Corporate Governance and Directors' Duties: Brazil

A Q&A guide to corporate governance law in Brazil.

The Q&A gives a high level overview of board composition, the comply or explain approach, management rules and authority, directors’ duties and liabilities, transactions with directors and conflicts, company meetings, internal controls, accounts and audit, institutional investors and reform proposals.
To compare answers across multiple jurisdictions, visit the Corporate Governance Country Q&A tool.
The Q&A is part of the PLC multi-jurisdictional guide to corporate governance law. For a full list of jurisdictional Q&As visit
Fabio Campos Mello and Rafaella Chiachio, Campos Mello Advogados in co-operation with DLA Piper

Corporate entities

Brazilian legislation provides for several company forms. Among them, the Brazilian limited liability company (sociedade empresária limitada, Ltda) and the Brazilian corporation (sociedade anônima, SA) are the most commonly used. Other company forms have not been accepted in practice, particularly because most of them provide for unlimited shareholder liability.

Limited liability companies

Limited liability companies are governed by the Brazilian Civil Code (Law 10,406 of 2002) (Civil Code). In case of omissions and depending on the company's articles of association, the rules under the Civil Code relating to limited liability companies may be supplemented by the rules in the Civil Code relating to the sociedade simples (a corporate type also established by the Civil Code) or by the Corporations Act (Law 6,404 of 1976).

The limited liability company structure is usually recommended for companies that prefer a simpler governance structure. The legislation grants such companies more freedom to organise their internal structure and decision-making process, as well as a lower degree of transparency and disclosure obligations. That is why these corporate entities are mostly used for wholly owned companies.


Corporations are governed by the Corporations Act, which provides a more sophisticated legal regime for corporate activities, management and shareholders' relations, corporate governance structures, decision-making processes, transparency and disclosure obligations, and conflict resolution procedures. This corporate entity is more appropriate for a co-owned equity structure, such as joint ventures, as well as for the participation of various kinds of stakeholder, such as financing entities or holders of debt instruments.

A corporation can be held either publicly or privately. As a general rule, a publicly held corporation has its securities traded on the stock exchange and/or the over-the-counter market.


Legal framework

1. What is the regulatory framework for corporate governance and directors' duties?

Corporate governance and directors' duties are governed by the following:

  • Civil Code, which provides a section dedicated to limited liability companies.

  • Corporations Act, which applies to both publicly and privately held corporations and limited liability companies which choose its subsidiary application in their articles of association.

  • Rules set out by the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários) (CVM), which apply to publicly held corporations.

  • Rules enacted by the Brazilian Stock Exchange (BM&F Bovespa). The BM&F Bovespa has created differentiated listing segments, with rules setting out corporate governance practices and transparency requirements in addition to those already established under Brazilian corporate legislation. The adherence to the listing segments better advertises a company's efforts to improve its relations with its investors and increases the potential for appreciation of asset value. This adherence is voluntary and must be approved by the BM&F Bovespa.

There are currently four special listing segments established by the BM&F Bovespa:

    • Bovespa Mais;

    • Level 1;

    • Level 2; and

    • Novo Mercado.

    The basic difference between the segments is the level of the applicable governance practices.

    The most popular listing segment is the Novo Mercado, which has the highest level of corporate governance requirements. The following are some of the main requirements:

    • a company's share capital must be represented only by common shares (that is, voting shares);

    • a company must maintain a minimum free float, equivalent to 25% of the company's share capital. The term free float means shares issued by the company, except for those shares held by the controlling shareholders and related parties, the company's officers and directors, as well as those shares kept in treasury by the company.

    • in the event of sale of a company by the controlling shareholder(s), the remaining shareholder(s) must be granted tag-along rights so that they can sell their interest on the same conditions as the controlling shareholder(s);

    • a company's board of directors (board) must comprise at least five members, with a unified term of office of two years. At least 20% of the directors must be independent;

    • a company must prepare an annual agenda of its corporate events (such as ordinary corporate meetings, disclosure of the results or public meetings with market analysts and investors);

    • in the event of a company's de-listing or cancellation of registration as a publicly held company, the company or its controlling shareholder(s), as the case may be, must perform a tender offer for the acquisition of the company's remaining shares using the economic value criteria;

    • any dispute involving the company must be settled by arbitration under the Market Arbitration Panel Rules;

    • the positions of chairman of the board and chief executive officer (CEO) cannot be held by the same person;

    • a company must prepare a trading policy regarding its securities, which will be applicable, at least, to the company itself, the controlling shareholder(s), company's officers, members of the board, members of the fiscal council (if established) and members of any statutory bodies with technical or advisory functions.

