Vote Of Legal Entities In Shareholders' Meetings Of Brazilian Publicly-Held Corporations

By unanimous decision of the Board of the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários - CVM), the voting exercise of legal entities in shareholders' meetings of publicly-held corporations will be facilitated from now on.

This means that investment funds, publicly-held or closely-held corporations, limited liability companies, foundations, associations or investment vehicles are no longer restricted to only grant a power-of-attorney to a shareholder, corporation officer (administrator) or lawyer in order to participate of assemblies. Therefore, a legal entity may choose for this purpose anyone who is empowered to represent it according to its bylaws (estatuto social) or articles of association (contrato social) and furnish to the designated representative the documents that validate such representation.

This flexibility does not apply to individuals, who must appoint another shareholder, a corporation officer or a lawyer as a proxy to this effect. According to the provisions of paragraph 1 of article 126 of Law No. 6,404, of December 15, 1976 (the Brazilian Corporation Law - BCL): "A shareholder may be represented at a general meeting by a proxy appointed less than one year before, who shall be a shareholder, a corporation officer or a lawyer; in a publicly-held corporation, the proxy may also be a financial institution. A condominium shall be represented by its investment fund officer."

The matter was discussed by CVM on account of a complaint made by Modal Administradora de Recursos Ltda. (Modal), that had one of its investment funds barred from voting at a shareholders' meeting of Brookfield Incorporações S.A. (BISA).

Modal granted a power-of-attorney to one of its employees, who were a member of the management team of investment funds, to attend the shareholders' meeting. BISA vetoed the participation of this employee because he was not a shareholder, corporation officer or lawyer. The case was decided by the Board of CVM. The Director Ana Dolores Moura Carneiro de Novaes gave reason to Modal, for understanding that the employee who attended the shareholders' meeting was duly authorized to represent the company by means of a power-of-attorney signed by two directors, which obeyed the requirements set forth by Modal's articles of association.

In her analysis, Ana Novaes concluded that the...