Before a Public Takeover Bid | Brazil | Global Public M&A Guide

3. Before a Public Takeover Bid

[Last updated: 1 January 2025, unless otherwise noted]

3.1 Shareholding rights and powers

The table below provides an overview of the different rights and powers that are attached to different levels of shareholding within a Brazilian listed company:

Shareholders	Rights
With 0.5% of the capital stock	To obtain the addresses of shareholders for the purpose of granting powers of attorney for their representation in meetings by another shareholder.
With 5% or more of the capital stock	To obtain the judicial exhibition of the company’s books whenever acts violating the law or the bylaws are inferred, or if there is a well-founded suspicion of serious illegality performed by the company’s management. To call for a shareholders’ general meeting when management fails to do so within eight days after a justified request (which must include the agenda) is made by the shareholders. To request the directors and officers to disclose: (i) the number of securities they acquired or disposed, directly or indirectly, in the previous fiscal year, issued by the listed company, its controlled companies or other companies of the same group; (ii) the stock options they have contracted or exercised in the previous fiscal year; (iii) the benefits, whether indirect or supplemental, they received or are receiving from the listed company, its controlled companies and other companies of the same group; (iv) the conditions of the employment agreements executed by the listed company with its officers and high level employees; and (v) any information material to the activities of the listed company. CVM Resolution No. 70 states that this percentage may vary for listed companies based on their corporate capital. To file a lawsuit against management for damages caused to the company, unless the general shareholders’ meeting decides otherwise. To obtain information on subject matters within the competence of the audit board. To file a lawsuit against the controlling shareholder to recover damages resulting from an abuse of power of control. CVM Resolution No. 70 states that the 5% threshold required to exercise the rights above may vary for listed companies based on their corporate capital. To file a lawsuit for the winding-up of the company attesting that it cannot accomplish its purposes anymore.
With 5% of the voting capital	To call a shareholders' general meeting for the establishment of an audit board if management fails to convene the same within eight days after a request by the shareholders.
With 5% of the non- voting capital	To call a shareholders’ general meeting for the establishment of the audit board if management fails to convene the same within eight days after a request by the shareholders. To request, during any shareholders’ general meeting, the establishment of the audit board. CVM Resolution No. 70 states that this percentage may vary for listed companies based on their corporate capital.
With at least 10% of the free float	In the case of listed companies, to request, within 15 days from the date the price of the delisting public offer (or public offer for the increase of controlling shareholder's equity participation above a certain threshold) is disclosed, that the administrators of the company call a special meeting of the holders of free-floating shares to deliberate on the performance of a new evaluation of the price to be offered, based on the same or different criteria. Holders of 10% of the free-floating shares may call such a special meeting if the administrators fail to do so within eight days of receiving a request to call such meeting. The shareholders requesting/approving the new evaluation shall reimburse the company for the costs incurred therewith if the value ascertained is not greater than the initial price offered.
With 10% of the voting capital	To request the adoption of the cumulative vote (voto múltiplo) proceeding in the election of the members of the board of directors, provided that it is made no later than 48 hours before the shareholders’ general meeting. CVM Resolution No. 70 states that this percentage may vary for listed companies based on their corporate capital. To request, during any shareholders’ general meeting, the establishment of the audit board. CVM Resolution No. 70 sets forth that this percentage shall vary for listed companies, according to their corporate capital. To elect a member and a respective alternate of the audit board in a separate election. Holders of preferred shares without voting rights or with restricted voting rights, acting jointly, shall be entitled to the same right. The controlling shareholders shall have the right to elect the same number of members elected by both holders of at least 10% of the voting shares and preferred shares, plus one member.
With non- voting shares representing at least 10% of the corporate capital with at least 15% of the voting shares	Holders of the majority of the preferred shares without the right to vote or with restrictions on the exercise of such a right representing at least 10% of the corporate capital of listed companies shall be entitled to elect and replace a member of the board of directors and respective alternate in a separate election (holders of the majority of the voting shares of listed companies representing at least 15% of the total voting shares shall be entitled to the same right. If the aforesaid percentages are not achieved, holders of voting shares and of preferred shares without the right to vote or with restrictions on the exercise of such right representing, jointly, at least 10% of the corporate capital shall be entitled to the abovementioned right). Only shareholders holding the relevant percentages of shares for an uninterrupted period of at least three months prior to the date of the shareholders' meeting at which the directors will be elected will be entitled to the abovementioned right.
With 25% of the voting capital	To install the general shareholders' meeting on first call, except if otherwise provided by the Corporations Law (i.e., in case of amendment to the bylaws, the quorum to install the meeting shall be of shareholders representing at least two-thirds of the voting shares).
Shareholder or group of shareholders part of a shareholders’ agreement with more than 50% of the voting shares	A shareholder (or group of shareholders) of a listed company that is bound to the provisions of a shareholders’ agreement and who holds more than 50% of the votes conferred by the voting shares shall have the right to elect the same number of directors elected by the other shareholders, plus one member, regardless of the number of members that make up the board of directors, provided that: (i) the election of the board members is performed through the cumulative vote (voto múltiplo) proceeding, and (ii) holders of preferred or common shares exercise their right to elect one of the directors.
Any common shareholder	If the company is listed, the right to sell shares in a public offer for the transfer of the share control for a price at least equal to 80% of the price paid for each voting share that is part of the share control.
Any preferred shareholder whose type of preferred shares have been adversely affected	Any preferred shareholder whose type of preferred shares has been adversely affected and who dissents from the decisions on any of the following matters shall have the right to withdraw from the company through the reimbursement of the value of their shares: to create preferred shares or increase an existing class of preferred shares disproportionately in relation to other classes, except to the extent already provided for or authorized in the bylaws; or to modify a preference, privilege or condition of redemption or amortization of one or more classes of preferred shares, or to create a new class with greater privileges. The creation of preferred shares or increase of an existing class not in proportion to the other classes of preferred shares, if not authorized in the bylaws, shall be approved by the holders of at least half of such class of preferred shares at a special shareholders' meeting called for such specific purpose. The CVM may authorize the reduction of such quorum for listed companies, provided that their shares are diluted (dispersas) in the market and that less than half of the holders of the voting shares attended the last three shareholders' meetings.
Any shareholder	Any shareholder dissenting from the decisions on any of the following matters shall have the right to withdraw from the company through the reimbursement of the value of their shares: to reduce the mandatory dividend; to amalgamate the company or cause its merger into another company; to participate in a group of companies; to change the corporate purposes; or to split off the company, provided that it results in: a change of the corporate purpose, except if the split net worth value is transferred to a company whose main activity is the same as the one set forth in the corporate purpose clause of the company being split; a reduction of the mandatory dividend; or the participation in a group of companies. In the case of listed companies and of decisions to: amalgamate the company or cause its merger into another company; or participate in a group of companies, the holders of classes or types of shares that have liquidity and are diluted (dispersas) in the market are not entitled to withdraw from the company.
Any shareholder	To file a lawsuit: to annul the incorporation of the company due to any irregularity or defect; to annul a resolution made at a general or special shareholders’ meeting irregularly called or held in violation of the law or bylaws, or flawed by error, bad faith, fraud or misrepresentation; to request indemnification for the losses incurred due to the appraisal of property from any appraisal expert or subscriber of capital; to collect dividends; to bring a claim to receive indemnification for a negligent or fraudulent act committed by founders, shareholders, administrators, liquidators, members of the audit board or controlling company in violation of the law, bylaws or the group’s agreement; to bring a claim against a shareholder for the refund of a dividend received in bad faith; to bring a claim against the administrators for the refund of profits received in bad faith; and in the case of listed companies, to request indemnification from the offering party, the financial institution and the CVM for the damages incurred if such parties do not comply with their duty of confidentiality in connection with any tender offer for the acquisition of share control.
Holders of preferred shares	The holders of preferred shares without voting rights or with restricted voting rights, acting jointly, shall be entitled to elect one member of the audit board and respective alternate in a separate election. Holders of preferred shares have the right to vote if the company does not pay the minimum or fixed dividend to which they are entitled for the period provided in the bylaws (not exceeding 3 years).

