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BYLAWS
CHAPTER I
OF THE DENOMINATION, DURATION, HEADQUARTERS AND OBJECT

ARTICLE 1 - The joint stock company named CESP – Companhia Energética de São Paulo is an integral part of the indirect administration of the State of São Paulo, the Company being governed by these By-laws, by Federal Laws No. 6,404, dated December 15, 1976 and No. 13,303, of June 30, 2016, and other applicable legal provisions.

First Paragraph – The duration of the Company is undetermined.

Second Paragraph – The Company is headquartered in the Capital of the State of São Paulo.

Third Paragraph Insofar as it is necessary to achieve its corporate purpose and observing its area of operation, the Company may open, install, maintain, transfer or extinguish branches, offices, dependencies, representations or may designate representatives, legal and regulatory.

ARTICLE 2 – The Company’s object is:

I. study, planning, design, construction and operation of systems of production, transformation, transportation and storage, distribution and commerce of energy, mainly electric, resulting from the use of rivers and other sources, especially renewable ones;
II. study, planning, design, construction and operation of accumulation dams and other enterprises, intended for the multiple use of water;
III. participation in undertakings that have as purpose the industry and the commerce of energy, mainly electric, as well as the provision of services that, directly or indirectly, relates to this object;
IV. study, design, execution of plans and programs for the research and development of new energy sources, especially renewables, either directly or in cooperation with other entities.
V. study, development, execution of economic development plans and programs in regions of interest to the Company, either directly or in collaboration with other state or private bodies, as well as the provision of information and assistance for private or state initiative aimed at implementation of economic, cultural, welfare and social activities in those regions, in order to fulfill its social function for the benefit of the community.
VI. study, design, implementation of afforestation and reforestation of trees, commercialization and industrialization of trees, timber and by-products resulting from these activities.
VII. research, mining, exploration and exploitation of mineral resources, mainly energy; and
VIII. participation in other companies, as partner, shareholder or quotaholder.

CHAPTER II
CAPITAL STOCK AND SHARES

ARTICLE 3 – The capital stock is five billion, nine hundred and seventy-five million, four hundred and thirty-three thousand, four hundred and fifty-four reais and forty-three centavos (R$ 5,975,433,454.43), divided into three hundred and thirty- and twenty-seven million, five hundred and two thousand, six hundred and seventy-three) shares, of which 109,167,801 (one hundred and nine million, one hundred and sixty-seven thousand, eight hundred and one) common shares and 7,386,323 seven million, three hundred and eighty-six thousand, three hundred and twenty-three) class A preferred shares and two hundred and ten million, nine hundred and forty-eight thousand, five hundred and forty-nine) class B preferred shares, all nominative and without par value.

Single Paragraph – Irrespective of statutory amendment, the capital stock may be increased up to a maximum limit of seventeen billion, nine hundred and twenty six million, three hundred thousand, three hundred and sixty-three reais and twenty-nine cents (R $ 17,926,300,363.29), through deliberation of the Board of Directors and hearing before the Fiscal Council.

ARTICLE 4 – Each common share shall correspond to one vote in the deliberations of the General Meeting.

Single Paragraph – The preferred shares shall not have voting rights, except as provided in Article 55, but shall be entitled to:

I – Class A preferred shares:

a) priority in the reimbursement of capital, without right to premium in case of liquidation of the Company;
b) non-cumulative annual priority dividend of 10% (ten percent), calculated on the value of the paid-in capital stock represented by class A preferred shares to be equally distributed among these;
c) right to indicate, together with class B preferred shares, a member of the Fiscal Council and respective alternate, chosen by the shareholders, in a separate vote;
d) the right to participate in capital increases, arising from the capitalization of reserves and profits, on equal terms with common shares and class B preferred shares; and
e) shall be unredeemable

II – Class B preferred shares:

a) the right to receive a value per share corresponding to 100% (one hundred percent) of the amount paid per share to the selling controlling shareholder in the event of sale of the Company’s control;
b) the right to participate on equal terms with the common shares of the distribution of the mandatory dividend attributed to such shares pursuant to these by-laws;
c) right to indicate, together with class A preferred shares, a member of the Fiscal Council and respective alternate, chosen in a separate vote;
d) the right to participate in capital increases resulting from the capitalization of reserves and profits, under equal conditions with the common shares and Class A preferred shares;
e) they will not have voting rights and will not acquire this right even in the event of non-payment of dividends; and
f) shall be unredeemable.

ARTICLE 5 – Shareholders, subject to the legal provisions and conditions set forth below, may convert (i) class A preferred shares into common shares and class B preferred shares of the Company and (ii) common shares in Class A preferred shares and shares class B preferred shares, in both cases after integrated. The Company’s class B preferred shares are non-convertible.

First Paragraph – In the event of conversion (i) of class A preferred shares into common shares and (ii) common shares in class A preferred shares:

I. the conversions will be carried out in periods to be determined by the Board of Directors, in periods not less than 15 (fifteen) consecutive days;
II. the shareholders must, in order to use the benefit, have enjoyed all the rights related to the shares held and present, at the time of the conversion, the identity documents;
III. in each period of conversion of species, the shareholder may file applications for conversion of up to 3% (three percent) of the capital stock and the amount of the requests formulated may not exceed 5% (five percent) of the capital stock.

Second Paragraph - In the event of conversion (i) of class A preferred shares into class B preferred shares and (ii) common shares into class B preferred shares, the conversion shall be in the proportion of one share held by a new converted share, observing the limit of 2/3 (two thirds) of the total shares issued for non-voting or restricted voting preferred shares.

Third Paragraph – It shall be incumbent upon the Company’s Board of Directors to establish the terms, timing, and conditions for the exercise of the conversion rights set forth in this article, and may perform all acts necessary for its implementation.

