PUBLICATIONS

After years of doctrinal and jurisprudential discussions, the “Comissão de Valores Mobiliários” (CVM) changed its understanding of the controlling shareholder’s vote in situations of potential conflict of interest.

The discussion on the nature of the conflict of interests stems from the wording of article 115 of the “Lei das SA” (Bill No. 6,404/76), which deals with the subject and gives rise to two interpretations: the understanding of the “formal conflict”, which resulted in the absolute prohibition of right to vote of the shareholder who has conflicting interests with those of the company; and the understanding of the “material conflict”, whereby it would be necessary to analyze the merits of the decision adopted by the shareholder before considering it as abusive and subject to annulment.

Until then, the “formal conflict” thesis prevailed, but in two judgments initiated in August, the majority of the CVM collegiate manifested itself in favor of the “material conflict” thesis, guaranteeing that the controller will be able to vote and, if proven any favoritism to the detriment of the company’s interests, their vote may be annulled and the controlling shareholder may be liable for the damage caused.

As this is one of the most controversial topics in the Brazilian capital market, the CVM intends to provide an institutional position soon to provide more clarity on the “material conflict” in the event of a controlling shareholder vote.