Statute – Fiscal Council Aumentar Diminuir


1. Nature

1.1. The Company’s Fiscal Council is a permanent, collegiate body whose members will be elected in the manner provided for in Act 6,404, of December 15, 1976, and subsequent amendments, in Act 13,303 from June 30, 2016 and in the Decree No. 62,349, from December 26, 2016.

1.2. The Fiscal Council is the Company’s supervisory body, which monitors and verifies, permanently, the action of the managers and the compliance with their legal and statutory duties, exercising the attributions inherent to their supervisory power in accordance with the current legislation and with the Company’s bylaws, seeking, through the principles of transparency, equity and accountability, to contribute to the better performance of the Company.

2. Composition

2.1. Pursuant to Article 24 of the Bylaws, the Fiscal Council shall be comprised of at least 03 (three) and at most 05 (five) Official Advisors and an equal number of alternates, elected annually by the Annual Shareholders’ Meeting, observing the provisions regarding its powers, duties and responsibilities, to the requirements and impediments to investiture, in addition to other provisions set forth in art. 147, paragraph 4 of art. 161 and paragraph 2 of art. 162 of Act 6,404/1976 and in art. 26 of Act 13,303/2016.

2.2. The controlling shareholder has the power to elect a majority of the members of the Fiscal Council pursuant to the sole paragraph of article 26 of the Bylaws.

2.3. The representation 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 at the Fiscal Council. Federal Act No. 6,404/1976 and pursuant to Article 26 of the Company’s Bylaws.

2.4. The alternates will replace the official Advisors to which they are bound, in their absences or occasional impediments.

2.5. Only individuals residing in the country with academic qualifications compatible with the exercise of their role and who have exercised them, for a minimum period of three (3) years, a management or advisory position in the public administration or a position of tax adviser or as a company administrator can be elected. In addition to the persons enumerated in the paragraphs of art. 147 of Act No. 6,404/76, members of management and employees of the Company or of a subsidiary or from the same group, and the spouse or relative up to third degree of the Company’s administrator cannot be elected to the Fiscal Council.

a. The ownership of the Fiscal Council members is conditioned to the previous subscription of the Statement of Consent to the Regulation of the Market Arbitration Chamber of the São Paulo Stock Exchange – Bovespa.

2.6. The mandate of Fiscal Councilors shall be unified and last one (01) year, with two (2) consecutive renewals being permitted. At the end of the mandate, the Advisors shall remain in their respective positions until the investiture of their successors.

2.7. In the event of impediments or resignations of the Chief Fiscal Counselor, the respective substitute will assume, until their substitution by the shareholder who referred them, “ad referendum” of the General Meeting.

2.8. The role of Fiscal Council member is not delegable.

3. Ownership

3.1. The possession and exercise of the Fiscal Council are conditioned to the submission of a declaration of the assets and values that make up its private assets, which will be transcribed in the proper book and filed with due secrecy.

a. The declarant may, in order to meet the requirement of item 3.1, at their discretion, be able to deliver a copy of the annual property declaration presented to the Federal Revenue Office in compliance with the income tax legislation and any type of income, with the necessary updates.

b. The declaration shall include all assets and property values located in the country or abroad and, when applicable, shall cover the assets and property values of the spouse or partner, children and other persons living under the economic dependence of the declarant, only excluding objects and utensils for domestic use.

c. The declaration of assets will be updated annually, as well as on the date on which the Fiscal Council member leaves the exercise of the mandate.

d. Without prejudice to other applicable sanctions, the Fiscal Advisor who refuses to provide a declaration of the assets within the specified period, or who will render it falsely will be destitute.

4. Investiture in the position

4.1. The Advisors will be invested in their respective positions, by signing a Term of Possession, recorded in the book of Draft of the Fiscal Council Meetings, as well as an Instrument of Consent to the Agreement of Share in the New Market of the São Paulo Stock Exchange, executed by the Company, by which they undertake to comply with the rules contained therein.

