Final version approved on January 27, 2016
OI S/A’S POLICY FOR TRANSACTIONS WITH RELATED PARTIES AND SITUATIONS
INVOLVING CONFLICT OF INTEREST
1.
Purpose
The purpose of this policy for transactions with Related Parties and situations involving
conflict of interest (“Policy”) is to establish rules and consolidate procedures for transactions
of this type, preserving the transparency of the process, such that decisions are always taken
in observance of the best practices of corporate governance and in the best interests of Oi
S/A (“Company”), its administrators and shareholders, avoiding abuses and improper use of
company assets.
2.
Applicability
This Policy is applicable to all administrators and employees of the Company, any direct or
indirect controlling companies and subsidiaries in transactions with Related Parties and in
situations in which there is a potential conflict of interest, as defined ahead, ensuring the
primacy of the Company’s interests and in accordance with the best practices of corporate
governance.
This Policy is not applicable to Contracts signed between subsidiaries of the Company
(Intercompany) no matter the value and to contracts that use standard clauses (boilerplate
contracts) which value is up to R$ 5.000.000,00 (five million Brazilian reais). With respect to
Related Parties transactions disclosure, all related rules will be followed, especially the rules
issued by Technical Announcement CPC 05 on the matter.
3.
Definitions
For purposes of this Policy and pursuant to applicable regulations, a Related Party is
considered to be a person or society related to the Company as follows:
a) A person, or a close member of the person’s family, is related to the Company if:
(i)
he holds full or shared control of the Company;
(ii)
has significant influence over the Company; or
(iii)
is a member of key management personnel of the Company or any eventual
controlling society of the Company.
Final version approved on January 27, 2016
b) An society is related to the Company if at least one of the following conditions is
met:
(i)
The society and the Company are members of the same economic group, with the
exception of Intercompany societies, pursuant to the exception provided in 2 above;
(ii)
The society is an affiliate of or jointly controlled by (joint venture) a third society (or
affiliate or jointly controlled by a member of the economic group of which the other
society is a member) and the Company is affiliate of or controlled by said third
society;
(iii)
Both societies are under joint control (joint ventures) of a third society;
(iv)
An society is under the joint control (joint venture) of a third society and the other
society is associated with said third society;
(v)
The society is a post-employment benefit plan, the beneficiaries of which are the
employees of both entities, the Company and the society that is related to the
Company. If the company is itself a post-employment benefits plan, the employees
who contribute to same shall also be considered Related Parties;
(vi)
The society is controlled, fully or under joint control, by a person identified in letter (a);
(vii)
A person identified in letter (a)(i) has significant influence over the society, or is a
member of key management personnel of the society or of any controlling company
of the society;
(viii)
The society, or any member of a group of which it is a part, provides key
management personnel services to the reporting entity or to the parent of the
reporting entity.
Transaction with a Related Party is a transfer of resources, services or obligations between
the Company and a Related Party, irrespective of a price being charged in return.
A person’s close family members are those family members of whom it could be expected
that they could exercise influence over or be influenced by that person in the business
relations of those members with the society and include:
Final version approved on January 27, 2016
(a) the person’s children, spouse or common-law spouse;
(b) the children of the person’s spouse or common-law spouse;
(c) dependents of the person, the person’s spouse or common-law spouse; and
(d) any direct ascendants or descendants.
Control
Regardless the nature of the business engagement with the society (invested), the investor
shall determine if it could be considered controller of the invested society analyzing its
commercial relationship.
The investor is considered the parent company of the invested society whenever it is
exposed or holds rights regarding to variable returns from the investments and has the
capability of impact this returns through its influence on the invested society.
Therefore, the investor can be considered as a parent company if, and only if, the investor
owns all the following attributes:
(a) Power upon the invested society;
(b) Exposure / rights regarding variable returns from the investments made on the invested
society; and
(c) Capability of impact the invested society returns value through its influence.
Joint control is the contractually agreed sharing of control of an arrangement, which exists
only when decisions about the relevant activities require the unanimous consent of the
parties sharing control.
Key management personnel are those people who have authority and responsibility to
decide on contracting for the society, directly or indirectly, including any manager (executive
or other) of said society, especially the CEO, officers directly connected with the CEO, and
members of the Board of Statutory Directors.
Significant influence is the power to participate in the financial and operational policy
decisions of the invested, but which does not characterize control or joint control of those
policies. Such significant influence is presumed when the investor holds 5% (five per cent) or
more of the invested company voting shares without being its controlling company. Such
presumption shall be considered as an identification parameter of Related Parties solely and
exclusively regarding pre-approval procedures. With regard to the disclosure of Transactions
with Related Parties to the market, it should be done in accordance with regulations
established in the accounting rule CPC 05.
Final version approved on January 27, 2016
Related transactions consists of the set of similar transactions that have logical relationship
to each other by virtue of their object or its parts, such as: (i) subsequent transactions arising
from a first transaction ever made, since this has established its main conditions, including
the amounts involved; and (ii) continued duration transactions which involve information
periodic, since the amounts involved are already known.
