On June 8^th 2017, the CVM Instruction No. 586 (ICVM 586) was enacted amending the CVM Instruction No. 480 (ICVM 480), providing for the registration of issuers of securities admitted to trading on regulated markets. Among the main changes introduced by the new Instruction is the Annex 29-A to the ICVM 480, which determines that publicly held companies will have to present annually a Report on Brazilian Code of Corporate Governance (the “Report” and the “Code”).

The Code was finalized in November 2016 by a working group that brought together several market entities to establish guidelines and  best practices for publicly held companies, and adopted a “comply or explain” model: the companies have to apply the corporate governance standards or, alternatively, inform the reasons why they chose not to do so. The Code was then submitted to CVM, which improved and implemented the recommendations, finally amending the Instruction No. 480.

Although the Report is a periodic document with mandatory presentation by the companies (using the CVM’s usual electronic system) for the disclosure of publicly held companies’ information (especially those registered as category A – equity issuers), the new rule does not require companies to amend their by-laws to introduce the recommendations, but to inform the reason for its adoption or not.

The aforementioned Annex 29-A lists the principles introduced by the Brazilian Code of Corporate Governance, determining to the company the disclosure of information regarding compliance with the guidelines of the Code, among which are the following: (i) company’s corporate capital should be composed only by common stocks; (ii) diversification of the board of directors; (iii) the development of evaluation mechanisms and improvement of risk management processes – compliance mechanisms; and (iv) adoption of policies on securities trading and mitigation of conflict of interests.

The Franchise Offering Circular (FOC) is an essential element to the franchise contract in accordance with article 4^th of the Law 8.955/1994 (which regulates franchising in Brazil). Brazilian legislation requires that this document must be provided to the interested party at least 10 days prior to the signing of the contract. This requirement together with the demand of a minimum content indicate the relevance of guarantee a conscious and well-supported choice for entering in a franchise agreement.

Said document is so relevant that the Law states that the franchise agreement is void if the minimum term of 10 days was not accomplished (article 4^th, sole paragraph) or in the case the FOC includes false information (article 7^th). In other words, this pre-contractual document is binding to the franchisor and might affect the validity of a contract subsequently signed.

Based on the article 7^th, the Court of Justice of the State of Minas Gerais accepted the claim to terminate a franchise contract (case file No. 0024.14.296.079-8, 14^th Civil Court of Belo Horizonte). The franchisee evidenced that the maximum value of investment indicated in the FOC did not correspond to the actual amount required, which in fact was much higher. It was also evidenced that the franchisor refused to provide training for personnel violating the terms proposed. Once the contract was declared void, franchisor was condemned to restitute to franchisee all the amounts paid.

The decision is also important because it did not considered valid the arbitration clause established in the contrac. As the Brazilian Superior Court of Justice has already decided (especially in the Appeal No. 1.602.076/SP, rapporteur Minister Nancy Andrighi), a franchise agreement is considered an standard term and, therefore, the validity of the arbitration clause depends on whether the clause was duly highlighted in the text or if an unequivocal consent by the adherent can be proven.

It is important to highlight that the arbitration clause is not automatically affected by the termination of the contract. This means that even if the discussion refers to the validity of the contract, this would not automatically confirm the State jurisdiction in detriment of the arbitral jurisdiction. As pointed out in the commented decision, the grounds that lead to the annulment of the arbitration clause in the case did not have any connection with the offense to the requirements content in the FOC.

The Superior Court of Justice’s 3^rd Chamber stated, in two recent decisions (Special Appeal no. 1.469.119/MG and Special Appeal no. 1.634.077/SC), that five-year statute of limitation provided in article 44, sole paragraph, Law no. 4.886/65 – Agency Law – does not affect the calculation of the indemnity for the termination of the agency agreement without cause, known as the 1/12 indemnity calculated on the total amount received by the sale agent during the term of validity of the contract (article 27, subitem “j”).

