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Brazil tightens corporate governance to mirror EU rules

Tuesday 13 July 2010 - by Andrew Hickley

The Brazilian Stock Exchange and Commodities and Futures Exchange in São Paulo has proposed tighter regulations to its main exchange, the Novo Mercado, in order to more closely mirror European rules.

The proposals announced on 7 July, will introduce new takeover positions as well as increasing the percentage of independent directors on the boards of companies from 20 to 30 per cent.

BM & FBovespa S.A listings issuer relations officer Cristiana Pereira says: “The main proposal is to introduce a takeover position similar to the position in the European Directive. Whenever any shareholder reaches a stake of 30 per cent within the Novo Mercado, it will be obliged to make a tender offer to acquire the remaining shares of the company.

“We are also proposing for it to be mandatory for the CEO and the chairman to be separate people. We also think that the board should establish an audit committee, which will be mandatory.”

Pereira stated that the fast-changing financial world had encouraged regulators to improve on a previously successful governance system.


“We had the financial crisis and the impact of it here in Brazil, and we have some facts that show we have to improve the structure of corporate governance of the companies, improve having a more effective board, and this is why we’re proposing these rules. I think Novo Mercado is already referenced in the world in terms of the structure that we’ve created to improve governance. I think what we’re proposing to it will only keep this image and this position of the Novo Mercado.”

The proposed changes will now be discussed with businesses on the listing, with a two-thirds majority needed to ensure that they are passed. Should businesses approve, the Brazilian Securities Commission will also analyse changes.

Pereira said she believed the changes will be approved by both, with the proposals expected to be put in place by November.


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