Category: Tax

The 1st Panel of the Superior Court of Appeals (STJ) will define whether real estate payment transactions carried out by real estate investment funds (FII) can be taxed by the Real Estate Transfer Tax (ITBI) or are subject to tax immunity because they are a transfer of fiduciary ownership, pursuant to articles 156, II, of the Federal Constitution^[1] (CF/88) and 35, II, of the National Tax Code (CTN).^[2]

The unprecedented question before the STJ is being examined in Special Appeal 1.492.971/SP.

On September 20, 2022, the judgment of the case was suspended by a request for examination of the case record by Justice Regina Helena Costa, after the reporting judge, Justice Gurgel de Faria, voted to dismiss the taxpayers' appeal in order to recognize the levying of the ITBI.

According to the Justice, in these transactions, acquisition of the property in order to make up the FII's assets is done directly by the fund administrator and paid by issuing new quotas of the fund to the sellers. There is, therefore, an effective conveyance for consideration of ownership of the property, which attracts levying of the ITBI.

Like the Justice, the Court of Appeals of the State of São Paulo also did not recognize the taxpayers' right to immunity from the ITBI, under the argument that shareholders cease to be owners of the property when passing it on to the FII, and therefore there is a transfer of ownership. This position led to the appeal being filed with the STJ.

The dispute translates into a clash between the interpretation of municipal tax authorities and taxpayers, and consequent judicial developments, regarding the possibility of characterizing this transaction, so common in FIIs, as a conveyance of property for consideration, liable to be taxed by the ITBI, under the terms of article 35, II, and 110^[3] of the CTN and of article  156, II, CF/88.

Aside from the tax issues, it is important to understand the purpose behind the legal concept of fiduciary ownership, for a correct interpretation of the transactions carried out by the FII. This concept gives cause for, moreover, investment funds to not have legal personality, but be organized constituted as a communion of resources that make up a separate equity, which is inspired in the figure of the trust in Anglo-American law.

Pursuant to Law 8,668/93, FIIs are characterized by being a pool of resources raised through the securities distribution system for investment in real estate projects, which do not have legal personality. The question is pertinent, since the assets of FIIs are made up of assets and rights acquired by the administering institution, in a fiduciary capacity.

The real estate, as well as its earnings and income, are held under the fiduciary ownership of the administrating institution, independently and non-conveyable to its assets. When investors pay for FII quotas by conveying real estate assets, these are transferred, in fiduciary ownership, to the administering institution, constituting separate assets administered for the benefit of the quotaholders.

This is a fiduciary deal that ascribes to the asset the purpose of administration, which distinguishes it from the fiduciary deal in guarantee, since the quotaholders continue to be indirect owners of the property, in their capacity as FII quotaholders.

In other words, in the case under analysis by the STJ, the quotaholders merely allocated the properties they owned to a vehicle to enjoy professional management, receiving in return the quotas, which are nothing more than ideal fractions of the FII's assets.

The objective of this transaction, therefore, is not a conveyance for consideration of ownership of real estate to the fund manager, but to entrust investors' properties to a third party for the specific purpose of asset management.

It must also be considered that the taxable event of the ITBI only occurs with the effective transfer of the ownership of the real estate, which takes place through the competent registration in the real estate registry office, according to the STF's case law.

On the other hand, in the payment of FII quotas through the conveyance of real estate, one could argue that this transfer of real estate is not registered, since it should be registered with the real estate registry that the property is within the FII's assets.

As we saw above, the FII is a pool of resources without legal personality. The property is simply held under the fiduciary ownership of the fund manager for the purpose of managing it for the benefit of the very quotaholders who have paid in full for the property and in favor of whom the quotas that represent ideal fractions of such property have been issued.

In this sense, it is incumbent on the administrator to make the annotation of a series of restrictions provided for in article 7 of Law 8,668/93^[4] in the real estate registry, to ensure effectiveness before third parties that the real estate is part of a separate, independent, and non-conveyable equity, not to be confused with the equity itself.

These issues should be considered by the STJ in analyzing the case, especially since "tax law cannot alter the definition, content, and scope of institutes, concepts, and forms of private law," as provided for in article 110 of the CTN.

Although this is not a case subject to the system of repetitive appeals, the decision to be reached by the 1st Panel of the STJ will represent an important precedent for other cases dealing with the same issue and will ensure legal certainty, especially because the state courts have differed on the matter, sometimes upholding and sometimes rejecting the levy.

The issue has not yet been examined by the 2nd Panel of the STJ, which, like the 1st Panel, is part of the Court's 1st Section of Public Law. If the 1st and 2nd Panels adopt divergent positions, the parties may file motions to resolve a divergence for the 1st Section to give the final word on the issue, standardizing the STJ's case law.

^[1] “Article 156. It is incumbent on the Municipalities to institute taxes on:

[...]

II - transmission "inter vivos", on any account, by an act for consideration, of real estate, by nature or physical accession, and of real rights over real estate, except for collateral rights, as well as assignment of rights to their acquisition;

(...)” (Federal Constitution).

^[2] “Article 35. The tax, which falls under the jurisdiction of the states, on the conveyance of real estate and rights related thereto has as its taxable event:

(...)

II - the conveyance, for any reason, of real rights on real estate, except for collateral rights;

(...)" (National Tax Code).

^[3] “Article 110. The tax law cannot alter the definition, the content, and the reach of institutes, concepts, and forms of private law, used expressly or implicitly by the Federal Constitution, by the Constitutions of the States, or by the Organic Laws of the Federal District or of the Municipalities, to define or limit tax accrual.” (National Tax Code).

^[4] “Article 7. The assets and rights that are part of the assets of the Real Estate Investment Fund, in particular real estate held under the fiduciary ownership of the trustee institution, as well as revenue and income therefrom, are not mixed with the assets of the latter, subject, as for such assets and rights, to the following restrictions:

I - they are not part of the administrator's assets;

II - they are not directly or indirectly liable for any obligation of the administering institution;

III - they are not included in the list of assets and rights of the administrator, for the purposes of judicial or extrajudicial liquidation;

IV - they cannot be given as a guarantee for the administering institution's operating debt;

V - they are not subject to execution by any creditors of the administrator, however privileged they may be;

VI - no real encumbrance can be placed on the properties.

Paragraph 1. In the deed of acquisition, the administrating institution shall state the restrictions listed in subsections I to VI, and highlight that the asset acquired is within the Real Estate Investment Fund's assets.

Paragraph 2. The restrictions and the highlighting referred to in the previous paragraph shall be registered with the real estate registry.

Paragraph 3. The administering institution is dispensed from presenting the clearance certificate issued by the National Institute of Social Security, and the Clearance Certificate of Taxes and Contributions, administered by the Federal Revenue Service of Brazil, when disposing of real estate that is part of the Real Estate Investment Fund's assets." (Law 8,668/93).

Category: Corporate

Clarissa Freitas, Marcos Costa, Amanda Siqueira Costa Vilela and Renata Marques de Moraes

Recognizing the importance of transparency in the disclosure of information to shareholders and to the market as one of the mechanisms for establishing trust between investors and the system, the regulation applicable to publicly-held companies pays particular attention to their duty to provide information to support shareholder and investor decisions.

One of the purposes of this disclosure obligation is to avoid the practice of insider trading by enabling means of obtaining this information not only to the company and its shareholders, but to the market as a whole.

Among the various instruments available for this dissemination, the relevant fact stands out. Article 157, §4, of Law 6,404/76 provides a general definition of relevant fact by determining that the company must disclose "any resolution of the general meeting or the company's management bodies, or relevant fact that occurred in its business, which may have a significant influence on the decision of market investors to sell or buy securities issued by the company".

In the same sense, the Brazilian Securities and Exchange Commission (CVM) issued CVM Resolution 44/21 (which replaced the former CVM Instruction 358/02). Such rule established as relevant any decision of the controlling shareholder, resolution of the meeting or the management bodies, or any other act or fact related to the company's business that may influence the listing of the company's securities, the decision of investors to buy, sell or maintain such securities or the decision of investors to exercise rights related to the securities of which they are the holders.

In the context of a publicly held company, there are numerous hypotheses in which shareholders and investors may be impacted by the non-disclosure of the necessary and relevant information. Resolution 44/21 seeks precisely to diminish the free will of administrators to decide what is relevant and susceptible to disclosure.

In addition to the definition above, the resolution brings an example list of matters that can be considered relevant facts, such as the signing of control transfer agreements, corporate transactions in general, debt renegotiation, conclusion of contracts, among many others.

Of course, the listing of themes is not final. The analysis of the relevance of a given fact to the company will depend on the discretion and understanding of its management. The same fact may or may not be considered relevant for companies with different realities.

According to the understanding that CVM has expressed over the last few years, the general rule, in case of relevant fact, is that of wide disclosure, even if the information refers to the operation under negotiation, feasibility studies, initial negotiations or even the mere intention to conduct the business.

The material fact may, exceptionally, cease to be disclosed if, at the discretion of the controlling shareholders or directors, its disclosure puts at risk the legitimate interest of the company. The exception to the obligation of immediate disclosure, however, will cease to occur immediately in case of leakage of information or atypical fluctuation in the quotation, price or negotiated quantity of the securities issued by the company.

It will always be the responsibility of the Investor Relations Officer (DRI) to expedite, in a relevant and timely manner, the communication of relevant fact, and he may be personally held liable for any inaccuracy in the disclosure.

The relevant fact must be disclosed in the manner provided for in the Company's Material Act or Fact Disclosure Policy, on its official website, through CVM’s Empresas.NET system and in the news portal reported in the Registration Form.

In case of change in the company's communication vehicles, it will also be up to the DRI to change the disclosure policy, update the registration form and disclose the change before its effective implementation.

In addition to the obvious disclosure obligation, it will also be up to the DRI to monitor situations in the company's life, in contact with key people, to become aware of facts that may be relevant, monitor the price of securities to identify atypical fluctuations and supervise leaks of information.

In case of leakage or atypical oscillation, there should be immediate disclosure of the relevant fact, even if related to ongoing operations, feasibility studies or mere business intention.

In relation to accountability, it is necessary to highlight:

• the joint and several nature of the responsibility between the DRI and the controlling shareholders, in case of inertia of the DRI, a situation in which directors and members of the boards of directors and tax, when aware of the possible inertia of the DRI, must provide themselves the disclosure; and
• the personal accountability of the DRI in the event of non-compliance with the relevant disclosure policy. This gives the DRI coercive power to demand transparency and effectiveness in the reporting of information by other board members.

In addition to analyzing the content of the disclosure itself, it is important that the publication of the relevant fact is timely, so that the information is still useful to its recipients, without being disclosed late.

