Bill 3899/12 causes significant changes to the Corporations Law.

The Chamber of Deputies approved Bill 3899/12, representing a significant change to the Corporations Law that will have a direct impact on investor protection and the accountability of directors and controllers.

Main changes:

• Creation of a mechanism allowing minority shareholders to file class action lawsuits in cases of losses caused by mismanagement or violation of transparency rules. The lawsuit may be filed directly against administrators and controllers. The CVM (Brazilian Securities and Exchange Commission), the Public Prosecutor’s Office, affected investors holding at least 5% of the securities of the same type or class, and the debenture holders’ trustee may also file the lawsuit.

• Expansion of the responsibilities of the Securities and Exchange Commission, giving it a more active role in regulating and overseeing the market. According to the text of the Bill, the agency will be responsible for establishing rules for class action lawsuits and arbitration proceedings involving publicly traded companies, monitoring and controlling indemnification agreements signed between companies and their managers, as well as regulating the way relevant information is disclosed to the market and investors.

• The possibility for the judge to reduce or exclude civil liability when there is a disproportion between the damage and the fault, or when good faith is proven.

• Strengthening the accountability of managers and majority shareholders, focusing on investor protection and reducing systemic risk.

The amendment to the Corporations Law was included in the bill dealing with the circular economy, and the bill now goes to the Federal Senate for analysis.