3.2 Restrictions and careful planning

Brazilian securities laws and regulations contain a number of rules that already apply before a takeover transaction is announced. These rules impose restrictions and hurdles in relation to prior stake building by a potential acquirer and announcements of a potential takeover transaction by a potential acquirer or a target company. The main restrictions and hurdles have been summarized below. Some careful planning is therefore necessary if a potential acquirer intends to start a process that is to lead to the takeover of a Brazilian listed company.

3.3 Insider dealing and market abuse

Before, during and after a takeover transaction, the normal rules regarding insider dealing and market abuse remain applicable. The rules include, among other things, restrictions on the trade based on material non-public information, manipulation of the target's stock price (e.g., by creating misleading rumors) or creating false demand over the volume of trading of the target's stock price. For further information on the rules on insider dealing and market abuse, see 6.3 below.

3.4 Disclosure of shareholdings

Pursuant to CVM Resolution No. 44, the direct or indirect controlling shareholders, the shareholders who elect members to the board of directors or audit board, and any individual or legal entity, or group of individuals or legal entities acting in concert or representing the same interest, which carry out significant trades with securities are required to inform the Brazilian listed company. Significant trades are defined as the transaction or series of transactions whereby any of those mentioned above changes its direct or indirect holdings by 5%, 10%, 15% and so forth of any class or type of shares of the capital stock of the Brazilian listed company, including through other types of securities, financial instruments referenced to shares and rights over any of the foregoing.