Adopting the understanding that relevance is in the potential to influence investors' decisions and not in their consummation, CVM has already considered atypical fluctuations in the price of securities as indications of the existence of relevant facts of necessary disclosure.

More recently, the CVM board, responsible for investigating irregularities committed by publicly-held companies in the disclosure of relevant facts, understood that the change in the company's pricing policy would be relevant, as it could mislead market participants.

According to CVM, companies should preserve consistency in disclosures – if the pricing policy was considered relevant and disclosed, any changes should also be disclosed in order to preserve the completeness of the information to the market.

In relation to litigation, the disclosure of the existence of legal proceedings involving the companies has already been understood as relevant by the CVM, even before the final judgment, given its potential impact on the negotiations of company’s securities.^[1]

Another topic much discussed by the CVM board concerns the disclosure of events considered relevant facts through other instruments, such as the Market Release.

The DRI must pay attention on the fact that, if a given event is in a material fact (i.e., it has the potential to influence the investors' decision to trade with the company's securities), it may not be disclosed in a format other than the relevant fact. On the other hand, if a given event does not fit as a relevant fact, but is important for decision making, it should become public by means of notice to the market or notice to shareholders, for example.

It is increasingly common to find CVM jurisprudence by imputing penalties to the DRI for disclosure through the incorrect instrument, which is why it is necessary to observe the proper use of the means of disclosure and avoid the repetition of incorrect practices.

Given the relevance of the theme to the daily life of companies and the effective supervisory power of CVM on the subject, special care is recommended in the performance of the DRI to ensure effective compliance with applicable legislation.

^[1] The disclosure of judicial, administrative and arbitration proceedings involving publicly held companies is also the subject of a specific item of the Reference Form, and the statement on corporate claims, pursuant to the recent CVM Resolution 80/22.

Category: Banking, insurance and finance

Since September 16, those interested in obtaining registration as securities advisors must submit their applications through the Securities Advisory Registration System (REGCON) of the Brazilian Securities and Exchange Commission (CVM).

Announced by CVM through the Circular Letter 7/2022/CVM/SIN, REGCON makes it possible to automatically grant the application for accreditation, already provided for in the CVM Resolution 19, of 25 February 2021.

The accreditation request is made by the link https://sistemas.cvm.gov.br. You must select the option "CVMWeb System" and then "Cadastral Update". After logging in using a GOV.BR with silver or gold level, simply select the option "Securities Advisor (Profile: Consultant)" from the menu on the left.

The documentation required for accreditation remains the one stipulated in CVM Resolution 19, which includes a copy of the Union Collection Guide (GRU) to prove the payment of the initial inspection fee provided for in Law 7,940/89.

After sending the documents in REGCON, automatic registration will be granted and the superintendence will review and validate the documents later. Accreditations performed in non-compliance with CVM Resolution 19 may be cancelled by the Institutional Investor Monitoring Management (Gain), as provided for in item III of article 10.

In addition to enabling the automatic granting of the accreditation application, the new system allows registered consultants to issue the certificate of regularity of registration and request the suspension and cancellation of registration.

In the CVM statement on REGCON, the superintende of institutional investor supervision (SIN), Daniel Maeda, said that "the system innovates by providing for the first modality of automatic registration, in practice, granted by cvm to service providers. The implementation of REGCON reinforces the role of the municipality as an institution always attentive to the proportionality of its performance in view of the different levels of risk offered by regulated activities."

For more information, cvm published on its website the Accreditation Guide and other information, with all the clarifications on the registration request.

Category: Competition

The recent and unprecedented decision of the Administrative Council of Economic Defense (Cade) to hold three competitors in the telecommunications sector liable for an antitrust violation (concerted practice) due to the formation of a bidding consortium caused surprise and raised several doubts.

The formation of consortia is permitted in Brazil not only by the Public Procurement Law but also by the Antitrust Law – which provides that bidding consortia are not subject to subject to merger control. Consortia among competitors are also authorized in several public bidding notices. Against this background, why did Cade consider it illegal for competitors to form a consortium?

In summary, the agency pointed out that the formation of a bidding consortium between competitors can undermine the competitive nature of the tender when:

• the market share jointly held by the consortium members is high (under the Antitrust Law, dominant position is presumed when the undertaking or group of undertakings controls 20% or more of the market, such threshold may vary depending on the characteristics of the market involved);
• the members do not provide different services that are complementary for the purposes of participation in the tender;
• there is no evidence that a member alone would not be able to carry out the contract individually; and
• there is no evidence of efficiencies associated with the consortium (the discount in relation to the previous contract signed with the public body would not be sufficient to show that the formation of the consortium would have enabled the provision of services more efficiently and less costly).

Cade is analyzing at least one additional case on bidding consortium among competitors, launched  in 2019, which investigates the formation of a consortium between companies in a tender for lease of port areas for the handling and storage of fuel.

The risk that consortia could reduce rivalry in public tenders is not a concern only of Cade. In the European Union, the draft revised Horizontal Guidelines published by the European Commission, which will enter into force in 2023, has brought guidance on the formation of consortia from a competition standpoint, which are closely related to Cade's recent decision.

According to the Horizontal Guidelines, there may be restrictions on competition if it cannot be ruled out that the parties to the bidding consortium could each compete individually in the tender (or if there are more parties than necessary in consortium). The analysis of the compatibility of consortia with competition law should be made on a case-by-case basis, based on elements such as competitive environment, rationality and efficiency gains. A consortium may be pro-competitive if joint participation allows the members to submit a more competitive tender than they could if they participate individually (in terms of price/quality/variety), and if the benefits to the public body offset the restrictions on competition arising from the consortium. The Horizontal Guidelines stress that efficiency gains should be passed on to consumers. Gains that benefit only the consortium members are considered insufficient.

In this context, the following cautions should be taken by companies that intend to form a consortium with competitors to participate public tenders:

• assess the market share of the companies involved, as well as whether there are other viable competitors;

• evaluate the reasons that would prevent the individual participation of the potential consortium members (such as insufficient financial and technical resources);

• evaluate the reasons that allow companies to submit a more competitive proposal in consortium than individually (such as complementarity of performance – geographical or products/services – or integrated service that would be unfeasible individually);

• assess the efficiency gains of the consortium (such as best price, quality and/or variety and whether they bring positive reflexes to consumers);

• if the exchange of competitively sensitive information between the o the consortium members is required, it shall be limited to what is strictly necessary to participate in the tender and the members should adopt cautions such as the preparation of a clean team agreement, so that this information is not used in future dealings or other businesses of the companies; and

• keep records of the assessment, including the clean team agreement and emails, opinions, memoranda and presentations demonstrating the justifications and pro-competitive motivation of the companies at the time of the consortium formation.

Category: Infrastructure and energy

The Federal Constitution assigns to the Federal Government the competence for the exploitation of nuclear services and the state monopoly on the research, mining, enrichment and reprocessing, industrialization and trade of nuclear ores. The monopoly is attributed to Indústrias Nucleares do Brasil S.A. (INB), a public company established in 1988 and linked to the Ministry of Mines and Energy. INB operates on behalf of the Federal Government and, together with the National Commission of Nuclear Energy (CNEN), throughout the production chain of the nuclear fuel cycle.

The Provisional Measure 1.133/22, published last August 2022, seeks to make this monopoly more flexible, attributing more dynamism to the industry segment and attracting resources from the private sector, by allowing INB to enter into partnerships with private companies.

Until then, it was exclusively up to the Federal Government the control and exploration of nuclear ores (not only those considered strategic, but especially projects appraised as of high economic value). The private sector was restricted to fulfilling its obligation in communicating to the National Nuclear Safety Authority (ANSN), the National Mining Agency (ANM) and the INB the identification of nuclear ores whenever this happened.

The main change brought by said provisional measure is the possibility of INB joining the titleholder of the exploration permit for the use of mineral resources. Previously, the exploitation of nuclear ores was only possible through the transfer of the mineral rights to INB.

The provisional measure authorizes the negotiation of INB with the private sector to provide services to national, foreign, public and private entities, in partnerships to be compensated, among other forms, through:

• payment in currency;
• percentage of the amount collected in the commercialization of the mining product;
• right to commercialize the associated ore; or
• right to purchase the mining product with previously authorized exportation.

The amendment keeps the titleholder of the mineral right still dependent on INB’s decision, which will opt for obtaining the title of the mining right (encampação)or closing a partnership with the private titleholder. The measure, however, represents a significant advance for the nuclear ore mining sector, as it makes possible to combine private sector investment with INB's operations to execute projects that eventually would not be carried out due to budget constraints.

There was also the inclusion of some new attributions for ANM and ANSN. Regarding ANM, the powers provided by Law 13.575/17 were added, such as obligations related to regulation, standardization, authorization, control and supervision of the activities of research and mining of nuclear ores in the country (with exception of nuclear safety and radiological protection issues, which remain as an assignment of ANSN), in addition to the obligation to supervise the titleholders of mining concessions regarding the occurrence of nuclear elements.

In relation to ANSN, the provisional measure attributes to the agency the competence to regulate, standardize, license, authorize and supervise nuclear safety and radiological protection of nuclear ore mining activity, in addition to tailings deposits and waste storage sites. It is also up to ANSN to supervise the titleholders of mining concessions regarding the radiological protection of ore mining containing nuclear elements.

The Provisional Measure 1.133/22 must be converted into law up to 60 days after the date of its publication, a term extendable for an equal period. However, for this conversion, the provisional measure needs to be duly analyzed by the House of Representatives and the Federal Senate. It is therefore possible that the amendments introduced so far still be further modified or rejected.

Category: Labor and employment

Law 14,457/22, sanctioned on September 22, 2022 as a conversion into law of Executive Order 1.116/21, creates the "Emprega + Mulheres" (Employ + Women) Program to place and maintain women in the labor market by implementing measures to support parenthood, training in strategic areas for professional advancement, and support for returning to work after the end of maternity leave.

The program also recognizes good practices in promoting women's employability and establishes measures to prevent and combat sexual harassment and other forms of violence in the workplace.

We will now analyze the main innovations brought about by the law.

Parenting support measures

• Childcare assistance

By means of an individual agreement or collective bargaining agreement, the law authorizes implementation of a day-care reimbursement benefit for employees who have children up to 5 years and 11 months of age, payment of daycare or preschool, or reimbursement of expenses with other services of the same nature, as long as the expenses are proven.

Observing the requirements provided for by the law, the amounts paid as day-care reimbursement do not have salary nature. For this reason, they are not incorporated into the employees’ remuneration for any purpose, do not constitute a basis for social security contributions and labor charges (FGTS deposits), and do not constitute taxable income for the beneficiary.

An act of the Federal Executive Brach will determine the limits of values for granting the day-care reimbursement and the accepted methods of provision of services, including payments to individuals. Companies should keep an eye on how this topic evolves.

