The decision of companies on the Novo Mercado to exterminate mandatory bid requirements from the company by-laws of future players in the tier did not last long. In a second consultation by BM&FBovespa in order to clarify this item of regulatory reform, the companies retreated and have decided to leave everything as it was. Thus, new companies on the Novo Mercado are free to implement mandatory bid requirements if they want. Mandatory bid requirements are clauses that oblige shareholders who attain a certain shareholding participation to make a public offer to acquire all the shares that comprise a company’s capital.

Carried out during October, this second consultation was necessary in order to clarify a point that could potentially be interpreted in different ways. The São Paulo Stock Exchange had initially subjected two proposals related to mandatory bid requirements to a vote: one that would mean all companies would have a single obligatory offer, inspired by European legislation, with pre-established price conditions (based on the greatest market value of the last 12 months) without a premium in the event that a shareholder attained 30% participation; the other vetoes new companies from establishing any type of mandatory bid requirement, with the exception of the offer of 30% covered in the São Paulo Stock Exchange in the previous item. In the voting, the companies vetoed the first proposal and accepted the second, which left one doubt: if companies were against the OPA (takeover bid) of the European model, why should they have voted in favor of this option for new companies?

This bone of contention led BM&FBovespa to carry out a new round, questioning whether the companies confirmed their understanding that the only mandatory bid requirement that could be adopted voluntarily by future companies on the Novo Mercado would be that suggested by the São Paulo Stock Exchange. This time, the proposal was voted down. A slightly simplistic hypothesis, although not entirely absurd, for the change of heart is that companies had not read the item approved in the first consultation carefully enough.

“Companies prefer to have the freedom to include mandatory bid requirements in the by-laws”, says Henrique Lang, partner at Pinheiro Neto Advogados law firm. According to Lang, the greatest problem with the model proposed by the São Paulo Stock Exchange was the condition that the price would be fixed on the basis of the greatest market value of the last 12 months. “In times of crisis, an OPA (takeover bid) like this one could expose companies, especially the small caps, to a hostile takeover at a very low price”, warns the attorney.

After this episode, HRT and Brasil Insurance started selling shares on the São Paulo Stock Exchange with mandatory bid requirements that establish obligatory offers starting from the acquisition of 20% of the capital. “The tendency, however, is that mandatory bid requirements start to be activated by the acquisition of more significant participations, of 25% to 35% of the capital”, says Renato Ximenes, partner at the Mattos Filho Advogados law firm.