    Considering that most of the companies that have carried out initial public offerings in Brazil in recent years have adhered to the Novo Mercado, the answers below relate to the regulation applicable to the Novo Mercado listing segment (Novo Mercado Regulation).

  • The Code of Best Practices in Corporate Governance of the Brazilian Institute of Corporate Governance (IBGC) (Code) (see Question 2). The IBGC, a not-for-profit organisation, has played a very important role in the introduction and dissemination of the corporate governance concept in Brazil.

2. Has your jurisdiction adopted a corporate governance code? If yes:
  • What is the name of the code? What areas are covered by it (for example, board composition and committees, remuneration, audit and risk)?

  • How is the code structured (for example, a set of rules or principles and provisions)? What type of companies must comply with the code?

  • Is the code based on the comply or explain principle? How are companies required to report their application and compliance with the code (for example, in their annual report)?

  • What are the consequences of non-compliance with the code?

  • What has been the general response of companies, regulators and shareholder groups to the comply or explain approach? Has it been popular or controversial? Are there plans to reform it?

The Code is considered the most traditional and comprehensive code relating to corporate governance in Brazil.

The Code is divided into the following six chapters:

  • Ownership.

  • Board.

  • Management.

  • Independent auditing.

  • Fiscal council.

  • Conduct and conflicts of interest.

The first five chapters contain a set of best practices and recommendations. The last chapter discusses conduct standards for an entity's agents, in addition to proposing policies and practices to avoid conflicts of interest and misuse of assets and information.

The compliance with the recommendations set out in the Code is not mandatory and the Code does not set out a special compliance procedure. Any type of corporate entity can choose to comply with the Code; the Code is not confined to a specific type of corporate entity.

Non-compliance with the Code recommendations does not trigger any penalties.

The regulations of the BM&F Bovespa listing segments could also be considered as a corporate governance code applicable to the companies concerned (see Question 1). Non-compliance with the regulations is punishable by penalties by the BM&F Bovespa.

The Code is currently in its fourth edition. The Code has been well accepted in Brazil, particularly among publicly held corporations.


Board composition and remuneration of directors

3. What is the management/board structure of a company? In particular:
  • Is there a unitary or two-tiered board structure?

  • Who manages a company and what name is given to these managers?

  • Who sits on the board(s)?

  • Do employees have a right to board representation?

  • Is there a minimum or maximum number of directors or members of the managerial and supervisory bodies?


Limited liability companies. The Civil Code does not establish a formal management structure for limited liability companies. Similarly, the existence of a board in a limited liability company is not expressly provided for, since the board is only regulated by the Corporations Act (see below, Corporations). Because of this, and considering that limited liability companies usually have a simplified structure, the existence of a board is not common and could be questioned by the Board of Trade. Therefore, any further references to board and directors in this chapter relate solely to corporations.

Corporations. Under the Corporations Act, the management powers are vested in the company's officers and the board, or only the officers. The existence of a board is mandatory only for publicly held companies, companies with authorised capital and mixed capital companies (that is, companies whose corporate capital is held both by private parties and the state, where the latter, as a general rule, is the majority shareholder).

In any case, the board is a deliberative body only; the company's representation rights rest solely with the company's officers. Brazilian legislation does not provide for a two-tiered board structure.

Fiscal council. Brazilian legislation establishes the fiscal council for both limited liability companies and corporations. The fiscal council is not part of the company's management, being essentially a supervisory/inspection body which reports directly to the shareholders. As a general rule, the fiscal council may be either permanent or temporary. A fiscal council is appointed by the decision of shareholders.


Limited liability companies. The management is carried out by one or more officers (or managers), who can be, but do not have to be, quotaholders. Their appointment is made by the quotaholders, who may attribute to them a specific designation. The managers' functions and responsibilities are set out in the applicable legislation and the company's articles of association.

Corporations. The management is carried out by:

  • The officers, elected by the shareholders' meeting or the board.

  • If applicable, the board (see above, Structure: Corporations).

Officers and board members are jointly referred to as managers under the Corporations Act. In general, their structure, composition, functions and responsibilities are determined by the Corporations Act and the company's bye-laws.

