New Rules For Registry Of Issuers Of Securities Admitted For Trading In The Brazilian Regulated Markets

On December 7, 2009, the Brazilian Securities and Exchange Commission ("Comissão de Valores Mobiliários" – CVM) released to the public CVM Instruction No. 480, of the same date, which establishes rules for registry of issuers of securities admitted for trading in the local regulated markets1. These rules will be in full force and effect as of January 1, 2010. The main provisions are outlined below.

The trading of securities in regulated markets in Brazil depends on the prior registry of the issuer with CVM. The registry application can be submitted regardless of the public offer registry for distribution of securities. With very few exceptions, the issuer must be organized in the form of a corporation (sociedade anônima)2. CVM Instruction 480 does not apply to investment funds, investment clubs and companies beneficiary of tax incentive resources.

Under the new rules there are two different categories of registry: (i) category A, which authorizes the trading of any types of securities; and (ii) category B, which excludes shares and share certificates of deposit as well as securities which attribute to the holder the right to acquire shares and share certificates of deposit as a result of the conversion or the exercise of inherent rights, provided that these securities are issued by the same issuer or by a company belonging to its economic group.

The cases of waiver of registry are very restricted and limited to the following situations: (a) foreign issuers of securities evidenced by Brazilian Depositary Receipt programs – BDRs Level I3, sponsored or not; (b) issuers of additional construction potential certificates; (c) issuers of investment certificates related to the Brazilian cinematographic audiovisual area; (d) small size companies; and (e) micro-companies.

According to the new rules, an issuer is not deemed to be foreigner, if either it is headquartered in the Brazilian territory, or whose assets located in Brazil correspond to 50% or more of those mentioned in its individual, segregated or consolidated financial statements, prevailing the one that best represents the economic substance of the business for the purpose of this classification. Therefore, a foreign issuer should have its head office located abroad or must have at least 50% of its registered assets based outside Brazil4.

The foreign issuers that sponsor BDR programs Levels II and III5 must be registered in category A.

With respect to the procedure to submit the registry application, the issuer shall forward it to CVM at the Companies Relations Supervise Department (Superintendência de Relações com Empresas – SEP), together with the relevant documentation, such as its by-laws, corporate resolution approvals, shareholders agreements or similar instruments, the periodical information documents indicated below, financial statements specially prepared for registration's purpose, information disclosure policy, securities trading policy (if any), proof of the empowered administrators, statements regarding the securities issuer hold by its administrators, etc. SEP...