At the end of last month, Provisional Measure 1.040/2021 was published with the announced objective of improving the business environment and positively impacting the country's ranking in the Doing Business report, prepared by the World Bank.

The improvement of the business environment in Brazil is, without a doubt, a laudable goal for any normative act.

The specific focus on the Doing Business report, despite sounding less meritorious, also has its relevance, given the recognition of this survey as an important parameter for measuring the level of ease of doing business among 190 countries, with comparison of various indicators.

So much so that the government's economic team, when justifying the adoption of the MP, highlighted a World Bank study which suggests that a 1% improvement in Doing Business ' measurement of the criteria represents an increase of US$ 250 to 500 million in foreign direct investment per year.

The MP brought a series of measures in line with these objectives, including, among others, facilitating the opening of companies, simplifying foreign trade rules and creating the Integrated System of Asset Recovery to enable the identification and location of debtors' assets.

In this article, the focus will be on the amendments to the Brazilian Corporations Law brought by the MP, which were made to increase the protection of minority shareholders in public companies.

The direction of the changes is commendable, but the manner and instrument used to achieve the goal may not have been the best.

The following changes were made to the Brazilian Corporation Law, always with respect to publicly-held companies: (i) expansion of the powers of the general shareholders' meeting; (ii) extension of the deadlines for calling general shareholders' meetings; (iii) prohibition on accumulating the positions of chairman of the board of directors and chief executive officer; and (iv) mandatory participation of independent members in the board of directors.

With regard to the extension of the competence of the general meeting, resolutions on the sale to other companies of assets corresponding to more than 50% of the total assets of the company and the entering into transactions with related parties, according to relevance criteria to be defined by the Securities and Exchange Commission of Brazil (CVM), were included.

During the discussions that preceded the MP, some groups defended that this expansion of the assembly's competence should be accompanied by changes in the rules that deal with the controlling shareholder's vote in situations of potential conflict of interest, which currently allow for different interpretations.

The change in the rule about conflicts did not come. For this reason, there is a fear that the provision will end up bureaucratizing and bringing uncertainty to operations that could previously be decided within the scope of the company's management, which is already subject to fiduciary duties and its own conflict of interest rules.

By broadening the competence of the assembly, operations that could be beneficial to the company may end up not being carried out due to the longer period required for approval in this forum and because of the lack of security that the controlling shareholders may face in knowing whether or not they can vote on certain matters.

With respect to the deadline for calling meetings of publicly-held companies, the MP increased the deadline for the first call from 15 to 30 days and reinforced the CVM's competence to declare the documents and information relevant to the resolution of shareholders that may not have been presented.

CVM was also authorized to determine the postponement of the meeting for up to 30 days, as of the date the documents and information are made available. These rules will come into force on May 1, pursuant to regulations already issued by the CVM.

With regard to the accumulation of positions of chairman of the board of directors and chief executive officer or equivalent position, the MP amended the Brazilian Corporations Law to prohibit the accumulation of such positions by the same person.

In addition, the law now provides for the possibility of the CVM exempting companies with lower revenues from the ban.

In my view, although the turnover criterion is relevant, other cases could also be allowed as exceptions to be provided for by the CVM.

To cite a more obvious example, publicly-held companies registered with the CVM as Category B issuers, which, under the terms of the regulations, do not issue shares, would not need to be subject to this limitation, not least because, in this case, there would be no gain in terms of protecting minority shareholders.

Other more conceptual criticisms of this amendment have already been raised by market participants.

In this vein, it is argued that fast-growing companies, where the founder's vision is relevant to their development, and even companies with a defined controlling shareholder whose stake is relevant to the company, should be able to allow the accumulation of key board and management positions in a single person.

However, in general terms, with the possibility of modulation of the rule by the CVM for exceptions in non-relevant cases, it seems to me that the amendment meets the goal of increasing the protection of minority shareholders.

Finally, the MP now provides that the presence of independent directors is mandatory in publicly-held companies, according to the terms and deadlines defined by the CVM.

In practice, many Brazilian companies already have independent members on the board, especially those adhering to the special listing segments of B3.

There is a concern with the text of the standard because there is no limitation on the number of independent directors that CVM may require in its regulations.

In fact, it would be good legislative technique to make this clear in the text of the law, but it does not seem to me that the CVM would seek to unreasonably increase the minimum number of independent directors or to subvert the majority principle that permeates the Brazilian Corporations Law, guaranteeing the most significant shareholders a majority of the board.

The intentions of MP 1040/2021 are good. However, the use of MP to amend relevant and stabilized normative diplomas such as the Corporations Law may not be the best path.

Firstly, there is the worn-out (but correct) argument that this type of amendment would hardly fit the requirement of urgency necessary for an MP.

In addition, changes in the corporate rules applicable to a large group of companies should be preceded by a debate in Congress, with the participation of the various sectors of civil society involved. This becomes even more evident when the merits of some of the proposed changes, as seen above, are not consensual or free of criticism.

Given this set of circumstances, there is a risk that the changes intended to improve the business environment will ultimately generate a greater sense of legal uncertainty and misalignment between the Executive and Legislative Branches.

In the recent past, amendments to the Corporations Law with excellent potential to improve the business environment in Brazil have not prospered, in part, because they were enacted by MP.

Provisional Measure No. 892/2019, which dispensed with printed publications, allowing publications mandated by the Corporations Act to be made on websites, free of charge, lost its validity without being considered by the National Congress and converted into law.

Despite occasional criticisms of form, it is expected that the National Congress will not miss the opportunity of examining MP 1040/2021 to maintain the good measures it brought and, if necessary, adjust whatever is necessary to, in fact, achieve the goal of the rule to improve the business environment and increase legal certainty in the country.