Corporate Governance Practices and the Brazilian Corporate Governance Institute (IBGC)

According to the IBGC, corporate governance is the system by which companies are managed and monitored and involves the relations with shareholders, the board of directors, the executive board, the independent auditors and the fiscal council. The basic principles that guide this practice are: (i) transparency; (ii) equitable treatment; (iii) accountability; and (iv) corporate responsibility.

Under the principle of transparency, management must cultivate the desire to inform not only the Company‘s financial performance, but also all other factors (even if intangible) that guide the business activities. Equitable treatment is defined as the fair and equal treatment of all minority groups, employees, clients, suppliers or creditors. Meanwhile, accountability means being accountable for the actions of corporate governance agents to those who elected them, and being fully liable for all acts executed. Lastly, corporate responsibility represents a broader view of the business strategy that incorporates social and environmental aspects into the definition of the business and operations.

The main corporate governance practices adopted by the Company are listed below:

  • capital stock consisting of common shares only, ensuring that all shareholders have voting rights;
  • in addition to the attributes set forth in Brazilian Corporate Law, it is incumbent on the Shareholders’ Meetings to: (a) elect or remove, at any time, members of the Board of Directors and Fiscal Council; (b) determine the overall annual compensation of the Board of Directors and Board of Executive Officers, as well as the Fiscal Council, if installed; (c) amend the Bylaws; (d) attribute bonuses in shares and decide on any eventual stock splits or reverse splits; (e) approve any stock option or share subscription plans for the Company’s directors, executive officers and employees, as well as the directors, executive officers and employees of other companies directly or indirectly controlled by the Company; (f) deliberate on management proposals for the allocation of annual net income and the payment of dividends; (g) the delisting from the Novo Mercado special corporate governance segment of the BM&FBovespa S.A. – Securities, Commodities and Futures Exchange; (h) deliberate on the Company’s delisting as a publicly-held company before the CVM, except when determined otherwise by the Bylaws; (i) the selection of a specialized company responsible for preparing a valuation report of the Company‘s stock in the event of the cancellation of its registration as a publicly traded company or its delisting from the Novo Mercado segment, as provided for by the Bylaws, from among the companies indicated by the Board of Directors; (j) deliberate on any other matter submitted by the Board of Directors;
  • the maintenance and disclosure of a registry containing the number of shares owned by each shareholder, identifying them by name;
  • in the case of a transfer of the Company’s control, the purchase offer must be extended to all shareholders and not just the members of the controlling block. All shareholders must have the right to sell their shares under equal conditions and the price must be transparent. If the entire controlling block is sold, tag-along rights must be extended to all shareholders;
  • the hiring of independent auditors to audit the balance sheets and financial statements;
  • statutory provisions for the installation of an Fiscal Council;
  • the choice of a location for the Shareholders’ Meetings that will facilitate the presence of all shareholders or their representatives;
  • a clear definition in the Bylaws of (a) the means for convening a Shareholders’ Meeting and (b) the means for electing and
  • removing members of the Board of Directors, as well as determining their term of office;
  • transparency in the public disclosure of management’s annual report;
  • open access to company information and installations by members of the Board of Directors; and
  • the resolution, through arbitration, of any eventual conflicts that may arise between the Company, its shareholders, directors, executive officers and members of the Fiscal Council.