• Teleworking

When allocating vacancies for activities that can be performed through remote work, employers must give priority to employees with children, stepchildren, or children under legal guardianship up to the age of 6, or with disabilities, with no age limit.

Flexible work and vacation arrangements

Observing the directive and management power of the company, and considering the express will of employees, it is possible to provide flexible working hours to employees who have children, stepchildren, or people under their guardianship up to 6 years old or with disabilities.

Such flexible hours can be implemented by means of a special working hours arrangement via a time bank (bank of hours), a part-time arrangement, flexible work start and end times, and advance of individual vacations, by means of an individual or collective agreement.

Measures to train women

The law provides that employers may suspend the employment contract for female employees interested in a professional training course or program offered by the employer, as long as the suspension is formalized in an individual or collective bargaining agreement.

The professional training course or program offered by the employer must prioritize areas that promote the professional advancement of employees or areas with low female participation, such as science, technology, development, and innovation.

During the suspension of the contract, the employee will be entitled to a professional qualification scholarship to be funded by the Workers Support Fund (FAT) and the employer may, at its sole discretion, grant a monthly compensatory allowance, not considered as salary for any purpose.

However, if the employee is terminated during the contract suspension period or within six months after returning to work, the employer will pay the employee, in addition to the mandatory severance, a fine to be established in a collective bargaining agreement. The fine will be at least 100% of the value of the last monthly remuneration prior to the suspension of the employment contract.

Measures to support the return to work after maternity leave

• Suspension of the employment contract of employed parents

The law allows the father/companion, upon formal request and in agreement with the company, to suspend his employment contract after the end of his wife's or partner's maternity leave in order to provide care and establish a bond with the children, monitor the children's development, and support his wife's or partner's return to work, through participation in a remote professional training course or program, offered by the employer, with a maximum workload of 20 hours per week. The suspension must be formalized via individual or collective bargaining agreement.

During the suspension of the contract, the employee will be entitled to a professional qualification scholarship to be funded by the Workers Support Fund (FAT) and the employer may, at its sole discretion, grant a monthly compensatory allowance, not considered as salary for any purpose.

However, if the employee is dismissed during the contract suspension period or within six months after returning to work, the employer will pay the employee, in addition to the mandatory severance, a fine to be established in a collective bargaining agreement. The fine will be at least 100% of the value of the last monthly remuneration prior to the suspension of the employment contract.

• Changes in the Corporate Citizenship Program

The 60-day maternity leave extension offered by citizen companies can be shared between the requesting female employee and male employee, provided that both are employees of a legal entity that adheres to the Citizen Company Program and that the decision is adopted jointly, in the manner to be established in the regulation.

The company participating in the Citizen Company Program is also authorized to replace the extended maternity leave period with a 50% reduction in working hours for a period of 120 days, by means of an individual agreement and payment of the full salary.

Measures to prevent and combat sexual harassment and other forms of violence in the workplace

Companies obligated to create and maintain a Cipa must adopt the following measures, in addition to others they deem necessary, to prevent and combat sexual harassment and other forms of violence in the workplace:

• Inclusion of rules of conduct regarding sexual harassment and other forms of violence in the company's internal rules, with wide dissemination of their content to male and female employees;

• Establishing procedures for receiving and following up on complaints, investigating the facts, and, when applicable, applying administrative sanctions to those directly and indirectly responsible for acts of sexual harassment and violence, guaranteeing the anonymity of the person making the complaint, without prejudice to the applicable legal procedures;

• Inclusion of topics related to preventing and fighting sexual harassment and other forms of violence in the Cipa's activities and practices; and

• Provide, at least every 12 months, training, orientation, and awareness actions for employees from all hierarchical levels of the company on topics related to violence, harassment, equality, and diversity in the workplace, in accessible and appropriate formats that present maximum effectiveness of such actions.

The Cipa, previously called the Internal Commission for Accident Prevention, is now called the Internal Commission for Accident and Harassment Prevention.

These measures must be adopted within 180 days after September 22, 2022.

Companies must therefore update their internal practices and policies.

“Emprega + Mulher” Seal

The new law creates the Emprega + Mulher Seal, which seeks to recognize companies that stand out for organizing, maintaining, and providing day-care and pre-school facilities to meet the needs of their female and male employees, and good practices by employers who seek, among other objectives:

• encourage the hiring, occupation of leadership positions, and professional advancement of women, especially in areas with low female participation, such as science, technology, development, and innovation;

• share parenting responsibilities equally;

• promote the culture of equality between women and men;

• offer flexible work arrangements;

• provide leave for women and men that allows them to care for and bond with their children;

• effectively support female employees and those providing services in its establishment in the event of harassment, physical or psychological violence, or any violation of their rights in the workplace; and

• implement programs to hire unemployed women in situations of domestic and family violence and to shelter and protect their employees in situations of domestic and family violence.

Companies that qualify to receive the Emprega + Mulher Seal must report annually on their compliance with the requirements introduced by the law.

Companies holding the Emprega + Mulher Seal may use it to publicize their brand, products, and services. It is forbidden to extend the use of the seal to the economic group or in association with other companies that do not hold the seal.

In view of these changes and innovations, companies must reassess their practices and policies to adapt them to the new obligations and study opportunities to introduce new benefits or practices in line with the Emprega + Mulheres Program guidelines.

Category: Litigation

Amidst intense debate in the legal community regarding the repercussions of Constitutional Amendment 125/22 (CA 125/22), published on July 14th of this year, the Superior Court of Appeals (STJ) promoted the seminar "Argument of Relevance in Special Appeals", on September 27th.

The purpose of the meeting, held in partnership with the FGV's Center for Innovation, Administration, and Research in the Judiciary (CIAPJ) and the Institute for Reform of State-Company Relations (IREE), was to discuss implementation of the new filter for admissibility of appeals to the STJ.

In the panels, which were attended by justices, advisors, lawyers, and other magistrates, some important theoretical issues were addressed, such as the function of superior courts in Brazil and in comparative law. The focus of the meeting, however, was on the more practical aspects of CA 125/22.

One of them, the subject of great divergence among operators of the law, refers to the moment from which the parties will be obliged to demonstrate fulfillment of the requirement of relevance, under penalty of not having their appeal heard. On this point, Justice Mauro Campbell Marques defended that the application of CA 125/22 depends on regulations, despite the position of some state courts that have already been requiring appellants to demonstrate the relevance requirement.

Other important practical issues, such as competence and minimum quorum for ascertaining relevance, the appropriate way to regulate CA 125/22, and the very definition of the concept of relevance, were also addressed.

Although it is not clear what the trend for the court's position will be, it was clear that the Federal Supreme Court's experience with the general repercussion for extraordinary appeals, provided for in CA 45/04, will serve as a guide for the implementation of the relevance mechanism at the STJ.

The event reinforces the importance of the topic for the STJ and the great impact that CA 125/22 is expected to have on the dynamics of the courts and on lawyers' practice. It is important, therefore, to follow the new developments that should soon be established by the court.

Category: Corporate

Promulgated on September 22, Law 14,451/22 (a result of Bill 1,212/22) amends the Civil Code to reduce certain quorums for resolution on matters for limited liability companies as follows:

• Appointment of non-partner officers: previously, the quorum for resolutions was unanimity of the partners as long as the capital was not paid up. After full payment, the quorum for approval was at least 2/3. With the new law, the quorum becomes 2/3 of the partners, while the capital is not paid-in, and of partners holding more than half of the capital, after the payment is made.

• Modification of the articles of association, merger, and dissolution of the company or termination of liquidation: a quorum which used to be 3/4 of the capital stock is now more than half (absolute majority of the capital stock).

Regarding the appointment of non-partner officers, the reduction in quorum occurred both for the paid-in capital and the pending paid-in scenario. In the second case, the reduction was greater to give more protection to partners, since, pending payment, all partners are jointly and severally liable for the capital to be paid in.

On one hand, the change certainly facilitates and optimizes decision-making, but by eliminating the need for unanimity of the partners pending payment, it ends up subjecting all of them to the risk of the new administrator's will, in a scenario of joint and several liability for the payment of the capital stock.

As for the other matters, by extinguishing the high quorum of 3/4, the change seems to be more in line with the majority principle for decision-making within companies, as provided for in article 129 of the Brazilian Corporations Law and other similar institutions, such as condominiums.

The quorum of 3/4 was maintained for calls to order of partners' meetings (article 1,074). With this, opening of the meeting requires a quorum greater than that necessary for resolution on the matters, which creates a certain incongruity.

In general, the change brings limited liability companies closer to corporations, allowing greater interference and exercise of control with a smaller stake in the capital stock.

The change requires that partners of limited liability companies pay attention to their rights and the extent of the influence they now have on corporate decisions with the new provisions. This can certainly impact on the valuation of partners' interests in the company in the event of sale or other transactions, encourage the renegotiation of articles of association and shareholders' agreements to adjust the applicable quorums to the will of the partners, and motivate litigation in the event of abuse.

The new law has 30 days to take effect from the date of its publication. By the end of October of 2022, therefore, the changes will be in full effect.

Category: Litigation

In the judgment of Special Appeal 1.738.657/DF, the Third Panel of the Superior Court of Appeals (STJ) found that the insurer has no duty to render accounts as a result of life insurance and health insurance contracts.

The Court held that an action to demand accounts presupposes the existence of two elements:

• the custody or administration of securities, assets, or interests by third parties; and
• the need for clarification about this management, in the face of uncertainties regarding the balance resulting from the relationship between the parties.

The reporting judge of the appeal, Justice Moura Ribeiro, found that this essential factual premise also applies to health insurance and life insurance contracts, in the sense that there is no interest on the part of the insured to demand accounts, since there is no relationship of custody or administration of assets or interests of third parties by the insurer.

According to article 757 of the Civil Code, the insurance contract does not establish the obligation of the insurer for management of other people's property, but only to "guarantee the legitimate interest of the insured, related to person or thing, against predetermined risks", due to the payment of a premium.

Thus, the insurer's obligation is only to pay the compensation to the insured, upon occurrence of the loss, according to the amount previously established in the policy, with no duty to render accounts.

For the STJ, in life and health insurance contracts, "the amount of compensation to be received in the event of occurrence of the insured event is previously established in the contract and, therefore, there is no ‘custody' of the amounts resulting from the collection, that is, of the premiums.

There is, therefore, a distinction between the obligation to give and receive and the specific obligation to demand and render accounts, which shows the inappropriateness of the action of demanding accounts based on an insurance contract. In this case, the main obligation of the insurer is to pay compensation due to the occurrence of one of the events prefixed in the policy.

