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3rd Latin American Corporate Governance Roundtable

Explore recent legal reforms and market-driven initiatives in corporate governance, focusing on BOVESPA's Novo Mercado commitment to best practices.

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3rd Latin American Corporate Governance Roundtable

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  1. 3rd Latin American Corporate Governance Roundtable Recent Corporate Governance Developments Maria Helena Santana São Paulo Stock Exchange - BOVESPA April 2002

  2. Novo Mercado Commitment with good corporate governance • Private sector initiative, based on and enforced through a contract with BOVESPA • Adhesion is voluntary and market driven • Companies committed to the highest standards of corporate governance • Set of rules over and above the Corporations Law reflecting market demands and requirements

  3. Legal ReformCorporations Law & CVM Law • Preferred shares: the new Law assures genuine privilege for preferred shares (although not tag along or voting rights) • Tag Along rights: the purchaser of a controlling interest must make a tender offer to all the shareholders with voting shares (ONs) at 80% of the price paid for the controlling shares • Delistings: tender offer at ‘fair’ value: either book value, market value of the net worth, discounted cash flow, market comparables, stock price on the market or other criteria acceptable to CVM • General shareholder meetings: minimum of 15 days notice, with the possibility of CVM interference to postpone the meeting

  4. Legal Reform Corporations Law & CVM Law • Board of Directors: Non-controlling shareholders representing at least 15% of the voting shares and preferred shareholders representing 10% of the total capital are allowed to elect board members (to be fully phased in by 2006) • Arbitration: bylaws may provide for resolution of disputes through arbitration • Criminal offenses: manipulation and insider trading • Strengthening of the CVM: operational and budgetary independence to CVM, five-year terms for the Commissioners

  5. Novo Mercado Commitment with good corporate governance • Only voting shares: one share, one vote • Full tag along rights • Delisting: public tender offer at economic value • Board of Directors: unified 1 year terms and a minimum of 5 members • Mandatory use of arbitration for shareholder/company disputes • 25% minimum free float

  6. Only Voting Shares • Rights to Investors • More Disclosure • Rights to Investors • More Disclosure • More Disclosure

  7. IGC x IbovespaCompared Performance

  8. Trading valueParticipation of the corporate governance segments 15 17 19 20 # of companies

  9. Market CapitalizationParticipation of the corporate governance segments 15 17 19 20 # of companies

  10. Novo MercadoBOVESPA’s Perception • The standard is set: • the only model for new listings that is being accepted by the market (domestic and international investors, underwriters) is the Novo Mercado • only very specific IPO cases will come to the Level 2 • Level 1 and Level 2 are real market requirements for the already listed companies • Minimum listing standard for the BOVESPA main board (2002): Level 1

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