Fourth Paragraph – The Company may authorize the depository institution responsible for recording the book-entry shares to be received from the shareholder, subject to the limits established by the Brazilian Securities and Exchange Commission (CVM), the cost of transferring ownership of the registered shares.

CHAPTER III
GENERAL ASSEMBLY

ARTICLE 6 – The General Meeting shall be convened, installed and deliberated in accordance with the law, on all matters of interest to the Company.

First Paragraph - the General Meeting may also be called by the Chairman of the Board of Directors, or by the majority of the Board Members in office.

Second Paragraph – The General Meeting will preferably be presided over by the Chairman of the Board of Directors or, in his absence, by the Senior Adviser.

Third Paragraph – The Chairman of the General Meeting shall choose from among those present one or more secretaries, including the use of their own advisory services in the Company.

Fourth Paragraph – The protocol of the General Meeting shall be drawn up in accordance with article 130 of Federal Law 6,404/76.

CHAPTER IV
COMPANY MANAGEMENT

General Provisions

ARTICLE 7 – The Company will be managed by the Board of Directors and the Executive Board.

CHAPTER V
ADMINISTRATIVE COUNSEL

ARTICLE 8 – The Board of Directors is a collegiate deliberation body responsible for the superior guidance of the Company.

Composition, investiture and mandate

ARTICLE 9 – The Board of Directors shall be composed of at least 3 (three) and at most 11 (eleven) members, elected by the General Assembly, all with a unified term of office of 2 (two) years from the date of the election, of the successors, with re-election permitted, for a maximum of 3 (three) consecutive reelections.

First Paragraph – The Company’s Chief Executive Officer shall be a member of the Board of Directors, while holding that position.

Second Paragraph – The General Meeting shall elect the Board of Directors to determine the total number of positions to be filled, within the maximum limit established in these By-laws, and to appoint its Chairman, however not being allowed to choose the person of the Company’s Chief Executive Officer who is also elected Counselor.

Employee Representative

ARTICLE 10 – It is ensured the participation of a representative of the employees in the Board of Directors, with a mandate coincident with that of the other Directors.

First Paragraph – The Director representing the employees will be chosen by the vote of the employees, in direct election, and is allowed to reapply for non-successive periods.

Second Paragraph – The internal regulations of the Board of Directors may establish eligibility requirements and other conditions for the exercise of the position of employee representative, in addition to the requirements and prohibitions of article 17 of Federal Law 13,303/16.

Representative of Minority Shareholders

ARTICLE 11 – Participation in the Board of Directors is guaranteed by a representative of the minority shareholders, with a mandate coincident with that of the other Directors, pursuant to article 239 of Federal Law 6,404/1976 and article 19 of Federal Law 13,303/2016.

Independent Members

ARTICLE 12 – The Board of Directors will have the participation of one or more independent members, observing the provisions of Articles 19 and 22 of Federal Law 13,303/2016, granting the controlling shareholder the power to elect a majority of its members, pursuant to “the” article 116 of Federal Law 6,404/1976.

Single Paragraph – The condition of Independent Board Member must be expressly stated in the protocols of the meeting that elects him/her.

Vacancy and Substitutions

ARTICLE 13 – In the event of vacancy of the position of Board Member before the end of the term, the board may decide on the choice of the member to complete the mandate of the member, with subsequent ratification by the next General Assembly.

Single Paragraph – In the vacancy of the position of the Director representing the employees, he shall be replaced by another representative, in accordance with the Internal Regulations of the Board of Directors.

Operation

ARTICLE 14 – The Board of Directors shall meet ordinarily once a month and, extraordinarily, whenever necessary in the interests of the Company.

First Paragraph – The meetings of the Board of Directors shall be convened by its Chairman or by the majority of the Board Members in office, by sending written or electronic correspondence to all Directors and also to the State, through the State Capital Defense Council – CODEC, with a minimum notice of 10 (ten) days, and the date, time and subjects that appear on the agenda must be included in the notice.

Second Paragraph – The Chairman of the Board of Directors shall ensure that the Directors receive individually, in advance of the date of the meeting, the documentation containing the information necessary to allow the discussion and deliberation of the matters to be dealt with.

Third Paragraph – The meetings of the Board of Directors shall be installed with the attendance of a majority of its members in office, observing the minimum legal and statutory number, with the Chairman of the Board of Directors or, in his absence, the Senior Adviser.

Fourth Paragraph – In the event of the temporary absence or impediment of any member of the Board of Directors, it shall continue with the other members, provided that the minimum number of Directors is respected.

Fifth Paragraph – The Chairman of the Board of Directors, on his own initiative or at the request of any Director, may call Company Officers to attend meetings and provide clarification on the matters under consideration.

Sixth Paragraph – The matters submitted to the Board of Directors will be examined with the approved proposal of the Board of Executive Officers or of the Company’s competent bodies, and of legal opinion, when necessary for the examination of the matter.

Seventh Paragraph – When there is a matter of urgency, the Chairman of the Board of Directors, or a majority of the Board Members in office, pursuant to the first paragraph of this article, may call extraordinary meetings at any time, which may be held by telephone, video conference or other means which shall be deemed valid for all purposes, without impairment to subsequent drafting and signature of the respective protocols.

Eighth Paragraph – The Board of Directors shall resolve by a majority of the votes of those present at the meeting, in the event of a tie, the proposal that counts on the vote of the Board Member presiding over the meeting shall prevail.

Ninth Paragraph – The meetings of the Board of Directors shall be secretariat by whom its Chairman indicates and all resolutions shall be drawn up and recorded in proper protocol, and included immediately in the Information System of Decentralized Entities – SIEDESC.