The conclusion is that there is no action to demand accounts based on an insurance contract, when there is no management of assets, nor are there complex debit and credit transactions linked to the contract.

For the Court, the claim for any clarification on the amount of the premium in the event of loss, due to uncertainty regarding the amount compensated in relation to the insured's contributions, should be carried out through the ordinary means and not through the special procedure of the action for demanding accounts.

This decision, which is already final and conclusive, established an important precedent as to the appropriate procedural means for clarifying the amount of compensation paid by the insurer. It also reinforced the legal nature of the insurance contract and the obligations assumed by the insurer, not admitting an expansive interpretation of the duties set in the policy and provided for by law.

The precedent also corroborates the already consolidated understanding of the case law that the action of demanding accounts is only applicable in the case in which there is administration or custody of assets and securities by others, and the holder has a legitimate interest in demanding accounts of this management, when there is uncertainty about the balance resulting from this relationship.

It is expected that the courts will observe the position adopted by the STJ and rule out the possibility for the insured to demand accounts from the insurer, given the legal nature of the insurance contract and the fact that the obligations assumed by the insurer are set forth in the policy and provided for by law. The decision precludes a broad and innovative interpretation of the duties of these companies, which would jeopardize the legal security of insurance relationships.

Category: Capital markets

For several years and at various times, there has been discussion not only in the scholarly sphere, but also in the administrative sphere of the Brazilian Securities and Exchange Commission (CVM) regarding the nature of conflicts of interests and the consequent prohibition on voting rights, whether the prohibition is absolute or whether it is necessary to analyze the merits of the decision (substantive theory). Over the years, we have seen the CVM's understanding varying from an understanding of formal conflict to one of a substantive conflict. Until now, the understanding that prevailed was that of a formal conflict.

On August 16th, again, an analysis in an administrative proceeding evaluated by the board of the CVM brought the topic to discussion, but with a majority already formed, which changes the understanding until then in force.

As the last change in the CVM's position occurred in 2010, it is necessary to recapitulate the whole discussion and the hectic history of decisions, but not without first going back to the legal provision that generated the different interpretations.

Article 115 of Law 6,404/76 (the Brazilian Corporations Law) treats as abusive and vetoes votes exercised with the purpose of causing damage to the company or to other shareholders; or that by which the shareholder seeks to obtain an advantage to which he is not entitled and that results or may result in damage to the company or to other shareholders. In practice, various situations can constitute abuse of voting rights.

Although voting is a shareholder's right, it cannot be exercised for a purpose other than the interest of the company, hence exercising the vote in this manner is considered abusive.

Abuse of voting rights can be committed by both the controlling shareholder and minority shareholders, because the Brazilian Corporations Law makes no distinction when dealing with abusive voting, and the rule applies to any shareholder who exercises the right to vote, in any kind of general meeting.

Voting with the purpose of causing damage to the company seeks only to harm the other shareholders.

Voting by means of which a shareholder seeks to obtain, for himself or another person, an advantage to which he is not entitled and which results or may result in harm to the company or to the other shareholders, is also considered abusive. In this case, the vote is contrary to the company’s interests and also seeks to obtain an illegitimate individual advantage.

But the aforementioned article of the Brazilian Corporations Law, in paragraph 1, also establishes three scenarios for resolutions in which the shareholder is prohibited from voting and in which there is an absolute prohibition, since it is assumed that there is a formal conflict of interest between the shareholder and the company:

• approval of the appraisal report of the assets with which he contributes to the formation of the capital stock;
• approval of his accounts as an officer; and
• that can benefit him in a personal way.

Article 115 also mentions a scenario for impediment against voting when there is an interest conflicting with that of the company, precisely the subject of analysis by the CVM's board that we will bring up in this article and discuss later.

The analysis even goes further and mentions a situation of private benefit as part of the same materialistic theory, and not as a case of formal conflict. But this is a controversy worth its own article.

The rule in paragraph 1 of article 115 of the Brazilian Corporations Law is exhaustive and does not allow interpretations that extend the prohibition, since the right to vote is considered an essential right of the shareholder and is also essential for the resolution passed at the meeting, in which the corporate interest is manifested. For this reason, the prohibition on exercising this right must be restricted to the reasons expressly provided for in the Brazilian Corporations Law.

In the three scenarios referred to in paragraph 1, the shareholder is prohibited from voting, although the prohibition on voting does not prevent him from attending the meeting and discussing the matters put up for resolution. The impediment is on voting, not on attending and expressing an opinion on the matters on the agenda, because the shares of the impeded shareholder make up the quorum required to convene the meeting, which is different from the quorum for resolutions.

The first scenario for prohibition on voting is related to approval of the valuation report of the shareholder's assets to be contributed to the capital stock. There is an absolute presumption that the shareholder, in this case, has no impartiality to vote, either on the choice of the experts or on the report prepared by them. In this situation, the prohibition effectively prevents the shareholder from approving a report that may overvalue his assets. Since the prohibition is absolute, the shareholder's intention or the content of his vote is irrelevant.

The second scenario for an impediment, provided for in paragraph 1, refers to approval of accounts, when the shareholder is also a company officer. The Brazilian Corporations Law also prohibits officers from voting as shareholders or proxies in this case (article 134, paragraph 1). The prohibition here is also absolute, since no one can be a judge in his own cause. Since the shareholder cannot separate the two roles he plays, the Brazilian Corporations Law prevents him from voting.

The third scenario of absolute impediment on voting is the one that occurs when the resolution may benefit the shareholder in a personal way, an expression identical to the one used in the 1940 law,^[1] which keeps the questions about what "personal benefits" would be, as well as its distinction from "conflicting interest", given the vagueness of the concepts. And, in this situation, as already mentioned, the new CVM decision puts in doubt whether it would even be a case of absolute impediment, even though paragraph 4 of article 115 cites only votes conflicting with the company's interests as null and void.

The personal benefit exists due to resolutions of the general meeting that result in an exclusive advantage for a certain shareholder, which does not benefit the other holders of shares issued by the company.

However, there is (still) great controversy about the extent of the concept of "personal benefit": whether it would only be established by virtue of advantages attributed to the shareholder in his capacity as a partner of the company or whether it would also apply in cases of advantages that do not arise from the corporate relationship itself or that are not directly related to the resolution to be taken.

According to part of the legal scholarship, only the lawful advantage conferred to certain shareholders in their capacity as shareholders, which exceeds the principle of equality among partners, constitutes a personal benefit.^[2] In other words, the establishment of a personal benefit presupposes the granting of an advantage of a corporate nature to a certain shareholder.^[3] According to this understanding, what the law intends to avoid is breaking of the relationship of equality among the shareholders, preventing one of them from deciding to assign to himself, through his vote, an advantage, even if legitimate, within the scope of corporate relations.

In its most recent opinions on the matter, the CVM found that a personal benefit would also cover advantages not linked to the corporate relationship, such as those arising from contracts signed between the shareholder and the company.^[4]

Despite the above controversy, we can say that a personal benefit is present when the resolution can bring about an exclusive advantage to a certain shareholder, which is not extendable to the other shareholders of the company.

In the three^[5] scenarios mentioned, the shareholder could not vote, regardless of his intention or the merits of the resolution. If he casts his vote, the chairman will not compute it. The resolution of the meeting, passed in the exercise of this vote, when necessary to form a majority, will be voidable. A resolution passed with a prohibited vote can be annulled, even if no damage occurs to the company.^[6]

Now we come to the issue of conflicts of interests, the subject of the current analysis and the change in the CVM's position: as we said, the final part of paragraph 1 also refers to the prohibition on voting when the shareholder has interests conflicting with those of the company, which generated all the discussion in legal scholarship and in the CVM's administrative sphere regarding the nature of the prohibition, whether it would be an absolute prohibition, as occurs in other cases, or whether it would be necessary to analyze the merits of the decision in each concrete case.

Situations of conflict of interest arise, as a rule, from the existence of a legal relationship involving, on the one hand, the shareholder and, on the other, the company. In these situations, a conflict arises when the shareholder's interest is incompatible with the corporate interest, and one of them cannot be satisfied without harming the other.

For some authors, scenarios of conflict of interest should be analyzed under a merely formal criterion, according to which the shareholder would be prohibited from intervening in any resolution in which he has an interest that potentially conflicts with the company, regardless of the merits of the decision or the factual circumstances in which it was adopted.^[7] Violation of this prohibition would render the resolution null and void, even if the vote cast by the shareholder has not caused any damage to the company.

For this school of thought, a formal conflict of interest exists in every bilateral legal transaction in which the shareholder and the company are contracting parties. Bilateral business, in itself, already implies the existence of diverse interests between the parties. Thus, there will always be a formal conflict, even if the legal transaction brings about equitable benefits for the company and its shareholder.^[8]

For other authors, however, corporate law regulates situations of conflict of interest from a substantive standpoint.^[9] Therefore, the possible illegality of the interference of the shareholder in the resolutions in which he is in a situation of potential conflict of interest with the company constitutes a factual issue, to be assessed a posteriori, based on an analysis of the merits of the decision, according to the concrete circumstances of each case.

The substantive (or material) conflict is only established when the vote is used in misuse of purpose, to promote shareholder interests incompatible with the corporate interest. In these cases, the shareholder's vote is unlawful, since he is sacrificing the corporate interest in favor of his own interest.

In the case of an absolute prohibition, the conflict of interests would be formal, found even before the vote is cast, by the simple position occupied by the shareholder and the company in a certain legal relationship. On the other hand, if the merits of the resolution were to be analyzed, the conflict would be of a substantive (or material) nature.^[10]

Let's take a look at the history of changes in the CVM's position on the subject: in a case in 2001, the understanding was that there is an absolute prohibition for a shareholder to participate in a resolution in which he had an interest potentially conflicting with the company, therefore considering it to be a case of a formal conflict of interest.^[11]

Indeed, in Administrative Inquiry TA RJ 2001/4977, the rapporteur board member Norma Parente expressed her opinion to the effect that the conflict is formal, when she decided that: "In the present case, it is unquestionable, in my opinion, that the benefit of the controller derives from the contract itself because he is on both sides, which is why he should abstain from voting, regardless of whether the contract is equitable. This is a case of negotiating with oneself. When referring to resolutions that may benefit the shareholder, the law does not assume that the shareholder is contracting with the company against the corporate interest. On the other hand, a conflict of interest does not presuppose that the interests are opposite but that the shareholder has dual interests. A conflict of interest, in fact, is established to the extent that the shareholder not only has a direct interest in the company's business but also has his own interest in the deal that is independent of his status as a shareholder because he is the counterparty to the deal. The conflict does not need to be divergent or opposing, or that there be an advantage for one and a loss for the other. The law employs the word conflict in a broad sense covering any situation in which the shareholder is negotiating with the company."

