Measures to encourage small and medium companies to go public
As anticipated by our firm at an event held jointly with BM&FBovespa on May 8, 2014, Provisional Measure (local acronym MP) No. 651, published on July 10, 2014 provides for, among other provisions, incentives for small and medium companies to go public.
The first incentive that MP No. 651 provides for (in Section 16) the exemption from income tax on capital gains incurred by individuals until December 31, 2023 as a result of the sale – in the spot market of the stock exchange – of shares issued by companies that meet all of the following requirements:
- shares must be admitted to trading in a special segment instituted by the stock exchange, that meets certain corporate governance practices;
- market value below BRL 700,000,000.00;
- annual gross revenue below BRL 500,000,000.00;
- primary distribution of at least 67% of the total volume of shares issued by the company;
The income earned by individuals on the redemption of quotas of funds investing in shares “FIA – Access Market (local acronym FMA) with at least 67% of their assets invested in shares whose gains are exempt from income tax and with a redemption period of at least 180 days, are also exempt from income tax.
Section 19 of MP No. 651 allows companies to publish the information required by Law No. 6,404, of December 15, 1976 on the websites of Brazil’s Securities and Exchange Commission (local acronym CVM) and of the managing entity of the market in which the company’s shares are admitted to trading. Therefore, companies that meet the requirements established in Section 16 of MP No. 651 are released of the obligation to publish such information in the Official Gazette and in another newspaper of general circulation, which helps reduce maintenance costs of listed companies.