Developments In M&A Transactions In Brazil In 2009

Before addressing any development occurred in Brazil in 2009 which may affect mergers and acquisitions in general – the so-called M&A transactions - it is important outline the legal framework and current scenario in which these negotiations are conducted.

M&A transactions in Brazil are governed by the following legislation and regulations: (i) Law No. 10.406, of January 10, 2002 (the Brazilian Civil Code)1; (ii) Law No. 6.404, of December 15, 1976, as amended (the Corporation Law)2; (iii) Law No. 6.385, of December 7, 1976, as amended (the Securities Law)3; (iv) rulings of the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM)4; (v) self-regulatory rulings from the New Market (Novo Mercado), the special corporate governance listing segment from the São Paulo Stock Exchange (Bolsa de Valores de São Paulo – Bovespa, as well as from Levels 1 and 2, special listing segments at Bovespa; (vi) rulings enacted by other specific governmental agencies, depending on the target's activities. Such governmental agencies, among others, comprise: the Telecommunications Agency (Agência Nacional de Telecomunicações – ANATEL), the Electrical Energy Agency (Agência Nacional de Energia Elétrica – ANEEL), the Oil and Gas Agency (Agência Nacional do Petróleo, Gás Natural e Biocombustíveis – ANP) and the Civil Aviation Agency (Agência Nacional da Aviação Civil – ANAC); and (vii) rulings from the National Monetary Council (Conselho Monetário Nacional – CMN) and the Central Bank of Brazil (Banco Central do Brasil – Bacen)5.

Unlike other jurisdictions such as the United States in which the wider share dispersion is quite common and constitutes the general rule, in Brazil many publicly-held corporations have an owner (or a group of owners) holding the share control and share dispersion still remains an exception.

Under Brazilian law, a controlling shareholder6 is an individual or a legal entity, or a group of individuals or legal entities by a voting agreement or under common control, which: (a) possesses rights which permanently assure it a majority of votes in resolutions of general meetings and the power to elect a majority of the corporation officers; and (b) in practice uses its power to direct the corporate activities and to guide the operations of the departments of the corporation. A controlling shareholder shall use its controlling power in order to make the corporation accomplish its purpose and perform its social role, and shall have duties and responsibilities towards the other shareholders of the corporation, those who work for the corporation and the community in which it operates, the rights and interests of...