More than two years after a Public Hearing Notice on the topic was published, Brazil’s Securities and Exchange Commission (Comissão de Valores Mobiliários/CVM) finally released CVM Resolution 88 on April 27, 2022 – thus altering the rules concerning securities crowdfunding on electronic platforms.
Unlike other recent resolutions – which basically consolidated current rules and offered little innovation –, Resolution 88 is a true regulatory revolution for this topic.
In the words of the CVM itself, the main innovations (in relation to the proposals made in the Public Hearing Notice) are:
- An increase in the maximum fundraising limit from BRL 10 million to BRL 15 million.
- An increase in the annual gross revenue limits that define a small business company from BRL 30 and BRL 60 million – individual and consolidated limits – to BRL 40 and BRL 80 million, respectively.
- Required transparency concerning the remuneration of people hired to promote disclosure of public offerings, in the case of agents who are regulated by the CVM.
- A change in the bookkeeper requirement; now, it is mandatory to hire such a professional in specific cases – and small business companies may choose to hire the platform that distributed the public offering to provide shareholding control and ownership services, as stated in CVM Resolution 88.
- Establishment of a transition rule for compliance with the minimum share capital requirement for platforms that have already registered and included two registration cancellation hypotheses related to lack of public offerings by the platform.
- An increase in the minimum funds raised for a compliance professional to be hired, from BRL 15 million to BRL 30 million.
- Small companies are now required to present financial statements that have been audited by an auditor who is registered with the CVM, in two cases: (i) when offers’ maximum funding targets are greater than BRL 10 million; and (ii) when a small business company’s consolidated annual gross revenue is greater than BRL 10 million.
- Amendment to the proposal that made allocation of funds from offers more flexible, thus forbidding acquisition of minority interests in other companies.
- An additional lot increase of up to 20% to up to 25% of the maximum target value.
- Maintenance of a seal so that funds can transit on platform accounts.
- Establishment of percentage ranges for small business companies’ leading investors’ mandatory participation, depending on the size of the offer.
- Permission for lead investors to receive other types of remuneration, provided they are not remunerated by the investor.
A prior market demand was also met by the CVM, concerning flexibility in the way crowdfunding offers can be divulged; from now on, campaigns are allowed in any type of media, but observing certain parameters.
Moreover, as an important way of providing liquidity to assets and making crowdfunding more attractive, platforms may act as intermediaries in secondary transactions, although the following are forbidden: (i) setting up and managing organized securities markets; (ii) carrying out activities that are typical of entities that manage such markets; and (iii) employing typical terms such as “stock exchange” and the like.
In due course, after careful analysis, we will comment on specific aspects of the new Resolution.
