BM&FBOVESPA presents here the final proposals of the Regulations for the BM&FBOVESPA special corporate governance segments (Novo Mercado and Level 2) which will be put before a Closed Hearing. In the first phase, which begins today and continues until May 31, 2017, the companies listed in these segments can make assessments and clarify doubts regarding the proposals for the respective listing segments. The second phase, for voting, will occur June 01-23, 2017. Taking part in the voting for the Closed Hearing will be the 131 companies listed on the Novo Mercado and the 19 companies listed at BM&FBOVESPA Level 2.
The principal points of the Novo Mercado Regulation to be submitted for the companies to assess, are:
- Free Float: the Exchange proposes that each company should maintain a minimum 25% free float, or 15% depending on the average daily trading volume of the shares or of public offerings; as well as raising from six months to 18 months the deadline to restore the free float, in the case of a lower percentage than the minimum foreseen in the regulation, and the holding of a voluntary PTO at fair value for divestiture of control or for acquisition of a relevant stake;
- Pre-operational: inclusion of a rule that foresees trading being liberated for non-qualified investors only after the company publishes a financial report containing operating revenue;
- Independent Board Members: the company must foresee its board of directors being comprised of at least 20% or two (whichever is higher) independent members, always rounding upwards, and foresee a process for determining the independence of nominees for independent board member;
- Audit Committee: inclusion of a Statutory Committee in compliance with CVM Instruction 308, comprised of one independent board member and one expert and with the publication of an annual report or, alternatively, a non-Statutory Committee with the same rules that apply to the Statutory Audit Committee, and a report every quarter to the Board of Directors; as well as a prohibition against the participation of directors of the company, subsidiaries, controlling company and companies in the same business group;
- Corporate Restructuring: in cases of transfer of the shareholder base, the resulting companies must request listing at the Novo Mercado or Level 2 (if the restructuring involves resulting companies that do not intend to request a listing at the Novo Mercado or Level 2, the decision about the structure must be made by the majority of free float shareholders);
- Delisting: voluntarily leaving the Novo Mercado must be preceded by a PTO at fair price; with acceptance of the exit from the Novo Mercado of 1/3 of the shareholders of the free float; as well as voluntary exit procedures in compliance with CVM Instruction 361 (including the possibility of a second finding).
- Acquisition of a Significant Shareholding: the company must foresee in its corporate bylaws that upon reaching a 20% or 30% (at the company’s discretion) shareholding, there must be a PTO held at the best price paid by the acquirer in the past six to 12 months (at the company’s discretion). Companies are dispensed from this rule if their bylaws already consider protection against dilution or a poison pill.
Regarding the Closed Hearing Vote
The companies listed on the Novo Mercado and Level 2 may submit their answers via an electronic ballot over June 01-23, 2017, in two parts:
- Part 1 – Voting on to the foundational regulation of the Novo Mercado/Level 2, which includes rules regarding the Free Float, Dilution, Board of Directors, Leaving the Novo Mercado/Level 2, Corporate Restructuring, Inspection and Controls, Pre-Operational, Transparency and Simplifications;
- Part 2 – Answers regarding the specific rules which, if approved, will become part of the foundational regulation. Part 2 contains rules regarding Assessment by the Board of Directors, the Socio-Environmental Report, 50% of holders of the Free Float being required as a quorum for leaving the segment, and the Acquisition of relevant shareholding (applicable only to the Novo Mercado).
The changes can only be implemented if no more than a third of the companies listed in the respective segments vote against them.
