BM&FBOVESPA: Agreement To Establish CAF Signed By Bodies
BM&FBOVESPA, the Association of Capital Markets Investors (AMEC) and the Brazilian Institute of Corporate Governance (IBGC) signed an agreementon June 27th for the establishment of the Mergers and Acquisitions Committee (CAF). This is a voluntary self-regulatory organization aimed at assuring the equitable treatment of publicly-traded companies’ shareholders during public tender offers and corporate restructuring.
The agreement’s signature formalizes an understanding by the four bodies to endeavor towards the creation of this organization - which is expected to begin operating in October. At the moment, the Exchange, AMEC, ANBIMA and IBGC are at the final stages of discussions into the wording of the Self-Regulation Code for Mergers and Acquisitions, drawn up by the legal expert Nelson Eizirik and which represents a composite of principles and rules regarding the Committee’s operations. Operational aspects and those relative to the financing of the organization are also being defined.
One part of CAF’s members shall be elected by its founding bodies and one part shall be independent. When called upon, its mission will be to opine and decide upon complaints regarding every type of public tender offer for the acquisition of shares, and regarding every type of takeover, stock takeover, merger, and spin-off with takeover, involving publicly traded companies.
Companies may adhere to the Committee regarding each and every of their public tender offers and corporate restructuring transactions, through the inclusion of this provision in their charters. Alternatively, the companies involved in a determined transaction can opt to take it before the Committee on an individual basis.
Evolution of the prevailing rules
The CAF Self-Regulation Code is based on certain fundamental principles and the rules stemming from these. When applying the Code it shall be incumbent upon CAF to privilege the principles rather than the rules themselves. This means that when CAF is faced with a concrete case it may make an exception as regards the application of a specific rule if it understands that there can be the observation of the principle through a less onerous means, such as determining the adoption of measures not expressly foreseen in the Code’s rules.
The two main CAF rules, which are at the forefront of the prevailing legislation, are public offer through having obtained a significant stake and the right of minority shareholders to a counter-report in corporate restructuring transactions involvingrelated parties. The purpose of the first rule is to guarantee that an investor or group that obtains a significant slice of a company’s capital makes a buy offer to all of the shareholders. The companies may decide within their charters what the significant stake is, within an interval of 20% to 30% of capital.
Furthermore, the rules do not permit the existence of different terms of exchange between shares of the same type and class in corporate restructuring transactions, unless the holders of the less favored share type or class approve the adoption of differentiated terms of exchange, or unless the CAF waives this rule in cases where the difference is based on the market price for equities.
It is important to note that the CAF will not judge the merit of values or the convenience of the transactions that are within its ambit. Neither will it be incumbent upon the organization to rule on and inspect trust issues, which are the responsibility of the relevant government organizations.
The central objective of CAF will be to guarantee that the transaction is executed in equitable conditions.
The Self-Regulation Code will not substitute the legal and regulatory provisions applicable to the transactions that are within its ambit. Neither shall the Committee’s operation substitute that of the Securities and Exchange Commission of Brazil (CVM) regarding such transactions. The founding bodies rather understand that the transactions that are submitted to the organization should already be presumed legitimate by the CVM.