Since the board is a deliberative body, its members do not have specific titles. However, the board must have a chairman, chosen among the board members (Corporations Act).

Although officers are not required to have a specific designation, it is common for companies to designate their officers in the bye-laws (for example, as CEO and chief financial officer (CFO)). An exception is made for publicly held companies that must have an investor relations officer with specific functions.

Board members

See above, Management.

Employees' representation

According to the Corporations Act, the company's bye-laws may provide for the participation of an employees' representative in the board. An employees' representative is chosen by employees' votes in a free election, organised by the company jointly with the labour unions representing the employees.

Number of directors or members

Limited liability companies. A minimum or maximum number of officers (managers) is not fixed by law.

Corporations. A corporation must have at least two officers and if there is a board, three directors. Generally, up to one-third of the board members can also serve as officers.

4. Are there any age or nationality restrictions on the identity of directors?

Age restrictions

Brazilian corporate law is silent on this matter. The general principles regarding civil capacity apply. Considering that, generally, an individual reaches civil majority at the age of 18 it is commonly understood that this should be the minimum age for election as manager of a company.

Nationality restrictions

Limited liability companies. Officers must be Brazilian residents. If the shareholders want to elect a non-resident person as an officer, that individual must first apply for a permanent visa to obtain the required resident status in Brazil.

Corporations. The position relating to officers is the same as for limited liability companies (see above, Limited liability companies). Directors do not have to be Brazilian residents. However, companies that perform certain regulated activities (such as communication and broadcasting) must have Brazilian nationals as managers.

5. In relation to non-executive, supervisory or independent directors:
  • Are they recognised?

  • Does a part of the board have to consist of them? If so, what proportion?

  • Do non-executive or supervisory directors have to be independent of the company? If so, what is the test for independence or what makes a director not independent?

  • What is the scope of their duties and potential liability to the company, shareholders and third parties?

  • Recognition. Non-executive and supervisory directors are not recognised in Brazil. Independent directors are recognised but are not mandatory. The existence of independent directors is considered good corporate governance practice, being provided for in the Code and Novo Mercado Regulation.

  • Board composition. The board of companies listed in the Novo Mercado segment must have at least 20% of the board members independent. There is no such requirement for other companies. Under the Code, the number of independent board members should depend on the level of maturity of the company, its life cycle and characteristics.

  • Independence. Under the Novo Mercado Regulation, an independent director is defined as an individual who:

    • has no ties with the company except for owning company's shares;

    • is not a controlling shareholder, the controlling shareholder's spouse or a relative to the second degree, and is not, or has not been in the last three years, linked to a company or entity with ties with the controlling shareholder;

    • has not been a manager of the company, or employed by or worked for the company, the controlling shareholder or any other company controlled by the company;

    • is not a direct or indirect supplier or purchaser of the company's services or products or both, to a degree that results in loss of independence;

    • is not an employee or manager of a company or entity that supplies services or products or both to, or buys these from, the company;

    • is not a spouse or a relative to the second degree of any manager of the company; and

    • does not receive any compensation from the company except for that related to his activities as a member of the board.

    The Code also provides a definition of independent director, which is similar to the one above, subject to some additions.

  • Duties and liabilities. Independent directors have the same responsibilities, duties and liabilities as the other directors of the company (see Question 15).

6. Are the roles of individual board members restricted? For example, can one person be the chairman and chief executive?

Under the Corporations Act, up to one-third of the members of the board can also serve as officers.

Under the Novo Mercado Regulation, the roles of chairman and CEO (or main executive) of a company cannot be held by the same person. The Code recommends this as well.

7. How are directors appointed and removed? Is shareholder approval required?

Appointment of directors

The members of the board are appointed by the general shareholders' meeting.

Removal of directors

The members of the board can be removed, at any time, by the general shareholders' meeting.

8. Are there any restrictions on a director's term of appointment?

The Corporations Act sets out a maximum three-year term in office for managers. Re-appointment is permitted. No similar restrictions apply to officers of limited liability companies.

Directors of companies listed in the Novo Mercado segment must not have a term in office exceeding two years. The Code sets out the same recommendation.

9. Do directors have to be employees of the company? Can shareholders inspect directors' service contracts?

Directors employed by the company

Brazilian corporate legislation does not require directors to be employees of the company.

Shareholders' inspection

The right to inspect the company is an essential right of all shareholders of a company, who must exercise this right in accordance with the applicable legislation.

