Policy for Related Party Transaction and Other Situations of Conflict of Interests
|Version:||Date of Review:||History:|
|2||05/23/2018||Updating of the entire policy in line with the Company’s current guidelines.|
Consolidate the procedures to be observed in Cielo’s businesses involving Related Parties, as well as other situations involving potential Conflict of Interests, conferring transparency on referred procedures to its shareholders and the market in general and ensuring their strict alignment with the Company’s interests, always in compliance with the best Corporate Governance practices.
- Law No. 6.404 of December 15, 1976, as amended (“Brazilian Corporation Law”);
- CVM Instruction No. 480 of December 7, 2009, as amended (“CVM Instruction No. 480”);
- Technical Pronouncement CPC 05(R1) of the Brazilian Accounting Pronouncements Committee – CPC on related parties disclosure (“CPC 5”) approved by Brazilian Securities and Exchange Commission as per Resolution No. 642/10 (“CVM Resolution No. 642”);
- Listing Rules of B3 S.A. – Brazil, Stock Exchange, OTC Novo Mercado (“Novo Mercado Rules”);
- Company’s Bylaws;
- Company’s Tax Policy; and
- Company’s Code of Ethics.
- Controlling Shareholder(s): shareholder or group of shareholders bound by shareholders’ agreement or under common control with the power of direct or indirect control of the Company, pursuant to the Brazilian Corporation Law.
- Management: members of the Board of Directors and Statutory Executive Board.
- Company: Cielo S.A.
- CVM: the Brazilian Securities and Exchange Commission.
- Investor Relations Officer (IRO): the Company’s Officer in charge of providing information to investors, CVM and Market Entities, as well as updating Cielo publicly-held company registration with CVM, executing and monitoring the Disclosure and Trading Policy.
- Key members of Management: members of the Board of Directors; Statutory Executive Board and another management body of Controlling Shareholder with effective power to influence the Company’s businesses.
Applicable to Controlling Shareholders and key members of their Management, directly or indirectly; to the Management of the Company and its direct or indirect subsidiaries; respective spouses or partners, children, spouses’ or partners’ children, and dependents or respective spouses, as well as all employees of the Company and its direct or indirect subsidiaries.
Related Party Transactions made out of Brazilian market (cross-border) shall observe, besides the rules applicable to this policy, the transfer price tax rules, as provided for in the Company’s Tax Policy.
- Cielo’s Related Party is considered the individuals and/or legal entities:
- who directly or indirectly by means of one or more intermediaries:
- control the Company;
- are controlled by the Company;
- are under common control with the Company;
- hold an interest in the Company conferring them relevant influence over the Company.
- Company’s associated companies or associated companies of an entity which is under common control with the Company;
- subsidiaries, parent companies or associated companies with common administrators amongst them or with Cielo; and a joint venture in which the Company is partner/shareholder.
- members of the Board of Directors and its Advisory Committees, Fiscal Council (sitting members and respective deputies), Board of Executive Officers (statutory officers or not) and the Audit Officer;
1.1.3. who have relevant influence on the Company’s Management or controlling shareholders (for instance, those with authority and responsibility for the planning, direction, and control of the Company’s activities, directly or indirectly);1.1.4. close family member of any person referred in items 1.1.2 e 1.1.3, who, in view of the relationship, may influence this person in his businesses with the Company, inclusive, necessarily:
- his spouse or partner and children,
- children of his spouse or partner, and
- his dependents or of his spouse.
1.1.5. any legal entity, which directly or indirectly, the persons referred in items 1.1.2 and 1.1.3 control, are controlled, exercise relevant influence or have voting powers;
- company whose suppliers, customers or lenders maintain a relationship of economic and financial reliance on the Company.
- Except for provisions in the Company’s Code of Ethics dealing with conflict of interests, the conflict of interests arises when the third party contracting or conducting business with the Company is not in situation of independence in relation to the matter under discussion and may influence or cause the Company to make decisions motivated by interests different from those which are of its best interest.
