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

2.1 Main legal framework

The pillars of the legal framework governing the acquisition of share control of Brazilian listed companies through private transactions or by public takeover bids are:

• Law No. 6,404, of 15 December 1976 (as amended from time to time), which governs corporations in Brazil ("Corporations Law");
• Law No. 6,385, of 7 December 1976 (as amended from time to time), which provides the general structure of the Brazilian securities market ("Securities Law"); and
• Resolution No. 215, issued by the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários - "CVM") on October 29, 2024, which provides for the specific rules governing takeover bids in the Brazilian market ("CVM Resolution No. 85").

2.2 Other rules and principles

While the legislation referred to in 2.1 above contains the main legal framework for the takeover transactions of Brazilian listed companies, there are a number of additional rules and principles that need to be taken into account when preparing or conducting a public M&A transaction, such as:

• the rules relating to the disclosure of extraordinary events related to Brazilian listed companies (disclosure of material fact notices) and significant shareholdings in listed companies. These rules are derived from Resolution No. 44, issued by the CVM on August 23, 2021, as amended ("CVM Resolution No. 44"). For further information, see 3.4 below;
• the rules relating to insider dealing and market manipulation, which are derived from the Securities Law and CVM Resolution No. 44 and CVM Resolution No. 62 of January 19, 2022 ("CVM Resolution No. 62"). For further information, see 6.3 below;
• the general rules on the supervision and control over the securities markets;
• the regulations issued by the São Paulo Stock Exchange (B3 S.A. Brasil, Bolsa, Balcão - "B3") concerning the listing and delisting of securities from its trading segments; and
• the rules and regulations regarding merger control. These rules and regulations are not discussed herein.

2.3 Supervision and enforcement by the CVM

Transactions for the acquisition of the share control of Brazilian listed companies are subject to the rules and supervision of the CVM. The CVM is the federal regulatory agency responsible for directly regulating and supervising the Brazilian securities market. It is associated with the Ministry of Finance (Ministério da Fazenda) and it was created by the Securities Law. 

On an administrative level, the CVM has powers to investigate and apply penalties for any irregularity or breach of law or regulations that might occur in the securities market. The penalties that the CVM is entitled to apply include monetary fines, suspension and cancellation of registrations and authorizations granted to participants in the Brazilian capital market, and temporary or permanent prohibitions from operating in the Brazilian capital market. In addition, criminal penalties and the obligation to indemnify for losses and damages may be imposed by the courts in case of non-compliance.

In certain cases, the CVM also has the power to grant exemptions from the rules that would otherwise apply to a public takeover bid.

2.4 General principles

In general, the share control of Brazilian listed companies is most commonly acquired through private transactions between the acquirer and the controlling shareholder. This is because the majority of Brazilian listed companies still do not have a dispersed ownership or a high free float of voting shares, even though this scenario is changing slowly over time.

The direct or indirect transfer of the share control of a Brazilian listed company through a private transaction is conditioned upon a tender offer by the acquirer for the remaining free float voting shares for a price equal to at least 80% of the price paid for each voting share that is part of the share control, added by the Selic Rate (base interest rate defined by the monetary council of the Brazilian Central Bank) from the date of the payment to the seller until the financial settlement of the tender offer. Depending on the segment of the stock exchange on which the company is listed, and on the provisions of the bylaws of the company, the tender offer may also have to be addressed to the non-voting free float shares. The price to be offered to the free float may also reach 100% of the price paid for each voting share that is part of the share control.

Although not as common as private transactions, M&A transactions involving listed targets may also be structured through public takeover bids, regulated by the Corporations Law and CVM Resolution No. 215. The public takeover bid is subject to registration with the CVM, and will be automatically approved unless any portion of the offer price is expected to be paid with securities owned or to be issued by the bidder (a swap offer). In this case, the prior authorization of the CVM is required as the swap offer is always subject to the ordinary registry procedure before the CVM. The following general principles apply to takeovers bids in Brazil:

• all holders of the securities of an offeree company of the same class or type must be afforded equivalent treatment;
• the bid must remain open for acceptance by the shareholders for a period of between 20 and 45 days following disclosure to the market of the bid notice to allow shareholders sufficient time to make an informed decision in relation to the bid;
• in takeover offers for the acquisition of share control, the board of directors may opine on the contents of the offer and, if it so decides, its opinion must address all relevant aspects to support the decision of the shareholders, including the offer price and changes in the financial situation of the target company since the date of the last disclosure of its annual or quarterly financial statements. The opinion of the board of directors is mandatory in relation to any public offer for the acquisition of shares (be it for the acquisition of the share control or another type of public offer) if the target company is listed on Novo Mercado or Nível 2 trading segments of B3; and
• false markets must not be created in the securities of the target company, of the offeror company or of any other company concerned by the bid such that movements in the market price of the securities become artificial and the normal functioning of the markets is distorted.

2.5 Foreign investments regulation

Foreign investments are generally not restricted in Brazil and, except for customary anti-trust approvals, are only subject to reporting upon completion (as opposed to prior authorization). However for specific industries and regulated sectors such as banking, insurance, energy - public utilities, port and telecommunications — mainly those related to the rendering of public services — takeovers are subject to prior governmental or regulatory approvals.

In addition, the purchase (whether the purchaser is a Brazilian or a foreign investor) of a direct or indirect controlling interest in a Brazilian state controlled company will be, as a rule of thumb, subject to a previous public tender procedure to be conducted by the governmental entity that controls such company. The direct sale would only be allowed in cases where the controlling governmental entity is able to demonstrate that a public tender is unfeasible (usually, due to a lack of potential competition).

2.6 Proposed reforms

The Resolutions that apply to public M&A transactions result from recent compilations of previous rules adopted by the CVM. CVM Resolution No. 44 brought important updates to insider dealing rules to reflect CVM established precedents and CVM Resolution No. 215 reduced some unnecessary burdens. To date, there are no proposed or upcoming reforms to the Brazilian regulations applicable to takeover transactions.