Tenth Paragraph – Whenever there are deliberations intended to have effects before third parties, the extract of the protocol shall be filed in the trade register and published.

Assignments

ARTICLE 15 – In addition to the attributions provided for by law, the Board of Directors is also responsible for the following:

I. approve the strategic plan containing the updated long-term strategy with analysis of risks and opportunities for at least the next five (5) years, the action guidelines, result goals and performance evaluation indices;
II. approve the business plan for the following annual exercise, annual and multiannual programs, indicating the respective projects;
III. approve budgets of expenditures and investment, indicating the sources and applications of resources;
IV. to express its opinion on the management report and the accounts of the Board of Executive Officers;
V. annually promote the analysis of compliance with the goals and results in the execution of the business plan and the long-term strategy, and shall publish its conclusions and inform them to the Legislative Assembly and the State Court of Accounts, however excluding information of strategic nature whose disclosure may prove to be detrimental to the interest of the Company;
VI. oversee and monitor the execution of plans, programs, projects and budgets;
VII. determine the drafting of an annual governance letter and endorse it;
VIII. approve and annually review the preparation and disclosure of the related party transactions policy;
IX. promote the annual disclosure of the integrated or sustainability report:
X. define objectives and priorities of public policies compatible with the Company’s area of activity and its corporate purpose;
XI. to deliberate on the price or tariff policy of the goods and services provided by the Company, respecting the regulatory framework of the respective sector;
XII. authorize the opening, installation and extinction of branches, offices, agencies, dependencies, and representations;
XIII. to resolve on the increase of the share capital within the limit authorized by the by-laws, establishing the respective conditions of subscription and payment;
XIV. set the Company’s maximum indebtedness limit;
XV. to elaborate the policy of distribution of dividends, in light of the public interest that justified the creation of the Company, submitting it to the General Assembly;
XVI. to resolve on the payment of interest on its own capital or distribution of dividends on account of the result of the current year or reserve of profits, without impairment to the subsequent ratification of the General Assembly;
XVII. propose to the General Assembly the payment of interest on shareholders’ equity or distribution of dividends on account of the result of the fiscal year then ended;
XVIII. deliberate on personnel policy, including setting the framework, employment and salary plan, general conditions for collective bargaining; opening of public tender to fill vacancies and Program for Participation in Profits and Results;
XIX. prior authorization, through the challenge of the Board of Directors, to enter into any legal business involving acquisition, disposal or encumbrance of assets, as well as assumption of obligations in general, when, in any case, the transaction value exceeds 2% (two percent) of the capital stock;
XX. approve the contracting of civil liability insurance in favor of the members of the statutory bodies, employees, and agents of the Company;
XXI. grant licenses to the Officers, subject to the relevant regulations;
XXII. to adopt its internal rules of procedure, clearly defining its responsibilities and assignments, and preventing conflict with the Board, in particular its Chairman;
XXIII. presenting in advance any proposal of the Board of Directors or subject to be submitted to the General Meeting;
XXIV. to call the examination of any matter included in the competence of the Board of Executive Officers and to issue binding guidance;
XXV. discuss, approve and monitor decisions involving corporate governance practices, relationship policy with related parties, people management policy, integrity program and code of conduct of the agents;
XXVI. implement and supervise the risk management and internal control systems established for the prevention and mitigation of the main risks to which the Company is exposed, including risks related to the integrity of the accounting and financial information and those related to the occurrence of corruption and fraud;
XXVII. establish spokesperson policies and disseminate information in accordance with current legislation and best practice;
XXVIII. to evaluate the Company’s Officers, pursuant to item III of article 13 of Federal Law No. 13,303/2016, while being permitted to rely on methodological and procedural support from the Eligibility and Counseling Committee;
XXIX. appoint Statutory Officer who will lead the Area of Compliance, Risk Management and Internal Control, linked to the Chief Executive Officer;
XXX. support the Area of Compliance, Risk Management and Internal Control, when there is suspicion of involvement in irregularities or noncompliance with the obligation to adopt measures necessary in relation to the situation reported, by the members of the Board of Directors, yet always assuring of independent performance;
XXXI. approve the Code of Conduct and Integrity, to be prepared and disseminated by the Area of Compliance, Risk Management and Internal Control, observing the guidelines established by the Council of Defense of State Capitals – CODEC;
XXXII. approve the parameters of the structure of the denunciations channel;
XXXIII. supervise the establishment of the prior consultation mechanism to resolve doubts about the application of the Code of Conduct and Integrity.
XXXIV. approve the proposal to increase the advertising and sponsorship expense limit established by the Collegiate Board, in compliance with the provisions of art. 93, § 2, of Federal Law No. 13,303/16;
XXXV. approve, upon proposal of the Chief Executive Officer, the responsibilities and duties of the Executive Officers;
XXXVI. elect and dismiss the members of the Board of Executive Officers and the Audit Committee.

Single Paragraph – The Controlling Shareholder, through the State Capital Defense Council – CODEC, may maintain a dialogue with the members of the Board of Directors, in order to disclose matters that it deems to be of strategic interest, especially linked to item “b” of the article 116 of Law No. 6,404/1976, in particular:

I. Election of the members of the Board of Executive Officers and of the Audit Committee;
II. proposal for allocation of income for the year;
III. job and salary plan;
IV. fixing or altering the establishment plan;
V. admission of personnel by public contest;
VI. collective bargaining agreement.

CHAPTER VI
BOARD OF DIRECTORS

ARTICLE 16 – The Board of Executive Officers shall be composed of four (4) members, being a Chief Executive Officer, a Financial and Investor Relations Officer, an Administrative Officer and a Generation Officer, with the respective duties fixed by the Board of Directors and specified in the Internal Regulations, when in this Statute not specified, all with a unified mandate of 2 (two) years, allowed 3 (three) consecutive renewals.

