With proxy season on the horizon, Brazilian regulators are taking steps to ensure that voting goes smoothly for all shareholders – particularly those that won’t be attending the meetings. Following a public hearing held by the Brazilian Securities and Exchange Commission (“CVM”) in November 2017 and a subsequent consultation, the new Instruction 594 has been published to amend and clarify the voting options available to remote voting shareholders.

The purpose of the amendments, as discussed in our prior post, is to make Brazilian shareholder meetings more accessible for investors voting remotely, particularly when dealing with elections of directors or supervisory council members, as well as reducing the expenses incurred by remote participation. Last year, Instruction 561 aimed to bring the country’s idiosyncratic governance and voting practices into line with other markets; implementation was partially successful, but there were hiccups along the way, in particular on timing and logistics (for further analysis of the effect of Instruction 561, see our 2017 Proxy Season Review for Brazil).

It should come as a relief to foreign institutions that Instruction 594 addresses timeframes for the submission of nominees and distribution of proxy cards. Shareholders will have to notify the company at least 25 days before the meeting if they want to appoint a candidate to the board election, and proxy cards with new candidates will only be resubmitted up to 20 days prior to the meeting. These new provisions will not only grant foreign shareholders sufficient time to analyse the candidates and recast their votes if necessary, but they should also provide reassurance that no unexpected last-minute appointments will leave them out of the voting process. It is worth mentioning that the CVM has clarified that shareholders who do not wish to amend their original votes following the inclusion of new candidates, will not need to do anything and their votes will be considered as sent originally, and only those wishing to change their votes will need to recast them.

The changes under Instruction 594 are applicable for all AGMs held from March 5, 2018. Beyond timing, the changes include:

  • Disclosure of proxy cards will be mandatory for any shareholder meeting where the agenda includes changes to the board of directors or the supervisory council, as well as for any extraordinary meeting held on the same day as the annual general meeting (a common practice in the Brazilian market).
  • Where cumulative voting has been requested, shareholders will be able to allocate their votes proportionally. In connection, an “abstain” option will be included in those resolutions where it was currently missing.
  • An analytical voting map will be published no later than seven days after the meeting, consolidating the votes issued remotely and at the meeting. This map will also include the first five numbers of each participant shareholder’s registration in the Individual Taxpayer’s Registry (Cadastro de Personas Físicas – “CPF”) or the National Register of Legal Entities (Cadastro Nacional de Pessoas Jurídicas – “CNPF”), the vote cast for each proposal and information on the shareholding position.

Brazilian voting and governance practices may still be difficult for foreign shareholders to follow, but things appear to be changing. Instruction 594 addresses some of the biggest issues that cropped up during the 2017 Proxy Season and, coming on the heels of recent changes to the listing regime, demonstrates that regulators will continue working with investors and issuers to improve governance and disclosure practices.

Eva is an analyst covering the Brazilian market.