On 16 July 2003, the Brazilian Securities and Exchange Commission ("CVM") laid down Instruction No. 391 that makes provisions on the organization, operation, and management of the so called private equity funds. These funds are closed condominiums, of 8 to 10-year maturity, formed to acquire equity holdings. The sector has long been waiting for regulation of the activity, which to date followed the rules of variable income funds.
According to Instruction No. 391, these funds are the combination of resources intended for the acquisition of shares, debentures, subscription warrants, or other securities or stock that may be converted into or exchanged for shares issued by publicly- or privately-held companies, and consequently taking part of the invested company’s decision-making process with effective influence in the definition of strategic and management policies, specially by appointing members of the Board of Directors (Conselho de Administração), but also, and alternatively, by