Single Paragraph – A condition for investiture in the office of the Board of Executive Officers is the assumption of a commitment to specific goals and results to be achieved by the Company.

Vacancy and Substitutions

ARTICLE 17 – In the absence or temporary impediment of any Officer, the Chief Executive Officer shall appoint another member of the Board of Executive Officers to complete the functions.

Single Paragraph – In its absences and temporary impediments, the Chief Executive Officer shall be replaced by the Officer appointed by him.

ARTICLE 18 – In the event of a vacancy, and until a successor is elected, the Chief Executive Officer shall be replaced, in turn, by the Chief Financial Officer and by the Senior Director.

Operation

ARTICLE 19 – The Board of Executive Officers shall ordinarily meet at least twice a month and, extraordinarily, by a call of the Chief Executive Officer or any other two Directors.

First Paragraph – The meetings of the Collegiate Board shall be installed with the attendance of at least half of the Officers in office, considering that the matter is approved, obtaining the agreement of the majority of those present; in the event of a tie, the proposal that counts on the vote of the Chief Executive Officer shall prevail.

Second Paragraph – The resolutions of the Board of Executive Officers shall be recorded in protocols drawn up in the proper book and signed by all those present.

Assignments

ARTICLE 20 – In addition to the duties defined by law, the Board of Directors is responsible for the following:
I. Prepare and submit to the approval of the Board of Directors:

a) strategic planning proposal, containing the updated long-term strategy with analysis of risks and opportunities for at least the next five (5) years, the action guidelines, results goals and performance evaluation indices;
b) proposal of business plan for the following annual exercise, annual and multi-annual programs, indicating the respective projects;
c) the costing and investment budgets of the Company, indicating the sources and applications of the resources, as well as their alterations;
d) the evaluation of the result of performance of the Company’s activities;
e) quarterly reports of the Company accompanied by the balance sheets and other financial statements;
f) annually, the protocols of the management report, accompanied by the balance sheet and other financial statements and related notes, with the independent auditors’ report and the proposed allocation of the result for the year;
g) the Internal Regulations of the Board of Executive Officers and the Company’s regulations;
h) proposal to increase the share capital and to reform this by-law, after hearing the Fiscal Council when applicable;
i) proposal of the personnel policy;
j) the proposal to increase the limit on advertising and sponsorship expenses, in compliance with article 93, § 2 of Law No. 13,303/16.

II. To approve:

a) the technical-economic evaluation criteria for the investment projects, with the respective delegation plans of responsibility for their execution and implementation;
b) the chart of accounts;
c) the Company’s annual insurance plan;
d) residually, within the statutory limits, anything that relates to Company activities and which is not within the exclusive competence of the Chief Executive Officer, the Board of Directors or the General Assembly.

III. Authorize, subject to the limits and guidelines established by law, by this statute and by the Board of Directors:
a) acts of resignation or judicial or extrajudicial transaction, to settle disputes or pending issues, and may set limits of value for the delegation of the practice of these acts by the Chief Executive Officer or any other Director;
b) execution of any legal business involving acquisition, disposal or encumbrance of assets, as well as assumption of obligations in general, when the value of the transaction exceeds any of the limits below and is less than 2% (two percent) of the capital stock:
- for Rental of Real Estate – R $ 120 thousand;
- Fixed Assets – R $ 300 thousand;
- Deactivation Order – R $ 200 thousand;
- Bidding – limit value of Price Take R $ 650 thousand;
- Signing of a contract related to the agreement and the commercialization of the use of CESP’s facilities and telecommunication system – R $ 150 thousand;
- Agreement on Legal Proceedings – R $ 400,000, and
- for the sale of real estate, financing with national and international entities and foreign travel – any amount, subject to mandatory submission to the Board of Directors when the amount is equal to or greater than 2% (two percent) of the share capital, pursuant to of item XIX of article 15 of these By-laws.

ARTICLE 21 – It is the duty of the Chief Executive Officer to:

I. represent the Company, actively and passively, in court or out of court, and may be constituted a proxy with special powers to receive initial citations and notifications, observing the provisions of Article 22 of these By-laws.
II. to represent the Company institutionally in its relations with public authorities, private entities and third parties in general;
III. to convene and chair the meetings of the Board of Executive Officers;
IV. to coordinate the activities of the Board of Executive Officers;
V. to issue acts and resolutions that substantiate the deliberations of the Board of Directors or that result from them;
VI. to coordinate the Company’s ordinary management, including the implementation of the guidelines and compliance with the resolutions adopted by the General Meeting, the Board of Directors and the Board of Executive Officers;
VII. to coordinate the activities of the other Officers;
VIII. to promote the organizational and functional structuring of the Company, in compliance with the provisions of article 15, XXXV, of these By-laws;
IX. to issue the normative instructions that govern the activities between the different areas of the Company.

Single Paragraph – The Area of Compliance, Risk Management and Internal Control shall be bound to the Chief Executive Officer.

Company Representation

ARTICLE 22 – The Company undertakes before third parties
(i) by the signature of two Executive Officers, one necessarily being the Chief Executive Officer or the Officer in charge of the financial area; (ii) by the signature of a Director and a proxy, according to the powers contained in the respective power of attorney; (iii) by the signature of two attorneys-in-fact, according to the powers contained in the respective power of attorney; (iv) by the signature of a proxy, according to the powers contained in the respective power of attorney, in this case exclusively for the practice of specific acts.

Single Paragraph – The power of attorney may be granted by a public or private instrument, including by electronic means, with a fixed period of validity, and specify the powers conferred; only the proxies for the forum in general will have indeterminate term.