The conditions of the agreements executed by and between the publicly held company and its directors and senior employees can be disclosed to the annual shareholders' meeting, at the request of shareholders representing 5% or more of the company's share capital (Corporations Act).

10. Are directors allowed or required to own shares in the company?

The members of the board must be shareholders of the company.

11. How is directors' remuneration determined? Is its disclosure necessary? Is shareholder approval required?

Determination of directors' remuneration

The shareholders' meeting must determine the total or individual remuneration of the company's managers, including benefits and allowances, taking into account (Corporations Act):

  • The managers' responsibilities.

  • Time dedicated by the managers to their tasks.

  • The managers' competence.

  • The managers' professional reputation.

  • Market practices.


The minutes of the publicly held company's shareholders' meeting approving manager remuneration must be registered before the Board of Trade and disclosed to the market.

CVM has recently issued an Instruction providing for additional disclosure requirements relating to the remuneration of publicly held companies' managers, which includes the disclosure of the highest and lowest remuneration levels.

As a general rule, privately held companies must register the shareholders' meeting minutes approving manager remuneration before the Board of Trade.

Shareholder approval

The shareholders determine the managers' remuneration (see above, Determination of directors' remuneration).


Management rules and authority

12. How is a company's internal management regulated? For example, what is the length of notice and quorum for board meetings, and the voting requirements to pass resolutions at them?

Besides the applicable legislation, companies' internal management is regulated by the articles of association (limited liability companies) or bye-laws (corporations), as well as shareholders agreements, if any.

The general quorum for board meetings is the majority of attending members (Corporations Act). This quorum can be increased by the company for certain matters. Other than in relation to board meetings' quorum, the applicable legislation does not provide specific rules regarding the management meeting proceedings. This matter can be freely determined by the company and its shareholders in the company's bye-laws or articles of association. The Code sets out some recommendations relating to the management meeting proceedings.

13. Can directors exercise all the powers of the company or are some powers reserved to the supervisory board (if any) or a general meeting? Can the powers of directors be restricted and are such restrictions enforceable against third parties?

Directors' powers

The Corporations Act provides a non-conclusive list of the powers of the board, which includes:

  • Establishing the general strategy for the company's business.

  • Supervising the performance of the officers, which includes examination of the company's books and records and the right to request information on contracts.

  • Electing and dismissing officers and determining their duties.

  • Convening the general shareholders' meeting

The company's bye-laws may grant additional powers to the directors, subject to the exclusive powers of the shareholders' meeting. However, the board is a deliberative body only and the company's general representation rights remain with the officers.

The Novo Mercado Regulation contains a list of the board's powers in addition to the ones set out in the Corporations Act. The bye-laws of the companies that comply with this listing segment must take into account these powers. The Code also contains an entire chapter on the board, which includes the board's expected powers.

Some powers of the company are reserved to the shareholders' meeting, for example (Corporations Act):

  • Amending bye-laws.

  • Approving financial statements (see Question 23).

  • Establishing the fiscal council and appointing its members.

  • Appointing board members.

  • Determining management compensation.

  • Approving company's merger, consolidation, spin-off and dissolution.

These powers cannot be delegated to any other corporate body.


Restrictions on directors' and officers' powers are enforceable against third parties provided they are set out in the company's bye-laws, which must be registered before the Board of Trade. The restrictions must comply with corporate legislation and other applicable regulation.

14. Can the board delegate responsibility for specific issues to individual directors or a committee of directors? Is the board required to delegate some responsibilities, for example for audit, appointment or directors' remuneration?

Powers conferred by law exclusively on the board (see Question 13, Directors' powers) cannot be delegated to any other corporate body. This restriction does not prevent the company from creating board committees to assist or advise the board in relation to certain matters. Board committees may include audit, human resources/compensation, governance, finance and sustainability committees, among others.


Duties and liabilities of directors

15. What is the scope of a director's duties and personal liability to the company, shareholders and third parties? Please distinguish between civil and criminal liability under each of the following (if relevant):
  • General duties.

  • Theft and fraud.

  • Securities law.

  • Insolvency law.

  • Health and safety.

  • Environment.

  • Anti-trust.

  • Other.

General duties

Corporations. Managers are subject to the (Corporations Act):

  • Duty of care. Managers must use the necessary care and diligence that any average and honest person would use in the management of his own businesses (recently, this care and diligence must be equal to the regular care of a professional manager).

