Unicasa Móveis - Relações com Investidores

Corporate Governance / Global Vision

Regulation of Brazilian Securities Markets

The Brazilian securities market is regulated by the CVM which has regulatory authority over the stock exchanges and securities markets, as well as the CMN and the Central Bank, which have, among other powers, regulatory authority over brokerage firms and regulatory authority over foreign investment and foreign exchange transactions.  The Brazilian securities markets are generally governed by Law No. 6,385 of December 7, 1976, or the Brazilian Securities Exchange Law, and the Brazilian Corporations Law, as well as by rules and regulations issued by the CVM, the CMN and the Central Bank. These laws and regulations include, among other things, providing for disclosure requirements applicable to issuers of publicly traded securities, criminal sanctions for insider trading and price manipulation, protections for minority shareholders, and procedures for licensing and supervising brokerage firms.

Under the Brazilian Corporations Law, a company is required to be a publicly held company (companhia aberta) before listing its common shares.  All publicly held companies are registered with the CVM and are subject, inter alia, to periodic reporting requirements and prompt disclosure of material facts.  A company registered with the CVM may trade its securities either on the BM&FBOVESPA or on the Brazilian over‑the‑counter market.  The shares of a listed company may also be traded privately, subject to several limitations.

The over-the-counter market is divided into two categories: (i) organized over-the-counter market, in which the transactions are supervised by self-regulating entities authorized by the CVM; and (ii) non-organized over-the-counter market, in which the transactions are not supervised by self-regulating entities authorized by the CVM. In either case, transactions are directly traded among persons, outside of the stock exchange market, through a financial institution authorized by the CVM. The institution must be registered with the CVM (and in the relevant over-the-counter market), but there is no need for a special license to trade securities of a publicly held company on the over-the-counter market.

To be listed on the BM&FBOVESPA, a company must apply for registration with the BM&FBOVESPA and the CVM.

The trading of securities on the BM&FBOVESPA may be suspended at the request of a company in anticipation of a material announcement.  Trading may also be suspended on the initiative of the BM&FBOVESPA or the CVM based on or due to a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or the BM&FBOVESPA, among other reasons.

 

Corporate Governance Practices and the Novo Mercado

In 2000, the BM&FBOVESPA introduced three special listing segments, known as Level 1, Level 2 and the Novo Mercado, aimed at fostering a secondary market for securities issued by Brazilian companies with securities listed on the BM&FBOVESPA by prompting such companies to follow good corporate governance practices.  The listing segments were designed for the trading of shares issued by companies voluntarily undertaking to abide by corporate governance practices and disclosure requirements in addition to those already imposed by applicable Brazilian law.

These rules generally increase shareholders' rights and enhance the quality of information provided to shareholders.  To become a Level 1 company, in addition to the obligations imposed by applicable law, the issuer must agree to:  (i) ensure that shares of the issuer representing at least 25.0% of its total capital are effectively available for trading; (ii) adopt offering procedures that favor widespread ownership of shares whenever making a public offering; (iii) comply with minimum quarterly disclosure standards; (iv) follow stricter disclosure policies with respect to transactions made by controlling shareholders, members of its board of directors and its executive officers involving securities issued by the issuer; (v) submit any existing shareholders' agreement and stock option plans to the BM&FBOVESPA; and (vi) make a schedule of corporate events available to shareholders.

To become a Level 2 company, in addition to the obligations imposed by applicable law, an issuer must agree to:  (i) comply with all of the listing requirements for Level 1 companies; (ii) grant tag-along rights for all shareholders in connection with a transfer of control of the company offering (a) the same price paid per share of the controlling block of shares for each common share and (b) 80% of the price paid per share of the controlling block for each preferred share; (iii) grant voting rights to holders of preferred shares in connection with certain corporate restructurings and related-party transactions, such as (a) any transformation of the company into another corporate form; (b) any merger, consolidation or spin-off of the company; (c) approval of any transactions between the company and its controlling shareholder or parties related to the controlling shareholder; (d) approval of any valuation of assets to be delivered to the company in payment for shares issued in a capital increase; (e) appointment of an expert to ascertain the fair value of the company in connection with any deregistration and delisting tender offer from Level 2; and (f) any changes to these voting rights, which will prevail as long as the adhesion contract to the Level 2 regulation with the BM&FBOVESPA is in effect; (iv) have a board of directors consisting of at least five members out of which a minimum of 20% of the directors must be independent and limit the term of all members to two years; (v) prepare annual financial statements (Demonstrações Financeiras Padronizadas or DFP), in English, including cash flow statements in accordance with international accounting standards, such as U.S. GAAP or IFRS; (vi) conduct a tender offer by the company's controlling shareholder if it elects to delist from the Level 2 segment (the minimum price of the shares to be offered will be the economic value determined by an independent specialized firm with requisite experience); and (vii) adhere exclusively to the Market Arbitration Chamber for resolution of disputes between the company and its investors.

