march 2011 martin miralles pose [email protected]
DESCRIPTION
Regulatory and Fund Structuring Trends. March 2011 Martin Miralles Pose [email protected]. Brazilian Legal Framework – more than 180 yrs. Consolidated Legal Environment. FIRST FEDERAL CONSTITUTION 1824. COMMERCIAL CODE 1850. CIVIL CODE 1916. CORPORATION LAW 1940. - PowerPoint PPT PresentationTRANSCRIPT
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Brazilian Legal Framework – more than 180 yrs
Consolidated Legal Environment
FIRST FEDERALCONSTITUTION
1824
LABOR LAWS1943
CORPORATIONLAW1940
COMMERCIALCODE1850
CIVILCODE1916
TAXCODE1966
CAPITALMARKETS LAW
1965
FOREIGNINVESTMENT
LAW
1962
BANKRUPTCYLAW1945
VENTURECAPITALRULES
1994
CONSUMERSCODE1990
PRIVATEEQUITYRULES
2003
ARBITRATIONLAW1996
NEW CIVILCODE2003
REV COMMERCIALCODE2003
SECURITIESLAW1976
NEW CORP.LAW1976
NEW BANKRUPTCYLAW2005
BANKINGLAW1964
LAST FEDERALCONSTITUTION
1988
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Foreign Investment - Principles
▪ EQUAL TREATMENT TO FOREIGN AND NATIONAL CAPITAL
• No restrictions, except for Nuclear Energy / Rural Property / Domestic Aviation / Mail / Media
▪ FREE INFLOW/OUTFLOW OF FUNDS – SINCE 1962
• Registration of Foreign Direct Investment with Central Bank of Brazil (Cenbank)
• Declaratory Electronic Registration System
• No prior approval of Cenbank for repatriation of registered FDI and remittance of profits
▪ REGULATED VEHICLES
• Corporations (either listed or not) since 1940
• Limited Liability Companies since 1919
• Investment Funds since 1965
• Venture Capital Funds since 1994
• Private Equity Funds since 2003
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Foreign Investment - Principles
▪ REGULATED CAPITAL MARKETS SINCE 1976
▪ SPECIFIC PERFORMANCE OF SHAREHOLDERS AGREEMENTS SINCE 1976
• Purchase and Sale of Shares
• Right of First Refusal
• Voting Rights
• Exercise of control
• Tag Along and Drag Along Rights
• Put and Call Rights
▪ ENFORCEABILITY OF FOREIGN AND BRAZILIAN ARBITRATION AWARDS
SINCE 1996
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Foreign Investment Vehicles
Foreign Country
LimitedLiability
Company
Foreign Investor
PE/VCFund
Non ListedCorporation
Brazil
ListedCorporation
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Private Equity Funds (FIP)
▪ Nature: Closed-end investment funds (condominium) with the purpose of investing in Brazilian
closely or listed companies or even in other funds
▪ Investors: Only for qualified investors
• Financial institutions
• Insurance companies
• Pension funds
• Individuals and legal entities having investments in financial markets over R$ 300 thousand
• Investment funds for qualified investors
• Managers of portfolios and securities consultants, in respect of theirs own funds
▪ Minimum Investment: R$ 100 thousand
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Private Equity Funds (FIP)
▪ Quotas: May issue different classes with special economic / political rights
▪ Payment of Quotas: Brazilian currency / assets or rights of companies under reorganization
or restructuring processes
▪ Corporate Governance:
• General Meeting for approval of accounts, dismissal of administrator, issuance of new
quotas, amendment to FIP Regulation, extension of the term of the FIP or reorganization
• Fund may have committees, such as investment committee, supervisory committee, audit
committee
• Restriction to related parties transactions, except if approved by a majority at the General
Meeting
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Private Equity Funds (FIP)
▪ Administration and management:
• Investment Manager shall be an entity duly authorized by CVM
• Manager duties may be exercised by the Investment Manager or by a third party contracted
by the Investment Managers also duly authorized by CVM
▪ Duty to inform: Investment Manager to deliver periodically to CVM and to the quotaholders
of the Fund accounting statements, portfolio composition, net equity of the FIP, etc.