  • Duty of loyalty. Managers must not benefit or must not cause third parties to benefit from their position. Managers must keep information regarding the company's business confidential.

  • Duty to avoid conflicts of interest. A manager must not take part in any corporate operation or deliberation in which his personal interests conflict with those of the company.

In addition, managers of publicly held companies have a duty of disclosure and must comply with the information policies set out by the Corporations Act and CVM Regulation.

Managers will not be personally liable for the obligations arising from agreements executed on behalf of the company and in connection with regular acts of management, except when the damages and losses have occurred due to either:

  • Fault, negligence or wilful misconduct on the managers' part.

  • Any breach of the law or the company's bye-laws.

Managers are jointly and severally liable for damages caused as a result of their non-compliance with the legal duties relating to the regular management of the corporation, even if, based on the corporation's bye-laws, liability would not be applicable to all managers. Exception is made for publicly held companies that set out in their bye-laws specific responsibilities for their officers, for example, investor relations officer.

In principle, a manager will not be liable for the unlawful acts of other managers, except if that manager:

  • Has consented to the illegal activity implemented by the other managers.

  • Was negligent in not discovering such illegal activities.

  • Having discovered the illegal activity, he did not act to avoid or stop it.

To be exempted from the liability for other managers' illegal activity or measure to be taken by the corporation that may result in damages or losses, the manager must dissent and make his dissent attested in the minutes of the relevant meeting.

Whether a manager can be criminally liable depends on the characterisation of his conduct as illicit according to the provisions of the law. Criminal liability is always based on misconduct by the manager. Criminal liability is similar in nature to civil liability, except that to be criminally liable, a manager's misconduct must be more severe, and also offensive to the public order, being therefore a crime.

In this respect, managers may be criminally liable for, among others:

  • Crimes against heritage, for example, fraud and/or provision of false information about the company.

  • Economic law crimes under Law No. 7,492 of 1986 (Crimes Against the Financial System Law) and Law No. 1,521 of 1951 (Crimes Against the Economy Law)).

  • Crimes in bankruptcy proceedings, for example, fraud against creditors.

  • Crimes set out in the Consumer Code.

  • Insider trading (applicable only to publicly held companies).

Limited liability companies. The section dedicated to limited liability companies in the Civil Code does not contain any specific provision relating to managers' duties and responsibilities. The general duties applicable to managers of corporations apply, mutatis mutandis, to managers of a limited liability company if the latter is subject to supplementary regulation by the Corporations Act. If not, the Civil Code provisions relating to the duties of managers of sociedades simples, which are conceptually similar to the ones set out by the Corporations Act, apply. Criminal liability applies in any case, except for insider trading (see above, General duties: Corporations).

Theft and fraud

Managers can be held liable for theft and fraud, as provided above (see above, General duties: Corporations).

Securities law

All publicly held corporations, as well as their managers, are subject to the CVM supervision. Any violation of the Corporations Act and CVM regulations may subject managers to administrative penalties.

Insolvency law

Managers can be held liable for acts during bankruptcy and judicial recovery proceedings (see above, General duties: Corporations).

Health and safety

Managers may be held liable for violations of health and safety regulations.


Managers may be held liable for environmental damages, if either:

  • Their actions are due to negligence, imprudence, wilful misconduct or are against the company's bye-laws (civil liability).

  • It is evidenced that they were aware of the crime and did not take the necessary steps to avoid it (criminal liability).


Managers may be held liable for violations of the anti-trust legislation.


Managers' liability may also include:

  • Employment law liability.

  • Tax liability. This requires abuse of power, or breach of the law or the company's bye-laws.

16. Can a director's liability be restricted or limited? Is it possible for the company to indemnify a director against liabilities?

Manager's liability for breach of duties described in Question 15 cannot be limited. A company can contractually agree to indemnify its managers. Indemnity is usually provided through directors and officers insurance (D&O Insurance).

17. Can a director obtain insurance against personal liability? If so, can the company pay the insurance premium?

Managers can have D&O Insurance, which may work to protect them against lawsuits brought by shareholders and/or third parties eventually affected by the management's actions.

The insurance premium is normally paid by the company.

18. Can a third party (such as a parent company or controlling shareholder) be liable as a de facto director (even though such person has not been formally appointed as a director)?

As a general rule, a third party can be held individually liable for acts practised on behalf of the company, when that third party performed the act without proper authorisation.


