• Report highlights main results of 1st phase of the working group (WG) main project.

Overview

• Originally in English, study is available on ministry of economy, BRZ CVM websites both in its original version and also as free translation into Portuguese.
• Analyzes legal dispute resolution mechanisms involving shareholders, lawsuits available for corporate claims in Brazil, procedural issues, use of arbitration.
• Legal framework, challenges re use of arbitration in publicly traded companies, etc.

Working Group Objective

• WG was set up to study, propose measures to improve legal mechanisms available to shareholders to protect their rights, if appropriate, obtain compensation for damages.

Report Findings

• Authors state there is widespread perception that current Brazilian legal regime does not offer adequate mechanisms for investor protection.
• It is relatively uncommon for minority shareholders to propose legally envisaged measures to seek redress from directors or controlling shareholders for losses to firms.
• Report lists several factors that explain low number of lawsuits e.g. costs, lack of information, restrictions on shareholder's active legitimacy, risk of further losses.
• Proposes improvement to currently existing mechanisms to make them more effective.
• Especially re damage repair as improvement of private tutelage mechanisms is an extremely important measure for Brazilian capital market's development.
• BRZ CVM regularly institutes proceedings to ascertain liability of managers or controlling shareholders for losses caused to companies.
• But even if illicit act proven, BRZ CVM is not competent to request compensation from company or investors, so private repair mechanisms complement its activities.
• Updating of existing regime can contribute significantly to attract new investments.