CVM’s FÁCIL system: Facilitating Access to Capital Markets for Small and Medium-Sized Enterprises

CVM’s FÁCIL system: Facilitating Access to Capital Markets for Small and Medium-Sized Enterprises

In recent years, the Brazilian Securities and Exchange Commission (CVM) has sought several ways to make the capital market more accessible to Brazilian small and medium-sized enterprises (SMEs). The FÁCIL system (the acronym for Facilitação do Acesso a Capital e de Incentivo à Listagens in Portugues, which translates to Facilitating Access to Capital and Incentivizing Listings and the acronym means ‘easy’), an initiative by the CVM, is the answer to this need. The FÁCIL system was designed to make it simpler and more affordable for companies with gross revenues of up to R$500 million to register and list their shares on the financial market. This initiative aims to democratize access to financial resources while simultaneously enhancing the corporate governance practices of these companies, a crucial factor for ensuring investor confidence and strengthening the overall capital market.

The introduction of FÁCIL is an important milestone towards reducing regulatory barriers and operational costs for SMEs, particularly when compared with the traditional regime’s burdensome and complex listing requirements. CVM’s proposal is targeted at filling the gap between crowdfunding and the traditional securities market, offering a more accessible way for SMEs to raise capital in the financial market.

MZ, who is constantly seeking to empower IR professionals by offering cutting-edge technology, exceptional customer service, and disseminating relevant content such as this, will analyze the FÁCIL system to better understand its characteristics, the benefits it offers to SMEs, the expected impacts on the Brazilian capital markets and the challenges this system may face.

The FÁCIL system: Purpose and Characteristics

The FÁCIL system, proposed by the CVM, aims to provide small and medium-sized companies with simpler, more affordable, and more agile access to the capital market. The system seeks to reduce bureaucracy and regulatory costs, while ensuring essential transparency and governance practices for investor confidence. The system is targeted at companies with gross revenue of up to R$500 million, which, in turn, must register under the Smaller Companies (CMP) category.

The proposal of the FÁCIL system is structured to offer flexible regulatory requirements. One of the main innovations of this system is that it replaces traditional documents, such as the prospectus and the offering factsheet, with a single document: the FÁCIL Form. This document needs to be submitted annually or at the time of public offerings, simplifying the collection and sharing of information. Another significant change is the frequency of financial information that companies must disclose; while companies listed in the traditional market are required to submit quarterly financial reports, CMPs may disclose half-yearly information, which reduces costs and simplifies the process for these companies.

Furthermore, the FÁCIL system allows companies to issue public offerings, of up to R$300 million, without needing to registration with the CVM and without the obligation to hire a lead coordinator. These two flexibilities are very significant as they reduce issuing costs, thus allowing SMEs to access the market more quickly and at lower costs. Another benefit is the possibility of issuing direct offering, that is, a new type of issuance that can be carried out directly on an organized market, without needing formal registration with the CVM.

Expected Impacts of the FÁCIL System on Small and Medium-sized Companies

The FÁCIL system has the potential to bring significant transformations to small and medium-sized Brazilian companies, offering them a feasible alternative to traditional bank debt instruments. These companies, who often struggle to access conventional bank credit, will now be able to leverage the capital market to finance their operations and expand their businesses. Moreover, by enabling companies to raise up to R$300 million with reduced costs and fewer requirements, the FÁCIL system can significantly boost the number of listed companies, thereby enhancing the competitiveness of the national financial market.

One of the main advantages of the FÁCIL system is that it reduces the operational costs involved in the listing process. SMEs, which often lack the capital needed for the audits, advisory, and other regulatory required by the traditional market, will save significantly by adopting the simplified system. This cost reduction can be a decisive factor for many companies, particularly those in a growth phase that need capital to expand their operations.

