Brazilian government enacted on March 30, 2020 the Provisional Measure No. 931 (“MP 931”), by means of an extra edition of the Federal Official Gazette. The purpose of MP 931 is to provide flexibility for deadlines and certain corporate law provisions addressing ordinary meetings, terms of office, and the granting of extraordinary powers to management bodies of companies, among other provisions, as a way of mitigating difficulties faced by entrepreneurs and entities as a result of the obstruction of economic activities caused by the Covid-19 pandemic.
MP 931 loosens certain provisions of Law No. 6404 of December 15, 1976 (the “Corporations Law”), Law No. 10406 of January 10, 2002 (the “Civil Code”), and Law No. 5764 of December 16, 1971 (“Cooperatives Law”), which govern, respectively, corporations, limited liability companies and cooperative companies. The main provisions of MP 931 allow such entities to (i) hold ordinary shareholders meetings within 7 (seven) months from the end of their fiscal year; and (ii) extend the term of offices of officers, directors, members of the audit committees and statutory committees that are expected to end before the aforementioned ordinary shareholders’ meeting, who will remain in office until such meeting is effectively held.
In what pertains solely to corporations, MP 931 authorizes the board of directors to decide upon urgent matters originally under the competence of the shareholders’ meeting (if the applicable bylaws do not provide otherwise), including approval of payment of dividends. Such resolution by the Board of Directors must be confirmed by the shareholders’ meeting whenever possible.
In addition, MP 931 authorizes in an exceptional basis during the fiscal year 2020 that the Brazilian Securities Commission (“CVM”) extend deadlines provided by the Corporations Law applicable for publicly held corporations, such as, for example, final dates for the attendance of ordinary shareholders’ meetings and for publishing and providing financial statements.
In view of the restrictive measures to the normal functioning of boards of trade resulting from the Covid-19 pandemic, MP 931 loosens the regular period of 30 (thirty) days for the filing of corporate resolutions with the board of trade. Corporate resolutions executed after February 16th, 2020 will have their effects counted from the date of signature if they are filed with the competent board of trade within 30 (thirty) days after such body reestablishes its regular services. The same applies for the filing of corporate resolutions prior to the issuance of securities or other legal transactions: the necessity of filing such corporate resolutions with the board of trade is suspended as of March 1st, 2020. This flexibility will allow companies to continue raising funds in the capital markets through issuance of debentures. In this case, market players will be responsible for creating mechanisms of control of these obligations (i.e. the filing of the corporate resolution that resolves upon the issuance of debentures and of the corresponding indenture with the board of trade), as well as to define the penalties in case of a breach, like a probable acceleration of the debt arising from the breach of such an essential requirement for the issuance.
Furthermore, MP 931 sets forth amendments to the Cooperatives Law, Corporations Law, and the Civil Code, opening a window for virtual online participation and voting in shareholders’ meetings. In case of publicly held corporations, virtual online participation and voting are subject to administrative rules to be issued by CVM, and, in case of limited liability companies, cooperatives, and closely held corporations, subject to rules to be issued by the competent federal authority. The Corporations Law was also amended to allow CVM to regulate the holding of shareholders’ meetings of publicly held companies in locations other than the company’s headquarters, including the attendance of a virtual online meeting.
Costa Tavares Paes Advogados is at your disposal to provide any further information regarding MP 931 and to assist with your company’s shareholders meetings.