INTERNAL REGULATIONS OF THE BOARD OF DIRECTORS
Object of the Internal Regulations
Article 1 – These Internal Regulations (“Regulations”) regulates the functioning of the Board of Directors (“Board”) of CESP – Companhia Energetica de São Paulo (“Company”), as well as the relationship between the Board, its Committees and other organs of the company, subject to the provisions of laws and regulations.
Mission of the Board of Directors
Article 2 – The Board of Directores is the decision-making body responsible for the overall guidance of the Company, representing the interests of shareholders, whose mission is to ensure the valuation of assets, the Company’s business planning, the vision, mission and values of CESP, highlighting excellence and corporate sustainability. The Board of Directors is the guardian of the Bylaws and its members should always decide in the best interest of the Company
Article 3 – The Board should decide on strategic issues, among others:
(i) promote and observe the Company’s corporate purpose;
(ii) ensure the interests of shareholders, considering the other stakeholders;
(iii) ensure the continuity of the Company, with long-term perspective, including in the definition of the business and operations, aspects of economic, social, environmental ordinance and good corporate governance;
(iv) make sure the established management guidelines are reflected in the corporate budget;
(v) make sure that the strategies and guidelines are effectively implemented by the Management, without intervening in operational matters; and
(vi) prevent and manage situation of conflicts of interests or difference of opinion in favor of the Company’s interests.
Composition, Mandate and Investiture
Article 4 – The composition and the mandate of the Directors are those established by the Bylaws and the Shareholders’ Meeting.
Article 5 – Immediately after the Meeting to elect Director(s), the Secretary of the Board shall contact the new Director(s) to deliver to them the following documents, getting their signature(s) as needed:
(i) Copy of this Bylaw.
(ii) Calendar of Meetings scheduled for the remainder of the year.
(iii) Copy of the Management Liability Insurance Policy.
(iv) Minutes of the Board of Directors, Fiscal Council and Committees of the last 12 months.
(v) Term of Possession.
(vi) Terms of Clearance Statement.
(vii) Statement of Consent with the Regulation of Trading Levels in which CESP is registered.
(viii) Declaration of Compliance to the Rules of the Arbitration Panel of the BM&FBOVESPA Market.
(ix) Term of Adhesion to the Disclosure Policy of Act or Relevant Fact.
(x) Term of Adhesion to the Trading Policy of the Company’s Shares.
(xi) Term of Compliance with the Code of Business Ethics/Conduct.
(xii) The information provided in Article 8, item v of these Regulations.
Paragraph one – The investiture of the Directors is conditional on the delivery of the above terms and the receipt requested of other documents, duly signed, to the Secretariat of the Board until the first annual meeting held after their election.
Paragraph two – The documents referred to in this Article shall be filed at the Company’s headquarters at least five (5) years after the end of Directors’ bond with CESP.
Article 6 – The Board member who misses two (2) consecutive meetings will be deprived of the receipt of fees for the month in which it is determined the mentioned accumulation of absences.
Article 7 – The powers of the Board of Directors are those determined by law, by regulations, especially the Brazilian Securities Commission – CVM and the Bylaws, and the Board may:
(i) Approve the risk management policy and monitor its implementation;
(ii) Establish specialized committees with specific assignments regarding the analysis and recommendation on certain matters, and approve their internal regulations;
(iii) Appoint the members of the specialized committees, which will have a term identical to the Board;
(iv) Approve the Code of Business Ethics/Conduct.
(v) Prepare, approve and update these Internal Regulations;
(vi) Ensure that shareholders are provided with all the information and support needed to exercise informed of his right to vote at General Meetings;
(vii) Approve the hiring and dismissal of independent auditors and call them to provide clarification to the Board of Directors, after hearing the recommendations of the Audit and Risk Committee;
(viii) Suggest, by approval of a simple majority of its members, hiring specialists and experts to better instruct the matters submitted to its deliberation;
(ix) Resolve on the quarterly financial statements and the interim dividend in the form of interest on capital;
(x) Define, at the last meeting of the fiscal year, the Ordinary Meeting Calendar for the following year.
Sole paragraph – The duties and responsibilities of the Board members are non-delegable and absences must be justified.
Duties of the Board of Directors Members
Article 8 – It is the duty of all Directors to, in addition to those provided for by law, in the applicable regulations and Bylaws:
(i) attend meetings of the Board properly prepared, with the examination of the documents made available to and participate actively and diligently;
(ii) maintain the confidentiality of any company information to which it has access as a result of position and demand the same confidential treatment of the professionals who provide her assistance, using it only for the exercise of their functions of Board Member, under penalty of liability for the act that contribute to its improper disclosure;
(iii) declare, prior to the decision that, for whatever reason, is of particular interest or conflict with the Company as to certain matter referred to it, abstaining from discussion and voting;
(iv) ensure the adoption and compliance with good corporate governance practices by the Company.
