Rules For Trading By A Brazilian Listed Company Of Shares Of Its Own Issue And Relevant Business

On September 17, 2015 the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários - CVM) issued two Instructions: (i) ICVM 567 that regulates the trading by listed companies of shares of their own issue and derivatives; and (ii) ICVM 568 that aims to maintain an informational regime regarding the negotiation of relevant business in listed companies that is consistent with the rules of ICVM 567.

1. Scope of the Regulation

   The provisions of ICVM 567 apply to the trading: (i) of shares of the listed company by its affiliates and controlled companies; and (ii) by the listed company, its affiliates and controlled companies of subscription bonuses and any other securities referenced in shares issued by them.

2. Treasury Shares

   When trading shares of its own issue a listed company can only: (i) acquire shares to be held in treasury or to be cancelled; and (ii) dispose of the shares acquired pursuant to item (i) and held in treasury. The shares held in treasury will be referred to herein as "treasury shares".

   The listed companies cannot keep treasury shares issued in quantities exceeding 10% of each species or class of shares in circulation on the market. This provision does not apply to: (i) the redeemed or forfeited shares, under the terms of article 45, paragraph 31, and article 107, paragraph 42, of Law No. 6,404 of December 15, 1976 (the Brazilian Corporation Law - BCL); and (ii) the acquisitions made by the company in connection with the public offering of shares, which will be governed by specific rules.3

   The above-mentioned percentage (10%) comprises: (i) the shares issued by the listed company held by its affiliates or controlled companies; and (ii) the shares issued by the listed company which correspond to the economic exposure assumed because of derivatives or deferred settlement agreements entered into by the company itself or its affiliates or controlled companies.

   The number of shares referred to in derivatives instruments conferring economic exposure to shares issued by the company itself cannot be compensated with the number of shares referenced in derivatives instruments that produce inverse economic effects. The shares referred to in derivatives instruments must be computed independently of such contracts providing for financial settlement or through the delivery of shares.

   Shares in circulation are all those representing the capital of the company except for the shares held directly or indirectly by the controlling shareholder, by persons linked thereto (related persons), and by the administrators. Related person is the individual or legal entity, fund or universality of rights that represents the same interest of the person or entity to which he/she/ it is linked.

   The treasury shares do not have voting rights or cash proceeds of any nature. This does not prevent the treasury shares: (i) to receive bonus in shares; and (ii) to be object of reverse stock split or division of shares. Furthermore, the treasury...