Furthermore, the FÁCIL system allows SMEs to maintain their corporate governance at adequate levels, without needing to comply with all the heavy requirements of the traditional market. Requiring a single form to issue public offerings significantly simplifies the process, while still ensuring investors receive clear, transparent, and essential information. This flexibility can attract more companies to the capital market, which, due to the fewer regulatory barriers, will feel safer to raise capital and expand their businesses.

The possibility of issuing direct offerings also has a great impact on SMEs. Without needing to go through the registration process with the CVM, and without the obligation to hire a lead coordinator, companies can expedite the process of issuing securities, making it more efficient and more affordable. This flexibility is especially beneficial for companies with an existing network of interested investors, as they don’t require the full structure of a traditional IPO. A direct offer can be a simpler and faster solution, ideal for companies that want to raise funds more quickly.

The Governance Role of the FÁCIL System

A central discussion point regarding the FÁCIL system is how its more flexible requirements might influence the governance of companies adopting this system. While the FÁCIL system streamlines processes for smaller companies, it simultaneously requires adequate corporate governance practices to ensure investor confidence remains uncompromised. The CVM has been very careful in designing a system that, although simplified, does not weaken the governance of listed companies.

Introducing a more flexible regime offers SMEs the opportunity to enhance their governance practices, as these companies can gradually adapt to the requirements of the capital market.  Even with these simplifications, the CVM ensures that companies must still disclose their financial information regularly and transparently, which is crucial to increase investor confidence and ensure the robustness and efficiency of the capital markets.

However, some concerns arise regarding the lack of experience of many SMEs in dealing with corporate governance. Many of these companies still lack adequate governance structures, which may represent a risk to both investors and the company’s financial health in the long term. The CVM must, therefore, continue to monitor companies adhering to the FÁCIL system to ensure they meet minimum governance requirements without compromising market transparency and security.

Challenges and Considerations on the FÁCIL System

Although the FÁCIL system offers several benefits to small and medium-sized companies, it also has some challenges. One of the key critical points is how these flexibilities might influence companies’ governance and auditing practices. Although the CVM has designed a system aimed at reducing costs and simplifying processes, it must still ensure that companies maintain an adequate level of transparency and reliability. The absence of a lead coordinator in some offerings, for example, may impose a risk in terms of share distribution and liquidity of the offerings. The presence of a coordinator is essential to ensure that shares are well distributed and the offering’s success. The CVM will need to carefully assess the implications of this measure to ensure that companies do not face difficulties in distributing their shares.

Another challenge of the FÁCIL system is the limit of R$300 million for public offerings, which may restrict companies who need to raise a higher level of capital. Although this limit was established to ensure the system focuses on smaller companies, some companies may decide this limit is inadequate for their capital needs, leading them to seek alternatives outside the capital markets. As the FÁCIL regime rolls out, the CVM might need to reassess this limit to ensure it remains appealing for larger companies who are still below the R$500 million revenue threshold.

Summarizing in a few paragraphs

The CVM’s FIÁCIL system is an important milestone in democratizing access for small and medium-sized companies to the Brazilian capital markets. By reducing costs, simplifying regulatory processes and making governance requirements more flexible, the FÁCIL system offers a unique opportunity for SMEs to raise capital in the financial market and boost their business growth. Although the system has its challenges, such as the need to ensure corporate governance and transparency, it offers an innovative structure that can transform the Brazilian capital markets, making it more inclusive and accessible.

If well implemented, the FÁCIL system has the potential to increase the competitiveness of SMEs, improving their corporate governance and contributing to the growth of the capital market in Brazil. The public consultation opened by the CVM, until December 2024, will allow it to receive suggestions and carry out adjustments, ensuring the system’s effectiveness and that it meets the needs of smaller companies. The FÁCIL system offers SMEs a significant opportunity to access capital and improve their governance practices, while contributing to the strengthening of the Brazilian capital markets. MZ is here to help companies and to empower IR professionals in all processes involved for these new fundraising options.

We hope to have helped with this information about the FÁCIL system proposed by CVM and we are always at your service!

External Communications and MZ Research Team

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