Governance Model

In 2000, Bovespa introduced three special listing segments, known as Level 1 and Level 2 of Differentiated Corporate Governance Practices and the Novo Mercado. The objective was to create a secondary market for securities issued by Brazilian publicly held companies that follow better corporate governance practices. The most recent review of these segments was carried out in 2023, with the objective of creating a secondary market for securities issued by Brazilian publicly held companies that follow better corporate governance practices. The listing segments are intended for the trading of shares issued by companies that voluntarily commit to complying with good corporate governance practices, as well as higher information disclosure requirements compared to those already imposed by Brazilian legislation. In general, these rules expand shareholders’ rights and improve the quality of information provided to them.

The “Novo Mercado” rules require, in addition to the obligations imposed by current Brazilian legislation, compliance with the following requirements, among others:

Grant all shareholders tag-along rights in the event of a transfer of control of the Company, requiring the acquirer of control to carry out a public tender offer for the remaining shareholders’ shares, offering the same price per share paid to the controlling block;
Issue only common shares;
Ensure that shares representing at least 20% of the company’s total capital are freely traded;
Adopt offering procedures that promote shareholding dispersion; dispersion;
Comply with additional corporate governance standards;
Follow stricter disclosure policies regarding transactions carried out by the Company’s controlling shareholders, board members, and officers involving securities issued by the Company;
Submit any shareholders’ agreements and existing stock option plans to Bovespa;
Board of Directors – limit the term of office to two years and have at least two independent directors or 20% of the Board, whichever is greater;

Provide shareholders with a corporate events calendar;
Adopt exclusively the rules of the B3 Market Arbitration Chamber, under which Bovespa, the Company, the controlling shareholder, the officers, and the members of the Company’s Fiscal Council, if installed, undertake to resolve any and all disputes or controversies related to the listing regulation through arbitration;
In the event of a delisting from the Novo Mercado, for the shares to be traded outside the Novo Mercado, the controlling shareholder must carry out a public tender offer for the outstanding shares at their economic value, as determined by an appraisal report prepared by a specialized and independent firm, and the regulation requires a qualified quorum of acceptance or approval by the outstanding shareholders.

SLC Agrícola shares grant their holders the following rights:

The right to receive a mandatory minimum dividend each fiscal year equivalent to 25.0% of adjusted net income, as provided for in Article 202 of the Brazilian Corporation Law;
In the event of a direct or indirect, onerous transfer of the Company’s control, whether through a single transaction or successive transactions, the right to sell their shares under the same conditions granted to the selling controlling shareholders (tag along with 100.0% of the price);
In the event of cancellation of the Company’s registration as a publicly-held company or delisting from B3’s Novo Mercado, the right to sell their shares in a public tender offer to be launched by the controlling shareholders, at their economic value determined by an appraisal report prepared by a specialized and independent firm with proven experience, selected by the meeting of shareholders holding outstanding shares from a triple list presented by the Board of Directors, with all costs of preparing such report to be borne entirely by the controlling shareholders;
All other rights granted to shares under the Novo Mercado Rules, the Company’s Bylaws, and the Brazilian Corporation Law.

The Brazilian securities market is regulated and supervised primarily by the CVM (Brazilian Securities and Exchange Commission). Stock exchanges and other entities that manage organized markets operate under a self-regulatory regime, subject to CVM supervision.

These institutions are part of the Brazilian securities market. Other regulators of this market include the CMN (National Monetary Council) and the BACEN (Central Bank of Brazil).

The CMN establishes the general guidelines for the national financial system.
BACEN authorizes and supervises financial institutions, including brokerage firms and securities dealers.
BACEN and the CMN regulate foreign exchange transactions and foreign capital flows.

The Brazilian securities market is governed by the Brazilian Securities Market Law, the Brazilian Corporations Law, and regulations issued by the CVM, the CMN, and BACEN. These laws and regulations, among other matters, establish: information disclosure requirements; restrictions on the trading of shares based on insider information and price manipulation; and the protection of minority shareholders. However, the Brazilian securities market does not have the same high level of regulation and supervision as U.S. securities markets.

Under the Brazilian Corporations Law, a corporation is classified as publicly held if the securities it issues are admitted to trading in the Brazilian securities market, or closely held if its securities are not publicly traded in the Brazilian securities market. All publicly held companies must be registered with the CVM and are subject to regulatory and disclosure requirements.

A company registered with the CVM may trade its securities on B3 – Brasil, Bolsa, Balcão. It is necessary to apply for registration with both B3 and the CVM for a company to have its shares listed. Shares of companies listed on B3 may not be traded simultaneously on the Brazilian over-the-counter market, although they may be traded in private transactions, subject to various limitations.

Trading of securities on B3 may be halted at the request of the issuing company prior to the disclosure of a material fact. Trading may also be suspended at the initiative of B3 or the CVM, based on or due to, among other reasons, indications that the company has provided inadequate information regarding a material fact or has given unsatisfactory responses to inquiries made by the CVM or B3.

Resolution No. 44 addresses the disclosure and use of information regarding material acts or facts related to publicly-held companies, regulating the following::

Defines the concept of material fact, which includes any decision by the controlling shareholder, resolutions of the general shareholders’ meeting or the company’s management bodies, or any other act or fact of a political-administrative, technical, business, or economic-financial nature that occurs or relates to the company’s business and may significantly influence (i) the price of securities issued by the publicly-held company or referenced to them; (ii) investors’ decisions to buy, sell, or hold such securities; or (iii) investors’ decisions to exercise any rights inherent to the condition of holder of securities issued by the company or referenced to them.
Provides 22 examples of potentially material acts or facts, including, among others, the execution of an agreement or contract for the transfer of the company’s controlling interest; entry or exit of a partner maintaining an operational, financial, technological, or administrative agreement with the company; merger, consolidation, or spin-off involving the company or related entities; changes to disclosed projections; etc.
Requires the Investor Relations Officer to report any material fact to the CVM; controlling shareholders, officers, members of the fiscal council, and any technical or advisory bodies must report any material fact to the Investor Relations Officer.
Mandates simultaneous disclosure of material facts in all markets where the company’s shares are listed for trading. The full information must be made available through at least one of the following channels: newspapers of wide circulation customarily used by the company OR a news portal with a webpage on the World Wide Web, providing free access to the full information.
Requires the acquirer of the controlling interest of a publicly-held company to disclose a material fact, including its intention to cancel the company’s registration as a publicly-held company within one year of the acquisition.
Establishes rules regarding the disclosure of acquisition or disposal of a significant equity interest in a publicly-held company; and
Restricts the use of insider information.

Governance Code Report

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