How to Close an M&A in Pandemic 

May, 2020 - Lior Pinsky, Gabriel Florencio Marques de Menezes

The pandemic and government health protection measures have created a series of challenges and smart government responses to try to deal with the imposed social distance.

The COVID-19 pandemic and the governmental measures to protect the health of the population resulting from it have created a series of challenges and intelligent governmental responses to try to deal with the imposed social distance, such as the provision of exclusively digital assemblies brought by Provisional Measure 931 and its regulation. 


The usual market practice in M&A operations is that it is not necessary to register (or even recognize firms) documents in any of the steps until the effective closing of the transaction (called “ closing ” in the jargon of professionals in the field). At closing, transfers of ownership of assets (shares or quotas, real estate) occur for payment of the price and the eventual change of management, and at closing or before, incidental acts (disbursement of financing and / or registration of guarantees) that may require interaction with registration bodies.


With Brazil comparatively poor in measurements made by multinational agencies, such as the World Bank's Doing Business project , especially with regard to our proverbial bureaucracy (for example, in Starting a Business our ranking is 138 and in Registering Property , 133 (in both cases considered 189 countries)), we wonder whether the agencies responsible for registrations are prepared in this pandemic to serve the business community in the context of M&A operations.


Electronic Signatures and the DREI Rules


For some time, the practice of signing documents electronically has been gaining ground in the Brazilian business scenario. The digital signature platforms have evolved to the point of giving integrity, authenticity and security to the documents digitally signed. In Brazil, this practice has been legally valid since 2002: Provisional Measure No. 2,200-2 / 2001 instituted the Brazilian Public Key Infrastructure (ICP-Brasil) and disciplined this practice. 


However, it is undeniable that public bodies were slow to institute and regulate processes that allow the full use of this “innovation”. Some of them, as we will see later, have not yet implemented mechanisms in this direction, which has already harmed everyone who depends on the provision of their services. COVID-19 made this delay even clearer.  


DREI 1 has  issued two Normative Instructions (the one of number 52, of November 9, 2018 (“ IN DREI 52/2018 ”), and of number 60, of April 26, 2019 of DREI (“ IN DREI 60/2019 ” ) that deal with the issue of electronic processes of commercial boards.


IN DREI 52/2018 authorizes the commercial boards to adopt procedures for the registration of documents digitally signed by their signatories with any digital certificate issued by an entity accredited by the Brazilian Public Key Infrastructure - ICP-Brazil. IN DREI 60/2019, in turn, authorizes interested parties' lawyers or accountants to declare the authenticity of copies of documents submitted for registration before trade boards 2 .


At the beginning of the measures related to COVID-19, on March 25, 2020, DREI issued SEI Circular Letter No. 1014/2020 / ME and communicated to the commercial boards some understandings based on the Normative Instructions mentioned above:


  • It is possible for the entrepreneur to digitize all physical documents (including articles of incorporation, amendments, write-offs, etc.), including those that he signed with his own hand, and his accountant or lawyer performs (i) the authentication of these scanned documents and (ii) the their protocol in the Junta Comercial system, provided they have a power of attorney and signing with their digital certificate.
  • The entrepreneur can grant powers for the accountant or lawyer to sign the instrument on his behalf (with his digital certificate). In this situation, the professional will add the power of attorney and the respective declaration of authenticity to the process.

When the above provisions are fully implemented by the commercial boards, there will be no major difficulties for corporate registration through digital means, including those resulting from M&A transactions. However, this is not yet the case. 



Closing Related Issues


When an interface with public registration and advertising agencies is necessary, the challenges faced by M&A professionals are as follows:


Commercial Boards


Most of the commercial boards suspended or drastically reduced their face-to-face activities. Some of them have not yet adopted 100% digital processes and, therefore, it is important to evaluate on a case-by-case basis how to carry out the necessary records for the closing of an M&A in the different states. In São Paulo, for example, JUCESP's face-to-face service was suspended until 05/11/2020 and will start to occur in a restricted way at JUCESP's headquarters from 05/12/2020. Therefore, the filing of typical corporate acts in M&A transactions has been impaired, as they cannot all be done in person (the filings currently accepted in person include only limited acts and EIRELIs - limited companies depend on the resumption of activities). 


