By: Antonio Mazzuco and Luiz Gustavo Doles

Public offerings of securities are complex procedures regulated by CVM Resolution 160 that make use of several different documents, but there is a common thread in every type of issuance: there are four documents that are mandatory.

The Deed of Issue, the Placement Agreement, the Sheet and the Prospectus are part of these operations, and understanding the purpose of each of these documents is an essential step for the issuance process to be carried out without any problems.

Initially, it should be noted that these documents are mandatory in public issues of securities.

Writing

The term deed is used here broadly as it represents the document that contains the terms and conditions that will be respected by the securities being issued, such as the debenture issuance deed or the securitization term.

This can be considered the main document of the operation as it presents many of the most important conditions for investors such as:

1. The hypotheses of early maturity
2. Debt repayment hypotheses
3. Description of service providers and their responsibilities
4. The remuneration criteria for the title
5. The operation's functioning in several different areas
6. Guarantees provided within the scope of the operation

This is a complex document, which is why ANBIMA (Brazilian Association of Financial and Capital Market Entities) created a model widely used in the market for different types of deeds.

Negotiating the deed is a long process since both creditors and issuers have an interest in making all the conditions agreed between the parties clear, which is why it is recommended to hire specialized legal advice in these situations.

Distribution Contract

This is the document that regulates the relationship between the issuer of securities and its coordinators, led by the Lead Coordinator.

The Lead Coordinator is the intermediary institution, acting on behalf of the offeror as leader in conducting the public offering, and to whom the CVM must direct communications regarding the offering, working with the coordinators' union to ensure the offering is successful.

This is a document whose content changes according to the offer that generated it, and resolution 160, in an effort to standardize the documentation of public offerings of securities, established the following basic clauses and conditions that must be included in any distribution contract:

1. Qualification of the issuer, the lead coordinator and, if applicable, the other coordinators and other intermediary institutions that signed the distribution contract, with express indication of the respective capacity in which each of these agents appears in the contract;
2. Deliberative act that authorized the issuance;
3. Securities placement regime;
4. Total number of securities covered by the contract, mentioning the form, nominal value, if any, issue price and conditions for payment, advantages and restrictions, including those arising from any decisions of the assembly or board of directors that decided on the increase;
5. Conditions for the resale of securities by the lead coordinator and, if applicable, by other coordinators or other intermediary institutions involved in the distribution, in the case of a placement regime with firm guarantee;
6. Remuneration of the lead coordinator and, if applicable, of the other coordinators and intermediary institutions involved in the distribution, detailing the commissions due;
7. Description of the procedure adopted for distribution; and
8. Mention of price stabilization and market maker contracts, if any

Except for offers subject to the automatic registration procedure, after the start of distribution, the distribution contract signed between the offeror and the coordinators may be changed with prior authorization from CVM.

Reallocations may be carried out between the lead coordinator and the other institutions participating in the distribution consortium, provided that they are provided for in the distribution contract and duly communicated to the CVM.

Prospectus

The prospectus is a document that must be prepared by the offeror together with the lead coordinator and contain the necessary, sufficient, true, precise, consistent and current information, presented in a clear and objective manner in direct and accessible language, so that investors can carefully form their investment decision.

This is one of the main sources of information for investors regarding the offering and one of the main ways for the issuer to comply with its duty to inform investors, since the offeror is responsible for the sufficiency, veracity, accuracy, consistency and timeliness of the offering documents and other information provided to the market during the public distribution offering. Thus, the issuer may be held liable in the event of insufficient or false information presented to investors.

Aiming to standardize documents involved in the Brazilian capital market, the CVM requires the prospectus not to omit relevant information, not to present inaccurate information or information that may lead to errors, and must contain data and information on: ]

1. the offer, including its terms and conditions;
2. the securities subject to the offer and the rights inherent to them;
3. the offeror, if different from the issuer;
4. the issuer and its patrimonial, economic and financial situation;
5. third party guarantors of obligations related to the securities subject to the offer, if any, including their equity, economic and financial situation;
6. the main risk factors related to the issuer, the security, the offer, and the third party guarantor; and
7. third parties who may be recipients of the resources raised through the primary offering.

In order to provide investors with the greatest possible level of information, securities issuers often prepared prospectuses that were excessively long.

RCVM 160 limited the number of pages in the prospectus so that investors can find only essential information. Thus:

1. Section 1 of the prospectus, called the Prospectus Cover, must have a maximum of 1 (one) A4 page, when printed, and must reflect, in a legible, direct and objective manner
2. Section 2 of the prospectus, called Main Characteristics of the Offer, must present the characteristics of the transaction and contain the fundamental information that investors need to understand the nature of the issuer and characteristics of the securities offered, and must have a maximum number of 15 (fifteen) A4 pages, when printed.

The prospectus must:

1. be presented in the specific order established in the respective annex to this Resolution;
2. have a presentation and layout that facilitates reading; and
3. be written in readable-sized characters.

Blade

The leaflet is a document that presents summarized information about the offer, and must be prepared by the offeror together with the lead coordinator in addition to the prospectus and in a manner consistent with it, serving to summarize its content and present the essential characteristics of the offer, the nature and risks associated with the issuer, the guarantees, and the securities.

The offering sheet is not mandatory in offers in which the preparation of the prospectus is waived.

The offering sheet must:

1. be useful for investment decision purposes;
2. be written in a clear, concise and effective manner with the aim of enabling the general investing public to understand the offering;
3. be accurate, appropriately balanced in the emphasis given to positive and negative information, and must not mislead the investor;
4. be easy to read and written in simple language, refraining from making comments by reference to the prospectus in the sections intended to summarize the requested information;
5. follow the model and requirements for topics covered in the order presented in Annexes F to J of CVM Resolution 160;
6. additionally establish the general terms and conditions of the offer; and
7. be designed in such a way as to allow proper reading, including on mobile electronic devices, programs and applications in general

The 5 (five) main risk factors must be listed, in decreasing order of materiality, based on the probability of occurrence and the magnitude of the negative impact, if it occurs.