4.2. The Fiscal Advisors, pursuant to CVM Instruction 358 of January 3, 2002 and subsequent amendments, are required to inform the Company of the ownership and trading of securities issued by the company itself, by its controlling companies or controlled companies, in the latter two cases, provided that these are publicly-held companies. The communication shall cover negotiations with derivatives or any other securities referenced in the securities issued by the Company or issued by its parent companies or subsidiaries, in the latter two cases, provided that they are publicly-held companies. They should also indicate the securities that are owned by the spouse of whom they are not separated judicially or extrajudicially, of a companion, of any dependent included in their annual income tax adjustment and of companies controlled by them, directly or indirectly.

a. Said notice should be made:
(I) Within 5 (five) days after the completion of each business;
(II) On the first business day after the investiture in the position; and
(III) When presenting the documentation for the Company’s registration as open.

5. Competence

5.1. It is up to fiscal council to:

(I) Supervise, by any of its Fiscal Advisors, the acts of administrators and verify compliance with its legal and statutory duties;

(II) give an opinion on the annual report of the management, stating in its opinion the additional information deemed necessary or useful for the deliberation of the General Meeting;

(III) give an opinion on the proposals of the management bodies to be submitted to the General Meeting, regarding the modification of the share capital, issuance of debentures or subscription bonuses, investment plans or capital budgets, dividend distribution, merger or spin-off;

(IV) denounce, by any of its members, to the administrative bodies and, if they fail to take the necessary measures for the protection of the Company’s interests, to the General Meeting, any errors, fraud or crimes they discover, and suggest useful measures to the company;

(V) call the Annual Shareholders’ Meeting, if the management bodies delay the call for more than one (01) month, and the Extraordinary one, whenever there are serious or urgent reasons, including on the agenda of the meetings the matters they deem necessary;

(VI) analyze, at least on a quarterly basis, the balance sheet and other financial statements periodically prepared by the Company;

(VII) examine the financial statements of the fiscal year and express their opinion;

(VIII) carry out these duties, during the settlement, in view of the special provisions that regulate it;

(IX) request, by any of its members from the management bodies, clarifications or information related to its supervisory function and the preparation of special financial or accounting statements;

(X) attend meetings of the Administration Council, when matters are deliberated on which the Fiscal Council must express its opinion:
- Annual Administration Report;
- Modification of share capital;
- Issuance of debentures or subscription bonus;
- investment plans or capital budgets;
- Distribution of dividends or interest on own capital;
- Transformation, incorporation, merger or spin-off;
- Financial Statements;

(XI) attend, at least one of its members, general meetings and respond to requests for information from shareholders;

(XII) provide information on matters within its competence whenever requested by a Shareholder or group of Shareholders, representing at least 5% (five percent) of the share capital;

(XIII) request clarification or determination of specific facts to independent auditors;

(XIV) notwithstanding the provisions of item 6.2, the Fiscal Council may, in order to determine a fact clarified for the performance of its duties, formulate, with a justification, questions to be answered by an expert, and request the Board of Directors to refer, within no more than 30 (thirty) days, three experts, individuals or legal entities, with a well-known knowledge in the area concerned;

(XV) choose an expert for hiring and performing the services required by the Fiscal Council. The expenses arising from the hiring of the selected expert will be borne by the Company;

(XVII) assess the effectiveness of the Company’s internal controls, being allowed to recommend and propose changes, if necessary, as a form of continuous support for the implementation of the Integrity Program;

(XVIII) identify the critical accounting aspects and analyze the adequate application of accounting principles, normally accepted in Brazil;

(XIX) approve an annual calendar of regular meetings, and

(XX) exercise the other attributions related to its power of inspection, according to the powers attributed by Act 6,404/76, articles 163 to 165-A, as well as of article 5, section II of State Decree No. 62,349/2016.

6. Operation

6.1. The Fiscal Council will have a support structure, in charge of the Company’s Internal Audit Department, with the following assignments:
(I) assisting in the elaboration of the agenda, and in the call of members for the Fiscal Council meetings;
(II) organizing the meetings, preparing the respective drafts and keeping them recorded in the proper book;
(III) issuing and receiving the pertinent documentation to the Fiscal Council;
(IV) administratively supporting the Fiscal Council in what is necessary for compliance with the provisions of these Internal Regulations and applicable legislation;
(V) forwarding the drafts and opinions of the Fiscal Council to the Company’s competent bodies.

