[Last updated: 1 January 2024, unless otherwise noted]
In general terms, there are no jurisdictions that would not be acceptable for a company to be listed in Brazil. However, the listing of securities of a foreign issuer (through a Brazilian depositary receipt program) will only be permitted by the CVM if the foreign issuer is located in a jurisdiction that has either:
- Formalized a mutual cooperation agreement with the CVM regarding the consultation, technical support and mutual assistance in the exchange of information.
- Signed the multilateral memorandum of understandings issued by the International Organization of Securities Commissions (IOSCO).
Financial requirements. There are no specific financial requirements applicable to a company (domestic or foreign) in order to list its securities in the Brazilian securities market or in order to maintain such a listing, provided, however, that the CVM may refuse the registration of Brazilian Depositary Receipt (BDR) programs or IPOs of pre-operational issuers if it deems that the project is unviable or reckless or, in either case, if it finds the founders, controlling shareholders or management of the applicant company to be dishonest or untrustworthy.
Trading or operating history. There is no requirement for a company to demonstrate a trading history or time in operation in order to have its securities listed in the Brazilian securities market. However, in order for a pre-operational company to have its securities listed on the Brazilian securities market, it will have to prepare and submit to the CVM, as part of its registration documentation, a viability study providing detailed information on the operational aspects of the project and its viability from an economic, financial and legal perspective. Also, a foreign company interested in sponsoring a Level II or III BDR program must have been a foreign issuer for at least 18 months prior to the registration of the foreign company as issuer with the CVM.
Ownership. There are no requirements regarding the ownership of securities to be listed. Particular to the listing of foreign companies on the Brazilian stock market is the restriction that the foreign company cannot be from any country deemed to have high risks of corruption and sponsorship of terrorism. In addition, and as mentioned above, the company must be located in a jurisdiction with a mutual cooperation agreement with the CVM or that is a signatory to the IOSCO multilateral memorandum.
Lack of presence in Brazil. In order to be qualified as a foreign company for purposes of trading securities in the Brazilian securities market through BDR programs, the issuer must not have its head office located in Brazil and: (i) must be a legal entity separate from its shareholders; (ii) its shareholders must have limited liability; (iii) its securities must be admitted to trading on securities markets; (iv) must be registered with the local regulator; (v) must have a delegated collective professional management structure; and (vi) its shareholders must have rights to, as a minimum, vote and receive dividends, without prejudice to differentiations applied to different share classes and types.
Depositary receipt programs. As mentioned above, a foreign company may only list its securities in the Brazilian market through BDR programs, which may either be sponsored or non-sponsored. These BDR programs allow Brazilian investors to invest with local domestic accounts in offshore securities of publicly-traded companies headquartered outside Brazil, on a registered basis. BDRs may be traded upon the registration of the respective depositary receipt program with the CVM, as long as the trades are underwritten by a local "depository institution" or "depository issuer" authorized by both the CVM and the Central Bank to trade securities in Brazil, subject to the applicable rules.
Under this arrangement, the BDR program will be subject to registration with the CVM, while the underlying securities of the foreign company will not be required to be registered. Moreover, the actual requirement for the registration of the foreign company itself with the CVM will depend on the type of BDR program to be launched, as further described below.
Sponsored and non-sponsored programs. Under a sponsored BDR program, the foreign company will be required to hire both:
- A custodian institution in the jurisdiction where it is originally registered as a listed corporation.
- A local Brazilian depositary institution, duly authorized by the CVM and the Central Bank of Brazil, to act as the depositary of the receipts representing the company's shares.
The local depositary institution will act as the foreign company's representative and also will be liable for the disclosure of information and compliance with Brazilian securities regulations applicable to the foreign company under the sponsored BDR program.
In contrast, under a non-sponsored program, the program is initiated without the participation of the foreign company issuer. Thus, the foreign company is not involved in the issuance and trade of depositary receipts in the Brazilian market. In this case, it is possible to have one or more local depositaries issuing non-sponsored BDRs that will undertake the responsibility both to hire the custodian institution to act as the custodian of the securities underlying the BDR program and to make available in Brazil all information disclosed by the foreign company in its country of origin.
It is worth highlighting that a sponsored BDR program cannot be in force simultaneously with a non-sponsored program in relation to the same security, and the depository institution responsible for the non-sponsored BDR program must request the conversion and, if applicable, the transfer of the program under its responsibility to the depository institution that comes to assume responsibility for the sponsored BDR program. It is also possible to convert a BDR program level (always to a higher level) by complying with the requirements applicable to the level to which the program will be converted.
Levels of BDRs. In the case of a sponsored BDR program, BDRs may be issued in accordance with any of the following three levels:
- Level I characteristics include:
- That trades are made on organized over-the counter-market or a stock exchange designated for Level I BDRs.
- It may be sponsored or not sponsored by the foreign issuer. If sponsored, the sponsoring company must disclose the same information in Brazil that it is required to be disclosed in the issuer's country of origin, in addition to material facts or press releases, meeting call notices for shareholders meetings, notices to shareholders, minutes of shareholder or board meetings and financial statements.
