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10/19/2012

Overview

In 2000, the BM&FBOVESPA introduced three special listing segments, known as Levels 1 and 2 of the Differentiated Corporate Governance Practices and the Novo Mercado, aimed at fostering a secondary market for securities issued by Brazilian companies with securities listed on the BM&FBOVESPA, by prompting these companies to follow good practices of corporate governance. The listing segments were designed for the trading of shares issued by companies voluntarily undertaking to abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law. These rules generally increase shareholders’ rights and enhance the quality of information provided to shareholders.

Listing within the Novo Mercado segment of the BM&FBOVESPA is accomplished through the execution of agreements between the company, directors, officers, controlling shareholders and BM&FBOVESPA to reinforce the company’s commitment with the good practices of corporate governance, in addition to the modification of the company’s bylaws in conformity with Novo Mercado regulations. These regulations generally increase the transparency of the company in relation to its activities and financial condition and grant greater power to minority shareholders to participate in the company, among other measures.

The following is a summary of the principal requirements of the Novo Mercado applicable to Sonae Sierra Brasil:

  • Capital stock should exclusively comprise of common shares;
  • Public float of shares should represent at least 25.0% of the capital stock;
  • In the event of a transfer of control, even if through a series of successive sales, the transfer should be subject to the minority shareholders being granted the same conditions offered to the controlling shareholders, including the same price (tag along) through a tender offer for the acquisition of shares;
  • The board of directors should comprise at least five members, of which at least 20.0% should be independent directors elected during the shareholders’ meeting for a term of up to two years, subject to reelection, except for a single term of three years in the event control of the company is no longer centralized;
  • A statement of cash flow (both of the company’s and consolidated subsidiaries, if any) must be included in the quarterly financial reports and annual financial statements;
  • In view of the preparation of financial statements in observation of international standards and the process of convergence of the Brazilian rules, certain topics have been subject to discussions concerning its practical implementation, which caused certain companies listed in Novo Mercado and Level 2 to request to BM&FBovespa the postponement of the final terms for submission of its financial statements in international standards, in addition to the discharge of application of certain items of IFRS. Considering the aspects indicated above and in order to allow companies listed in Novo Mercado and Level 2 that have not disclosed its financial statements pursuant to international standards or with the reconciliation of the shareholders’ interest and net earnings for these standards to benefit of the final processes for application of a group of local regulations converging to the international IFRS standards, BM&FBovespa, pursuant to item 6.9 of the Regulations, enacted an external communication (comunicado), dated November 16, 2009, informing that such companies are dismissed from the obligation to disclose its financial statements of 2009 in observation of the international standards, provided that, in essence or form, such data shall be presented in a comparative manner in the financial statements of 2010, considering that CVM’s Ruling (Instrução) No. 457 determined that as of the end of the fiscal year of 2010 public companies shall disclose its consolidated financial statements in observation of the international standards IFRS. However, the requirement of presentation of financial statements in English has been maintained;
  • A schedule of corporate events disclosed each year prior to the end of January;
  • Delisting from the Novo Mercado, as well as the decision to cancel the registration as a public company, should be subject to the controlling shareholders (or the company, in the event of the cancellation of the company’s registration as a public company) making a public tender offer for the acquisition of all of the outstanding shares of the company at a minimum price of the economic value of the shares; and
  • The company, directors, executive officers and shareholders should adhere to the Regulations of the Market Arbitration Chamber as a means to solve any dispute or controversies that may arise amongst them.