CHAPTER VII
SUPERVISORY FISCAL BOARD

ARTICLE 23 – The Company will have a Fiscal Council of permanent operation, with the powers and attributions provided by law.

ARTICLE 24 – The Fiscal Council shall be composed of at least 3 (three) and at most 5 (five) effective members, and an equal number of alternates, elected annually by the Ordinary General Assembly, two (2) consecutive renewals are permitted.
Single Paragraph – In the event of vacancy or impediment of an effective member, he shall assume the respective alternate.

ARTICLE 25 – The Fiscal Council shall meet ordinarily once a month and, extraordinarily, whenever convened by any of its members or by the Board of Executive Officers, protocols being drawn up in a proper book.

Representative of Minority Shareholders

ARTICLE 26 – The participation in the Fiscal Council of representatives of the minority shareholders and of the preferred shareholders, if any, and their respective alternates, pursuant to article 240 and item “a” of paragraph 4 of article 161, are guaranteed by Federal Law No. 6,404/1976.

Single Paragraph – The controlling shareholder is granted the power to elect a majority of the members of the Fiscal Council, pursuant to paragraph b) of the fourth paragraph of article 161 of Federal Law No. 6,404/1976.

CHAPTER VIII
AUDIT COMMITTEE

ARTICLE 27 – The Company will have an Audit Committee, a permanent technical support body for the Board of Directors, in addition to those competencies attributed by Law, under the terms defined in the internal regulations:

I. to recommend the choice of the person in charge of the Internal Audit, propose its dismissal to the Board of Directors and supervise the execution of the respective work;
II. to analyze the financial statements;
III. promote the supervision and accountability of the financial area;
IV. ensure that the Board promotes effective internal controls;
V. ensure that the Internal Audit fulfills its role satisfactorily and that the independent auditors evaluate, through its own review, the practices of the Board and Internal Audit;
VI. ensure compliance with the Code of Conduct and Integrity of the Company;
VII. evaluate the adherence of business practices to the Code of Conduct and Integrity, including the commitment of managers to the dissemination of integrity culture and the valorization of ethical behavior;
VIII. monitor the diagnostic procedures for violation of the Code of Conduct and Integrity, as well as the events registered in the Complaints Channel.

ARTICLE 28 – The Committee shall be composed of at least three (3) and at most five (5) members, most of whom are independent, elected and dismissed by the Board of Directors, without a fixed term of office, at least one member of the Committee to have recognized experience in matters of corporate accounting.

First Paragraph – The Committee shall be coordinated by an independent Board Member.

Second Paragraph – In order to be a member of the Committee, the minimum conditions established by law must be observed, especially paragraph 1 of article 25 of Federal Law No. 13303/2016.

Third Paragraph – The minimum time required for each member of the Audit Committee shall be 30 (thirty) hours per month.

ARTICLE 29 – The Audit Committee shall have operational autonomy and its own budget approved by the Board of Directors, pursuant to the Law.

CHAPTER IX
ELIGIBILITY AND COUNSELING COMMITTEE

ARTICLE 30 –The Company will have an Eligibility and Advisory Committee, responsible for overseeing the appointment and evaluation process of administrators and Fiscal Council members, in compliance with the provisions of article 10 of Federal Law No. 13303/2016.

First Paragraph – The Committee:

I. issue a conclusive statement, in order to assist the shareholders in the appointment of administrators and Fiscal Council members on the fulfillment of the requirements and the absence of fences for the respective elections;
II. verify the conformity of the evaluation process of the administrators and Fiscal Council members;
III. resolve by a majority of votes, recorded in protocols, and must be drawn up in the form of a summary of the events, including dissent and protest, and contain the transcript only of the deliberations taken;
IV. must appear within 7 (seven) days, counting from the date of receipt of the registration forms and supporting documentation of the nominees, of which failure will be reported as an omission notice to the Board of Directors and the competent governmental bodies.

Second Paragraph – In case of apparent urgency, the Committee shall meet, optionally, by virtual means, issuing its deliberation so as to enable the necessary procedures in due time.

Third Paragraph – After the presentation of the committee, the protocols must be sent to the Defense Council of the State Capitals – CODEC, with the request of a General Assembly for the election of those approved.

Fourth Paragraph – The originals of the registration documents and supporting documentation shall be kept on file by the Company.

ARTICLE 31 – The management bodies may also submit to the committee a request for consultative character aiming at strategic advice for meeting the public interest that justified the creation of the Company, pursuant to article 160 of Federal Law No. 6,404/1976.

ARTICLE 32 – The committee shall be composed of up to three (3) members, who may attend meetings of the Board of Directors, with the right to speak, but not to vote.
Single Paragraph – The members of the committee must have at least three (3) years of professional experience in the Public Administration, or three (3) years in the private sector, in the Company’s area of activity or in a related area.

CHAPTER X
AREA OF CONFORMITY, RISK MANAGEMENT AND INTERNAL CONTROL

ARTICLE 33 – The Company will have a Compliance, Risk Management and Internal Control area, linked to the Chief Executive Officer and headed by a Statutory Officer appointed by the Board of Directors.

First Paragraph – The area may count on the operational support of the Internal Audit and maintain direct dialogue with the Audit Committee and the Audit Committee.

Second Paragraph – The area provided for in this Chapter shall report directly to the Board of Directors in situations where the Board member is suspected of being involved in irregularities or when a member of the Board of Directors evades the obligation to adopt necessary measures in relation to the situation described therein, always requiring independent performance.