- No registration of the foreign issuer is required with the CVM.
- The Level I sponsored BDRs can be offered publicly, provided that certain restrictions are observed in relation to the investors who may acquire the securities, in accordance with the terms of CVM Resolution 160/22.
- As a general rule, the acquisition of the securities in the market is limited to qualified investors.
Pursuant to CVM Resolution no. 30/21, "qualified investors" are: (a) professional investors; (b) individuals or legal entities that hold financial assets in excess of BRL 1 million (approximately US$206,000) and declare themselves to be qualified investors; (c) individuals, solely if related to their own investments, who have obtained certification of technical capacity to act as investment agent, portfolio manager, securities analyst or consultant, and (d) investment clubs.
Further, according to the same Resolution, "professional investors" are: (a) financial institutions authorized to operate in Brazil by the Brazilian Central Bank; (b) insurance or capitalization companies (sociedades de capitalização); (c) open or closed private pension entities; (d) individuals or legal entities that hold financial assets in excess of BRL 10 million (approximately US$2.06 million) and declare themselves to be professional investors; (e) investment funds; (f) investment clubs, provided that the portfolio is managed by an asset manager authorized to operate by the CVM; (g) investment agents, portfolio managers, securities analysts and consultants, but solely with respect to their own investments; and (h) foreign investors.
- Level II characteristics include:
- That trades are made on stock exchanges or organized over-the-counter markets.
- The foreign company must be registered as an issuer with the CVM.
- It must be sponsored.
- The Level II BDRs can be offered publicly in Brazil, provided that certain restrictions are observed in relation to the investors who may acquire the securities, in accordance with the terms of CVM Resolution 160/22.
- Level III characteristics include:
- Trading on stock exchanges or organized over-the-counter markets.
- The foreign company must be registered as an issuer with the CVM.
- The Level III BDRs can be offered publicly, with general solicitation to the general public in Brazil, subject to general registration requirements for public offerings in Brazil.
Below is a table summarizing the main characteristics in accordance with each type of BDR program mentioned above:
Non-sponsored programs are restricted solely to Level I programs.
Domestic companies that list securities on the securities market are also required to be registered with the CVM, in one of the following two categories: (i) Category A, which authorizes the listing of any type of security, or (ii) Category B, which authorizes the listing of any type of security, except for shares, share certificates or any other security convertible or that grants the right to the holder to acquire shares or share certificates.
Custody of securities. Regardless of whether a particular BDR program is sponsored or non-sponsored, the foreign company's securities that underlie that BDR program must be held in custody by a financial institution located in the jurisdiction where those securities are originally traded. On the other end of the transaction, a Brazilian depositary institution will be responsible for issuing the depositary receipts based on the securities held in custody by the foreign financial institution. Consequently, the shares underlying a BDR program have their trading restricted in their market of origin, until the termination of the BDR program.
Interviews. A company is not required to conduct any interviews with B3 or the CVM in order to list its securities, although companies that are in a pre-operational stage usually seek, voluntarily, preliminary discussions with the CVM to demonstrate the viability of their projects.
Minimum number of shareholders. A Brazilian corporation, regardless of whether it is a publicly-held company or not, is required to have at least two shareholders at all times (except for companies that are wholly owned subsidiaries of a Brazilian legal entity). Aside from this general rule, there is no applicable requirement for a publicly-held company to have or maintain a minimum number of shareholders.
Minimum trading value. There is no applicable requirement for a publicly-held company to have or maintain a minimum trading price for its securities, though B3 rules do require listed companies to adopt measures in the event that their stock price falls below BRL 1.00.
Lock-up. As a general rule, there are no lock-up or escrow requirements for newly listed securities. However, the trading of securities might be subject to restrictions depending on the structure of the public offering to be carried out, the pre-operational status of the issuer and/or the qualification of the investors involved.
Free Float. A foreign company listed under a BDR program Level II and III is required to have and maintain a minimum free float (listed shares not held by the controlling shareholder or management of the company) of 10% of their total equity and a daily trading average volume equal, or superior to, BRL 10 million (approximately US$2.06 million) taking into consideration a daily average verified within a 12-month trading period. Domestic companies are not required to maintain a minimum free float, except, however, that domestic companies listed in Level 1, Level 2 and New Market segments are obliged to maintain a minimum of 20% of their total equity in the free float, which may be reduced to 15% provided that the company achieves a daily trading average volume equal, or superior to, BRL 20 million (approximately US$4.12 million).
Currency. As a general rule, current regulations restrict payments of transactions in Brazil in any type of foreign currency. Therefore, the trading prices must be in Brazilian currency (BRL).
Settlement. All trades of securities in the Brazilian stock and organized over-the-counter markets are negotiated through PUMA Trading System, B3's electronic system for the negotiation of securities. Settlement is made by B3's clearing house, which is integrated with the PUMA Trading System.
Compliance adviser. There is no requirement applicable to a company to retain a compliance adviser. The requirement regarding compliance with Brazilian regulations is applicable to the local financial institutions that operate in the Brazilian securities market, including the depositary institutions.