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Provisional Measure to improve the business environment in Brazil (MP 1,040) | Corporate aspects
On March 30, 2021, the Provisional Measure No. 1,040 (“MP 1,040”), also known as the “Provisional Measure to improve the Brazilian business environment”, was enacted with the main purpose, according to the Brazilian Federal Government, of leveraging the Brazilian position in the Doing Business ranking in more than 20 levels, which is the ranking published by the World Bank about the easiness of doing business in a given country.
The several proposals brought by MP 1,040 include matters ranging from facilitation for the incorporation of companies, facilitation of foreign trade transactions, the Integrated Asset Recovery System, and, among others, there are several articles that aim to change certain rules applicable to Brazilian corporations, amending, therefore, Law No. 6,404/1976 (Brazilian Corporation Law).
Among the main changes proposed to the Brazilian Corporation Law, it is important to highlight the purposes of:
(i) protecting the minority shareholders of publicly-held companies, upon the inclusion of new matters subject to the exclusive approval by general shareholders’ meetings, the increase of the minimum call notice period for general shareholders’ meeting to 30 days in advance, and the postponement of general shareholders’ meetings for up to 30 days when the necessary documents or information have not been timely or satisfactorily made available to shareholders; and
(ii) incorporating best practices of corporate governance into the Brazilian Corporation Law, by not allowing the same individual to accumulate the positions of chairman of the board of directors and chief executive officer or main executive of the company and by setting forth the mandatory participation of independent directors in publicly-held companies.
Despite the fact that MP 1,040 has entered into force since its publication, it shall only produce effects as of (i) March 25, 2022, with regard to the prohibition of accumulating the positions of chairman of the board of directors and chief executive officer or main executive of a given company; and (ii) on the date of its publication for other cases related to the protection rights for minority shareholders. It is worth mentioning, however, that, according to article 6 of MP 1,040, the Brazilian Securities and Exchange Commission (CVM) may establish rules for the transition of the obligations arising from such matters.
Because of its nature of Provisional Measure, it is worth bearing in mind that the rules set forth therein shall be valid for a 60-day period, automatically renewable for additional 60 days, in case the Congress Houses do not conclude the voting of the MP 1,040 by then. Upon the elapse of the maximum deadline of 120 days with no deliberation by the House of Representatives and the Senate, and with no presidential endorsement, the Provisional Measure ceases to be effective, due to the expiration of its term – which would make the previous rules applicable again.
Dias Carneiro Advogados is entirely available to provide any clarifications and to assist with this matter.
