued, the old rules that require publication in the newspapers for various acts of companies, such as corporate reorganization, issuance of securities, and convening of shareholders' meetings, will still be in force. Failure to comply with the old rules may lead to administrative and judicial litigation regarding the validity of the acts in question.

Although the CVM’s regulation on the publication of relevant information is already considerably aligned with the objective of MP 892, it is necessary to await the new regulations in order to be able to evaluate what the impacts will be for publicly-held companies’ disclosure policies and the receptivity of the market to the new regime.

Depending on the rules established, MP 892, if converted into law, has the potential to encourage increase in the number of corporations in industries in which this type of company has never predominated precisely due to the existence of higher additional costs.