In 2002, the CVM's board understood differently and its opinion was that article 115 of the Brazilian Corporations Law regulates situations of conflicts of interest based on a substantive analysis, in which there is no absolute prohibition on the shareholder's participation in the general meeting's resolutions.^[12]

In this sense, in Administrative Inquiry No. TA RJ 2002/1153, through the prevailing opinion of board member Luiz Antonio Sampaio Campos, the understanding was settled that the conflict of interest would be substantive (material): "The line that finally came to prevail for cases of conflict of interest, as shall be shown below, was that for which the conflict of interest should be assessed in the concrete and specific case, in a substantive and not formal manner, and in my opinion it is the one that best defends the corporation’s assets and is integrated in the corporation system. This understanding, as I have already had the opportunity to explain, is a majority both in Brazil and abroad, and it is rare for anyone to hold the contrary, especially in Brazil (...) In Brazil, the subject has not been forgotten either. The view has always been that conflicts of interest are a question of fact, to be examined on a case-by-case basis, and that conflicts would need to be evident, colliding, strident, irreconcilable."

To the same effect was the judgment of Administrative Proceeding CVM RJ 2004/5494. The Appeals Board of the National Financial System - CRFSN, in appellate decision 4706/04, understood the conflict to be formal, since, when analyzing paragraph 1 of article 115 of the Brazilian Corporations Law, it concluded that: "The most appropriate interpretation for the final part of the provision in question - which deals with the personal benefit or conflicting interest - should be the one that concludes that the vote of the shareholder who considers himself to be in conflict is prohibited a priori, but only in the event that this voting shareholder, in his value judgment, finds himself in a situation of conflict. (...) The central issue is that, if there is, as there was, an interest of the external affiliate and indirectly of its subsidiary and this appellant in the execution of the contract, the latter should have abstained from voting, which would have avoided materialization of the conflict."

In a new change of position, in 2010, the board of the CVM returned to the position, in response to a consultation submitted by a publicly-traded company, that article 115, paragraph 1, of the Brazilian Corporations Law deals with cases of formal conflicts of interests, with the shareholder being absolutely prohibited from voting in any resolution in which he has interests potentially conflicting with the company.^[13]

In fact, in the decision of Administrative Proceeding CVM RJ 2009/13179, in which the rapporteur was board member Alexsandro Broedel Lopes, the agency stated again that the conflict was formal. Dissenting in this judgment was board member Eli Loria, who understood that the conflict of interest can only be found after the meeting is held and upon proof of the damage caused to the company. Here, the formal conflict was used despite the attempt to mitigate it, with the creation of a special independent committee in accordance with the provisions of Opinion 35, created for situations of corporate reorganization transactions in which parent and subsidiary companies are involved, representing "a single will".

In this decision, the CVM also pointed to the possibility of adopting a less rigid alternative, which would mitigate the excessive rigor of the defenders of the formal current, according to which cases of conflict of interests can be divided into two distinct groups:

• those in which the conflict is evident and appears a priori, in which the impediment to vote should be in force summarily; and
• those in which the conflict is not evident, for which the prohibition on voting must be justified if it is invoked by other shareholders.^[14]

In 2015, the board reaffirmed the formal theory in the Eletrobrás case, by deciding against the Federal Government's vote in the resolution for the renewal of the generation and transmission concessions of Eletrobrás' subsidiaries, although this decision was later modified by the CRFSN through a casting vote by the chairman of the board.

The same position, by the formalist theory, was confirmed in a new case reviewed in 2020, in which the board modifying the decision of the technical department, allowed the vote of the shareholders of Linx S.A. in the merger transaction STNE Part. S.A., on the understanding that there would be no conflict of interest or personal benefit in the situation.

In this case, two board members even affirmed that there was no personal benefit, because there was no breach of the equality of treatment or direct relationship with the resolution, as well as no "flagrant opposition between the interests of the appellants and the corporate interest", and there was no conflict capable of preventing Linx S.A. shareholders from voting.

In the administrative sanctions proceeding whose judgment was initiated at the board session on August 16, 2022 (case 19957.003175/2020-50), the board concluded that the materialist theory of conflict of interests should be adopted, changing its position, given that "the historical analysis added to the majority principles and presumption of good faith and strengthening of the means of remedial protection of minority shareholders' rights in the Brazilian capital market is not consistent with the adoption of a formal analysis with regard to the impediment on voting by shareholders in the cases analyzed in paragraph 1 of article 115 of the Brazilian Corporations Law."

This already seemed to be a trend, not only because of the attempt to soften the formal theory (although maintaining it) in 2010, but also because in 2021, in a case involving Cyrela - FII Grand Plaza, "bases of the material theory of conflict of interests" had already been used to allow the vote of a majority shareholder of an investment fund in a resolution passed at a shareholders' meeting regarding the spin-off of an investment fund, even though the formal theory was still confirmed, as we said above.

In fact, there was no settled case law on the subject, which was positioned either by the formal theory or the material theory.

We are now waiting for the board decision to change the position and, if so, for how long it will prevail.

^[1] Article 82 of Decree-Law 2,627/40 stated the following: "shareholders cannot vote on resolutions of the general meeting regarding the valuation report of assets contributed to formation of the capital stock, nor on those that benefit him in a personal way." However, article 95 of the same law provided that: "a shareholder who, having interests contrary to those of the company in a transaction, votes on a resolution that reaches the necessary majority with his vote shall be held liable for losses and damages." EGBERTO LACERDA TEIXEIRA. Das Sociedades por Quotas de Responsabilidade Limitada ["Limited Liability Companies"] - updated according to the New Civil Code by Syllas Tozzini and Renato Berger. 2nd edition, São Paulo: Quartier Latin, 2007, p. 176, criticizes its wording, noting that: "The legislator, in our opinion, would have been better advised to not make the subtle and dangerous distinction between ‘personal benefit' and 'interests contrary to those of the company' because, in fact, the two errors can easily be confused, they being the modalities of the 'self-contract' or 'contract with oneself'".   

^[2] ERASMO VALLADÃO AZEVEDO E NOVAES FRANÇA. Temas de Direito Societário, Falimentar e Teoria da Empresa ["Topics in Corporate and Bankruptcy Law and Theory of the Company"]. São Paulo: Malheiros, 2009, p. 576/577

^[3] Vote of Officer Luiz Antonio de Sampaio Campos in a decision by the Board of the CVM in CVM Administrative Proceeding TA/RJ2001/4977.

^[4] Decision of the Board of the CVM in CVM Case RJ 2009/13179 and in CVM RJ 2009/5811.

^[5] Except for the mention made in PAS 19957.003175/2020-50 as noted herein.

^[6] JOSÉ ALEXANDRE TAVARES GUERREIRO, "Conflicts of Interest between Controlling Companies and Subsidiaries and between Affiliates, in the Exercise of Voting Rights at General Meetings and Corporate Meetings", Revista de Direito Mercantil, Industrial, Econômico e Financeiro ["Journal of Commercial, Industrial, Economic, and Financial Law"]. São Paulo: Ed. Revista dos Tribunais, v. 51, July-September, 1983, p. 29-32.

^[7] MODESTO CARVALHOSA. Comentários à Lei de Sociedades Anônimas ["Comments on the Law of Corporations"], São Paulo: Saraiva, 2003, vol. 2, pp. 464/465; NORMA PARENTE. "O Acionista em Conflito de Interesses" ["Shareholders in Conflicts of Interests"]. In: Direito Empresarial (Aspectos Atuais de Direito Empresarial Brasileiro e Comparado) ["Business Law (Current Aspects of Brazilian and Comparative Business Law)"]. Ecio Perin Junior, Daniel Kalansky, and Luis Peyser (Coord.). São Paulo: Método, p. 3229 et seq.

^[8] NELSON EIZIRIK. Temas de Direito Societário ["Topics in Corporate Law"]. Rio de Janeiro: Renovar, 2005, p.72.

^[9] NELSON EIZIRIK. A Lei das S/A Comentada ["Comments on the Brazilian Corporations Law"]. São Paulo: Quartier Latin, 2011, vol. I, pp. 662/663. To the same effect: ERASMO VALADÃO AZEVEDO E NOVAES FRANÇA. Conflito de Interesses nas Assembléias de S.A. ["Conflicts of Interest in Corporate Meetings"]. São Paulo: Malheiros, 1993, p. 89. LUIZ GASTÃO PAES DE BARROS LEÃES. Estudos e Pareceres sobre Sociedades Anônimas ["Studies and Opinions on Corporations"]. São Paulo: RT, 1989, p. 25; TRAJANO DE MIRANDA VALVERDE. Sociedades por Ações ["Corporations"]. Rio de Janeiro: Forense, 1959, p. 26.

^[10] Understanding that this is a formal conflict of interest: MODESTO CARVALHOSA. Comentários à Lei de Sociedades Anônimas ["Comments on the Brazilian Corporations Law"]. v. 2 ..., p. 470; NORMA PARENTE, according to opinion issued in CVM Administrative Inquiry TA RJ 2001/4977, decided on December 19, 2001, and article published in Direito Empresarial: Aspectos Atuais de Direito Empresarial Brasileiro e Comparado ["Current Aspects of Brazilian and Comparative Business Law"]. São Paulo: Método, 2005, p. 329-343. Considering that this is a substantive conflict: LUIZ GASTÃO PAES DE BARROS LEÃES, "Conflito de Interesses" ["Conflicts of Interests"]. In: Estudos e Pareceres sobre Sociedades Anônimas ["Studies and Opinions on Corporations"]. São Paulo: Revista dos Tribunais, 1989, p. 25-26; FABIO KONDER COMPARATO, "Controle Conjunto, Abuso no Exercício do Voto Acionário e Alienação Indireta de Controle Empresarial" ["Joint Control, Abuse in the Exercise of Shareholder Voting and Indirect Disposal of Corporate Control"]. In: Direito Empresarial: Estudos e Pareceres. São Paulo: Saraiva, 1990, p. 91; ERASMO VALLADÃO AZEVEDO E NOVAES FRANÇA, "Conflito de Interesses: Formal ou Substancial? Nova Decisão da CVM sobre a Questão" ["Conflict of Interests: Formal or Substantive? New CVM Decision on the Issue"]; Revista de Direito Mercantil, Industrial, Econômico e Financeiro ["Journal of Commercial, Industrial, Economic, and Financial Law"]. São Paulo: Ed. Malheiros, v. 128, October-December, 2002, p. 259; TRAJANO DE MIRANDA VALVERDE. Sociedades por Ações ["Corporations"]... v. II, p. 116 and 315; CARLOS FULGÊNCIO DA CUNHA PEIXOTO. Sociedades por Ações ["Corporations"]. v. 3, São Paulo: Saraiva, 1972, p. 81; EGBERTO LACERDA TEIXEIRA and JOSÉ ALEXANDRE TAVARES GUERREIRO. Das Sociedades Anônimas no Direito Brasileiro ["Corporations in Brazilian Law"]. v. 1, São Paulo: José Bushatsky, 1979, p. 278; PEDRO A. BATISTA MARTINS, "Responsabilidade de Acionista Controlador – Considerações Doutrinária e Jurisprudencial" ["Responsibility of Controlling Shareholders - Considerations from Legal Scholarship and Case Law"], Revista de Direito Bancário e do Mercado de Capitais ["Journal of Banking and Capital Markets Law"]. São Paulo: Ed. Revista dos Tribunais, v. 27, January-March, 2005, p. 58-63. On this subject, see also LUIZA RANGEL DE MORAES, "A Jurisprudência no Tocante aos Conflitos de Interesse no Exercício do Voto em Sociedades Anônimas" ["Case Law Regarding Conflicts of Interest in the Exercise of the Vote in Corporations"], Revista de Direito Bancário, do Mercado de Capitais e Arbitragem ["Journal of Banking and Capital Markets Law and Arbitration"]. São Paulo: Ed. Revista dos Tribunais, v. 11, January-March, 2001, p. 281-288; and JAIRO SADDI, "Conflitos de Interesse no Mercado de Capitais" ["Conflicts of Interest in the Capital Markets"]. In: Rodrigo R. Monteiro de Castro and Leandro Santos de Aragão (Coord.). Sociedade Anônima – 30 Anos da Lei 6.404/76 ["Corporations - 30 Years of Law 6,404/76"]. São Paulo: Quartier Latin, 2007, p. 344-346. The dispute was summarized in the article "Is a Formal Conflict of Interest Enough to Stop a Shareholder or Board Member from Voting?", in the Antithesis Section, Revista Capital Aberto ["Open Capital Journal"]. No. 89, January, 2011, pp. 30-31.