Examining whether the calculation of the indemnity could be limited by the five-year period prior to the termination of the contract, considering the statute of limitation, the Court concluded that there are two different legal rules: (i) one related to the indemnity legally established to cases of termination of the agency agreement without cause; and (ii) another one related to the statute of limitation of the right to claim unpaid commissions during the period of validity of the contract.

Thus, STJ decided that the five-year statute of limitation affects only the commissions or other rights not paid or insufficiently paid and not claimed, and the term for claims begins on the date of the default. This means that the right to receive the due compensation arises with each defaulted month.

On the other hand, the right to be indemnified arises with the termination of the contract without cause and it may be executed since then, within 5 (five) years. If the claim is proposed within the referred term, all the commissions received by or credited in favor of the sale agent during the period of validity of the contract are included in the calculation, without limitation of time.

After collecting contributions from the public (during a public hearing), CVM published, on July 13^th,the Instruction No. 588 (ICVM 588),  regulating the public offering of securities issued by small companies carried out with waiver of registration through an electronic collective investment platform.

Companies with annual revenue up to R$ 10 million (ten million Brazilian Reais) will be allowed to make public offers to raise funds with automatic waiver of obtaining the registration necessarily requested (for both the issuer and the offer), provided that they use the platforms pre-authorized by CVM. The provider of the platform will be responsible for a number of measures including verifying that the issuer and the offer meet the requirements under the new Instruction.

Among other determinations of the ICVM 588, it was established that the fundraising is limited to R$ 5 million (five million Brazilian Reais), it shall have a term of up to 180 days, and each offer can only be started after 120 days from the closing of the previous one.

In addition, on July 14^th the Circular Letter SRE nº 2/2017 was published aiming at guiding the platforms providers on the procedures set forth in ICVM 588. The concern of CVM with the electronic platforms emphasizes such service providers’ role as gatekeepers, which is, therefore, a new activity regulated by CVM, including a minimum capital need, a requirement for minimum computer systems, codes of conduct and a policy to prevent conflicts of interest, as well as requirements for its managers and their operation.

The purpose of the ICVM 588 is to regulate, enable and encourage a safe fundraising by companies in the early stages, with even greater restrictions on credit and capital, but which can still be relevant by increasing jobs and income.

On May 23^rd, 2017, the Superintendence of Private Insurance (SUSEP) issued the Rule No. 553 and turned more flexible the rules applicable to D&O Insurance, which was introduced in Brazil in the 1990s and that has been developed without a specific regulation. Only in 2016, SUSEP ruled the product through Rule No. 541 of October 14^th, 2016.

The main highlights of the new regulation of D&O Insurance are:

• The coverage of insurance contracts may include  fines and penalties applied against  the insured. Such coverage was prohibited by SUSEP until the edition of Rule No. 541;
• Individuals may hire D&O Insurance directly; consequently executives will be able to find this coverage in the market even if the insurance is not offered by the company – a practice that was prohibited in Rule No. 541;
• Insurers may mention foreign legislation when the D&O Insurance has coverage outside of the national territory. Such practice will allow the insurers to offer their products with international coverage, which is especially important to the executives of Brazilian companies with foreign-traded securities (such as American Depositary Receipts – ADRs);
• Insurance contracts may comprehend costs of defense independently of the coverage for indemnification. This is especially important for executives of closed-end private pension entities, since PREVIC imposes limitations on contracting D&O Insurance with indemnity coverage; and
• Offering contract in three (3) different types of coverage: (i) coverage A (side A), with coverage for losses suffered directly by the executive; (ii) cover B (side B), with coverage for reimbursement to the company, in cases in which the company pays in advance some amounts and/or commits itself to indemnify the executives; and (iii) coverage C (side C), with coverage for damages suffered by the company as a result of illicit acts practiced by the executive.

The insurers have until November 20th, 2017 to adjust the D&O Insurance plans to the new regulation. From this date, the insurance plans which have not being adapted to the new rule cannot be hired nor renewed.