Policy for Related Party Transaction and Other Situations of Conflict of Interests
|Version:||Date of Review:||History:|
|2||06/19/2018||Updating of the entire policy in line with the Company’s current guidelines.|
|3||07/31/2019||Items II. Scope, III. Guidelines, V. Responsibilities and VII. Concepts and Acronyms were changed.|
Consolidating the procedures to be followed in Cielo’s business involving Related Parties, as well as other situations involving any Conflict of Interest, providing transparency on such procedures to the Company’s shareholders and the market in general, and ensuring that such procedures strictly comply with the Company’s interests, always in accordance with the best Corporate Governance practices.
Applicable to Controlling Shareholders and Key Members of Cielo’s direct and indirect Management; the Members of the Company’s Management, as defined below, and its direct or indirect subsidiaries; the spouses or partners, children, children of their spouses or partners, their dependents or the dependents of their spouses, as well as all employees of the Company and its direct or indirect subsidiaries.
Transactions with Related Parties out of the Brazilian market (cross-border) must comply with the tax rules for transfer price, as provided for in the Company’s Tax Policy, in addition to the rules applicable in this Policy.
Furthermore, the Company’s subsidiaries and affiliated companies must set their guidelines based on the guidelines set forth in this Policy, considering the specific needs and legal and regulatory aspects to which they are subject.
1.1. The following are considered as Cielo’s Related Parties:
1.1.1. those who, directly or indirectly, through one or more intermediaries:
- control the Company;
- are controlled by the Company;
- are under common control with the Company;
- have an interest in the Company that gives them a significant influence over the Company.
- affiliated to the Company or affiliated to a company under common control with the Company;are subsidiaries, parent companies or affiliated companies with common members of the Management amongst them or with Cielo; and
- are a Joint Venture in which the Company is a partner/shareholder.
1.1.2. are members of the Board of Directors and its Advisory Committees, of the Fiscal Council (sitting members and due alternates), of the Executive Board (statutory officers or not) and the Chief Audit Officer;
1.1.3. have a significant influence on the Management of the Company or its controllers (for example, those who, directly or indirectly, have the authority and responsibility for planning, guiding and controlling the Company’s activities);
1.1.4. are a close member of the family of any person referred to in Items 1.1.2 and 1.1.3 who, due to their relationship, may influence that person in his or her business dealings with the Company, including, necessarily:
- his/her spouse or partner and children,
- children of his/her spouse or partner, and
- his/her dependents or dependents of his/her spouse.
1.1.5. any legal entity that any person referred to in Items 1.1.2 and 1.1.3, directly or indirectly, has control over, are controlled by, have a significant influence or have voting powers;
1.1.6. any company that has a relationship of economic and financial dependence with the Company and/or whose suppliers, clients or financiers have a relationship of economic and financial dependence with the Company.
1.2. Situations with Conflict of Interests:
1.2.1. The conflict of interest arises when any member of the Management, Shareholder or other governance agent is not independent in relation to a specific matter under discussion and may influence, make or lead the Company’s decisions motivated by specific interests or interests that are different from the Company’s interests, even if converging with the Company’s interests.
1.3. Transactions with Related Parties:
1.3.1. The following are considered as Transactions with Related Parties: transfer of goods, rights, resources, services or obligations between the Company and/or its subsidiaries and a Related Party, even if there is no charge as compensation.
2. Rules on the Decision-Making Process regarding Related Parties and/or Situations with Conflict of Interest:
2.1. Communication and resolution process regarding Transactions with Related Party.
2.1.1. The requesting area must report to the Legal Board any potential Transaction with Related Party. The Board will review and comment on if such transaction is under the definition of Transaction with Related Party. If confirmed, the Legal Board will report the Transaction to the Compliance Management.
2.1.2. The Compliance Management will contact the requesting area to ask for the information and documents necessary to comment on the Transaction.
2.1.3. The requesting area shall submit to the Compliance Management the minimum information required to evaluate the Transaction, according to its own rules or procedures, as well as evidence and opinion of the manager clearly showing that, from the point of view of the Company’s business, if the Transaction with Related Party is carried out, the Transaction will be on terms at least equally favorable to the Company than those generally available on the market or those offered by a non-related party of the Company under equivalent circumstances.
2.1.4. After the Compliance Management has commented on the matter, the Legal Board will report this to the Company’s Corporate Governance Office, as per the rules set forth in the Governance Committee’s Internal Regulations and in the Bylaws. The Office will then convene an extraordinary meeting of the Corporate Governance Committee, in which requesting area’s manager will present the Transaction and the reasons for it.