^[11] CVM Administrative Inquiry 2001/4977.

^[12] CVM Administrative Inquiry TA-RJ 2002/1153

^[13] CVM Board Decision in Case RJ2009/13179.

^[14] In this regard, it is worth transcribing the following excerpt from the opinion of board member Alexsandro Broedel: "59. The text above conveys the idea that there will be, in cases of conflict of interests, two distinct situations: (i) one in which such conflict is apparent a priori, when, then, the impediment on voting must be in force summarily; (ii) another in which this conflict is not so evident, it being possible, obviously, to consider the prohibition on voting, which, however, must be justified, when invoked by other shareholders. (...) 62. I fully agree with Comparato's interpretation of article 115, paragraph 1. I believe that the conflict of interest can be found both a priori, in cases where it can be easily evidenced, and a posteriori, in situations where it does not shine through."

Category: Tax

Fernando Colucci and Alexia Costa Polloni

The problem of gender inequality in taxation has gained greater visibility in the legal universe. There are several forms of taxation that mainly affect women.

In early June, the Federal Supreme Court (STF) ruled the Direct Action of Unconstitutionality 5,422, filed by the Brazilian Institute of Family Law (IBDFAM), which questioned the constitutionality of the alimony taxation. Not only does this type of taxation aggravate the gender inequality scenario, but it also compromises the primary goal of the right to alimony, which is to ensure a life with dignity to those who cannot provide it for themselves.

In a decision taken in plenary, the Supreme Court ruled the action well founded and declared unconstitutional the taxation of alimony arising from family law, excluding from the scope of assessment the maintenance support due for other reasons – such as those arising from civil wrongdoing.

Interpretation was given in accordance with the Federal Constitution to Section 3, §1, of Law 7,713/88;^[1] Sections 4^[2] and 46^[3] the Annex to Decree 9,580/18; and Section 3, caput and §1^[4] and §4^[5] Decree-Law 1,301/73.

To understand the impacts of this form of taxation and the consequences of the Supreme Court's decision, it is necessary to highlight some essential characteristics of the family law alimony – its objective, its subjects and its way of quantification – before dealing with the tax legislation challenged by the direct action of unconstitutionality.

Characteristics of the right to alimony

In family law, the main objective of the alimony is to guarantee a life with dignity, citizenship and freedom to those who do not have the means to provide their own livelihood.^[6] The maintenance allowance should enable access to universal rights, such as education, food, clothing, leisure, health and housing, preserving the living standard of those who receive it.^[7]

In technical terms, in relation to the subjects involved, there are two parties involved in this legal relationship: a creditor and a debtor. While the creditor receives the alimony, the debtor pays for it.

According to the most recent data released by the Brazilian Federal Revenue, approximately 97.5% of pensions declared in the calendar year 2020 for the purposes of Personal Income Tax (IRPF) were paid by men.^[8]

The last statistical survey conducted by the Brazilian Institute of Geography and Statistics (IBGE) in 2019 revealed that the custody of underage children was granted unilaterally to women in 61.8% of divorces. To husbands, in only 4.1% of cases.^[9]

These data indicate that men mainly occupy the debtor position, while the creditor position is occupied by women and their children. Despite the diversity of family arrangements that can be contemplated in the obligation to provide maintenance, the reality of the subjects involved is much more restricted. The arrangements are limited to: men as debtors, and women as creditors or as legal guardians of the creditors – which are the children of whom they have custody.

The quantification of the support should, in theory, comply with the trinomial need/possibility/proportionality, considering the need of the creditor and the possibility of the debtor, according to Section 1,694, §1 of the Civil Code.^[10]

Necessity arises when the creditors do not have sufficient means to provide livelihood for themselves. The possibility exists when the debtor is able to provide the maintenance of the creditor, without harming its own livelihood. Proportionality determines the balance between these two factors.

There is an important aspect in the maintenance allowance quantification directly related to gender inequality. Even if the woman is entitled to receive the support, the arbitrated amount does not usually dampen the fall in their standard of living after a divorce.^[11] It is common for women's needs to be valued with excessive caution: the value set is usually not enough to guarantee the life with the dignity promised by the provision.

According to IBGE, women dedicate themselves to the care of the home and those who inhabit it twice as many hours as men.^[12] This domestic and affective work performed by women is devalued^[13] and disregarded when quantifying the support.

It is by this scenario that the alimony taxation is supported.

Taxation of alimony

Law 7,713/88 determines the incidence of IRPF on the value of perceived support paid in cash. On the one hand, pursuant to Section 3, §1 of that law, the Received alimony should be part of the IRPF calculation basis. On the other hand, pursuant to Section 12a, §3, I^[14] of the same law, the values Paid as alimony may be deducted from the basis for calculating the tax, when the support is the result of compliance with a court decision, an agreement approved by law or consensual separation or divorce made by public deed.

Before the Supreme Court decision, the alimony taxation was completely paid by the creditor. The debtors, in turn, could enjoy a tax benefit, deducting from the calculation basis of the IRPF the amounts paid as alimony.

Given that women – more specifically mothers who hold custody of their children after divorce – occupy, in the overwhelming majority, the direct or indirect creditor position, it is clear that they are more tax-charged.

These women could pay the tax in two ways, pursuant to Section 4, single paragraph, of Decree 9,580/18:

• As creditors, declaring and paying the IRPF on the pension amounts they receive in their own name; or
• As legal guardians of the creditors – their children, who receive the support – placing them as dependents in their statement and paying the IRPF on the amounts received by them.

Women, therefore, supported the financial burden of the tax payment, using part of the alimony – or their income itself – which should be intended to pay the children's expenses.

The negative impacts of the taxation extinguished by the Supreme Court

It does not take much to identify the gender inequality perpetuated by this form of taxation: the tax burden was concentrated on the creditor and, given that this position is occupied mostly by women, the entire financial burden of the tax payment used to fall on them.

However, this is not the only negative impact of the alimony taxation that was extinguished by the Supreme Court decision of unconstitutionality.

The taxation of amounts received as alimony, because they are not considered at the time of the quantification of the support, further reduced these amounts, which are usually already insufficient to cover the expenses of the wife and children after a divorce. Through this form of taxation, the party that was recognized to be in need was subjected to the payment of the tax, while the opposing party enjoyed a deduction benefit.

The proportionality, therefore, was not at all balanced, sacrificing women’s need in benefit of men’s possibility. Consequently, one of the parties of the supporting allowance relationship was at a clear disadvantage compared to the other.

The Supreme Court decision suppressed another impact: non-compliance with the alimony’s main objective. The jeopardy of part of the support for IRPF payment and the non-recognition of the costs faced by women with domestic work drastically reduced the value of the pension that could effectively be used to ensure the education, food, clothing, leisure, health and housing of the creditors.

Although indirectly, the disproportionality in the quantification of the alimony and the failure to comply with its main objective ended up increasing gender inequality. The need of women who asked for alimony was further aggravated, intensifying their position of disadvantage in relation to men.

The Supreme Court decision, therefore, removed from our legal system a form of taxation that not only deepened gender inequality, but put at risk the essence of the institute on which it relied.

The interpretation given by the Supreme Court to Law 7,713/88 and its corresponding decrees, in the analysis of the Direct Action of Unconstitutionality 5,422, helped to reduce the impact of gender inequality on taxation and on the alimony itself. The trial restored much of the proportionality in the alimony and paved the way for the satisfaction of its main purpose.

Although there are still several other issues related to gender inequality that need to be addressed in the Brazilian legislation, the Supreme Court's decision is an extremely important milestone for this necessary change in our legal system.

^[1] Law 7,713/88, Section 3: "The tax shall be levied on gross income, without any deduction, with the prohibition of the provisions of the arts. 9th to 14th of this Law. §1 - The entire proceeds of capital, work or combination of both, maintenance and pensions perceived in cash, and also income of any kind, thus also understood are the capital increases not corresponding to the declared income".

^[2] Annex to Decree 9,580/18, Section 4: "In the event of perceived income in cash by way of maintenance or pensions in compliance with a judicially approved agreement or judicial decision, including provisional or provisional maintenance, verified the civil incapacity of the creditor, the taxation will be made on his behalf by the guardian, the trustee or the person responsible for his custody (Decree-Law 1,301/73, Section 3, § 1, and Section 4).

Single paragraph. Optionally, the person responsible for the maintenance of the creditor may consider it its dependent and include its income in its statement, even if in values below the limit of the first range of the annual progressive table (Law 9,250/95, Section 35, caput, items III to V and VII)".

^[3] Annex to Decree 9,580/18, Section 46: "The amounts perceived, in cash, by way of maintenance or pensions, in compliance with a court decision, in an agreement approved by judicial or public deed registered in a notary's office, including the provision of provisional maintenance (Law 5,172/66 – National Tax Code, Section 43, § 1; Decree-Law 1,301/73, Section 3 and Section 4; and Law 7,713/88, Section 3, § 4)".

