BRAZIL: Agreement to Establish Brazil Mergers and Acquisitions Committee (CAF)

Friday June 29 2012

BM&FBOVESPA, the Association of Capital Markets Investors (AMEC) and the Brazilian Institute of Corporate Governance (IBGC) signed an agreement on June 27th for the establishment of the Brazil 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.

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.

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