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Bar on increasing board compensation in Brazil this year: 3 outstanding issues

Written by
Veirano Advogados, one of the leading and most renowned Brazilian business and employment law firms.
The Brazilian Central Bank has imposed restrictions on increasing board and company officers' remuneration until the end of 2020, but questions remain on how this can be implemented.  

Between April and May this year, the Brazilian Central Bank (BACEN) issued Ordinances 4797 and 4820 setting forth some restrictions to protect the financial system. These apply to banks and other financial institutions subject to the BACEN regulations. The restrictions include a prohibition on increasing officers’ and board members’ compensation from April 2020 until the end of the year.

However, there are three issues arising from this restriction, despite the BACEN’s efforts to clarify some practical aspects of the ordinances through a list of FAQs on their web page (see here).

1. If the officer has an employment agreement under the CLT (the Labor Code) regime, the ordinance will conflict with the forthcoming collective bargaining agreement on salary adjustment for inflation and profit sharing in September.

2. It is unclear if the limit on stock awards applies to the number of stocks or to their aggregate value as compared to the awards granted in 2019.

3.  Job offers issued after April 2020 might also be restricted by the bank’s pre-existing compensation policies.

José Carlos Wahle
Partner - Brazil
Veirano Advogados