Transactions with directors and conflicts

19. Are there general rules relating to conflicts of interest between a director and the company?

The Corporations Act establishes a duty to avoid conflicts of interest (see Question 15, General duties: Corporations). The Code sets out additional provisions relating to conflicts of interest.

20. Are there restrictions on particular transactions between a company and its directors?

A manager can only enter into transactions with the company under reasonable and fair conditions, identical to those prevailing in the market or under which the company would contract with third parties.

21. Are there restrictions on the purchase or sale by a director of the shares and other securities of the company he is a director of?

As a general rule, the shareholders can freely transfer their shares and securities. Certain restrictions may be established contractually, for example, lockup period and right of first refusal. In relation to limited liability companies, quota transfers to third parties must be previously approved by quotaholders representing at least 25% of the company's share capital.

Brazilian corporate legislation sets out additional rules for trading of the publicly held companies' securities by their managers. In general terms, managers are forbidden from trading with securities issued by a publicly held company, or backed by it, before either:

  • The disclosure of any material fact regarding the company's business, as defined by the CVM.

  • The disclosure of the company's quarterly and annual results.

The Novo Mercado Regulation and Code establish additional dispositions regarding the trading of shares, which include the requirement of the implementation of a securities trading policy by the company.


Disclosure of information

22. Do directors have to disclose information about the company to shareholders, the public or regulatory bodies?

Brazilian legislation establishes several disclosure obligations for managers in relation to the company's information:

  • Limited liability companies. Information that must be disclosed to quotaholders includes but is not limited to:

    • management accounts and balance sheet;

    • corporate documents (such as articles of association and any amendments, and minutes of corporate resolutions). Certain corporate documents must also be published in the press (usually acts that could affect creditors' rights, such as the documents deliberating on merger, spin-off, consolidation, dissolution and excess capital reduction).

  • Corporations. Information that must be disclosed to shareholders includes but is not limited to:

    • annual management accounts and financial statements, which also must be published in the press;

    • corporate documents (to be effective against third parties, minutes of a meeting must also be published in the press after being filed with the Board of Trade);

    • any documents related to shareholder meeting agendas.

  • Publicly held corporations. Documents and information that publicly held companies must disclose both on a ordinary and extraordinary basis to the CVM and the market in general (including shareholders) are as following:

    • corporate documents (bye-laws, shareholders' agreements, minutes of corporate meetings, material fact notices and communications to the market);

    • financial statements, management reports and other financial information;

    • registration form (Formulário Cadastral), which summarises, among others, the company's basic information, such as name, headquarters, business sector, website, investor relations officer, types and ownership of securities issued, stock exchanges in which such securities are traded, and independent auditors. This form must be constantly updated by the company;

    • reference form (Formulário de Referência). This is very similar to the 20-F form requested by the US Securities and Exchange Commission (SEC). The Formulário de Referência must be provided by the publicly held company annually and updated periodically. It is a very information-dense, complex form regarding the company's business and operations

    Companies that carry on regulated activities (for example, telecommunications, energy, oil and gas) must also comply with the disclosure obligations set out by the respective regulatory agencies.


Company meetings

23. Does a company have to hold an annual shareholders' meeting? If so, when? What issues must be discussed and approved?

Companies must hold an annual shareholders' (quotaholders') meeting during the first four months after the end of each fiscal year to deliberate on the following matters:

  • Limited liability companies:

    • management accounts and year-end balance sheet and economic results; and

    • election of managers, if applicable.

  • Corporations:

    • management accounts and year-end financial statements;

    • allocation of the net profits for the fiscal year and distribution of dividends; and

    • election of managers and members of the fiscal council, if any, and their remuneration.

    Special meetings can be held whenever the corporate interest so requires.

24. Can shareholders call a meeting or propose a specific resolution for a meeting? If so, what level of shareholding is required to do this?

It is the managers' duty to call quotaholders'/shareholders' meetings.

Such meetings can also be called by:

  • Any quotaholder/shareholder, if there is a delay in calling the meeting for more than 60 days.

  • Holders of more than 20% (limited liability companies) or 5% (corporations) of the company's corporate capital when the company's managers do not comply, within eight days, with the formal request to convene a meeting. Such request must clearly demonstrate the proposed meeting agenda.


Minority shareholder action

25. What action, if any, can a minority shareholder take if it believes the company is being mismanaged and what level of shareholding is required to do this?