(v) communicate the investiture of charge and monthly to the Investor Relations Officer of CESP, the number and characteristics of the securities issued by the Company that they hold, or the spouse, partner and the dependents included in the annual income tax and shall inform the shareholder movement made, if any, within three (3) days after the trade, including date, quantity, characteristics and form and purchase price and / or sale of shares, being certain that this information is provided to the Securities and Exchange Commission, pursuant to CVM Instruction 358;
(vi) refrain from any kind of direct or indirect advantage because of the position he holds.
Presidency of the Board
Article 9 – The Chairman of the Board of Directors shall be appointed through General Meeting and the choice may not fall on the person of Chief Executive Officer of the Company pursuant to the Bylaws.
Article 10 – The Chairman has the following duties without prejudice to others that confer upon it the Bylaws and the Law:
(i) chair the meetings of the Board;
(ii) ensure the efficiency and the performance of the Agency;
(iii) ensure effective monitoring and evaluation system, by the Board, the performance of the Company and the Board itself, the Management and, individually, the members of each of these bodies;
(iv) organize and coordinate, in cooperation with the Secretary of the Board, meeting agendas, consulting, if necessary, other Board members, the CEO and other officers;
(v) ensure that the Board members receive individually, with due advance of the meeting date, the necessary documentation to examine matters;
(vi) propose the Annual Calendar of Regular Meetings;
(vii) call managers and/or employees of the Company to attend meetings and provide clarifications or information about matters being discussed;
(viii) ensure that the decisions taken by the Board are properly implemented, and that the Company provide the information requested by the Board;
(ix) indicate in their absence, the Board member who will chair the meeting that is missing, and, in the absence of such information, the meeting will be chaired by the Board member who is longer in office. Persisting equality, the criterion of greater age will prevail.
Board’s Executive Secretary
Article 11 – The Board’s Executive Secretary will be chosen by the Chairman among professionals with recognized expertise and knowledge in the areas of law, corporate governance and the Company’s operations, and will report directly to the Board.
Article 12 – The Board’s Executive Secretary shall:
(i) disclose the annual calendar of regular meetings, pursuant to the Board’s resolution;
(ii) organize the agenda to be discussed, based on the proposal submitted by the Company’s Board of Directors and requests, in compliance with legal, regulatory and statutory provisions, subjecting it prior to distribution, the Chairman of the Board;
(iii) issue, on behalf of Chairman of the Board to convene meetings with the expected advance in the Bylaws and indicating the date, time, place and agenda of the meeting;
(iv) submit to the Board members the necessary documents for the consideration of issues to be resolved, including, where appropriate, the Board Resolution and its report, technical and legal character of manifestation and other documents related to the subject;
(v) submit the minutes of the previous meeting to the Board and, once approved, plowing and collect the signatures of the Board members present in the proper book;
(vi) be secretary of the meetings and records the minutes that summarize objectively the subjects dealt with and the resolutions approved by the Board;
(vii) submit to the Company meeting minutes, duly approved and signed, for registration and publication, providing, when necessary, their respective minutes extracts;
(viii) file minutes, statements, resolutions, as well as the documents and materials used in meetings for stakeholder consultation on request;
(ix) provide, on the occasion of the investiture of new Board member(s) in charge, all documentation provided for in Article 5 of these Regulations, obtaining signature on documents that may be necessary;
(x) monitor the progress of decisions or requests of the Board by the company’s Board of Directors;
(xi) monitor and record the frequency of Board meetings and inform the agency responsible for paying the compensation.
Meetings of the Board of Directors
Article 13 – The Board of Directors shall meet ordinarily, according to the Calendar of Ordinary Meetings and extraordinary meetings when necessary to the Company’s interests.
Article 14 – The Board of Directors’ meetings shall be convened by its Chairman or by the majority of acting directors, by sending written or electronic correspondence to all Directors, respecting the expected advance in status, indication of location, day and time the meeting and the matters to be discussed.
Article 15 – The Board of Directors’ meetings shall be convened with the presence of most of its members in office, led by Chairman of the Board of Directors or, failing that, by another Director appointed by him. In the absence of such information, the meeting will be chaired by the Director who has been the longest in office. Persisting equality, the criterion of greater age will prevail.
Article 16 – The Board of Directors shall resolve by majority vote of the attending members, prevailing, in the event of a tie, the proposal with the vote of the Board Member who is chairing the meeting.
Article 17 – The Board of Directors’ meetings will be developed as follows:
I. meeting opening and presence verification;
II. reading, discussion and approval of the minutes of the previous meeting;
III. reading, discussion and voting on each item on the agenda;
IV. executive session (without the participation of employees and directors).
Paragraph One – The Chairman or members of the Board of Directors may summon executives of the Company for information or create technical committees for specific jobs.
Paragraph Two – It is provided to each Board member the bringing items to integrate the agenda, which must be submitted to the Secretary of the Board at least 10 (ten) days prior to each meeting.
