by Rodney A. Alves and Rodrigo N. Totoli
The most relevant affairs of Brazilian corporations, such as election of officers, amendments to By-Laws or even approval of financial statements, are decided by the shareholders at the mandatory general meetings. According to the Brazilian Corporations Law (“LSA”), the shareholders or their representatives must be physically present at the meetings in order to exercise their voting rights.
However, many absences to these general meetings have frequently occurred, resulting in less participation of the shareholders in such relevant decisions. Shareholders of Brazilian corporations have always faced problems to attend the general meetings. Brazil is a large country and traffic in major cities is heavy, thus distance and time consuming are common issues. These two problems combined inevitably makes shareholders, especially minority, find the costs to attend meetings prohibitive, thus causing the absences.
Among the several topics set forth by Law no. 12.431, enacted on June 24, 2011 (“Law 12.431/11”), one has stood out due to its importance, since it addresses the shareholders’ votes at the general shareholders meetings of Brazilian corporations. Law 12.431/11 intends to mitigate the absence problem, by adding a paragraph to section 121 of LSA, allowing shareholders of publicly held corporations to participate and vote in the general meetings even when they are not physically present.
With the enactment of the new law allowing shareholders to vote remotely, it is believed that the lack of attendance by the shareholders to general meetings will be reduced and, therefore, more involvement of minority shareholders in the corporate affairs is expected.