In the midst of the Covid-19 pandemic, with the objective of ensuring the solidity, stability and regular functioning of the National Financial System, the National Monetary Council published Resolution no. 4,797, on April 6, 2020 (“Res. CMN 4,797“).
The Res. CMN 4,797 established, for a determined term, limitations to the distribution of results and the increase of management compensation to be observed by financial institutions and other institutions authorized to operate by the Central Bank of Brazil (“BCB“).
Effective immediately, Res. CMN 4,797 prohibited these institutions from making payments related to the results calculated on the base dates between April 7 and September 30, 2020, or to be made during this period, except for eventual payments for 2019, related to:
(i) interest on own capital and dividends above the mandatory minimum established in the bylaws, on April 07, 2020, or established by law, when applicable;
(ii) repurchase of own shares, except if authorized by the BCB, up to the limit of 5% of the issued shares, provided that through stock exchanges or organized over-the-counter markets, with the purpose of keeping them in treasury and selling them later;
(iii) reduction of share capital, if legally possible; and,
(iv) increase in remuneration, fixed or variable (
e.g.
(iv) increase in fixed or variable compensation (e.g., bonuses, profit sharing, and any deferred compensation and other performance-related pay incentives) of officers and members of the board of directors, in the case of corporations, and of management, in the case of limited liability companies.
It is important to point out that the aforementioned prohibitions must be observed regardless of the maintenance of resources in an amount greater than the Additional Principal Capital (ACP), and that the aforementioned amounts cannot be anticipated, subject to future obligations, or linked to future dividend payments.