Such disclosure obligation applies regardless of whether the derivatives are cash-settled or settled by physical delivery of the underlying asset. The difference will be in the form of calculation of the 5% threshold:

shares directly held and those referenced in derivatives with physical delivery of the underlying asset (e.g., the shares of the Brazilian issuers) should be bundled together for the purposes of determining the disclosure threshold under CVM Resolution No. 44;
derivatives referenced to shares which are exclusively cash-settled should be computed separately from the shares mentioned in item (a) above for the purposes of determining the disclosure threshold under CVM Resolution No. 44; and
the number of shares referenced in derivative instruments that have economic exposure to the shares cannot be offset with the number of shares referenced in derivative instruments with opposite economic exposure.

The disclosure obligation does not apply to certain specific securities, such as securities index investment funds and other derivative instruments in which the shares of the listed company represent less than 20%.

The investor relations officer of the Brazilian listed company will be responsible for informing the CVM, the stock exchanges and organized over-the-counter markets where the company is listed. If the investor’s intention is to change the share control or the administrative structure of the Brazilian listed company, or in the cases where the acquisition will result in an obligation to launch a tender offer, the investor will also be required to disclose a material fact notice with the details of the transaction.

The communication to be provided by the investor must include at least the following information: (a) its particulars, e.g., name, address, Brazilian resident attorney in fact in case of non-Brazilian resident investors, etc.; (b) the purpose of the participation acquired and the number of shares the investor intends to acquire, with a statement as to whether it intends to change the share control or the administrative structure of the Brazilian listed company; (c) the number of shares and other securities and derivative financial instruments referred in such shares, even if only subject to financial liquidation; and (d) whether the investor or any party related to the investor is a party to any agreement governing the right to vote and/or the purchase or sale of securities issued by the Brazilian listed company.

The members of the board of directors, board of officers, audit board, and any other board which may be set forth in the company’s bylaws, must inform the company of transactions carried out by them with securities and derivative instruments referenced to shares issued by the company (and by its controlled or controlling companies, if they are also listed). The investor relations officer will then be responsible for transmitting the information to the CVM, the stock exchanges and organized over-the-counter markets where the company is listed.

In addition to the above, and specifically during the period of the tender offer for the acquisition of the share control of a Brazilian listed company, the offeror, the target company, its administrators (and those related to any of those previously mentioned), any third party registering a competing tender offer to acquire shares, as well as any holder (or group of holders acting together) of shares or derivative instruments referenced to shares representing at least 5% of a class and type of shares of the target company are subject to the disclosure requirements outlined in 6.3 below.

3.5 Disclosures by the target company

The target company must continue to comply with the general rules regarding disclosure and transparency throughout a takeover process. These rules require a company to immediately announce all relevant inside information that may influence (a) the trade price of the securities issued by the target company or the securities referenced thereto; (b) the investors’ decision to purchase, sell or keep the securities issued by the company or the securities referenced thereto; or (c) the investors’ decision to exercise any rights arising from their position as holders of securities issued by the company or of securities referenced thereto. For further information on inside information, see 6.1 below.

The facts surrounding the preparation and negotiation of a public M&A transaction may constitute inside information. As such, the target company would ordinarily be required to announce this to the general public. However, the management of the target company can delay the announcement if it believes that disclosure would not be in the legitimate interest of the company. This could be the case if the target's management believes that early disclosure would prejudice the negotiations of the transaction.

A delay of the announcement is only permitted provided that the non-disclosure does not entail a risk that the public will be misled, and that the company can keep the relevant information confidential. To the extent there is any leak of information concerning the possibility of a public M&A transaction involving a Brazilian listed company, the CVM may require the issuance of a formal notice to the market confirming or denying such transaction. For further information on early disclosures, see 3.7 below.

3.6 Announcements of a public M&A transaction

According to CVM Resolution No. 44, the transfer of the share control of a Brazilian listed company through a private transaction must be reported to the CVM and the stock exchanges where the company's securities are traded and disclosed to the market by both the company and the acquirer. The acquirer of share control is required to disclose to the market, among other things, information on the price paid (total and per share), the form of payment, the number and percentage of shares acquired, the purpose of the acquisition of the share control, the existence of any shareholders' agreement governing the exercise of the voting right or the sale and purchase of securities. The acquirer will also be required to notify the market if it intends to delist the company within 1 year following the acquisition of control, and other important information related to the business and any corporate reorganization.