All shareholders have the essential right to inspect the management of the company's business. The Corporations Act entitles minority shareholders to:

  • Request documents and information to verify the company's direction, pursuant to the applicable legislation.

  • Request the calling of a shareholders' meeting and propose a specific agenda, which may include the consideration of managers' actions.

  • Call a shareholders' meeting if the managers do not comply with the formal request (see Question 24).

In addition, the Corporations Act provides two kinds of legal action that can be brought against managers:

  • Civil liability claim brought by the company itself aiming at the compensation for damages to its corporate assets. This claim is subject to the prior approval of the shareholders.

  • Civil liability claim brought by any shareholder or a third party that suffered damages due to the managers' acts.

Limited liability companies

Similarly to corporations, quotaholders can request a quotaholders' meeting to discuss the managers' acts (see Question 24). If the limited liability company is subject to supplementary regulation by the Corporations Act, the civil liability claims can be brought against the managers (see above, Corporations). If the company is not so governed, shareholders can seek compensation for damages based on the general civil liability rules set out in the Civil Code.


Internal controls, accounts and audit

26. Are there any formal requirements or guidelines relating to the internal control of business risks?

The corporate legislation does not provide any formal requirements or guidelines regarding the internal control of business risks. Such matters are dealt with by the Code.

27. What are the responsibilities and potential liabilities of directors in relation to the company's accounts?

Company accounts must be prepared by the management in strict compliance with the applicable legislation. The approval of the company's accounts by the quotaholders/shareholders with no exceptions or restrictions excludes the managers' liability. An exception is made in cases of managers' error, wilful misconduct, fraud or simulation.

28. Do a company's accounts have to be audited?

The following companies must have their accounts audited by an independent auditor registered with the CVM:

  • Publicly held companies.

  • Large entities (either corporations or limited liability companies), that is, a company or group of companies under the same corporate control which had, in the previous fiscal year, either:

    • assets totaling an amount above BRL240 million (as at 1 April 2011, US$1 was about BRL1.6); or

    • annual gross revenue in excess of BRL300 million.

    Companies that do not meet the specifications above may voluntarily choose to have their accounts audited.

29. How are the company's auditors appointed? Is there a limit on the length of their appointment?

The board or the shareholders' meeting appoints and dismisses the company's independent auditors.

Independent auditors of publicly held corporations have a maximum five-year term in office, and must not be reappointed by the same company for three years following the end of their term in office. The application of this requirement has been temporarily suspended by the CVM until the end of fiscal year 2011 to allow companies to fully adapt themselves to the recent accounting modifications introduced by the Brazilian legislation, which includes the compliance with the International Financial Reporting Standards (IFRS).

30. Are there restrictions on who can be the company's auditors?

To be an independent auditor, the accountant (either individual or legal entity) must be registered with the CVM and the Accounting Regional Council (CRC).

31. Are there restrictions on non-audit work that auditors can do for the company that they audit accounts for?

Independent auditors of publicly held companies cannot provide any consultancy services that may cause the loss of objectivity and independence to:

  • The company they audit accounts for, its subsidiaries and parent company.

  • Companies in the same economic group.

Such prohibition is currently under judicial discussion.

Also, according to the rules issued by the CRC, before an independent auditor agrees to provide a service to the company not related to the company's audit, it must previously have determined that providing this service would not put its independence at risk.

32. What is the potential liability of auditors to the company, its shareholders and third parties if the audited accounts are inaccurate? Can their liability be limited or excluded?

Independent auditors can be held liable for any damages caused to third parties due to negligence or wilful misconduct in performing their duties.

The managers' responsibility for the information in the company's financial statements does not prevent the independent auditors' responsibility for their audit report.


Corporate social responsibility

33. Is it common for companies to report on social, environmental and ethical issues? Please highlight, where relevant, any legal requirements or non-binding guidance/best practice on corporate social responsibility.

Reporting on social, environmental and ethical issues is more common among publicly held companies. Such a report is usually included in the management report, which must be annually presented by every corporation and describes the company's business and main administrative facts that occurred in a given year.

The CVM has issued a practice bulletin regarding the preparation of the management reports, also recommending some fundamental matters that should be addressed in it, for example:

  • Comments on macroeconomics.

  • Human resources.

  • Research and development.

  • Environmental protection.

  • Perspectives for the subsequent fiscal year.