6.2. The Fiscal Council may resolve on the hiring of external advisors (lawyers, auditors, consultants, analysts and others) in order to assist it in attainment of its purposes, and may also approve the payment of such advisors and any necessary administrative expenses to the performance of their duties, all in strict compliance with said Council.

6.3. The Fiscal Council, in the event of a need for a budget to hire external advisors, foreseen in item 6.2, may request the corresponding contribution to the Administration Council.

6.4. Meetings of the Fiscal Council shall take place at least once a month, and extraordinary meetings may be held at any time, if a majority of the Advisors so request.

6.5. The ordinary meetings shall be provided for in the annual calendar approved by the Fiscal Council Members;

6.6. The meetings of the Fiscal Council shall be called up to five (5) days in advance by means of a notice sent by the representative of CESP, indicating the matters to be dealt with. The necessary supporting documents must be sent within five (5) days prior to the date of the meeting.

6.7. In case of a manifest urgency, the meetings of the Fiscal Council may be called in a shorter term than mentioned in the previous item.

6.8. The quorum for the meetings of the Fiscal Council is comprised of 03 (three) Advisors and its decisions will be taken by a simple majority of the Advisors attending.

6.9. If there is no quorum for deliberation, the meeting shall be held for half an hour, ending the meeting whether the minimum number stipulated in the form of item 6.8 is not reached at the end of this period. In this case, the occurrence and names of the Fiscal Council Members attending shall be logged in the meeting draft.

6.10. The presence of all the Advisors will allow meetings of the Fiscal Council to be held regardless of the call.

6.11. The meetings of the Fiscal Council may be held by means of a teleconference, with the consent of the majority of the members.

6.12. The Fiscal Council members must inform the support structure in advance, whenever they are unable to attend ordinary and/or extraordinary meetings of the Council and request, in advance, the call of their respective alternates.

6.13. Alternate Fiscal Advisors, whenever they are not invested in their positions, may attend the meetings, as guests, to keep up-to-date, being allowed to participate in the discussions, but not being able to vote the matters submitted for approval.

6.14. The Fiscal Advisors may submit suggestions for matters to be included in the agenda of the meetings, at least 05 (five) days prior to the issuance date of the call, and subsequent additions are permitted only on an exceptional basis. Such referral should be directed to the Internal Audit Department, which will be responsible for passing them onto the competent area, which will prepare the presentation.

6.15. Any additional information on the matters to be deliberated in the meetings should be sent, in writing, to the Internal Audit Department, which will be responsible for passing them onto the competent area, to provide the clarifications requested.

6.16. Even if documents and information related to the matters on the agenda, as stipulated in item 6.6 have been sent, in case there is insufficient time to read and understand them, by mutual agreement, the members of the Fiscal Council may postpone the meeting for the term they understand necessary, provided that without prejudice to the deliberation of the other administration bodies of the Company.

6.17. The order of presentation of the subjects of the day’s agenda will be defined based on the following criteria:
(I) first, the priority of the matter by reason of the urgency;
(II) second, matters whose deliberation has been postponed in a previous meeting;
(III) third, ordinary matters and
(IV) fourth, general subjects.

6.18. During the discussion of the matters, the Fiscal Council members may:
(I) propose measures or request further clarification, verbal or written, aiming at the perfect instruction of the subject being debated;
(II) require urgency or preference in the deliberation of certain matter(s);
(III) propose the postponement of the discussion of the matter on the agenda or its withdrawal from the agenda.

6.19. It will be up to the majority of the Fiscal Council members attending to decide on the proposal(s) relative to item 6.18.

6.20. After the discussion of the matters, the Coordination Assisting the Activities of the Fiscal Council will put them into a vote session, proclaiming then the result and recording in the respective Drafts the result of the approval and identification of divergent votes and/or votes converged with caveats.

6.21. Any Fiscal Advisor may attend the respective meetings, by means of a teleconference, and their participation by means of said meeting shall be considered as attendance at the meeting.

