The Securities and Exchange Commission of Brazil (CVM), in line with the movement to update, consolidate, and simplify the regulatory framework governing the Brazilian capital market that began in 2020, issued, on March 29, 2022, CVM Resolution 80, "which provides for the registration and provision of periodic and one-off  information from issuers of securities admitted for trading in regulated securities markets.” The resolution repeals several previous instructions, the most relevant of which are CVM Instruction 480 (which provides for the registration of securities issuers) and CVM Instruction 367 (which provides for the declaration to be provided by managers of publicly-traded companies upon their election).

With the revocation of ten prior instructions, CVM Resolution 80, in practice, consolidated in a single rule the rules relating to registration and the provision and disclosure of periodic information by issuers of securities, without significant changes to existing obligations. The exception was the institution of a new obligation applicable to publicly-traded companies registered in category "A", concerning the disclosure of information on corporate lawsuits involving the companies themselves, their shareholders, or their officers and directors, as parties.

The creation of this obligation is not new to participants, since the topic was put up for public hearing by the CVM in 2021, in which the agency highlighted the purpose of improving protection mechanisms for investors and minority shareholders, based, among other issues, on OECD recommendations in its report Private Enforcement of Shareholder Rights: A Comparison of Selected Jurisdictions and Policy Alternatives for Brazil, published in November of 2020.

In the reasons set out in the public hearing notice, the CVM contends that the communication duties existing today are not sufficient to give investors in publicly-traded companies adequate visibility on demands involving invested company, which often refer to discussions on issues that may, directly or indirectly, relate to rights dear to shareholders.

The corporate lawsuits that must be disclosed by publicly-traded companies registered in category A are all legal or arbitral proceedings whose prayers for relief are, in whole or in part, based on the corporate or securities market legislation, or on the rules issued by the CVM, provided that such lawsuits involve the companies themselves, their shareholders, or officers and directors and that, alternatively, involve diffuse, collective, or homogeneous individual rights or interests; or in which a decision may be handed down whose effects affect the company's legal sphere or other holders of securities issued by the issuer who are not parties to the lawsuit, such as a lawsuit for the annulment of a corporate resolution, a liability action against an officer or director, and a liability action against a controlling shareholder.

Annex I of CVM Resolution 80 establishes the minimum content that must be disclosed. It comes very close to the content that was already required in relation to material lawsuits, in items 4.3 to 4.7 of the reference form, which include parties to the lawsuit, the amounts, assets, or rights involved, and the main facts.

In addition to the information that would usually already be disclosed, the standard now requires that the following be expressly stated:

• In the case of lawsuits - claims or relief sought, decisions on requests for urgent relief and production of evidence, decisions on jurisdiction and competence, decisions on inclusion or exclusion of parties and judgments on the merits or extinguishing the case without a judgment on the merits, at any level of appeal; and
• In the case of arbitration - submission of an answer, execution of an arbitration agreement, or equivalent document that represents stabilization of the claim, decisions on interim or urgent measures, decisions on jurisdiction of arbitrators, decisions on inclusion or exclusion of parties, and partial or final arbitral awards. In relation to both types of corporate claims, the new obligation requires disclosure regarding the execution of any agreements made in such claims.

The new disclosure obligation does not interfere with the company's analysis regarding the need to disclose the same information by means of a material fact, under the terms of the applicable standard. In other words, regardless of the disclosure provided for in CVM Resolution 80, companies must make their own analysis to assess whether it is necessary to disclose the information by means of a material fact, being exempted from presenting the report, provided that the material fact contains all the information required by the resolution.

CVM Resolution 80 also establishes that the confidentiality obligations provided for in the arbitration chambers' rules should not override compliance with the new regulatory obligation, subject to the legally established rules regarding the confidentiality of such claims.

The disclosure of this kind of information is a controversial topic in itself. On several occasions, this type of claim is dealt with in institutional arbitration bodies that have strict rules regarding the confidentiality of claims. This can even be considered one of the reasons that lead companies to prefer this type of means to manage and solve corporate disputes, given the potential damage that a corporate lawsuit has to the companies' image.

In this regard, the CVM itself took care to include its arguments on the issue of secrecy in the public hearing notice, emphasizing that "the regulations of the clearinghouses cannot contradict legal and regulatory provisions" and "that the disclosure obligations reflect central concerns of the capital market regulations and cannot be set aside by arbitration agreements, rules of arbitration chambers, or by any other convention, subject to the applicable confidentiality limits provided for by law.

Regarding the topic, the statements of the participants, contained in the report of the public hearing which resulted in the creation of the obligation (in the sense that the confidentiality of arbitration also has legal support and that a smaller set of information should be required in confidential claims), already set the tone of the possible discussions regarding the normative conflict between the rules that establish the confidentiality of arbitration claims and the new obligation established by the CVM.

Despite the polemics surrounding the topic, which will certainly still give rise to discussions, CVM Resolution 80 will come into effect on May 2. The application of the new obligation to disclose corporate claims will be compulsory for corporate claims filed as of this date and optional for those initiated before the rule went into effect.