- Related Party Transaction(s):
- Related party transactions are those related to the transfer of goods, rights, resources, services or obligations between the entity and a Related Party, irrespective of being charged a price in consideration.
2.1. The requesting area shall notify the Legal Executive Board on any potential Related Party Transaction, which will analyze if this is really a Related Party transaction to be submitted to the procedures of this Policy. If confirmed by Legal Executive Board, the requesting area shall submit the potential Related Party Transaction to an Internal Audit for its opinion.
- The notice to Legal Executive Board and Internal Audit shall be instructed with the information necessary for its analysis, besides evidence and opinion from manager in charge that there are clearly conclusive reasons, from the Company’s business viewpoint, to conduct the Related Party Transaction, and such transaction to be conducted under terms, at least, equally favorable to the Company than those usually available in the market or those offered by an unrelated third party with the Company, in similar circumstances.
- In the event this is classified as a Related Party Transaction, after manifestation of the Legal Executive Board and Internal Audit, the requesting area shall prompt the Company’s Corporate Governance Department immediately, so that the latter analyzes, under the terms of the Company’s Bylaws, the need of calling for an extraordinary meeting of the Corporate Governance Committee (“Governance Committee”), in which the requesting area’s manager of Transaction shall present the business and its reasons.
- In the event of any situation between Related Parties to raise a Conflict of Interest, this shall be evoked by the party giving cause thereto, or also by any third party aware thereof as soon as the conflict is verified or acknowledged thereby.
- The issues referring to the Conflict of Interests involving or not the Related Parties shall be referred to the Governance Committee, so that the Committee, by means of assumptions, filters, and mechanisms defined below, recommends this issue or not for deliberation of the Board of Directors. When this deals with issues related to Conflict of Interests between Related Parties involving the Company’s controlling shareholders and the Company, the Governance Committee, exceptionally, shall be composed of all Independent Board members.
- Notwithstanding the aforementioned, if characterized as relevant transaction or agreement subject to authorization, as defined in the Company’s Bylaws, its submission and previous authorization from the Board of Directors shall be required, after the favorable opinion of the Governance Committee. In this case, the board members representing the Controlling Shareholders involved in the relevant transaction or agreement shall be absent from discussions on this matter and abstain from voting in resolutions on this matter.
- If, after analysis of the transaction and/or agreement, the Governance Committee does not characterize as relevant subject to the previous authorization of the Board of Directors, referred transaction and/or agreement shall be the purpose of the annual report submitted by requesting area to the Governance Committee.
- The Governance Committee will analyze the incentive agreements executed with controlling shareholders, after the manifestation of the Internal Audit Executive Board, pursuant to item 2.2. above, as well as any agreements or transactions, except for those relating to standardized banking products.
- Managers in the position of conflict shall be absent from discussions on this matter and abstain from voting in resolutions on this matter. If requested by Chairman of the Board of Directors or by Chief Executive Officer, where applicable, these Managers may partially participate in discussions, aiming at subsidizing them with additional information on the transaction and the parties involved, however, shall always be absent from the final discussion, inclusive in the voting process of such matter.
- The lack of voluntary manifestation of a Manager shall be considered a violation of good corporate governance principles and of this Policy, and such behavior shall be cognized by Corporate Governance Committee and, subsequently, by Board of Directors.
- The Governance Committee shall act so that to ensure that the Related Party Transactions, which involve or not a conflict of interests:
- are formalized and documented, specifying their main characteristics, inclusive the Company’s eventual termination of any Related Party Transaction whether as succession in title, under conditions corresponding to those available in unrelated party agreement (market arm’s length conditions);
- are conducted at prices, terms and usual rates of the market or previous negotiations representing arm’s length conditions; and
- are clearly reflected in the financial statements and in the Reference Form and disclosed pursuant to prevailing laws and regulations.
