In order to carry out a reform of the informational regime which publicly-held companies are subject due to the issuance of securities, the Brazilian Securities and Exchange Commission (CVM) issued the CVM Resolution 59, which promotes several changes in CVM Instructions 480 and 481.

The purpose of the new rule is to reduce costs involved in regulatory compliance and to eliminate provisions requiring for repeated information, especially in the Reference Form. In addition, aligned with the international movement and the greater engagement of investors with environmental, social and corporate governance matters, commonly known as ESG, the new rule also deals with the report of certain information related to these matters.

The following amendments are some of the more general changes brought by CVM Resolution 59:

  • The obligation to keep the eventual and periodic information available on the company’s official website for three years, as well as the obligation to deliver the report on the Brazilian Code of Corporate Governance, are now applicable only to issuers which, cumulatively: (i) are registered in category A; (ii) have securities admitted to trading on the stock market; and (iii) have shares or certificates of deposit of shares in circulation;
  • The update of the Reference Form within seven working days is also required in the case of: (i) bankruptcy, judicial recovery, liquidation or out-of-court reorganization; (ii) replacement of the independent auditor; (iii) conviction of a member of the management or the fiscal council in criminal proceedings, in administrative proceedings within the competence of the CVM, Central Bank (Bacen) and Superintendence of Private Insurance (Susep), or any final conviction that determines the suspension or incapacity for the practice of any professional or commercial activity; and
  • The rules and procedures for remote voting, according to CVM Instruction 481, must be provided in the call notice prior to the shareholders’ meeting, and no longer in the reference form.

The Reference Form has undergone a major change in terms of organization, besides the addition of new requirements and the streamlining of some of its items. For example, information related to the company's activities and key corporate transactions is now included at the beginning of the document, requiring new information on ESG matters and the explanation for the possible non-adoption of certain practices, such as materiality matrix, key ESG performance indicators and greenhouse gas emission inventories.

The other main changes regarding the content of the Reference Form are:

  • It will no longer be necessary to include the last three fiscal years in the annual presentation of the Reference Form, except for the last fiscal year, unless when submitted to apply for registration as a publicly-held company or in some other cases specified in the regulation, such as compensation of the managers. In the context of public offerings of securities, the company remains obliged to disclose the latest accounting information, in addition to the last fiscal year;
  • To fill out fields not structured in the reference form, it is now allowed to include information by way of reference to other documents made available by the issuer, provided that they have been previously sent to the CVM and that the investor is informed about the complete way to access these documents;
  • Limitation of the requirement for management comments only to significant changes in items related to the statements of income and cash flow, replacing the previously required comments on each item of the financial statements;
  • As required in prospectuses of public offerings of securities, the issuer shall indicate the five main risk factors among those listed in each of the specific risk categories;
  • In the item related to the management, it must be included, if any, specific objectives that the issuer has with respect to the diversity of gender, color or race or other attributes in the composition of its management bodies and its fiscal council;
  • In the same item, the role of management bodies in the assessment, management and supervision of climate-related opportunities and risks should also be explained;
  • Information on the number of employees now requires indicators of diversity, such as gender identity, color or race, age group and other diversity indicators that the issuer considers relevant;
  • The ratio between the highest individual compensation, including directors, and the average individual remuneration of the issuer's employees in Brazil should be informed, disregarding the highest individual compensation, as recognized in its results in the last fiscal year;
  • Information on the current item 12.2, which deals with the description of the rules, policies and practices relating to the shareholders’ general meetings, will not be required in the new Reference Form;
  • It will no longer be necessary to individually detail transactions with related parties involving the issuer and its subsidiaries and transactions between its subsidiaries, unless when there is the participation of the issuer's direct or indirect controlling shareholders, its directors or persons linked to them.

CVM Resolution No. 59 also brought new rules for the announcement on transactions between related parties provided for in Annex 30-XXXIIII of CVM Instruction 480:

  • The issuer is now exempted from communicating new transactions related to a previous transaction already reported to the CVM, provided that they are routine and related to the normal course of the company's business, always following the same negotiation and approval process, and provided that the issuer has indicated, in a previous statement and in the same fiscal year, the routine character and the total estimated value of these operations until the end of the fiscal year; and
  • The definition of transactions with related parties excludes credit operations and financial services provided by an institution authorized to operate by the Central Bank, in the normal course of business of the parties involved and under similar conditions to those carried out by them with unrelated parties, in addition to transactions preceded by bids or other public pricing procedures.

CVM Resolution 59 will come into effect on January 2, 2023, so that issuers have time to prepare for the compliance with the new rules. However, as the information to be disclosed in 2023 relates to the fiscal year ended in 2022, CVM advises that issuers be attentive and prepared to disclose the information, especially involving ESG matters, before the new resolution is effective.