At that time, I hoped that the National Congress would not let the opportunity of appreciation of the MP pass by, in order to, in fact, improve the business environment in Brazil.

Well, on 23 June, the House of Representatives approved, with several amendments, the text of PM 1.040/2021, which now follows its processing in the Federal Senate.

With regard to the changes in the provisions of the MP on the Corporations Law, which was the focus of the previous article, the main innovation proposed by the House of Representatives was the inclusion of a provision on the possibility of creating a class of shares with plural voting rights.

The issue has the potential to be controversial, but the regulation given by the legislator sought to placate some of the possible criticisms.

Before detailing the plurality vote, it is worth mentioning that other changes have been made to the chapter dealing with the protection of minority shareholders.

Among them is the provision that the CVM, in addition to the Public Prosecutor's Office or the injured party itself, as already provided for in Law No. 7,913/1989, will now have the power to take legal action to prevent or compensate for losses caused to investors as a result of irregularities committed in the capital markets.

And, also, the inclusion of the possibility of electing a director residing abroad, whose appointment would be conditional on the constitution of a representative in the country to receive service of process.

Regarding this change, it could be said that it does not concern the protection of minority shareholders, but it could be argued that it improves the business environment by fostering the entry of foreign companies in Brazil.

Returning to the regulation of plurality voting, the text approved in the House of Representatives provides that a company may issue one or more classes of shares that have more than one vote per share, up to a limit of ten votes each.

Both private and public companies will be able to issue this type of share, provided that the creation of the class occurs before the start of trading of shares in organised markets - that is, public companies currently in existence would not be able to make use of the innovation.

The creation of the plural voting class of shares will depend on the affirmative vote of shareholders representing half of the votes of the voting and non-voting shares, with the right of withdrawal for dissenting shareholders, through reimbursement of their shares under the terms currently set forth in the Brazilian Corporations Law.

For listed companies, after listing their shares for trading, it will only be allowed to change the rules of the classes with plural voting rights in order to reduce the rights and advantages of those classes.

The plurality vote will also have a validity period (mechanism known as sunset clause) of seven years, extendable only once, by means of a resolution of the shareholders that do not hold plurality voting shares, observing the same quorum for creation of the class of shares and the reimbursement rule for dissenters.

The transfer of plural voting shares to a third party will, as a rule, cause them to be automatically converted into common shares without plural voting.

The issue of plurality voting is a controversial one. There is a vast body of corporate and corporate governance literature that advocates the one share, one vote principle, which has been adopted, albeit in part, by the Corporations Act.

In part, because the law has always provided for the possibility of issuing preferred shares, without voting rights, but with other advantages over ordinary shares.

The mismatch between economic aspects (a shareholder's percentage stake in the company) and political aspects (the number of votes a shareholder holds) has the potential to exacerbate the inherent conflict that exists between the controlling and minority shareholders, allowing them to maintain control with less equity exposure.

Part of the literature on the subject had an empirical basis that showed that companies that followed a higher standard of governance, with the principle of one vote per share being the cornerstone of this standard, enjoyed economic benefits by raising funds under more favourable conditions.

The thesis is that minority shareholders would demand a lower premium when investing in a company with better governance standards.

This thinking even inspired the emergence of the Novo Mercado in Brazil and the other differentiated governance segments that exist at B3, with excellent results.

However, in recent years, the existence of plural voting shares in more developed markets than the Brazilian one has come to be seen as a relevant mechanism to allow the raising of funds by new companies, of accelerated growth and which depend, to a large extent, on the dedication and permanence of their founders.

In this scenario, plural voting became an institute seen as beneficial for the companies and their founders, by allowing them to raise funds from the market without giving up control, and for investors in general, who now have the possibility of investing in these companies.

The prohibition of plurality voting in Brazil is one of the reasons (but not the only one) why young and relevant companies in the country have chosen to go public on Nasdaq, in the United States, and not on B3.

Concerns about corporate governance are legitimate, but it does not seem that mere legal fencing is the best way to protect minority shareholders, who today may be largely deprived of investing in promising companies.

Differentiated corporate governance segments already exist for Brazilian listed companies, which could continue to exist without the participation of new companies adopting multiple voting share classes.

In addition, the duties and responsibilities of the controlling shareholders will remain in force under the Brazilian Corporations Law, whether the control is exercised with multiple or single vote shares.

Finally, the text proposed by the House of Representatives to regulate the institution of multiple vote shares has some relevant protections to avoid exposing minority shareholders to the arbitrage of the controlling shareholders.

As explained above, companies with multiple voting shares would only access the capital market if this class of share is created before the IPO, the creation of this class of share would depend on the decision of the shareholders, with the right of withdrawal for dissenters, and the multiple vote would have a validity term and would not be transferable to third parties.

The Federal Senate has now, until August 9, the opportunity to appreciate PM 1.040/2021, with the changes made by the House of Representatives, to convert the measure into law.

So far, the processing of the measure has proved fruitful, with relevant contributions from members of the Legislature.

It is expected that the Senate will examine the measure bearing in mind the objective expressed in the origin of the norm, to improve the business environment and increase legal security in Brazil.