▪ Audit: FIP shall be annually audited by an independent audit firm
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Private Equity Funds (FIP)
FIPPORTFOLIO
CONVERTIBLESECURITIES
WARRANTS
DEBENTURES
SHARES
OTHERADMISSIBLE
ASSETS
INVESTMENT MANAGER
SHARES
REAL ESTATEPROPERTIES
INVESTMENTSABROAD
FUND OFFUNDS
FIP/FIEE
DERIVATIVES(HEDGING)
OTHERADMISSIBLE
ASSETS
90%
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Private Equity Funds (FIP)
▪ Participation in the decision-making process of the portfolio companies:
• By participating in the block of control
• By shareholders agreement
• Any other arrangement guaranteeing actual influence on the strategic policy and
management of such companies
▪ Investment in listed companies: Regulation shall establish criteria for investment
▪ Privately-held companies of the portfolio:
• Shall not issue participation certificates
• Board of Directors shall have a unified term of 1 year
• Disclosure of agreements with related parties, shareholders agreements, stock option plans
• Adhere to arbitration procedure
• When becoming listed shall adhere to special listing segment of the stock exchange
• Accounting records audited annually by independent auditors registered at CVM
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Private Equity Funds (FIP)
▪ The Self Regulation and Best Practices Code of ABVCAP / ANBIMA:
• Purpose:
▪ Transparency on management activities
▪ To create standard practices and processes
▪ Equitable treatment
▪ Increase fiduciary duties
• Mandatory Adhesion for:
▪ Private equity managers affiliated to ABVCAP
▪ Institutions affiliated to ANBIMA
▪ Investment Managers of FIP/FIEE
▪ Managers of FIP/FIEE
▪ Distributors of FIP/FIEE Quotas
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Private Equity Funds (FIP)
• Classification of FIP/FIEE:
▪ Restricted: 50% or more of total quotas are held by a sole investor, by investor
having a family relation as defined in the Code or by investor that belong to the same
economic group
▪ Diversified: Constituted by several investors and not within the definition of
Restricted
▪ Type 1: Representatives of the investors in the Investment Committee. No obligation
to have a Supervisory Committee
▪ Type 2: Investment Committed solely composed by representatives of the
Administrator or Manager and a has Supervisory Committee
▪ Type 3: No Investment Committee. May have a Supervisory Committee
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Capital Markets – Regulated Activities
CVM
DEPOSITARIES
STOCKEXCHANGE
BROKERS
CUSTODIANS
DEALERS
OTC
ASSETMANAGERS FUNDS
AUDITORS
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Capital Markets – Basic Rules
▪ REGULATORS
• CVM acts as governmental regulatory agency
• Several self-regulation entities – BM&FBOVESPA, ANBIMA, ABRASCA, among
others
▪ STOCK EXCHANGE AND OVER THE COUNTER
• First Stock Exchange founded in 1890
• Self regulatory organizations with supervision of CVM (Brazilian SEC)
• Responsibilities in relation to their markets and participants
• Only one Stock Exchange nowadays / following international trend other stock
exchange may start to operate
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Capital Markets – Basic Rules
▪ TRADES AND ACCOUNTS
• Identified up to the beneficial owner
• Better oversight and risk management
▪ FULL & PUBLIC DISCLOSURE
• Net Asset Value – daily basis
• Portfolio composition – monthly basis
▪ ADOPTION OF THE IFRS
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Capital Markets – Listed Companies
▪ CATEGORIES
• Issuers of Securities
• Issuers of Debt Instruments
▪ REFERENCE FORM
• Self registration system in accordance with IOSCO standards
• Mandatory disclosure
▪ Risk Factors
▪ MD&A
▪ Executive Pays
▪ Financial Instruments
▪ Risk Management Policies
▪ FINANCIAL STATEMENTS
• Annual & Quarterly Basis
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Capital Markets – Listed Companies
▪ SHAREHOLDERS MEETINGS
• Sufficient Information on matters at the time of the call notice
▪ TAG ALONG RIGHTS
• For all voting shares
• 80% of the premium paid to controlling stake
▪ LISTING SEGMENTS
• Standard Market
• Bovespa Mais
• Corporate Governance Level I
• Corporate Governance Level II
• Novo Mercado
Informações Confidenciais de Propriedade de TozziniFreire Advogados
Corporate Governance
▪ Corporation Law
• Tag along for voting shareholders
• Reduction of disproportion between voting and non-voting
• Minority shareholder on the board
▪ Novo Mercado
• Self-regulatory effort from BM&FBovespa
• Corporate governance practices and transparency requirements
▪ Only voting shares
▪ Minimum free float of 25%
▪ Same premium paid to controlling stake for all shares
▪ 20% of independent directors
▪ Compliance with IFRS
▪ Mandatory arbitration for resolution of corporate disputes