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AdvancedBrazilian REITs · Lesson A2.3 · Module A2

How to replace the manager or administrator

Module A2: Governance: the unitholder's power

11 slides~5 minquiz at the end

In this lesson

  • Call, notice and vote
  • Who can call a meeting, and with how much
  • What it takes to gather the votes
See the slides
Meeting in a room with a long table and people seated

Brazilian REITs · Lesson A2.3

A bad manager isn't forever

Shareholders can replace them. The hard part isn't the rule; it's gathering votes.

Four doors

The path to a replacement

  1. 5% requestshareholders ask for a meeting
  2. Noticeat least 15 days before a special meeting
  3. 25% approvequalified quorum (lesson A2.1)
  4. Handoverthe new provider takes over

Once asked, the administrator has up to 30 days to call it. CVM Resolution 175, general part, art. 73.

Who can call it

Who calls the meeting

  • Administrator and managerthe essential providers
  • Custodianholds the assets
  • Holders of 5%of issued shares
  • Shareholders' representativethe elected watchdog

The manager about to be replaced doesn't have to agree to the call.

To call a meeting

A fund with 2 million shares at R$ 90

2,000,000×5%=100,000shares
100,000×R$ 90=R$ 9 mnjust to call it

To approve

The 25% floor in shares and in reais

2,000,000×25%=500,000votes in favor
500,000×R$ 90=R$ 45 mnin shares voting yes

With 30,000 shareholders, that's a lot of people to organize.

In practice

Who usually unlocks a replacement

  • A rival managerwants the fund and rallies the votes
  • An institutional investoralready holds a large stake
  • A group with proxiesadds up many small holders' votes (lesson A2.4)
  • Youread the notice, vote or grant a proxy

When the administrator walks away

Resigning has a process too

  1. Day 0Resignsbut can't just leave
  2. Within 10 daysCalls a meetingto elect a successor
  3. If it doesn'tHolders of 5% call itin its place
  4. Minutes registeredSuccessor takes overonly then does the old one leave

CVM Resolution 175, Annex III, art. 34.

Remember this

Three ideas from this lesson

  1. 5% callHolders of 5% of shares can demand a meeting.
  2. 25% replaceReplacement needs a qualified quorum of issued shares.
  3. Votes are the hard partThe rule exists; gathering shares is the work.

Quick quiz · 1 of 2

What share of the fund lets shareholders call a meeting directly?

See answer

5% of issued shares. 0.5% is for a public proxy request, and 3% is for adding agenda items (lesson A2.4).

Quick quiz · 2 of 2

A fund with 4 million shares and 20,000 holders. How many yes votes replace the manager?

See answer

4,000,000 × 25% = 1,000,000, and it still has to be a majority of those present.

Lesson complete

Next lesson

A2.4Advanced · Lesson A2.4Representative, proxies and the minority voiceThree keys small shareholders hold, and almost nobody uses.Continue
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Image credits
  • Christina Morillo · Pexels · Pexels License — Pexels
  • Alena Darmel · Pexels · Pexels License — Pexels

Educational content, written for learners. Not investment advice.