4.
Directives to Related Parties Transactions
The companies of the Oi group may carry out transactions with Related Parties to take
advantage of synergies, achieve operating efficiency and thereby improve joint results, it
being understood that the individuality of each company must be strictly observed.
Business with Related Parties must always be conducted pursuant to current legislation and
the best practices of corporate governance, ensuring transparency and full respect for the
interests of the Company, under arm’s length conditions,1 or with proper payment in return, it
being clear that for a transaction to be considered valid and legitimate it must be contracted
on fair bases and under market conditions,2 such that there are no business transactions that
benefit only one of the parties involved.
Transactions with Related Parties do not depend on the cost of the transaction, rather, they
are characterized by the parties involved in them.
Pursuant to applicable legislation, managers’ actions shall be guided by the duty of loyalty,
according to which the interests of the society of which they are managers is placed above
their personal interests. Similarly, shareholders must exercise their right to vote in the
interests of the company in which they hold equity, and voting for any other reason is
considered abusive.
Company managers, in the exercise of their duties, must employ the care and diligence that
any active and honest man would use in managing his own affairs, and must carry out the
1
Arm’s Length Conditions: Equivalence of commitment or reciprocal obligations, without favoring either of the parties in a
business transaction, conditions that are characteristic of transactions between independent entities.
2
Market Conditions: Those conditions that are observed during negotiations of a particular transaction and that observe the
principles of (i) competitiveness (prices, fees, deadlines and conditions that are compatible with others practiced in the market, if
applicable and possible); (ii) appropriateness and compliance (relevance of the terms of a given contract with the needs of the
company, as well as adequate control of security and information); and (iii) transparency (proper disclosure of the conditions
and their application). When there is no definition of a market parameter, conditions from previous, similar negotiations must be
observed.
Final version approved on January 27, 2016
duties that the law and the bylaws ascribe to him to achieve the company’s purposes and
interests, while satisfying the requirements of the public good and the social function of the
company.
Managers elected by groups or types of shareholders have, in relation to the company, the
same duties as the others, and they may not fail in their duties, even in defense of the
interests of those who elected them.
When considering any transaction with Related Parties, attention must be directed to the
essence of the transaction and not merely to its legal form.
5.
Forbidden Operations:
The following transactions with Related Parties are forbidden:
(a) those carried out in noncompliance with this policy in non-market conditions that
jeopardize the interests of the Company;
(b) participation of employees and managers in business matters of a private or personal
nature that interfere or conflict with the interests of the Company or result in the use of
confidential information obtained through exercise of a position or function within the
Company;
(c) those carried out to the detriment of the Company, favoring an affiliated, controlling or
subsidiary company, and transactions between such parties must obey strictly arm’s length
conditions; and
(d) granting of loans and guarantees to Controlling Shareholders and administrators.
Granting of loans and guarantees to a Related Party not covered in the prohibition of item (d)
above shall be subject to the approval of the Board of Directors, pursuant to item 6 below.
6.
Rules and procedures for contracting with Related Parties
The Board of Directors and the Officers Board, according to the authority levels applied must
ensure that transactions with Related Parties be formalized in writing. Whenever the required
conditions for approval of the Related Parties transaction are verified, the information shown
on the attached form (Attachment I – “FORM FOR CONTRACTING RELATED PARTIES”),
among others, must be sent to the Board.
Final version approved on January 27, 2016
All transactions or sets of related transactions with related parties involving a disbursement
by the Company of an amount equal to or exceeding one percent (1%) of the Company’s net
worth as registered in the last balance sheet approved by the shareholder’s Ordinary
General Meeting,
will comply with the following requirements and procedures for their
formalization:
(i)
the transaction must be previously approved by the Board of Directors, with favorable
vote of the simple majority of its members, excluding directors possibly in conflict of
interests; and
(ii)
if the simple majority of the Board of Directors members is prevented from voting a
particular related-party transaction, this related-party transaction may be executed
solely upon approval of the majority of the Board of Directors members not involved in
the transaction at issue.
The Officers Board must keep the Board of Directors and the Risk and Contingencies
Committee informed of Transactions with Related Parties, presenting each semester a list of
contracts that involve Related Parties, reporting on the status of the services provided.
Without prejudice to the actions of the Board of Directors and of the Risk and Contingencies
Committee, the Audit Board, following its rules of procedure, will monitor compliance with the
directives herein presented for situations of conflict of interest involving the Company.
7.
Rules and procedures for situations that involve conflict of interests
If shareholders or managers have interests that are in conflict with the interests of the
Company regarding matters to be discussed in session or at the general shareholders
meeting, they must timely announce their conflict or private interest, and declare that they
must abstain from discussions and decisions on the matter. If they do not do this, another
person who is present at the meeting may point out the conflict, which will be decided by
majority vote.
Pointing out a conflict of interest and the subsequent abstention must be entered in the
minutes.
8.
Disclosure of Transactions with Related Parties
The Company must ensure proper disclosure to the market of transactions between the
Company and its Related Parties with sufficient and complete information that allows
shareholders to supervise and monitor management acts of the Company.