6.22. Any Fiscal Advisor who has an actual or potential conflict of interest or who is related to the related party, whose preponderant activities imply the actual or potential existence of a conflict of interests, with a matter to be examined by the Fiscal Council, shall express in a timely and formal manner their conflict of interest and may not deliberate on it, and shall refrain from participating in the part of the Audit Board meeting in which such matter is analyzed. Nevertheless, if requested by the Fiscal Council, the member in a situation of conflict of interest may be summoned to provide specific information.

6.23. The manifestation of the conflict of interest situation and subsequent abstention shall be included in the Draft of the Fiscal Council meeting, in accordance with the Company’s Related Party Transactions Policy.

6.24. In the event of a call by the Fiscal Advisors, the Chairman, the Officers, the Managers, the Employees, the advisers or the members of the Company’s Board of Directors shall remain in the meetings only during the discussion of the matter that originated their summoning, unless due to an opposite determination from the majority of the Advisors.

6.25. The minutes of the Drafts will be submitted for the consent of the Fiscal
Advisors attending the meeting, within 10 (ten) days after the meeting. The Drafts will be subsequently drawn up in the proper book and signed at the next meeting. Especially in the month of disclosure of the financial statements for each year, the Company has a period of 7 (seven) business days to file the Draft Statement to the CVM.

7. Rights and Duties

7.1. The Fiscal Advisors shall comply with and strictly enforce the applicable legislation, what is established by the Bylaws, the Company’s Policies and Code of Conduct and Integrity, and the rules defined by these Bylaws.

7.2. The Fiscal Council members shall have access, through written requests, to the Company’s management bodies, to all documents and information deemed necessary for the exercise of their roles, including documents of the Board of Directors and of the companies controlled by the Company.

7.3. The Fiscal Advisors shall maintain the secrecy of the information to which they have privileged access, due to the position they occupy, until their disclosure to the market, in accordance with the Company’s Disclosure Policy.

7.4. The Fiscal Council members, holders and alternates, may not negotiate, provide investment advice or assistance in securities issued by the Company and its subsidiaries or affiliates, or anyone referenced thereto:

(I) from the awareness date to the communication date of a Relevant Act or Fact to the market;

(II) in the period between the 15 (fifteen) days prior to the 15 (fifteen) days after the disclosure or publication of the quarterly (IQRs) and annual (DFP) financial statements;

(III) in the period between the decision date by the Administration Council, recorded in the Draft of the meeting, and the publication of notices or announcements related to an increase in the Company’s share capital, distribution of dividends, payment of interest on own capital, bonuses in shares or their derivatives, share grouping and/or split;

(IV) whenever the acquisition or alienation of Shares by the Company itself is in progress;

(V) in the periods determined by the regulations issued by the CVM; and

(VI) when the Chief Financial and Investor Relations Officer, regardless of justification or the existence of a material act or fact, stipulate periods in which the related persons cannot negotiate with securities.

7.5. In the event of resignation or expiration of the mandate as Fiscal Advisor, the prohibitions contained in item 7.4 above shall apply, which shall be extended for a period of 180 (one hundred eighty) days after their removal from the position of Advisor.

8. Remuneration

8.1. The remuneration of Advisors shall be fixed annually by the General Meeting that elects them, according to art. 162, paragraph three, of Act 6,404/76.

8.2. Alternate Fiscal Advisors who participate in the meeting, in the absence of their holders, will be entitled to 100% (one hundred percent) of the remuneration that they are entitled to, in accordance with the provisions of item 8.1.

8.3. The expenses of travel and lodging for Fiscal Advisors who reside outside the city where the Company’s headquarters are located shall be reimbursed, in accordance with the normative provisions in force in the Company, regarding for travelling for service purposes, by means of rendering of accounts, in accordance with art. 162, paragraph three, of Act 6,404/76.

9. Defense Mechanism

9.1. The Company shall ensure to the Fiscal Advisors legal technical defense in judicial and administrative proceedings, which have as their purpose deeds or acts practiced in the exercise of their legal or institutional attributions, in accordance with article 49 and its paragraphs one to six, in its Bylaws.

10. General Provisions

10.1. The present Internal Regulation may be modified as a result of legal or statutory changes.

10.2. This Internal Regulation of CESP’s Fiscal Council, approved at the 337th Meeting of the Fiscal Council, was held on August 28, 2018.