If the transaction is expected to be conducted through a public takeover bid, there are no prior announcement requirements. Given that this specific type of tender offer is voluntary, the candidate bidder is able to announce the takeover tender offer directly upon the filing of the tender offer notice for registration with the CVM, which will be automatically approved unless the offer involves the swap of securities.

If there are rumors or leaks that a potential acquirer intends to acquire the share control of a Brazilian listed company either through a private transaction or by way of a takeover bid, the CVM could force an announcement. For further information, see 3.7.

3.7 Early disclosures – Put-up or shut-up

Early disclosure demanded by the CVM – Whenever required for the good functioning of the markets, the CVM has the right to require a person that could be involved in a possible public M&A transaction to make an announcement confirming or denying the intentions to pursue the transaction. This type of disclosure is often made when there are leaks or rumors regarding a potential transaction involving a Brazilian listed company.
Put-up or shut-up – In addition to the foregoing rule, the CVM has a specific mechanism to require a person to make an announcement as to whether or not it intends to carry out a public takeover bid. The relevant rules can be summarized as follows:
- If there are leaks or rumors concerning a potential takeover bid, the potential acquirer is expected to either disclose the tender offer notice or inform the market of whether or not it is considering launching the takeover bid. If the potential acquirer fails to do so, the CVM may demand such disclosure subject to the application of penalties imposed by Brazilian securities regulations.
- If the potential acquirer issues a notice to the market indicating that it is still considering whether or not to launch a takeover bid, the CVM may impose a window of time for the potential acquirer to either (a) file the tender offer for registration with the CVM and disclose the tender offer notice, or (b) issue a new announcement to the market indicating that it does not intend to launch a takeover bid during the period of six months following the publication of such announcement.

3.8 Due diligence

The Brazilian public M&A laws and regulations do not contain specific rules as to whether prior due diligence can be organized nor how such due diligence is to be organized. Be that as it may, the concept of a prior due diligence or pre-acquisition review by a potential acquirer is generally accepted both by market practice and by the CVM, and appropriate mechanisms have been developed to organize a due diligence or pre-acquisition review in order to address potential market abuse issues and early disclosure concerns. These include the use of strict confidentiality procedures and data rooms.

In addition, and more specifically in relation to public takeover bids, the potential bidder may not have sufficient information on the target company to populate the tender offer notice as required under CVM Resolution No. 215. As a result, the CVM requires, the target company to disclose the following information publicly to the CVM and the market after the disclosure of the tender offer notice by the potential acquirer:

the number, class and type of securities issued by the target company and owned (or taken or given in loan) (i) by the target company itself, (ii) by the members of management, (iii) by individuals/entities related to the target company, and (iv) by individuals/entities related to the management of the target company;
a detailed description of the exposure of (i) the target company, (ii) the members of management, (iii) the individuals/entities related to the target company, and (iv) the individuals/entities related to the management of the target company to derivatives referenced to securities of the target company;
a report on transactions with securities or derivatives referencing securities of the target company by (i) the target company itself, (ii) the members of management, (iii) individuals/entities related to the target company, and (iv) individuals/entities related to the management of the target company for the period between three months before the disclosure of the tender offer notice until the disclosure of this information to the market;
a detailed description of any agreements, options, letters of intent or other legal documents related to the acquisition or sale of securities issued by the target company involving (i) the target company itself, (ii) the members of management, (iii) the individuals/entities related to the target company, and (iv) the individuals/entities related to the management of the target company;
a description and analysis of possible economic consequences of the tender offer for the members of the management of the target company, including, among others, extraordinary payments and acceleration of stock option rights; and
securities, derivatives referencing securities, securities given or taken in loan, issued by the potential acquirer and owned by (i) the target company itself, (ii) the members of management, (iii) individuals/entities related to the target company, and (iv) individuals/entities related to the management of the target company.

3.9 Acting in concert

For the purposes of the Brazilian public takeover bid rules, persons "acting in concert" shall be those acting together to represent the same interest as another person.

Pursuant to the CVM Resolution No. 215, the following situations will be construed as "acting in concert" or "representing the same interest", in relation to a person, entity or fund: (a) its spouse, ascendant, descendant or relative by blood up to the second degree, (b) its direct or indirect controller, anyone controlled by it or anyone under common control with it, (c) anyone that has acquired (even if under a suspensive condition), its control or the control of the target company, has promised to acquire or holds a call option in relation to the control of the target company, or any intermediary in the transfer of the control of the target company, (d) the manager of investment fund, in relation to those investment funds in which it exercises the discretionary management of the investments, and (f) the administrator of the estate, judicial manager or equivalents, in relation to the “universality of rights”.

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