Plural Voting in Brazilian Companies: How Can This Mechanism Redefine the Dynamics of Corporate Control?

The introduction of multiple voting rights into the Brazilian legal system represents one of the most significant changes in the governance of publicly traded companies in recent decades. The possibility of assigning more than one vote per share makes the traditional corporate principle of "one share, one vote" more flexible, enabling more sophisticated control structures and new strategies for accessing capital markets. Provided for in Law No. 14,195/2021, which amended the Brazilian Corporations Law (Law No. 6,404/76), multiple voting rights bring the Brazilian regulatory environment closer to structures already consolidated in markets such as the United States, especially in technology companies. More than a legislative innovation, multiple voting rights represent a corporate engineering tool that directly impacts the relationship between control, governance, and capital raising.

But what exactly is plural voting?

Multiple voting rights are a mechanism that allows certain shares to confer more than one vote in general meeting deliberations. As stipulated in the Brazilian Corporations Law, each share can grant up to ten votes, provided that this structure is foreseen in the company's bylaws. In practical terms, this allows certain shareholders, especially founders or strategic shareholders, to preserve significant decision-making power even after processes of economic dilution, dissociating political power from economic participation.

What was the motivation for its introduction in Brazil?

Historically, the Brazilian corporate model adopted strict proportionality between capital and voting rights as an almost absolute rule, imposing a significant strategic dilemma: to raise the necessary funds for growth, founders needed to sell significant shareholdings, resulting in the progressive loss of control over fundamental strategic business decisions. The introduction of multiple voting rights sought to mitigate this. trade-off, This makes it possible to structure fundraising operations that reconcile the need for financing for expansion with preserving the strategic direction of the business in the hands of the founders, something especially important in companies whose value is directly associated with the unique vision and innovative capacity of their original creators.

How can plural voting be instituted?

The adoption of multiple voting rights necessarily depends on an express provision in the company's bylaws and approval by the shareholders at a general meeting. Legislation provides for two main scenarios: at the time of the company's incorporation or through a subsequent amendment to the bylaws in already existing companies. In the case of already incorporated companies, the institution of this mechanism guarantees dissenting shareholders the right to withdraw from the company, and they may receive reimbursement for their shares. This legal protection seeks to ensure that no investor is forced to remain in a corporate structure substantially different from the one for which they originally allocated their resources.

Is plural voting permanent?

No. The legislation established time limits that prevent the indefinite perpetuation of this mechanism. Plural voting rights have a maximum term of seven years, which can be renewed by a new resolution of the general meeting. In addition to this time limitation, the right to differentiated voting rights can be terminated early in situations such as the transfer of shares to third parties who do not belong to the original group of founders, voluntary conversion of shares to another class, or the occurrence of events previously established in the bylaws. This regulatory framework seeks to balance the necessary corporate flexibility and the protection of equity among shareholders.

Is multiple voting allowed for all companies?

Although formally permitted by law, multiple voting rights are not accepted in all capital market listing environments. Higher governance segments of B3, particularly the Novo Mercado, maintain the traditional principle of "one share, one vote," prohibiting structures with differentiated political rights. Thus, adopting multiple voting rights represents a strategic choice that establishes a significant trade-off: opting for greater flexibility in the control structure or adhering to higher levels of formal governance in exchange for benefits such as greater liquidity, expanded access to institutional investors, and improved corporate reputation.

In which situations does plural voting make the most sense?

The usefulness of multiple voting rights becomes apparent in specific contexts: technology-based or highly innovative companies, where founders concentrate essential strategic knowledge; companies in a stage of accelerated growth that require successive rounds of capitalization; companies with long-term strategies sensitive to short-term market pressures; and family-owned companies undergoing corporate reorganization that seek to preserve control stability throughout generational transition processes. In these scenarios, multiple voting rights enable access to external capital without causing a rupture of the controlling block or an abrupt change in the company's strategic direction.

What are the impacts on corporate governance?

The adoption of multiple voting rights generates significant benefits, but also presents challenges. Among the positive effects are the preservation of a long-term strategic vision, greater stability of corporate control, and expanded alternatives for raising capital. On the other hand, it can generate risks such as misalignment between political power and economic participation, excessive concentration of decision-making power, and potential conflicts with minority shareholders. Therefore, structures with multiple voting rights are usually accompanied by additional governance mechanisms with more restrictive clauses, qualified quorums for sensitive matters, a qualified board composition with independent members, restrictions on the transfer of shares with multiple voting rights, and robust transparency policies. What determines the success of the structure is the quality of the governance architecture that accompanies multiple voting rights.

Could plural voting change the dynamics of the Brazilian market?

The introduction of this instrument significantly expands the range of available corporate structures and tends to impact how innovative companies structure their growth and financing strategies, bringing Brazil closer to consolidated practices in developed markets. Multiple voting rights can enable fundraising operations and initial public offerings that, under traditional logic, would be less attractive or even unfeasible, especially in companies where value is strongly associated with the differentiated vision and specific leadership of their founders.

Differences between Plural Voting and Multiple Voting

Plural voting should not be confused with multiple voting, an institution already consolidated in the governance of Brazilian companies with a completely different purpose. While plural voting is related to the composition of the share capital, allowing certain shares to confer more than one vote in the deliberations of the general meeting, multiple voting is a specific mechanism used exclusively in the election of the board of directors. In multiple voting, shareholders temporarily receive a number of votes equivalent to the product of the number of shares they own and the number of seats on the board, and can strategically concentrate them, a technique that allows organized minority shareholders to elect at least one representative. In this way, multiple voting acts as an instrument of proportional representation of minority shareholders without permanently altering the proportionality of votes in the capital, while plural voting structurally modifies the political weight of the shares.

Article prepared by: Antonio Mazzucco, Marina Moreno and Paula Suraci.