CVM answers an inquiry made by Amec in 2010

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On January 31st, the Brazilian Securities and Exchange Commission answered an Amec’s inquiry submitted in December, 2010. By means of a certified mail, the association requested CVM to provide its opinion on the legality of some provisions in the by laws of publicly-held companies, including companies listed under Bovespa’s “Novo Mercado” category.
According to the mentioned provisions, which are object of consultation, if a shareholder with a relevant share interest in a company (such relevance may vary among the companies) wants to purchase additional shares, he/she must communicate the company’s Director of Investors Relations who, in turn, must send a request to the Stock Exchange to carry out an auction through which the shareholder can buy the shares, competing with other interested parties, including both the members of the company’s Board of Directors and the company itself.
The objective is to check whether the provisions that limit the free circulation of shares of publicly-held companies infringe the article 36 of the Business Corporation Act and also whether they are not authorized by CVM’s Instruction 168, which provide for all special procedures in the Stock Exchange, among which, auctions. Amec has also addressed the possibility of lack of economic efficiency resulting from the mentioned clauses.
After three years, CVM was contrary to the association’s inquiry, stating that the Superintendência de Relações com Empresas (Office of the Superintendent of Companies) concluded that “statutory clauses that establish the requirement that an auction is to be held in the Stock Exchange for the acquisition of shares by a shareholder who has reached a specific percentage of share interest are not compatible with the ongoing legislation…”.
About the possibility of lack of economic efficiency resulting from the mentioned clauses, the regulatory entity understands that “the critical and detailed analysis of costs and benefits of restrictive statutory clauses must be exclusively performed by shareholders themselves, based on the social interest, in a sovereign decision taken in the General Shareholders’ Meeting…”
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