Final version approved on January 27, 2016
Disclosure shall be carried out clearly and precisely, in the explanatory notes on Company
Financial Statements, with sufficient detail to allow identification of the Related Parties and
which were the essential conditions inherent to said transactions, in accordance with
Technical Announcement CPC 05, so as to allow shareholders to exercise the right of
supervision and monitoring of acts by Company management, without prejudice to the duty
of ensuring its broad disclosure to the market, when the transaction is a material fact or when
the Financial Statements are published.
It is also the Company’s duty to ensure disclosure of Transactions with Related Parties to the
market, pursuant to the Level 1 Listing Regulations of BM&FBOVESPA, especially as
concerns the additional requirements for Quarterly Information (ITR), and also pursuant to
CVM Instruction No. 480/2009, Attachment 24, that deals with the content of the Reference
Form.
Further, in compliance with Section 10(a) of the U.S. Securities Exchange Act of 1934, a
Company must disclose its information annually on SEC Form 20-F, which contains detailed
information on Company transactions involving Related Parties.
The Officers Board must ensure full and correct disclosure in the explanatory notes on the
Financial Statements and Quarterly Information, as well as on the Reference and Important
Facts Form, when a transaction is such that it comes under the applicable legislation.
9.
Controls
Each semester, the Key Management Personnel shall give the Company a list of societies
and people who qualify as Related Parties under the terms of this Policy, without prejudice to
the subsequent forwarding of cases considered to be matters of Conflict of Interest to the
Risk and Contingencies Committee. Any updating of the list must be communication to the
Company in up to ten days following the end of each quarter.
Notwithstanding the described procedures, Management may also adopt additional controls
in order to ensure identification of Related Parties.
In this context, among other measures, Key Management Personnel may periodically be
required to identify whether there are companies considered Related Parties among
Company suppliers, as provided in the applicable rules.
Final version approved on January 27, 2016
10.
Penalties
Any violation of the provisions of this policy will be submitted to the Risk and Contingencies
Committee, except for those cases in which the violation has been committed by a member
of the Company Board of Directors, when the matter must be analyzed by the Audit Board.
The competent body, as the case may be, shall determine whether to apply one of the
following penalties: warning, suspension, termination for cause of the employees involved,
termination or removal (or a recommendation for removal) of administrators, as applicable,
without prejudice to taking any applicable legal measures.
11.
Final Provisions
The adoption of this policy for transactions with Related Parties and situations involving
possible conflicts of interest of OI S.A. and its direct and indirect subsidiaries (hereinafter
referred to collectively as “Oi Companies” or, individually, as “Company”) was approved in a
meeting of the Board of Directors held on 09 December 2015, having been proposed by the
Officers Board of the Company, and any changes or revisions must be submitted to that
body.
This Policy is in compliance with the provisions of the Oi S/A Bylaws, applicable law, the
Code of Best Practices for Corporate Governance of the Brazilian Institute for Corporate
Governance and the Regulations of Level 1 Listing for Corporate Governance of BM&F
Bovespa S.A. – Commodities and Futures Market.
When they take office, members of the Board of Directors and Advisory Committees (if
applicable), as well as Executive Officers of the Company, must declare they are aware of
the terms of Oi’s policy for Related Parties and situations involving conflict of interest as well
as the definition, according to accounting rule CPC 05, of transactions with Related Parties
and their obligations regarding identifying and disclosing transactions with Related Parties,
and undertake to base their actions on compliance with these rules.
The current members of the Board of Directors and, if it applies, of the Advisory Committees
of the Company and its Executive Officers will sign a Letter of Acceptance when this policy is
approved.
Any omissions will be decided by the Board of Directors and/or by the Risk and
Contingencies Committee.
.
.
Final version approved on January 27, 2016
ATTACHMENT I
FORM FOR CONTRACTING RELATED PARTIES
FORM FOR CONTRACTING RELATED PARTIES
xx/xx/xxxx
Meeting of the Oi Board of Directors – Date: xx/xx/xxxx
PROPOSAL No. xxx/xxxx
Contracting Company:
Companies Being Contracted:
Relationship between the companies:
Purpose:
Object of the Contract:
Contracting Area:
Budget:
Contract Period:
DATA: xx/xx/xxxx
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Final version approved on January 27, 2016
Companies Participating in the Process:
Suppliers Invited for RFP
Related
Party
Proposals
Received
Technically
Approved
Technically
Rejected
Technical Evaluation:
Proposals Received:
Initial Proposal
(R$-MM)
Final Proposal
(R$-MM)
Final Comparison:
Amount of
Item
Proponent
Proposal
(R$-MM)
TOTAL per
Proponent
(R$-MM)
TOTAL
BUDGET
27. Recommendation: In view of the information provided in this Technical Note, we recommend
approval by the Board of Directors to contract with the companies xxxxxxxxxxxxxxxxxxxxxxxxxxx to
carry out the listed procedures, as they have presented the best commercial proposals and an
approved technical solution.
___________________________
Director N3
___________________________
Director N2