By Daniela Froener and Layon Lopes*
Initial public offerings (IPO) of shares in Brazil must comply with specific legislation and with the rules of the Brazilian Securities Commission, and one of the principles of public offerings of shares is the offering on equal terms to all investors, so that they can make their investment decisions consciously.
The law that regulates public offerings of shares in Brazil is Law No. 6,385/1976, which also regulates the capital market as a whole, and establishes that all public issues of shares must have prior registration with the Brazilian Securities Commission. It is noteworthy that in some cases, the Brazilian Securities and Exchange Commission may exempt the company from registration, as is the case with crowdfunding. In addition to registration, both the law and CVM rules regulate in detail the entire process of public offering of shares, including the form of communication of potential investors.
Specifically regarding CVM rules, it is Instruction No. 400, of December 29, 2003, which governs the rules for public offerings of shares, both in the primary and secondary markets. In this instruction, CVM establishes several provisions with respect to mandatory registration, cases of waivers, aspects related to information, the distribution system, receipt of reserves, rules of conduct, among other matters.
Public offerings of shares may only be carried out through institutions that are part of the Brazilian securities distribution system, such as investment banks, brokers or securities distributors. In other words, to carry out its public offering of shares, the company must hire the specialized services of institutions that are part of the Brazilian securities distribution system, as well as the investor interested in the acquisition.
In summary, in a registration process for a public offering of shares in Brazil, the following essential steps are taken:
- a) Registration of the public offering of shares with CVM;
- b) Formation of the consortium of institutions that will coordinate and distribute the operation;
- c) Establishment of guarantee (if any);
- d) Content of the offer, including lot and pricing method;
- e) Distribution of the preliminary and definitive prospectus (advertising material);
- f) Collection, from investors, of intentions and reserves (quantity and maximum price);
- g) Receipt of reservations (when contemplated in the prospectus and in the announcement of the start of distribution);
- h) Disclosure of the distribution period;
- i) Result of the offer, including the final share price;
Finally, it is noteworthy that in Brazil, company B3 is the only company that offers the infrastructure and technology necessary for transactions in the Brazilian financial market, and, for this reason, in Brazil, B3 ends up being the synonym for ‘stock exchange values’.
* Layon Lopes is the CEO of Silva | Lopes and Daniela Froener is COO of the Silva | Lopes team.