Senate approves stricter rules for the State-Owned Enterprises Law.

Luciano Nascimento - Reporter for Agência Brasil

The Senate plenary today (21) approved the stricter version of the bill that establishes rules for the appointment of directors and members of the board of directors of state-owned companies. A version of the bill, with more lenient rules, was approved by the Chamber of Deputies last week, but the president of the Senate, Renan Calheiros (PMDB-AL), said that he intended to return to the original text from the House, which actually happened.

The approved text now goes to President Michel Temer for his signature. Approved by the Senate in April, the bill stipulates that the appointments of directors, members of the deliberative council, and presidents of these bodies and companies must follow technical criteria, preferably with people from within the company itself. According to the bill, those nominated for board members and director positions, including president, general director, and CEO, must have a minimum of ten years of professional experience or four years in first or second-tier positions in companies of similar size. The same applies to professors or researchers in the company's areas of activity and professionals who have held positions in special advisory roles in the public sector.

The Senate reintroduced into the bill the 36-month "quarantine" period for the appointment of members to the board of directors and the administrative council who have participated in the decision-making structure of a political party, in the organization and execution of an election campaign, or who hold a leadership position in a union. This waiting period had been removed by the Chamber of Deputies.

The approved bill reinstates the 25% quota for so-called independent members of the boards of directors. According to the text, these members cannot have any ties to the state-owned company, nor be relatives of those holding senior positions in the Executive branch. The Chamber had previously reduced this percentage to 20%.

This prohibition also applies to those holding office in the Legislative branch, ministers of state, state secretaries, municipal secretaries, and individuals who have any type of conflict of interest with the controlling entity of the public or mixed-economy company.

One of the points altered by the Chamber of Deputies and maintained in the Senate concerns the minimum requirements for the appointment of other members of the boards of directors. The senators maintained the modification stating that nominees must have at least four years of experience in the state-owned company's area of ​​operation, a minimum of three years of experience in leadership positions, and academic training compatible with the position. The original proposal increased the experience requirement to ten years.

According to the approved bill, every state-owned company will have to maintain at least 25% of its shares in circulation on the market within a period of ten years. Current legislation does not specify a minimum number of shares that must be traded.
The rules will apply to any and all public companies and mixed-economy companies of the Union, the states, the Federal District, and the municipalities.

The project includes state-owned companies that engage in economic activity, such as Banco do Brasil; those that provide public services, such as the National Supply Company (Conab); and those that engage in economic activity subject to a Union monopoly regime, such as the Mint.

The approval of the bill was considered a priority by the government of interim president Michel Temer. Earlier this month, Temer ordered a halt to all appointments to directorships and presidencies of state-owned companies and pension funds until the proposal was voted on.

In addition to this project, the government also wants to approve a bill that creates new rules for the selection and performance of executive directors and board members of closed-end supplementary pension funds linked to public entities and their companies, foundations, or autonomous agencies.