Implemented in December 2000 by the São Paulo Stock Exchange (Bovespa), the Special Corporate-Governance Levels are special listing segments developed to create a trading environment that simultaneously promotes the interest of investors and increases the value of companies.

Companies listed on these segments offer their shareholders improved corporate governance practices that increase minority shareholders’ rights and the transparency of companies through the disclosure of more and higher-quality information that makes it easier to accompany the performance of companies.

The basic assumption is that the adoption of good corporate governance practices by companies confers greater credibility to the stock market and consequently increases the confidence of investors and their willingness to buy the company’s shares, thereby increasing stock prices and lowering the cost of capital.

The inclusion of companies on the Level 1 or Level 2 segments depends on the level of commitment assumed and is formalized by an agreement signed by the Bovespa, the Company, its managers, the members of the fiscal council and the controlling shareholders. By signing the agreement, the parties agree to comply with the Listing Regulations of the specific segment, which consolidate the requirements that must be observed by companies listed on that segment. In the case of Level 2, companies must also adopt arbitration for the resolution of any disputes.

Level 1 companies primarily commit to improving the disclosure of information to the market and promote widespread stock ownership. For example, in addition to the obligations established by legislation, publicly held companies listed on Level 1 must also observe the following requirements:

  • Improve disclosure, complementing their disclosure of the Quarterly Information (ITR) document submitted to the Securities and Exchange Commission of Brazil (CVM) and Bovespa and made public, with the disclosure of, among other documents, the Consolidated Financial Statements and the Statement of Cash Flow.
  • Improve the disclosure of information for each fiscal year, complementing their disclosure of the Standardized Financial Statements (DFP) submitted to the CVM and Bovespa and made public, and which contain the annual financial statements, with the disclosure of, among other documents, the statement of cash flow.
  • Improve the disclosure of information, complementing the disclosure of the Annual Information (IAN) document sent to the CVM and the Bovespa and made public with the disclosure of corporate information that includes the number and characteristics of the securities issued by the company held by the block of controlling shareholders and the members of the Board of Directors, Executive Board and Fiscal Council, as well as any changes in these positions.
  • Hold public meetings with analysts and investors at least once a year.
  • Present an annual calendar of corporate events, such as meetings and disclosure of results, etc.
  • Disclose the terms of the agreements entered into by the company and related parties.
  • Disclose on a monthly basis the trades made by controlling shareholders involving the securities and derivatives issued by the company.
  • Maintain in circulation in the market (free-float) a minimum percentage of shares representing at least 25% of the company’s share capital;
  • Public offerings must implement mechanisms to promote widespread ownership of capital.

The Brazilian securities markets are regulated by the CVM, which has regulatory authority over the stock exchanges and securities markets, by the National Monetary Council and by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions. The Brazilian securities markets are governed by the principal law governing the Brazilian securities markets, by the Brazilian Corporation Law, and by regulations issued by the CVM, the CMN and the Central Bank. These laws and regulations provide for, among other things, disclosure requirements, restrictions on insider trading and price manipulation and protection of minority shareholders. However, the Brazilian securities markets are not as highly regulated and supervised as U.S. securities markets.

Under the Brazilian Corporation Law, a company is either publicly held and listed, a “companhia aberta”, or privately held and unlisted, a “companhia fechada”. All listed companies are registered with the CVM and are subject to reporting and regulatory requirements. To be listed on the Bovespa, a company must apply for registration with the Bovespa and the CVM and is subject to regulatory requirements and information publishing requirements.

The company registered with the CVM may trade its securities either on the Brazilian exchange markets, including the Bovespa, or in the Brazilian over-the-counter market. Shares of companies listed on the Bovespa may not simultaneously trade on the Brazilian over-the-counter market. The shares of a listed company may also be traded privately, subject to several limitations.

The Brazilian over-the-counter market, whether or not organized, consists of trades between investors through a financial institution registered with the CVM, and authorized to trade in the Brazilian capital market. No special application, other than registration with the CVM, is necessary for securities of a public company to be traded in the non-organized over-the-counter market. The CVM must receive notice of all trades carried out in the Brazilian over-the-counter market by the respective intermediaries.