^[4] Decree-Law 1,301/73, Section 3, caput and § 1: "The net alimony or pensions perceived in cash constitute taxable income, classifiable in the "C" Form of the income statement of the creditor, which will be taxed distinctly from the feed. § 1 - In the case of civil incapacity of the creditor, he shall be taxed in the form of this section, and the income statement must be made on his behalf by the guardian, curator or guardian".

^[5] Decree-Law 1,301/73, Section 4, §4: "The provisions of Sections 2 and 3 also apply to cases of provision of provisional or provisional maintenance".

^[6] DIAS, Maria Berenice. Family Law Handbook. 4. Ed. São Paulo: Editora Revista dos Tribunais Ltda., 2016. Electronic book. p. 910.

^[7] TARTUCE, Flavius. Civil Law: family law. 14. ed. Rio de Janeiro: Editora Forense Ltda., 2019. Electronic book. p. 788.

^[8] Brazilian Federal Revenue - Large IRPF Numbers: calendar year 2020, financial year 2021

^[9] IBGE - Civil Registry Statistics - 2019. Table 5.8. Vital Statistics System

^[10] Civil Code, Section 1,694. Relatives, spouses or partners may ask each other for the support they need to live in a manner compatible with their social condition, including to meet the needs of their education. § 1 - Maintenance shall be fixed in proportion to the needs of the complainant and the resources of the obliged person.

^[11] OLIVEIRA, Ligia Ziggiotti de. Feminist Views on Contemporary Family Law. 2. Ed. Rio de Janeiro: Lumen Juris, 2020. p. 128.

^[12] IBGE - National Survey by Continuous Household Sample: other forms of work 2019

^[13] OLIVEIRA, Ligia Ziggiotti de. Feminist Views on Contemporary Family Law. 2. Ed. Rio de Janeiro: Lumen Juris, 2020. p. 126.

^[14] Law 7,713/88, Section 12a. §3: "The basis of calculation shall be determined by deducting the following expenses related to the amount of taxable income: I – amounts paid in cash as alimony in the face of family law rules, when in compliance with a court decision, a court-approved agreement or a consensual separation or divorce made by public deed; e (...)"

Category: Labor and employment

Law 14,442/22, published on September 5, regulates teleworking and changes the rules on meal allowances, provided for in the Brazilian Labor Laws (CLT). The law is the result of the conversion into law of Executive Order 1.108/22, already discussed in an article in this portal, available at this link.

Remote work is the rendering of services outside the employer's premises, predominantly or not, using information and communication technologies that, by their nature, do not constitute external work. Thus, even those who work just one day from home will be subject to the remote work rules.

Companies that had already implemented telecommuting, home office, or remote work policies (including work from anywhere policies) must reevaluate and adjust their practices to bring them into line with the new rules, if they have not already done so.

The point of greatest attention is the requirement to track the working hours of employees who work remotely, except in case of activities performed by task or by production or employees who occupy positions of trust, in accordance with article 62, II, of the CLT.

This is because, by requiring companies to implement mechanisms to track the working hours of employees working remotely, the new rule generates reversal of the burden of proof for companies, in the event of a labor lawsuit disputing the payment of overtime.

Thus, if companies do not control the working hours of employees who work remotely, the burden is on the company to prove that the employee did not work overtime.

Based on our experience, the production of this proof (absence of overtime) in situations like this is very difficult, since the company usually has difficulties in obtaining witnesses or records that can prove the employee's actual working hours.

Therefore, it is highly recommended that companies review the mechanisms used to track working hours in cases of remote work and, if they have not adopted them, that they evaluate and implement them in order to carry out correct tracking of working hours.

Category: Labor and employment

The labor legislation provides that for every 12 months worked, the employee is entitled to 30 days of vacation, which must be taken within the 12 months following the date on which the employee accrued this right. For each vacation period, the employee must be paid the remuneration that would be due to him as though he had worked, plus the constitutional increase of 1/3 of the amount, up to two days before the vacation period granted.

In 2014, the Superior Labor Court (TST) promulgated Precedent 450, which provides as follows:

“Payment is due at twice the remuneration for vacation, including the constitutional one third, based on article 137 of the Consolidated Labor Laws, when, even when taken at the appropriate time, the employer has breached the deadline provided for in article 145 of the same law.”

In other words, Precedent 450 of the TST establishes that the payment of double vacation pay, legally provided for when vacation is enjoyed outside of the time period, is also applied in the event that the employer pays vacation after the legal deadline, even if the vacation is enjoyed at the appropriate time.

In 2017, the governor of the state of Santa Catarina proposed a petition for breach of a fundamental precept (ADPF), which is an instrument for control of constitutionality used to prevent or repair injury to a fundamental precept, the subject matter of which is the constitutionality of Precedent 450 of the Superior Labor Court. This is ADPF 501.

The filing of ADPF 501 was supported, basically, on the fact that the TST allegedly applied, by analogy, a sanction provided for for conduct other than that indicated in the precedent. Thus, since the Judiciary is usurping a typical function of the Legislative Branch, there was said to be breach of the constitutional principle of separation of powers, in affront to the Federal Constitution.

After the labor reform, the legislation itself now stipulates that "precedents and other pronouncements of case law issued by the Superior Labor Court and by the Regional Courts of Labor Appeals may not restrict rights legally provided for or create obligations that are not provided for by law.” Thus, the creation of obligations not provided for by law, as stated in Precedent 450, is now expressly forbidden by the labor legislation itself.

Justice Alexandre de Moraes, reporting judge for the ADPF, found that, even if the obstacles related to legality and the use of analogy were overcome, it would be impossible to carry the penalty imposed for a given case of default to a different situation, since sanctions rules have a restrictive interpretation, which means that they cannot have a broader interpretation than that conferred by the literalness of the law.

The Attorney-General of Brazil also issued an opinion favorable to the understanding that it is impossible to apply the sanction provided for in Precedent 450 of the TST: "it is not incumbent on the Superior Labor Court to change the scope of application of the rule itself, in order to reach a situation not contemplated by it, especially since it is a rule with sanctioning content and, therefore, of restrictive interpretation.”

Based on the above-mentioned grounds, the ADPF was granted relief in a majority opinion to declare the unconstitutionality of Precedent 450 of the Superior Labor Court and invalidate all court decisions that have not become final and unappealable, which, supported by this precedent, have applied the penalty of double payment in the event of late payment of vacation pay.

In all actions in which there is a judgment that is not yet final and unappealable in this regard, therefore, it is possible for companies to request a review of the decision, not least because the decisions handed down in the scope of claims of breach of a fundamental precept are unappealable and binding on all proceedings that still discuss the same matter. There are enough matters to litigate these decisions all the way to the Federal Supreme Court (STF).

Category: Banking, insurance and finance

The Legal Framework of Securitizations, established by Law No. 14,430/22, defined the certificates of receivables in a broad and comprehensive way, admitting their use in securitization in the most varied sectors of the economy, which will allow the expansion and consolidation of the receivables credit market in Brazil beyond the real estate, agribusiness and financial sectors.

In the cases in which they are publicly offered or admitted for trading on a regulated securities market, certificates of receivables are classified as securities, as set forth in Article 20, § 1, of the Legal Framework of Securitizations, which fits them in the definition of Article 2º, IX, of Law No. 6,385/76 (“Capital Markets Law”).

Their public distribution in the capital market, therefore, is subject to prior registration with the Brazilian Securities Commission (CVM), as provided for in Article 19 of the Capital Markets Law, except in situations in which such registration is expressly waived in accordance with the regulatory rules issued by the Brazilian Securities Commission, according to the competence delegated to it by Articles 8,  I, and 19, § 5 of the aforementioned law.

In the regulatory sphere, issuances and offers for public distribution of securities are regulated by Instruction No. 400/03, issued by the Brazilian Securities Commission (“CVM Instruction No. 400/03”), which regulates public offerings for the distribution of securities on primary or secondary markets and aims to ensure the protection of investors and the integrity of the capital market.

CVM Instruction 400/03 requires that any public offering for the distribution of securities in the primary and secondary markets, in the Brazilian territory, addressed to individuals, legal entities, fund or universality of rights, residents, domiciled or incorporated in Brazil, be previously submitted for registration with the Brazilian Securities Commission. This is a relatively time-consuming and costly process due to the need to preparation, review and collection of various documents that are submitted for review and approval by the Brazilian Securities Commission through many protocols.

In order to facilitate issuers’ access to the capital market and reduce the time and costs of public issuances, the capital market also relies on another regulation, the Instruction No. 476/09, also issued by the Brazilian Securities Commission (“CVM Instruction No. 476/09”), which contains provisions that automatically exempt public offerings directed to a restricted number of professional investors from registration, as defined in Article 11 of Resolution No. 30/21, issued by the Brazilian Securities Commission (“CVM Resolution No. 30/21”).

In addition, this regulation allows the securities offered to be traded on the secondary market, even if the issuer is not registered with the Brazilian Securities Commission. For this, trading must be restricted to qualified investors, as defined in Article 12 of CVM Resolution No. 30/21. The regulator assumes that these investors have sufficient knowledge to assess the risks of the securities offered and, therefore, a prior review of the documentation by the regulatory entity would not be necessary.

In this sense, the well-known public offering with restricted distribution efforts, carried out under the terms of CVM Instruction No. 476/09, is widely used in the capital market. However, in view of its exceptional nature, said regulation has an exhaustive list of securities whose public offering restricted to a group of professional investors may be exempted from prior registration with the Brazilian Securities Commission. As certificates of receivables were recently created by the Legal Framework of Securitizations, they are not included in the list.

In view of this situation, on August 18, 2022, the Brazilian Securities Commission correctly issued Resolution No. 165 which equated certificates of receivables to  Certificates of Real Estate Receivables and Certificates of Agribusiness Receivables for the purposes of applying the CVM Instruction No. 476/09.

This measure, which takes effect on September 1, 2022, will allow certificates of receivables to be  automatically exempted from registration with the Brazilian Securities Commission when publicly offered to a restricted group of professional investors. The resolution, therefore, makes it possible for issuers of certificates of receivables to have easier access to the capital market, which contributes to the development of the securitization market and offers potential benefits for the expansion of this private financing instrument to various economic sectors.

The equivalence will only be valid until the entry into force of Resolution No. 160/22, issued by the Brazilian Securities Commission (“CVM Resolution No. 160/22”), which, as of January 2, 2023, will inaugurate a new regulatory framework for public offerings of securities, replacing and revoking CVM Instructions Nos. 400 and 476, with several changes in the registration processes of public offerings at the regulatory entity.

