On December 3, 1999, CVM (the Brazilian Securities and Exchange Commision) Instruction 319 was published which regulates merger, acquisition and spin-off operations involving public companies. The Instruction provides the first specific rules covering the area of M&As of public companies. General guidelines for M&As are contained in the Brazilian Corporation Law.
The Instruction covers areas such as public disclosure and publication requirements, accounting treatment of premiums and discounts, treatment of shares and dividends of minority shareholders, financial audit requirements, timing and contents of reports by directors.
The effect of the new Instruction is to provide public companies the same tax treatment as companies that are publicly traded (i.e., companies that are registered with the CVM) and companies whose shares are traded over-the-counter. 
Notice must be given to the CVM of mergers, acquisitions and spin-offs involving public companies by the company at least fifteen days before the holding of a general meeting called to consider the proposal. The accounting of the amount of the premium or discount arising in the merged company from the merger of a public company and its parent will depend on how the premium or discount arises.
When the premium arises due to a difference between the market value of assets and their book value, the premium will be accounted for in the respective assets.
When the premium arises from the acquisition of a right of exploration, concession or permission delegated by the government, the premium must be accounted for in a specific fixed asset account.
When the premium or discount arises due to an expectation of future results the amount will be accounted for as a deferred asset or liability.
Under the Instruction, when the company gains a tax benefit through the amortization of the premium, that part of the special reserve equivalent to such benefit may be capitalized for the benefit of the controlling shareholder.
The capitalization of the special reserve corresponding to such fiscal benefit can only be realized at the end of each accounting year, but only if such benefit represents an effective reduction of the taxes paid by the company. Preferential rights will always be assured to minority shareholders, and amounts paid by them will be delivered to the controller shareholder (pursuant to article 170 of Law 6,404/76).
The premium arising in the merged company, from the merger of a public company and its parent, will be matched by a special reserve forming part of the net equity of the company. Such reserve will only be capitalized in proportion to the amortization of the premium and for the benefit of all the shareholders (except for the provisions of art. 7 of referred Instruction).
When the merger is completed, the premium or the discount will be amortized, pursuant to the dispositions of CVM Instructions 247 , of March 24, 1996, and 285 of July 31, 1998.
At the end of each accounting year, the company is required to disclose its accounting treatment of the premium and any changes in accounting policy in view of write-off of the premium or changes in the useful economic life of the same, affecting the amortization period.
In transactions resulting from the merger of a public company with its parent or vice-versa, the calculation of the ratio of the substitution of shares of minority shareholders may not include the balance of the premium paid on the acquisition of the company.
Dividends due on shares held by minority shareholders cannot be diluted by the amount of the premium amortized each accounting year.
Founding partner of Noronha Advogados, admitted to the Brazilian Bar Association in the State of São Paulo in 1978.