To be listed on the Novo Mercado, an issuer must meet all of the requirements for Level 1 and Level 2 companies and, in addition, the issuer must:  (i) issue only common shares; and (ii) grant tag-along rights for all shareholders in connection with a transfer of control of the company, offering to the minority shareholders the same price paid per share of the controlling block.

 

Investment in Our Common Shares by Non-residents of Brazil

Foreign investors must register their investment in common shares under Law No. 4,131 or CMN Resolution No. 2,689 and CVM Instruction No. 325. CMN Resolution No. 2,689 affords favorable tax treatment to foreign investors who are not residents in a tax haven jurisdiction, as defined by Brazilian tax laws (please refer to the section "Taxation—Tax on Foreign Exchange Transactions (IOF/Exchange)" for further discussion on the concept of tax haven under Brazilian law).

Under CMN Resolution No. 2,689, foreign investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain requirements are met. In accordance with CMN Resolution No. 2,689, the definition of foreign investor includes individuals, companies, mutual funds and other collective investment entities domiciled or headquartered abroad. Under CMN Resolution No. 2,689, a foreign investor must: (i) appoint at least one representative in Brazil, with powers to perform actions relating to its investment; (ii) appoint an authorized custodian in Brazil for its investment, which must be a financial institution duly authorized by the Central Bank or the CVM; (iii) through its representative, register as a foreign investor with the CVM; and (iv) register its foreign investment with the Central Bank.

In addition, an investor operating under the provisions of CMN Resolution No. 2,689 must be registered with the Brazilian internal revenue service pursuant to its Normative Ruling No. 1,183/11.

Securities and other financial assets held by non-Brazilian investors pursuant to CMN Resolution No. 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading is restricted to transactions carried out in the stock exchanges or through organized over-the-counter markets licensed by the CVM, except for transfers resulting from a corporate restructuring, or occurring upon the death of an investor by operation of law or will.

In October 2010, the Brazilian government increased the IOF/Exchange Tax. See "Taxation— Tax on Foreign Exchange Transactions (IOF/Exchange)."

 

The Novo Mercado

The Novo Mercado is a special stock market listing segment of the BM&FBOVESPA exclusively intended for companies meeting certain requirements and agreeing to adhere to differentiated corporate governance rules. The items below summarize the key points of the Novo Mercado that are applicable to us:

  • we may not issue or maintain preferred or founder's shares;
  • we must have a public float of at least 25.0% of our capital stock;
  • in the event of a change of control, either through a single transaction or through successive transactions, the same price conditions and terms offered to the prospective controlling shareholders must be extended to minority shareholders in a tender offer (tag-along rights);
  • the board of directors should be composed of at least five members, of which at least 20.0% should be independent directors elected during the shareholders' meeting for a term of up to two years, with re-election permitted;
  • before taking office, new members of the board of directors and the board of executive officers are required to execute an instrument of consent through which they agree to comply with the listing rules of the Novo Mercado, the Market Arbitration Chamber, the Novo Mercado listing agreement, the Sanctions Regulation and the Arbitration Regulations;
  • prepare, in English, the full financial statements, accompanied by management reports and the opinion or special review report from the independent auditors, as applicable according to local laws. Under the listing rules of the Novo Mercado, we are required to adopt these criteria after the first release of our financial statements following the commencement of trading of our common shares on the Novo Mercado;
  • send to the BM&FBOVESPA and disclose by December 10 of each year a schedule of corporate events for the following year. Any further changes in connection with such scheduled events must be informed to the BM&FBOVESPA and disclosed at least within five days prior to the occurrence of the altered event;
  • if we delist from the Novo Mercado or become a privately held company, the controlling shareholders must make a tender offer for the purchase of our common shares held by other shareholders at a price per share at least equal to such shares' economic value, according to a valuation report prepared by a specialized and independent company of recognized experience. If this occurs, we also must comply with requirements of the Brazilian Corporations Law; and
  • we, our shareholders, our officers, our directors and members of our fiscal council (if established) must commit to resolve, by means of arbitration, any and all disputes or controversies which may arise relating to or resulting from the application, validity, effectiveness, interpretation, violation and respective effects of the provisions of the Brazilian Corporations Law, our bylaws, the rules and regulations of the CMN, the Central Bank, and the CVM, as well as other rules and regulations applicable to the Brazilian capital markets, in addition the listing rules of the Novo Mercado, the Novo Mercado listing agreement, Sanctions Regulations and Arbitration Regulations.

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Dell Anno Favorita New Móveis Casa Brasileira Unicasa Corporate

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