Put: Andre Jerusalem

On August 26, 2021, Law No. 14,195/2021 was published, which brought several changes to corporate legislation with the aim of making the national market more competitive from a regulatory point of view. One of the most innovative issues was the institution of plural voting in public limited companies. 

The creation of plural voting allows a single share to have the right to multiple votes during general shareholders' meetings. In other words, the original shareholders (i.e., former controlling shareholders) can maintain control over certain decisions even without holding the majority of the share capital, thus eliminating the need to enter into a shareholders' agreement with a group of investors. As a result, the founding shareholders can now have decision-making powers that were previously only guaranteed through shareholders' agreements. 

According to the approved Law, the following are requirements for the viability of plural voting: 

• For common shares with plural voting rights to be created, an approval quorum of at least half of the total votes conferred by the shares with voting rights and half of the preferred shares without voting rights or with restricted voting rights, if issued, is required; 
• Shareholders who dissent from the resolution on ordinary shares with plural voting rights will have their right to withdraw assured, unless the creation of these shares is already provided for or authorized by the company's bylaws; 
• Once the trading of shares with plural voting rights in organized markets is authorized, the characteristics of the shares that include this right cannot be changed, except to be reduced; 
• As a general rule, shares with plural voting rights will be automatically converted into shares without plural voting rights if they are transferred to third parties; 
• Incorporation or spin-off operations of companies that do not adopt the mechanism will be prohibited if the incorporating, surviving or resulting company uses the mechanism. 
• Plural voting cannot be adopted in meetings that deliberate on the remuneration of directors and the execution of transactions with related parties, in compliance with the relevance criteria to be established by the Securities and Exchange Commission (CVM). The CVM will also be responsible for determining other matters that cannot be voted on using this mechanism; 
• Mixed-economy companies, subsidiaries, public companies and companies directly or indirectly controlled by the public authorities cannot have shares with plural voting rights.