As of 2023, public offerings that are currently automatically exempted from registration under the terms of CVM Instruction 476 will be automatically registered with the Brazilian Securities Commission, through the protocol of certain documents, but without the need for prior analysis.

In this new scenario, certificates of receivables are duly covered by CVM Resolution No. 160/22, which includes these certificates using a broader language – “securitization-related securities issued by securitization companies registered with the Brazilian Securities Commission”. Thus, public offerings of these securities may be submitted to the public body through the rite of automatic registration of distribution, provided that the other applicable requirements are met.

The recently edited CVM Resolution No. 165, therefore, meets the market's need and expands the scope of CVM Instruction No. 476/09 to admit that the certificates of receivables recently created by the Legal Framework of Securitizations can be offered publicly, with automatic exemption from registration, to restricted groups of professional investors.

Category: Capital markets

In order to reform and simplify the information regime disclosed by the publicly-held securities issuing companies, the Brazilian Securities and Exchange Commission (CVM) issued, on December 23, 2021, the Resolution CVM 59. Among the changes brought by this standard, we highlight those related to the reference form, which underwent relevant changes in its structure, with a considerable reduction in the number of sections.

In its new version, the form will have 13 sections (compared to the current 21). The change resulted in the exclusion of some sections and the inclusion of new disclosure obligations by publicly-held companies in categories "A" and "B", especially with regard to information relating to environmental, social and governance (ESG) issues and climate information.

The new reference form will enter into force on 2 January 2023 and will apply to the disclosure of information relating to the financial year ending 31 December 2022.

The table below illustrates the changes in the structure of the sections in relation to the current standard, as provided for in Annex C to CVM Resolution 59:

The main novelty brought by CVM Resolution 59 is the obligations to disclose ESG information and climate. The change is a reflection of investor behavior and the growing market interest in greater transparency of companies in relation to compliance, in addition to commitment to these themes. The change also meets the longing for a standardization of the information provided, following what has already been done by regulatory agencies in international capital markets.

To provide greater transparency, the "practice or explain" model was used, already incorporated in the Governance Report of publicly held companies of the Brazilian Institute of Corporate Governance (IBGC). The goal is to get publicly-held companies to implement or at least justify the non-implementation of ESG practices in their reference forms, allowing investors to analyze whether the practices adopted by a company are consistent and adapt to ESG standards disseminated by the market.

The ESG and climate information will fully apply to category "A" companies and will be partially applicable to the category "B" companies. They will appear in at least six sections of the new reference form, as we highlight below:

• 1. Issuer activities:

"1.9. In relation to environmental, social and corporate governance (ESG) information, indicate:"

The company shall indicate, for example, whether it discloses its information in an annual or corresponding report, the methodologies used in the preparation of the report, whether it is audited by an independent entity and whether it considers any materiality matrix and ESG performance indicators, as well as the Sustainable Development Goals (SDGs) of the United Nations (UN). If so, the company should indicate whether any of the indicators and/or SDDs are material for its business.

Regarding climate responsibility, the company should also clarify whether the report considers the recommendations of recognized entities related to climate issues, in addition to pointing out whether it carries out greenhouse gas emission inventories in detail.

If the company does not comply with any of the conduct, it must justify in sub-item "i" item 1.9.

• 2. Comments of officers

"2.10. Officers should indicate and comment on key elements of the issuer's business plan, specifically exploring the following topics:"

The company's officers should clarify the opportunities included in the issuer's business plan related to ESG issues.

• 4. Risk factors

"4.1. Describe risk factors with the effective potential to influence the investment decision by observing the categories below and, within them, the decreasing order of relevance"

Among the risk factors, the company should include factors on social, environmental and climate issues, including physical and climate transition risks.

• 7. General Meeting and Administration

"7.1. Describe the main characteristics of the administrative bodies and the supervisory board of the issuer"

The company shall provide social information on the composition of the above-mentioned bodies, indicating the total number of members grouped by self-declared identity of (i) gender; (ii) color or race; or (iii) diversity attributes that you understand relevant. In addition, it should indicate specific objectives that the company has in relation to the diversity in these bodies.

Regarding climate issues, the company should indicate the role of management bodies in the assessment, management and supervision of risks and opportunities related to climate.

"7.2. in relation specifically to the Board of Directors"

It should be declared whether there are channels established for critical issues related to ESG and compliance issues and practices to come to the board's attention.

• 8. Remuneration of directors and officers

"8.1. Describe the remuneration policy or practice of the board of directors, the statutory and non-statutory officers, the fiscal council, the statutory committees and the audit, risk, financial and remuneration committees"

When describing the elements that make up remuneration, the main performance indicators should be indicated, including, where appropriate, indicators related to ESG issues. We highlight that this item will be optional to companies with registration of category "B".

• 10. Human resources

"10.1. Describe the sender's human resources"

The total number of employees and groups should be indicated, based on the activity performed, geographical location and diversity indicators, which, within each hierarchical level of the company, cover self-declared gender identity, self-declared identity of color or race and age group. We clarify that this item will be optional to companies with registration of category "B".

The wide inclusion of ESG factors in the reference form demonstrates the importance that CVM and the market have been giving to the theme. The change follows the trend of international markets and shows the commitment to encourage companies to realize the importance of the effective implementation of environmental, social and governance practices in their business.

Companies should pay special attention to the changes, even if they will only come into force next year, as the practical and strategy changes often necessary for fulfilling obligations are not always simple and quick to implement.

Category: Banking, insurance and finance

Law No. 14,430, sanctioned on August 3, 2022, originated from Provisional Measure No. 1.103/22, instituted the Legal Framework of Securitization and consolidated the sparse legislation that disciplined the Certificates of Real Estate Receivables (CRI) and Certificates of Agribusiness Receivables (CRA).

It is an important legal rule that will have a significant impact on the expansion and consolidation of the securitization market in Brazil, by contributing to financial disintermediation and the expansion of the capital market.

The law standardizes the general rules applicable to the securitization of credit rights and issuance of certificates of receivables, establishes important definitions for the market, brings a uniform and comprehensive concept of certificate of receivables, in addition to pacifying issues that generated legal controversy or burdened the structuring of operations.

The legal framework of securitization represents a paradigm shift in the receivables credit market in the country, since it will allow the expansion of securitization with the intermediation of securitization companies to the most diverse sectors of the economy.

Prior to the enactment  of Provisional Measure No. 1.103/22, securitization with the intermediation of securitization companies were restricted to the real estate, agribusiness and financial sectors.

In the education and sanitation sectors, for example, there is a demand for private investment instruments through capital market, which was already manifested in bills that were processed in the National Congress, aiming at the creation of Certificates of Educational Receivables and Certificates of Sanitation Receivables. These regulatory initiatives ended up not evolving, but with the edition of the Legal Framework of Securitization, this demand can be met due to the creation of the broad concept of "Certificate of Receivables".

The reform implemented by Law No. 14,430 is part of the broad context of modernization of the rules applicable to securitization companies and the securitization market. In the regulatory sphere, we highlight the edition of CVM Resolution No. 60/21, which came into force on May 2, 2022. This resolution of the Brazilian Securities Commission complements the law recently sanctioned by establishing a regulatory framework for securitization companies and the securitization market.

The regulatory standard shares the same view of the legal diploma. It was conceived to encompass a comprehensive concept of Certificate of Receivables, which will allow the use of this instrument in various economic sectors. This alignment was possible thanks to the discussions for the drafting of the law, which took place between public administration and private sector entities within the scope of the Capital Markets Initiative (IMK), a strategic action led by the Ministry of Economy, in which Brazilian Securities Commission participates.

The coordination, supervision and supervision of the securitization market and its participants is the responsibility of the Securitization Superintendence created in 2021, which is part of the Brazilian Securities Commission.

Regarding the the main changes brought by the Legal Framework of Securitization, the following stand out:

• The creation of important legal definitions for the securitization market, such as "securitization companies" and "securitization";
• The use of a uniform and comprehensive concept of "Certificate of Receivables";
• The possibility for securitization companies – including securitization companies of financial credits – to use the fiduciary regime with the constitution of separate estate in the issuance of any Certificate of Receivables and other securities representing securitization;
• The protection of the investor in relation to risks related to tax, social security or labor issues of the securitization company, with removal from the application of article 76 of Provisional Measure 2.158-35^[1];
• The possibility of capital calls through the execution of a subscription promise and payment of certificate of receivables;
• The extension of the revolving mechanism – previously restricted to agribusiness credits – for securitization involving receivables of any kind, with implementation subject to adjustment in CVM Resolution No. 60/21, which currently prohibits revolving on real estate securitization;
• The possibility of recomposing the backing of the structure with other credit rights in view of the insufficient of the separate estate;
• The provision of payment of investors with credit rights in situations of settlement of issues arising from the insolvency of the securitization company or insufficiency of the separate estate assets, in situations in which there was no agreement between investors or quorum at the general meeting; and
• The extension of the correction clause by the exchange variation for Certificates of Receivables of any nature, which was previously restricted to Certificates of Agribusiness Receivables (CRA), provided that the requirements set forth in law and by the National Monetary Council are observed.

The income tax exemption on income paid to individuals holding Certificates of Real Estate Receivables (CRI) and Certificates of Agribusiness Receivables (CRA), however, does not extend to other Certificates of Receivables.

Provisional Measure No. 1.103/22 has been in force, with force of law,  since its edition, on March 15 of this year. During its process in the National Congress, 55 parliamentary amendments were presented.

Among the proposed amendments, we highlight the revocation of items I, II and III of paragraph 8 of Article 3 of Law 9,718/98 to allow the fundraising expenses incurred by legal entities whose purpose is the securitization of credits to be deducted from the calculation basis of the contribution to PIS/PASEP and COFINS taxes.

The revoked items limited this possibility to the securitization of real estate, agribusiness and financial credits. This tax treatment is necessary to facilitate the payment flow in the acquisition of credit rights in securitization.

The edition of the Legal Framework of Securitization is an important advance for the receivables credit market and inaugurates a new paradigm in this sector, with enormous economic potential and guarantee of legal certainty for the performance of securitization companies. The reform will therefore allow the consolidation and expansion of the securitization market in Brazil and has the potential to positively affect the most varied sectors of the economy, in addition to strengthening the national capital market.

^[1] Provisional Measure 2.158-35. "Art. 76. The rules establishing the allocation or separation, in any capacity, of assets of an individual or legal entity have no effect in relation to debts of a tax, social security or labor nature, in particular with regard to the guarantees and privileges attributed to them.

Single paragraph. For the purposes of the provisions of the caput, all the assets and income of the taxable person, his estate or his bankrupt estate, including those that have been subject to separation or affectation, remain liable for the debts referred to therein."