ARTICLE 34 – In addition to compliance with the provisions applicable to article 9 of Federal Law No. 13303/2016, it is the responsibility of the area to:

I. establish policies to encourage compliance with laws, norms and regulations, as well as to prevent, detect and treat risks of irregular, illegal and unethical conduct by Company members, and for this purpose adopt efficient structures and practices of internal controls and strategic, patrimonial, operational, financial, socio-environmental and reputational risks management, among others, which must be periodically reviewed and approved by the Board of Directors, and communicated to the entire functional body;
II. verify the adherence of the Company’s organizational structure and processes, products and services to the laws, normative acts, internal policies and guidelines and other applicable regulations;
III. disseminate the importance of compliance, risk management and internal control, as well as the responsibility of each area of the Company in these aspects;
IV. to coordinate the processes of identification, classification and evaluation of the risks to which the Company is subject;
V. coordinate the preparation and monitoring of action plans to mitigate identified risks, continuously monitoring the adequacy and effectiveness of risk management;
VI. establish contingency plans for the Company’s main work processes;
VII. to evaluate the fulfillment of the goals set forth in the plans, projects and budgets, proving the legality and evaluating the results, as to the effectiveness and efficiency of budgetary, financial and patrimonial management, under the terms of article 74 of the Constitution of the Republic;
VIII. identify, store and communicate all relevant information, in a timely manner, in order to allow the established procedures to be performed, guide decision making, monitor actions and contribute to the achievement of all internal control objectives;
IX. verify the proper application of the principle of segregation of duties, so as to avoid the occurrence of conflicts of interest and fraud;
X. adopt internal control procedures, with the purpose of preventing or detecting the inherent or potential risks to timing, reliability and accuracy of Company information;
XI. prepare and disseminate the Code of Conduct and Integrity, which shall be approved by the Board of Directors and shall be available on the Company’s website, providing for the ethical standards expected of the directors, Fiscal Counselors, employees, agents and contractors. periodic training;
XII. elaborate the integrity program, observing the directives established in the State Decree No. 62.349/2016;
XIII. to submit to the periodic evaluation of the Audit Committee the adherence of corporate practices to the Code of Conduct and Integrity, including the managers’ commitments with the dissemination of the culture of integrity and the valorization of ethical behavior;
XIV. maintain an institutional channel, which may be external to the Company, to receive complaints about practices of corruption, fraud, illegal acts and irregularities that harm the Company’s assets and reputation, including violations of the Code of Conduct and Integrity;
XV. to prepare periodic reports of its activities, submitting them to the Board of Directors, to the boards of directors and the Audit Committee.

First Paragraph – The Company’s administrators shall disclose and encourage the use of the institutional channel of denunciations, which shall ensure the anonymity of the denouncer for an indeterminate period and the confidentiality of the investigation process and determination of responsibilities until the publication of the final administrative decision.

Second Paragraph – Under the supervision of the Board of Directors, the Company shall establish a prior consultation mechanism to resolve doubts about the application of the Code of Conduct and Integrity and to establish guidelines in specific cases.

CHAPTER XI
INTERNAL AUDIT

ARTICLE 35 – The Company will have Internal Audit, directly linked to the Audit Committee, governed by the applicable legislation and regulations.

Single Paragraph – The area will be responsible for measuring:
I. the adequacy of internal controls;
II. the effectiveness of risk management and governance processes;
III. the reliability of the process of collection, measurement, classification, accumulation, registration and disclosure of events and transactions, aiming at the preparation of the financial statements.

ARTICLE 36 – The composition and detail of its attributions will be defined in internal regulations, approved by the Board of Directors.

ARTICLE 37 – It shall be required of the Audit Committee to approve the Board of Directors’ choice of the person responsible for Internal Audit by the Board of Directors, to propose their dismissal to the Supervisory Board and to supervise the execution of the respective work.

ARTICLE 38 – The Internal Audit will provide operational support to the Compliance, Risk Management and Internal Control area.

CHAPTER XII
RULES COMMON TO STATUTORY BODIES

Possession, Impediments and Fences

ARTICLE 39 – The members of statutory bodies must prove compliance with legal requirements, by presenting curriculum and relevant documentation in accordance with current regulations.

ARTICLE 40 – The members of the statutory bodies will be invested in their positions by signing an instrument of investiture drawn up in the respective book of protocols.

First Paragraph – The term of office must be signed within 30 (thirty) days after the election, under penalty of its ineffectiveness, unless justified by the body to which the member has been elected, and must contain at least one domicile to receive citations and subpoenas of administrative and judicial proceedings, related to acts of its management, and being allowed to change the address indicated only by written communication.

Second Paragraph – The investiture shall be conditioned to the presentation of a declaration of assets and values, in the form provided for in current state legislation, which shall be updated annually and at the end of the term.

Third Paragraph – The appropriation of the members of the Board of Directors and of the Board of Executive Officers shall be conditional upon the prior subscription of the Statement of Consent of the Directors in accordance with the provisions of the B3 S.A. – Brasil, Bolsa, Balcão Level 1 Regulation, as well as compliance with applicable legal requirements.

Paragraph Four – The change in the composition of statutory bodies shall be immediately communicated to the Defense Council of State Capitals – CODEC.

ARTICLE 41 – Except in the event of resignation or dismissal, the term of office of the members of statutory bodies shall be automatically extended until the respective substitutes are in office.

Remuneration and Licenses

ARTICLE 42 – The remuneration of the members of statutory bodies shall be fixed by the General Assembly and there shall be no accumulation of salaries or any advantages due to the substitutions that occur due to vacancy, temporary absences or impediments, or accumulations in councils and committees.

First Paragraph – The remuneration of the members of the committees shall be fixed by the General Assembly and, in the cases in which the members of the committee are also members of the Board of Directors, shall not be cumulative.