The restricted service is being carried out by ACSP and, from 05/12/2020, by JUCESP headquarters. Accepted protocols are limited to limited acts and EIRELIs, as long as there are no pending / administrative or judicial irregularities - it is not necessary to attest to the regularity by means of “ nothing is stated ” certificates , but if there is an irregularity, the registration may be impaired.


It is necessary to organize the collection of the physical copies of these documents in the signatories' houses (by motoboys, for example) or the electronic signature. Despite the fact that the electronic signature is accepted by JUCESP, as we saw above, there are some obstacles due to COVID-19: 


  • Signatories who do not have the digital certificates required for electronic signature under the terms of ICP-Brasil (such as e-CPF) may have difficulty in issuing these certificates (the Management Committee of ICP-Brasil has already authorized the remote issuance of digital certificates for the duration of the pandemic. and several of the transmitters are already adapted for remote broadcasting, including by video conference); and
  • There are reports of cases in which ACSP advisers refused documents with a digital signature and claimed that it was impossible to verify the signature. 

To avoid unforeseen circumstances, we recommend that the collection of physical copies signed by the signatories be collected at their respective homes and subsequently registered. 


The corporate book protocol for JUCESP's seal is also suspended, since the analysis and seal are carried out only by the board's headquarters. As M&A transactions involving public limited companies require the transfer of shares via corporate books (which are usually open and certified by JUCESP), we see no major obstacles: the logistics of collecting signatures must also be organized so that the books are taken in houses of the respective signatories on the day of the closing (for motoboys, for example).


The Commercial Registry of the State of Rio de Janeiro (“ JUCERJA ”), in turn, has suspended face-to-face assistance 05/31/2020 but accepts protocols of corporate acts online, under the terms set out in the DREI normative instructions mentioned above. This facilitates the remote logistics of closings at the present time. Lawyers or accountants can certify the authenticity of the documents and file on the JUCERJA website, using only their digital signature. However, the collection of signatures in corporate books should occur as indicated above. 


Notaries / RTDs


It is common for documents signed at the closing of M&A transactions to require registration with notaries as a way of conferring publicity with third parties or validity. This may be the case with financing instruments and / or guarantees entered into within the scope of the operation, for example. 


The registry offices of titles, in compliance with the recommendations of the corregidorias of their respective states, continue to operate with reduced hours. As long as the signature collection logistics in the referred documents is carried out, as mentioned above, there are no major obstacles for subsequent registration. 


CNJ Provision No. 48/2016 authorizes and establishes general guidelines for the electronic registration system for electronically signed titles and documents. This is not yet a widely adopted practice, but there is the possibility of a digital protocol for documents signed electronically or physically at the National Registry of Titles and Documents and the Civil Registry of Legal Entities ( ).




The real estate registry offices are maintaining their face-to-face service with reduced hours. However, one of the most relevant developments in this pandemic period came from Provimento CG nº 12/2020, of April 28, which authorized in the state of São Paulo the execution of public deeds and notary minutes by secure electronic means (including videoconference), followed by digital signature.


The provision will be effective for a period of 30 days and there are still few precedents, but it seems to us to be a potentially relevant evolution. If maintained, positive impacts will be felt after the pandemic. 


In contact with one of the notary offices that has already drawn up a digital deed by videoconference after the mentioned provision, we were warned that the electronic procedure may take longer than the traditional (physical) procedure, especially if there are requirements regarding electronic signatures, proof of the identities of the signatories, in addition to the other aspects of the document in question. The standard procedure usually takes 7 business days.





It is noteworthy to note that the Brazilian public bodies responsible for registration are easing their usual requirements in order to adapt to the new social reality, especially in view of the mandatory distance imposed by governments in the face of the current pandemic situation. In a way, it is surprising that, at least in theory, legislation has the necessary tools so that M&A operations can follow their normal course. 


We know that in day-to-day practice obstacles can occur, an employee, member or registrar can effectively resist (inertia or fear of the new is not an uncommon characteristic), but we hope that one of the few positive legacies of this pandemic is greater adoption by all in simpler ways, resulting in a reduction in the bureaucracy needed to close transactions.


1 The National Department of Business Registration and Integration (“ DREI ”) is the body responsible for the regulation and inspection of the Public Registry of Mercantile Companies and Related Activities.


2 This procedure is authorized by the Public Records Law (paragraph 3 of article 63 of Law No. 8,934, of November 18, 1994, included by the Law of Economic Freedom (Law No. 13,874, of September 20, 2019).


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