- The Board of Directors, at its discretion, shall have access to all documents connected with Related Party Transactions, including any technical reports or opinions that the appropriate authority has received and analyzed it. The Governance Committee shall define the content and the format of information considered necessary for resolution of the Board of Directors concerning a Related Party Transaction (observing the provisions of this Policy), which shall be distributed along with a call for the meeting where the transaction will be submitted for analysis.
- The documents connected with Related Party Transactions shall not be made available to the board members who are linked to the related party involved in the Transaction.
- The following Related Party Transactions are forbidden:
- those conducted under non-arm’s length conditions so that to jeopardize the Company’s interests;
- the Company’s direct grant of loans to Related Parties as defined above, as well as:
- to executive officers and members of the fiscal council or board of directors or respective advisory committees, as well as respective spouses, partners, descendants or descendants of respective spouses or partners;
- to relatives up to 2nd degree of persons mentioned above;
- to individuals or legal entities holding interest in the Company, in excess of ten percent (10%), unless specific authorization of the Brazilian Central Bank, in each case, when it refers to transactions backed by commercial effects resulting from purchase and sale transactions or pledge of goods, within limits defined by Brazilian National Monetary Council in general;
- to legal entities in which any managers of the Company, as well their spouses or partners, descendants or descendants of respective spouses of partners and respective relatives up to 2nd degree holding an interest in excess of ten percent (10%).
- It is also forbidden the participation of Managers and employees in private or personal businesses interfering or conflicting with the Company’s interests or resulting from the use of confidential information obtained in view of the performance of position or office held at the Company.
- The Company is required to disclose the Related Party Transactions pursuant to Article 247 of the Brazilian Corporation Law, CVM Resolution No. 642 and CVM Instruction No. 480, as amended.
- The Related Party Transactions shall be disclosed in the notes to the financial statements, observing the condition set forth by Technical Pronouncement CPC -05 – Related Party Disclosure, required by Brazilian Central Bank Resolution No. 3750/2009 of providing sufficient details to identify the Related Parties and the essential conditions inherent to the transactions mentioned, so that to enable shareholders to exercise the right to take cognizance, inspect and monitor the Company’s managerial acts, as well as obtain information necessary for assessment of opportunities and risks deriving from its operations, without prejudicing the duty of promoting its broad disclosure to the market when the transaction is characterized as a material fact or upon disclosure of the financial statements.
- Pursuant to CVM Instruction No. 480, the Company shall keep updated its Reference Form with information on the Related Party Transactions.
- The Company shall also complete the Exhibit 30-XXXIII to CVM Instruction No. 480 when:
- the total transaction amount or a set of related transactions exceeds the smallest of the following amounts:
- Fifty million Reais (R$50,000,000.00); or
- One percent (1%) of the Company’s total assets.
- at the Management’s discretion, the transaction or a set of related transactions the total amount of which is lower than the parameters above, considering: the characteristics of the transaction, the nature of the related party relationship with the issuer and the extension of related party’s interest in the transaction.
The violations of provisions herein shall be submitted to the Corporate Governance Committee, which will analyze and advise the Board of Directors on the adoption of reasonable penalties.
- Management, shareholders, and employees: Observe and ensure the compliance with this Policy, and whenever necessary, prompt the Legal Executive Board for consultation on situations involving conflict with this Policy or by means of the occurrence of situations described therein.
- Requesting areas: These shall arrange the approvals necessary for the Related Party Transactions with the Company’s governance bodies, as set forth in item 2 above.
- Internal Audit: It shall express its opinion on the Related Party Transactions and/or situations involving a conflict of interests, as provided for in item 2 above.
- Governance Committee: It assesses and expresses its opinion on the Related Party Transactions and/or situations involving a conflict of interest, pursuant to item 2 hereof.
- Legal Executive Board: It complies with the guidelines set forth herein, it keeps it updated so that to ensure that any alteration in Cielo’s management is incorporated thereto and clarifies doubts relating to its content and application.
It shall be incumbent upon the Company’s Board of Directors to amend this Policy whenever necessary.
This Policy takes effect on the date of its approval by the Board of Directors and revokes any contrary rules and procedures.