Second Paragraph – The Director, who on the date of his/her appropriation belongs to the Company’s employees, is entitled to choose his salary.

ARTICLE 43 – The Officers may request the Board of Directors to leave for unpaid leave, provided that for a term not exceeding three (3) months, which shall be recorded in the protocol.

CHAPTER XIII
FISCAL YEAR AND FINANCIAL STATEMENTS PROFITS, RESERVES AND DISTRIBUTION OF RESULTS

ARTICLE 44 – The fiscal year will coincide with the calendar year, after which the Board of Executive Officers will prepare the financial statements provided for by law.

First Paragraph – The Company undertakes, as of January 1, 2010, to disclose, in the English language, the full financial statements, management report and explanatory notes, prepared in accordance with Brazilian Corporate Law accompanied by an additional explanatory note that demonstrates the reconciliation of net income for the year and shareholders ‘equity calculated according to the Brazilian accounting standards and according to the international standard IFRS, showing the main differences between the accounting criteria applied and the independent auditors’ report.

Second Paragraph – The disclosure of the financial statements referred to in Paragraph 1 of this article shall occur no later than four (4) months after the end of the respective fiscal year.

ARTICLE 45 Profit for the fiscal year, after deductions provided by law, will have the following destination:

I. 5% (five percent) shall be applied, before any other destination, in the constitution of the legal reserve, up to the limit of 20% (twenty percent) of the capital stock;
II. of the balance, will be assigned amount for payment of the priority dividend of class A preferred shares, provided for in Article 4, item I, letter b;
III. of the balance, the amount to be paid for the mandatory annual dividend to the common shares and class B preferred shares, corresponding to 10% (ten percent) of the paid-in capital stock represented by these shares, to be apportioned equally among them;
IV. of the balance, up to 20% (twenty percent) may be allocated as per resolution of the General Assembly, to reinvest in the expansion of the activities set forth in Article 2 of this by-law, up to 10% (ten percent) of the capital stock;
V. the balance will be allocated deliberately at the General Assembly, subject to the retentions permitted by law, and in case of distribution of the remaining balance to the common and preferred shares class A and class B, this will be done under equal conditions.

Single Paragraph – The payment of interest as remuneration of equity may be deducted from the amount of dividends payable, in accordance with current legislation.

ARTICLE 46 – The common shares will be entitled to the minimum mandatory dividend corresponding to 25% (twenty-five percent) of the net income for the year, after deductions determined or admitted by law.

First Paragraph – Class A preferred shares shall be entitled to the annual non-cumulative priority dividend of 10% (ten percent), calculated on the value of the paid-in capital stock represented by class A preferred shares to be equally distributed among them.

Second Paragraph – Class B preferred shares shall be entitled to participate on equal terms with the common shares in the distribution of the mandatory dividend pursuant to the caput of this Article.

Third Paragraph – The mandatory dividend may be paid by the Company in the form of interest on capital.
Fourth Paragraph – The Company may issue interim or intercalary balance sheets for the purpose of dividend distribution or payment of interest on shareholders’ equity.

CHAPTER XIV
LIQUIDATION

ARTICLE 47 – The Company will be liquidated in the cases provided for by law, and the General Assembly, if applicable, shall determine the method of liquidation and appoint the liquidator, establishing its remuneration.

CHAPTER XV
ARBITRAL JUDGE

ARTICLE 48- The Company, its shareholders, administrators and members of the Fiscal Council undertake to resolve, through arbitration, before the Market Arbitration Chamber of the São Paulo Stock Exchange – BOVESPA, in accordance with its respective Arbitration Rules , any and all disputes or controversies that may arise between them, related to or arising in particular from the application, validity, effectiveness, interpretation, violation and its effects, of the provisions contained in Law No. 6404/76, in the rules issued by the National Monetary Council, by the Central Bank of Brazil and by the Securities and Exchange Commission, as well as in other rules applicable to the operation of the capital market in general, in addition to those set forth in the Stock Exchange Level 1 Corporate Governance Practices Regulation São Paulo Stock Exchange – BOVESPA, the Arbitration Rules of the Market Arbitration Chamber and the and Differentiated Practices of Corporate Governance Level 1.

Single Paragraph – The resolutions of the controlling shareholder of the Company, whether by vote at a General Meeting or by determination to the Company’s management, aimed at guiding the Company’s business, pursuant to Article 238 of Law No.6,404 / 76, are considered forms of exercise of unavailable rights and will not be subject to the arbitration procedure set forth in the heading or beginning of this article.

CHAPTER XVI
DEFENSE MECHANISM

ARTICLE 49 – The Company will ensure to members of statutory bodies, through its legal department or contracted professional, the technical defense in judicial and administrative proceedings proposed during or after the respective mandates, for acts related to the exercise of their functions.

First Paragraph – The same protection may, with the specific authorization of the Board of Directors, be extended to the Company’s employees and agents.

Second Paragraph – The form, criteria and limits for granting legal assistance established in this article shall be defined by the Board of Directors.

Third Paragraph – When the Company does not indicate, in a timely manner, a professional to assume the defense, the interested party may contract one on its own account, being entitled to reimbursement of the respective legal fees fixed in a reasonable amount, if in the end they are acquitted or exempted of responsibility.

Fourth Paragraph – In addition to ensuring technical defense, the Company will bear the costs of proceedings, emoluments of any nature, administrative expenses and deposits to guarantee a request.

Fifth Paragraph – An agent who is convicted or liable, with a final and unappealable judgment, shall be obliged to reimburse the Company for the amounts actually disbursed, except when it is evidenced that it acted in good faith and aiming at the interest of the Company.