The trading of securities on the Bovespa may be suspended at the request of a company in anticipation of a material announcement. Trading may also be suspended on the initiative of the Bovespa or the CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or the Bovespa.


Holders of shares issued by Fras-le enjoy the following rights:

  • Each common share issued by Fras-le confers its holder the right to one vote at the company’s annual and extraordinary general meetings.
  • Fras-le’s preferred shares do not confer voting rights, however, holders of preferred shares enjoy all other rights attributed to the common shares on equal terms, including dividends at minimum equal to those distributed to the holders of common shares. In addition, in the event of Fras-le’s liquidation, holders of the preferred shares enjoy priority in the reimbursement of capital, with no premium, proportional to their interest in the company.
  • Holders of preferred shares with no voting rights shall effectively acquire voting rights if Fras-le fails to pay the minimum amount of dividends to them for a period of three consecutive fiscal years.
  • Fras-le shareholders shall enjoy, proportional to their equity interests in the company, preference in any subscription of new shares and/or securities convertible into shares. However, Fras-le may issue shares, debentures convertible into shares or warrants without prioritizing preferred shareholders if the placement is carried out via sale on the stock exchange, public subscription or exchange of shares in a public offering for acquisition of control, in accordance with the legal provisions.

Pursuant to CVM Rule # 358, of January 3, 2002, the CVM revised and consolidated the requirements regarding the disclosure and use of information related to material facts and acts of publicly held companies, including the disclosure of information in the trading and acquisition of securities issued by publicly held companies.

Such requirements include provisions that:

  • establish the concept of a material fact that gives rise to reporting requirements. Material facts include decisions made by the controlling shareholders, resolutions of the general meeting of shareholders and of management of the Company, or any other facts related to the Company’s business (whether occurring within the Company or otherwise somehow related thereto) that may influence the price of its publicly traded securities, or the decision of investors to trade such securities or to exercise any of such securities’ underlying rights;
  • specify examples of facts that are considered to be material, which include, among others, the execution of shareholders’ agreements providing for the transfer of control, the entry or withdrawal of shareholders that maintain any managing, financial, technological or administrative function with or contribution to the Company, and any corporate restructuring undertaken among related companies;
  • oblige the officer of investor relations, controlling shareholders, other executive officers, members of its board of directors, members of the audit committee and other advisory boards to disclose material facts;
  • require simultaneous disclosure of material facts to all markets in which the corporation’s securities are admitted for trading;
  • require the acquirer of a controlling stake in a corporation to publish material facts, including its intentions as to whether or not to de-list the corporation’s shares, within one year;
  • establish rules regarding disclosure requirements in the acquisition and disposal of a material stockholding stake; and
  • restrict the use of insider information.

Investors residing outside Brazil, including institutional investors, are authorized to purchase equity instruments, including Fras-Le’s common shares, on Bovespa provided that they comply with the registration requirements set forth in Resolution No. 2,689 of the National Monetary Council, which the Company refers to as Resolution 2,689, and CVM Instruction No. 325.

With certain limited exceptions, under Resolution 2,689 investors are permitted to carry out any type of transaction in the Brazilian financial capital market involving a security traded on a stock exchange, futures exchange or organized over-the-counter market. Investments and remittances outside Brazil of gains, dividends, profits or other payments under Fras-Le’s common shares are made through the new unified exchange rate market.

In order to become a Resolution 2,689 investor, an investor residing outside Brazil must:

  • appoint a representative in Brazil with powers to take actions relating to the investment;
  • appoint an authorized custodian in Brazil for the investments, which must be a financial institution duly authorized by the Central Bank and CVM; and
  • through its representative, register itself as a foreign investor with the CVM and the investment with the Central Bank.

Securities and other financial assets held by foreign investors pursuant to Resolution 2,689 must be registered or maintained in deposit accounts or in the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading by foreign investors is generally restricted to transactions involving securities listed on the Brazilian stock exchanges or traded in organized over-the-counter markets licensed by the CVM

Last updated on March 27, 2020