2.1.5. Regarding Transactions sent to the Corporate Governance Committee, the requesting area’s manager must provide to the Committee the documents proving that the Transaction will be carried out under fair market conditions (such as, but not limited to, business proposals and market research). Notwithstanding the provision of these documents, if the Corporate Governance Committee deems necessary, the requesting area’s manager must present an independent appraisal report prepared without any party involved in the Transaction with Related Party – either bank, lawyer, specialized consulting firm, among others – based on realistic assumptions and information endorsed by third parties.
2.1.6. After the recommendation of the Corporate Governance Committee, the Transaction will be submitted to the Board of Directors, who will resolve on the matter.
2.2. Role of the Corporate Governance Committee and of the Board of Directors.
2.2.1. Transactions with Related Parties, as well as issues related to Conflicts of Interest with Related Parties or not, should be sent to the Corporate Governance Committee. Such Committee, through the assumptions, filters and mechanisms defined below, will refer the matter to the Company’s Board of Directors or not.
2.2.2. The Corporate Governance Committee will work to ensure that Transactions with Related Parties, involving a conflict of interest or not:
- are formalized and documented, specifying their main characteristics, including the possibility of the Company terminating any Transaction with Related Party, in successive treatment, under conditions that are equivalent to those available in contracts with unrelated parties (fair market conditions);
- are carried out at usual market prices, terms and rates or previous trades representing commutative conditions;
- are clearly reflected in the financial statements and Reference Form and disclosed in accordance with applicable laws and regulations.
2.2.3. The Corporate Governance Committee and the Board of Directors will evaluate the incentive agreements signed with controlling shareholders, following the comments from the Legal Board and Compliance Management, as described above, as well as any agreements or transactions, except those related to standardized banking products.
2.2.4. All transactions between Related Parties shall be the subject of a half-yearly report submitted by the Legal Board to the Corporate Governance Committee.
2.2.5. The Board of Directors will have access to all documents related to Transactions with Related Parties, including any technical advice or expert opinions received by the due body, as well as its own review. The Corporate Governance Committee will establish the content and format of the information deemed necessary by the Board of Directors to resolve on a Transaction with Related Party (subject to the provisions of this Policy), which will be distributed together with the call notice for the meeting at which the transaction will be evaluated.
2.2.6. Notwithstanding the provisions of item 2.1.5 above, before approving the Transactions with Related Parties or guidelines for hiring, if the independent appraisal report or other internal document of the Company on the Transaction does not include market alternatives or state that the transaction does not comply with market conditions, (i) the Corporate Governance Committee will request to the Executive Board market alternatives to the Transaction, adjusted for the risk factors involved; and (ii) if the Corporate Governance Committee does not do so and recommends the Transaction’s approval by the Board of Directors, the latter shall make such request to the Executive Board.
2.2.7. The Board of Directors will ensure that corporate restructurings involving Related Parties will be addressed equally by all shareholders.
2.3. Transactions with Controlling Shareholders
2.3.1. Subject to the standards set forth in this Policy, the Transactions between the Company and any of its controlling shareholders will be evaluated by the Corporate Governance Committee, who shall refer the matter to be resolved by the Board of Directors. Such Committee will exceptionally have only independent members, who will be convened to evaluate the matter as ad hoc members of the Committee, replacing the member(s) appointed by the said controlling shareholder(s), in addition to non-conflicting Committee members.
2.3.2. The members of the Board of Directors in a position of conflict (i) a priori, will not attend the meetings or (ii) if they attend the meeting due to other matters, they shall abstain from the discussions on the matter and abstain from voting in the resolution. If requested by the Chairman of the Board of Directors or by the Chief Executive Officer, as the case may be, such members may be partially part of the discussions, to subsidize such discussions with further information on the transaction and parties involved; however, such members must always leave the meeting at the end of the discussion, not staying during the voting procedure. The absence of a voluntary statement by a Board Member regarding his/her conflicting position will be considered a violation of the principles of good corporate governance and this Policy. Such behavior must be reported to the Corporate Governance Committee and, subsequently, to the Board of Directors.
2.3.3. When the matter to be resolved refers to the strategic issue of the conflicting shareholder, the meetings of the Board of Directors or Corporate Governance Committee will not be attended by the member(s) appointed by the controlling shareholder(s) who are not in a position of conflict of interest.