Company secretary

34. What is the role of the company secretary in corporate governance?

Under Brazilian corporate law, a company secretary is not mandatory. However, the appointment of a company secretary is considered good corporate governance practice, being provided for in the Code.

According to the Code, a company secretary must be a non-director appointed by the board. A company secretary's main responsibilities include:

  • Assisting the chairman in setting the agenda for board meetings and sending it out to other directors.

  • Interacting with officers and senior management to satisfy requests for clarification and information made by the directors.

  • Providing support to the directors and members of the board committees in the performance of their activities.

  • Drafting, filing and registering the minutes of the board meetings.


Institutional investors and shareholder groups

35. How influential are institutional investors and other shareholder groups in monitoring and enforcing good corporate governance? Please list any such groups with significant influence in this area.

Institutional investors are very influential in monitoring and enforcing good corporate governance. The most significant institutional investors are:

  • Private equity investment funds, which are required by law to participate in invested companies' decision-making process and effectively influence the determination of their business strategies and management.

  • The Brazilian Development Bank (BNDES), which establishes certain minimum governance practices that companies that the bank invests in must comply with.

  • Pension funds. The National Monetary Council has established rules regarding pension funds' investment limits in companies, based on the BM&F Bovespa listing segments.



36. Is there statutory protection for whistleblowers (persons who disclose criminal activity or other serious malpractice within a company)?

The law is silent on whistleblowing. The Code contains a recommendation that companies insert in their codes of conduct provisions to protect whistleblowers.



37. Please summarise any proposals for reform and state whether they are likely to come into force and, if so, when.

In the past years, Brazilian laws and regulations regarding corporate governance have been extensively changed and adapted. The recent changes include:

  • The reform of the Novo Mercado Regulation and the Code.

  • The issuance of several CVM rules improving publicly held companies' governance practices.

The following reforms are expected, among others:

  • Creation of the Brazilian Mergers and Acquisitions Committee (M&A Committee), inspired by the English Takeover Panel. The proposal is based almost entirely on self-regulation and intends to be a new kind of corporate governance quality seal for M&A transactions involving companies which abide by the M&A Committee's rules. The M&A Committee is expected to be set up in the second half of 2011.

  • Passing of Bill for conversion of Provisional Measure No. 517 into federal law, which, among others, proposes the amendment of the Corporations Act. The most notable amendments to the Corporations Act are:

    • insertion of an express provision regarding the possibility of remote participation of shareholders at shareholders' meetings. The remote participation was already allowed under the CVM rules.

    • deletion of the provision requiring that board members must be shareholders of the company; and

    • optimisation of the debenture issuance process.


Contributor details

Fabio Campos Mello

Campos Mello Advogados in co-operation with DLA Piper

T +55 21 3262 3000
F +55 21 3262 3011

Qualified. Brazilian Bar

Areas of practice. Corporate; mergers and acquisitions; capital markets; commercial contracts; real estate.

Recent transactions

  • Advising worldwide hotel operator and franchisor Marriott International on the US$47.5 million (as at 1 April 2011, US$1 was about EUR0.7) sale of JW Marriott Hotel Rio de Janeiro, in Brazil, to an affiliate of the US hospitality real estate company Host Hotels & Resorts.
  • Advising Ager Incorporações Imobiliárias, a Brazilian development company based in Rio de Janeiro, in a BRL500 million joint venture with global real estate investment firm GTIS Partners to perform real estate developments in the states of Rio de Janeiro, São Paulo and Minas Gerais.
  • Advising an affiliate of global hospitality company Hyatt Hotels Corporation on the acquisition of a majority interest in a 46,000 square metre ocean-front property in Barra da Tijuca, an upscale residential and commercial district of Rio de Janeiro for the purposes of developing a 408-room Grand Hyatt hotel on the site.

Rafaella Chiachio

Campos Mello Advogados in co-operation with DLA Piper

T +55 21 3262 3000
F +55 21 3262 3011

Qualified. Brazilian Bar

Areas of practice. Corporate, M&A, Listed Companies and Corporate Governance, Foreign Investment, Energy and Infrastructure.

Recent transactions

  • Assisting publicly held corporation Lojas Renner in a BRL670 million transaction, involving the acquisition attempt of Leader Magazine group.
  • Assisting Compass Group in a BRL305 million transaction, involving the acquisition of the total equity participation held by Accor group in Brazilian Company GR S.A.

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