Article 18 – At the last meeting of each year, the Chairman of the Board will propose the dates for the annual calendar of ordinary meetings of the following year that, in principle, will address the following topics:
|February:||Actuarial Revaluation of the Pension Fund
Self-assessment of the Board of Directors
|March:||Financial Statements from the previous year
|April:||Matrix of Strategic Risks
Evaluation of the Compensation Policy for the previous year’s results
|May:||Financial Statements for the first quarter
Assumptions for the Collective Bargaining Agreement
|June:||Recommendations Report of the External Auditors|
|July:||Business Performance Evaluation|
|August:||Financial Statements for the second quarter|
|September:||Internal Control System|
|October:||Matrix of Strategic Risks|
|November:||Financial Statements for the third quarter|
Policy of Remuneration for Results – Indicators and Targets
Article 19 – The work of the Board of Directors will be recorded in the minutes, to be prepared by the Secretary of the Board.
Paragraph one – The minutes of the draft should be sent to the Board members within 5 (five) business days for comments and review and their approval will take place by the next meeting.
Paragraph two – In principle the Board of Directors’ minutes will be considered public and should be made available in the form of extract in the electronic system of the Securities and Exchange Commission
Paragraph three – In case of confidentiality or relevance, the Board may determine the non-disclosure of the minutes or parts of it.
Paragraph four – It is up to the Investor Relations Officer to communicate to shareholders about material acts or facts derived from Board of Directors’ decisions, even before the publication of the minutes, if necessary, observing the provisions of current legislation and in the policy of Disclosure of Act or Relevant Fact adopted by the Board.
Paragraph four – The votes separately eventually pronounced by the Board members will also be published.
Paragraph six – The Management will provide disclosure of the decisions of the Board of Directors to employees, in the form it deems most effective.
Article 20 – The Board can create up to three (3) specialized committees, with simultaneous operation, without power of decision, necessarily composed of members of its Board of Directors, whose allocation is to study specific issues of the Board’s interest.
Paragraph one – In the meetings may participate as guests, however with no right to vote, officers, employees, specialists or others whose contribution is relevant to the performance of the work.
Paragraph two – The Committees will register their work in minutes, which shall be sent promptly to all Board members.
Article 21 – The Committees should study the issues within their competence and prepare proposals to the Board. The material needed to review by the Board should be available together with the recommendation of vote, and the Board Member may request additional information if deemed necessary.
Audit and Risk Committee
Article 22 – The Audit and Risk Committee is instituted on a permanent basis to:
(i) monitor the preparation of Financial Statements;
(ii) promote oversight and accountability in the financial area;
(iii) ensure that the Board develops reliable internal controls;
(iv) ensure that the Internal Audit perform satisfactorily its role and the Independent Auditors assess, through its own review, the practices of the Board and the Internal Audit;
(v) discuss with the Independent Auditors its work plan, issued reports and ensure the independence of action of the external auditors;
(vi) recommend to the Board of Directors the bidding process for hiring the independent auditor, or recommend their replacement;
(vii) oversee the Risk Policy and its implementation;
(viii) oversee the legal liabilities of the Company;
Article 23 – The Board should approve the Internal Regulations of the Audit and Risk Committee, which regulates the rules of its operation, as well as their specific responsibilities and assignments.
Article 24 – The Audit and Risk Committee shall consist of at least three (03) and at most five (05) members of the Board, mostly independent, all with basic knowledge of finance and accounting, at least 01 (one) member with experience in accounting, auditing and financial management.
Paragraph one – The Audit and Risk Committee shall be chaired by an Independent Board Member.
Paragraph two – The Board Member to accumulate executive functions may not participate in the Audit and Risk Committee.
Article 25 – The Audit and Risk Committee shall have, where necessary, resources to ensure them proper functioning, approved by the Board of Directors
Paragraph one – For the exercise of its functions, the Audit and Risk Committee may request the hiring of outside professionals.
Paragraph two – The Board members who serve on the Audit and Risk Committee will have compensation consistent with their responsibility and workload.
Interaction with the Fiscal Council
Article 26 – The Board of Directors may meet with the Fiscal Council to discuss matters of common interest and exchange insights and information of interest of the parties.
Article 27 – The minutes of the Fiscal Council will be forwarded promptly to the members of the Board of Directors, and vice versa.
Article 28 – Requests for information or documents from the Company by the Board members shall be formally submitted to the Secretary of the Administration Board, who shall notify the Chairman of the Board of Directors.
Article 29 – This Internal Regulation may be amended after discussion and approval by the Board of Directors, and the cases shall be resolved by the Chairman.
Article 30 – The present Internal Regulations was approved at the meeting of the Board of Directors dated June 09, 2015, and became effective as of this date.
Statute approved by the Board of Directors’ Meeting held on 04.14.2015