2.3.4. Documents related to Transactions with Related Parties will not be made available to members of the Corporate Governance Committee and Board of Directors related to the party involved in the Transaction.
2.4. Communication of Situations with Conflict of Interest.
2.4.1. Whenever there is a situation that leads to a Conflict of Interest, the party responsible or any third party who becomes aware of this must, as soon as the conflict occurs or becomes aware of it, report this to the Legal Board and the Governance Office, who will report this to the Governance Committee, who will comment on the matter.
3. Prohibited Transactions
3.1. The following Transactions with Related Parties are prohibited:
3.1.1. Transactions carried out under non-commutative conditions to harm the interests of the Company;
3.1.2. The Company directly granting loans to Related Parties as defined above, as well as:
- Board Members and members of the Fiscal Councils or Board of Directors or their Advisory Committees, as well as their spouses, partners, descendants or descendants of their spouses or partners;
- Relatives up to 2nd degree of persons mentioned above;
- Individuals or companies that have an interest in the Company surpassing ten percent (10%), unless specifically authorized by the Central Bank of Brazil, in each case, in case of transactions backed by commercial effects resulting from purchase and sale transactions or pledge of goods, within the limits set by the National Monetary Council, in general;
- Company in which any of the members of the Company’s Management, as well as their spouses/partners, descendants or descendants of their spouses or partners and their relatives up to the 2nd degree hold an interest surpassing ten percent (10%).
3.1.3. The participation of Members of the Management and employees in business of a private or personal nature that interferes with or conflicts with the interests of the Company or that results from using confidential information due to their position or role in the Company; and
3.1.4. Means to compensate advisors, consultants or intermediaries that generate a conflict of interest with the Company, the Members of the Management, the Shareholders or classes of Shareholders.
4. Disclosure Requirement
4.1. The Company is required to disclose the Transactions with Related Parties pursuant to Article 247 of the Brazilian Corporation Law, CVM Resolution 642 and CVM Instruction 480, as amended.
4.2. The Transactions with Related Parties shall be disclosed in the notes to financial statements, observing the condition set forth by Technical Pronouncement CPC -05 – Related Party Disclosure, required by Central Bank of Brazil’s Resolution 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.
4.3. Pursuant to CVM Instruction 480, the Company shall keep updated its Reference Form with information on the Transactions with Related Parties.
4.4. The Company must also complete the Exhibit 30-XXXIII to CVM Instruction 480 when:
4.4.1 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.
4.4.2 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.
IV. Management of Consequences
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.
- Members of the Management, Shareholders, and Employees: Observing and ensuring the compliance with this Policy, and whenever necessary, prompt the Legal Board for consultation on situations involving conflict with this Policy or by means of the occurrence of situations described therein.
- Requesting Areas: Must report and provide necessary information and documents, as provided in this Policy, for Transactions with Related Parties and/or situations involving conflict of interest to be submitted to the Company’s governance bodies, as set forth in Item 2 above.
- Corporate Governance Committee: Evaluating and issuing its opinion on the Transactions with Related Parties and/or situations involving a conflict of interest, as set forth in Item 2 above.
- Compliance Management: Issuing its opinion on the Transactions with Related Parties and/or situations involving a conflict of interests, as set forth in Item 2 above.
- Legal Board: Complying with the guidelines set forth herein, keeping them updated to ensure that any change in Cielo’s management is incorporated thereto and clarifying doubts relating to its content and application.
VI. Additional Documents
- Law 6404, of December 15, 1976, as amended (“Brazilian Corporation Law”);
- CVM Instruction 480, of December 7, 2009, as amended (“CVM Instruction 480”);
- Technical Pronouncement CPC 05(R1) of the Brazilian Accounting Pronouncements Committee – CPC (“CPC 5”) approved by Brazilian Securities and Exchange Commission as per Resolution 642/10 (“CVM Resolution 642”);
- Listing Rules of Novo Mercado of B3 S.A. – Brasil, Bolsa, Balcão (“Novo Mercado’s Rules”);
- Company’s Bylaws;
- Company’s Tax Policy; and
- Company’s Code of Ethical Conduct.
VII. Concepts and Acronyms
- 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.
- Members of the Management: Members of the Board of Directors and Statutory Executive Board.
- Company: Cielo S.A.
- CVM: the Brazilian Securities and Exchange Commission.
- Key Members of the 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.
VIII. General Provisions
The Company’s Board of Directors is responsible for amending this Policy whenever necessary.
This Policy takes effect on the date of its approval by the Board of Directors and revokes any contrary documents.