Sixth Paragraph – The Company may contract insurance in favor of the members of the statutory bodies, and with the approval of the Board of Directors, in favor of employees and agents, to cover liabilities arising from the exercise of their functions.

CHAPTER XVII
GENERAL PROVISIONS

ARTICLE 50 – Pursuant to article 101 of the Constitution of the State of São Paulo, in the manner regulated by State Decree No. 56,677, of January 19, 2011, the hiring of the lawyer responsible for the maximum management of the Company’s legal services shall be preceded by the approval of the State Attorney General, according to objective criteria of qualification, competence and professional experience.

ARTICLE 51 – The Company shall provide for the direct dialogue of its lawyers with the State Attorney General or other State Attorney appointed by it, with a view to ensuring a uniform and coordinated action, within the limits established in Article 101 of the State Constitution, subject to the duties and prerogatives inherent in professional practice.

ARTICLE 52 – By April 30 of each year, the Company shall publish its filled and vacant positions and functions for the previous fiscal year, in compliance with the provisions of Paragraph 5 of Article 115 of the State Constitution.

ARTICLE 53 – The Company is a member of Level 1 of Corporate Governance of the São Paulo Stock Exchange – BOVESPA (“Level 1″) and may only withdraw from Level 1 in order for the Company’s shares to be registered for trading outside Level 1 or due to a corporate reorganization in which the resulting company is not classified as holder of the same Level of Corporate Governance, through (i) prior approval at a General Assembly and (ii) communication to the São Paulo Stock Exchange – BOVESPA in writing in advance of thirty (30) days.

ARTICLE 54 – With the Company’s admission to the special listing segment called Level 1 of Corporate Governance of B3 SA – Brazil, Bolsa, Balcão, the Company, its shareholders, Directors and members of the Fiscal Council are subject to the provisions of the Level Listing Regulation 1 of Corporate Governance of B3 SA – Brazil, Bolsa, Balcão (“Level 1 Regulation”).

ARTICLE 55 – The provisions contained in (A) article 12 (B) in Article 48 and (C) of this by-laws may only be amended by a favorable vote of more than half of total capital stock of the Company or to incorporate any changes to the São Paulo Stock Exchange Regulations – BOVESPA for differentiated levels of corporate governance.

ARTICLE 56 – The indication, for the statutory organs of the Company, of persons that fall within the causes of ineligibility established in the federal legislation is prohibited.
First Paragraph – The prohibition in the “head” of this article extends to admissions for jobs in commission and assignments for functions of trust.
Second Paragraph – The Company shall observe Article 111-A of the Constitution of the State of São Paulo and the rules established in State Decrees No. 57,970 of April 12, 2012 and No. 58,076 of May 25, 2012, as well as any changes that are being edited.

ARTICLE 57 – The admission of employees by the Company is conditioned to the presentation of a declaration of assets and values that make up their private assets, which must be updated annually, as well as at the time of termination.
Single Paragraph – The Company shall observe the rules set forth in article 13 of Federal Law No. 8,429 of June 2, 1992, and in State Decree No. 41,865 of June 16, 1997, as well as any amendments that may be issued.

Modifications:

AGE of 12/29/1994 Filed under JUCESP under no 6.105/95-6 01/11/1995
AGOE of 04/28/1995 Filed under JUCESP under no 83.245/95-9 05/26/1995
AGOE of 04/26/1996 Filed under JUCESP under no 70.159/96-8 05/15/1996
AGOE of 04/25/1997 Filed under JUCESP under no 74.936/97-9 05/26/1997
AGO of 12/10/1997 Filed under JUCESP under no 208.082/97-9 12/26/1997
AGOE of 04/28/1998 Filed under JUCESP under no 71.372/98-2 05/19/1998
AGE of 07/23/1998 Filed under JUCESP under no 118.440/98-6 08/04/1998
AGE of 03/26/1999 Filed under JUCESP under no 101.241/99-9 04/24/1999
AGE of 12/20/2002 Filed under JUCESP under no 13.232/03-4 01/16/2003
AGE of 04/08/2005 Filed under JUCESP under no 107.840/05-4 04/14/2005
AGOE of 04/27/2005 Filed under JUCESP under no 140.076/05-0 05/13/2005
AGE of 01/31/2006 Filed under JUCESP under no 52.161/06-7 02/15/2006
AGE of 07/07/2006 Arquivada na JUCESP sob n 177.840/06-7 07/11/2006
AGOE of 04/25/2007 Filed under JUCESP under no 206.624/07-4 05/25/2007
AGE of 26/07/2007 Filed under JUCESP under no 269.661/07-4 08/07/2007
AGE of 06/05/2008 Filed under JUCESP under no 180.257/08-0 06/12/2008
AGE of 03/11/2010 Filed under JUCESP under no 99.910/10-0 03/22/2010
AGOE of 04/30/2010 Filed under JUCESP under no 160.766/10-2 05/12/2010
AGOE of 04/29/2011 Filed under JUCESP under no 177.939/11-4 05/10/2011
AGE of 10/14/2011 Filed under JUCESP under no 444.259/11-9 11/04/2011
AGOE of 04/24/2013 Filed under JUCESP under no 190.363/13-7 05/21/2013
AGOE of 04/27/2015 Filed under JUCESP under no 275.117/15-7 06/26/2015
AGE of 06/25/2015 Filed under JUCESP under no 312.941/15-8 07/22/2015
AGOE of 04/26/2016 Filed under JUCESP under no 299.706/16-3 07/07/2016
AGOE of 04/26/2017 Filed under JUCESP under no 244.331/17-0 05/31/2017
AGOE of 12/12/2017 Filed under JUCESP under no ……………… ………………
AGE of 08/02/2017 Filed under JUCESP under no ……………… ………………
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