One of the biggest problems in fixed-income public offering negotiations typically arises after the offering closes: how to deliberate when the required quorum is virtually unattainable?
In fixed-income offerings, it’s not uncommon to see deliberation quorums receive little attention during the negotiation of the offering documents. Various changes, such as renegotiated terms, remuneration adjustments, or early redemption options, often encounter qualified quorum requirements of 90% or more. In practice, the fragmented investor base makes it nearly impossible to reach this level, stalling transactions that often have long terms in a country where even the future is uncertain.
Negotiating, even during the offering structuring phase, deliberation quorums appropriate to the issuer’s and the offering’s profile, matters and movements that do not require prior approval, incorporating flexibility clauses for specific situations and substitute quorums in the event of a second or even a third call, are essential to ensure that good long-term financing does not become a lasting trap. However, issuances are not always designed with this contractual care, which creates a surreal situation: the issuer and creditors who attend the meeting are unable to approve changes or course corrections necessary to ensure the continuity of the issuer’s operations and preserve the investors’ credit.
This occurs because in issuances with a highly dispersed nature of the securities, many investors do not even attend the meetings to discuss the issues raised. Depending on the quorum established for the matters, this leaves diligent investors, who monitor and attend the meetings, unable to resolve issues or unforeseen events, even though this would be better for protecting their credit and the continuity of the issuance.
It is precisely in this scenario that the decision of the Board of the Brazilian Securities and Exchange Commission (CVM), issued on March 19, 2025, marked an important step in the practical application of §§ 8, 9 and 10 of art. 71 of the Brazilian Corporations Law (Law 6,404/1976), introduced by Law 14,711/2023. Based on a query made by Aeris Indústria e Comércio de Equipamentos para Geração de Energia S.A., CVM examined, for the second time, a request for authorization to reduce the quorum for deliberation, on third call, of debenture holders’ meetings (AGDs) intended to approve changes to the conditions of the debentures. The decision partially approved the request, setting the quorum at two-thirds of outstanding debentures (below the statutory quorum of 90%, but above the 50% sought by the issuer).
Until 2023, corporate law did not expressly provide for the possibility of reducing the quorum at AGMs, unlike what had been the case for years at extraordinary general shareholders’ meetings (Article 136, §2 and §2-A of the Brazilian Corporation Law). This gap hindered the renegotiation of structured debt when the securities were dispersed, as the approval of essential changes, such as maturity extensions, changes to remuneration, or the inclusion of redemption options, requires qualified quorums typically established in the deed.
Law 14,711/2023 filled this gap by: (i) delegating authority to the CVM to authorize a lower quorum on a third call; and (ii) condition the reduction on the dispersion of outstanding securities.
What is the impact for issuers and investors?
a) Moderation precedent: The CVM indicates that the quorum reduction is not automatic up to the legal minimum of 50%. The agency will evaluate, on a case-by-case basis, the reasonableness of the percentage in light of the history of participation and the quorums already agreed upon.
b) Preservation of contractual autonomy: The decision reinforces that the provisions of the deed remain a reference parameter. Issuers interested in drastic flexibility must present robust justifications.
c) Incentive to participation: By requiring demonstration of prior efforts, the CVM encourages the use of remote voting tools, digital platforms, and engagement campaigns that promote greater investor representation.
d) Restructuring planning: Companies with dispersed debt structures should incorporate, as early as the structuring phase of public debenture offerings, clauses that provide for alternative quorums and decision-making simplification mechanisms, mitigating the risk of future stalemates.
e) Legal certainty: The precedent provides predictability to the market, detailing the criteria that the CVM considers relevant (dispersion, historical quorums, engagement efforts, and maintenance of contractual logic).
In summary, the ideal situation is always to negotiate, during the structuring phase, quorums and flexibility mechanisms appropriate to the reality of the offering and the issuer. However, the market now has a clear guideline: it is not enough to claim dispersion; it is essential to prove historically low participation and justify the incompatibility of the original quorum with the current reality of the investor base. Furthermore, recent experience suggests that: (i) having precedents for more flexible quorums in the offering itself helps to obtain smaller quorums in exceptional situations; and (ii) quorums around two-thirds tend to be accepted when there are no lower precedents in the offering itself, while more aggressive reductions will continue to require exceptional justification.