Publicly-held companies: new regulations on multiple voting shares and internal management structure

On September 20, the Securities and Exchange Commission of Brazil (CVM) published Resolution No 168/2022 imposing limits on multiple voting shares, which allow shareholders who hold a small ownership stake to strengthen their control over the company.

To provide further protection to minority shareholders, the regulation has prohibited multiple voting rights to be exercised at a general shareholder’ meeting when voting on related-party transactions exceeding BRL 50 million or 1% of the company’s total assets.

The resolution also promoted changes in the internal management structure of publicly-held companies. Now, the same person may hold the positions of chair of the board of directors and Chief Executive Officer (CEO) or central executive officer in smaller-sized publicly-held companies (i.e., those with an annual gross revenue of up to BRL 500 million as informed in the financial statements released in the previous accounting period).

In addition, the participation of independent directors in the board has been relaxed. Now, such participation will be mandatory only for publicly-held companies that:

• are registered in category A;
• have their securities admitted for trading on the stock exchange through an entity responsible for managing the market; and
• have shares or certificates of deposit (CD) of shares in circulation.

Another important aspect is that the regulation fixed the number of independent directors on the board at 20% of the total number of directors.