The SEC approved in November 2003 the new corporate governance rules established by the NYSE. According to these rules, foreign private issuers that are listed on the NYSE must disclose the significant differences between their corporate governance practices and those required by the NYSE’s regulations for U.S. companies.
In Brazil, the CVM has provided guidance to the market with a set of recommendations on differentiated corporate governance practices which are not required but recommended. Additionally, the B3 S.A. – Brasil, Bolsa, Balcão (“B3”) and the IBGC-Brazilian Institute of Corporate Governance have developed guidelines to for corporate governance best practices. On November 16, 2016, the Brazilian Corporate Governance Code, which provides guidelines for the practice of corporate governance by public companies, was launched by an institution composed of several other entities, such as ABRAPP, ABRASCA, ANBIMA, ABVCAP, AMEC, APIMEC, B3, BRAIN, IBGC, IBRI and IBMEC Institute, after the contribution and comments made by the CVM. On June 8, 2017, the CVM issued Instruction 586, which amended Instruction 480, obliging publicly-held companies to disclose the Report on the Brazilian Code of Corporate Governance, in which companies must report on the adoption of the governance practices set forth in the Brazilian Code of Corporate Governance. Click here to access the Report on the Brazilian Corporate Governance Code of Ambev.
The principal differences between the NYSE corporate governance standards and our corporate governance practices are as follows:
a) Independence of Directors and Independence Tests
NYSE corporate governance standards require listed companies to have a majority of independent directors and set forth the principles by which a listed company can determine whether a director is independent. “Controlled companies” such as Ambev need not comply with this requirement.
The Brazilian Corporate Law requires that our directors be elected by our shareholders at a general shareholders’ meeting, cumulative voting being applicable if requested by 5% of the common shareholders. Moreover, provided certain statutory thresholds are met, the Brazilian Corporate Law grants common shareholders and/or preferred shareholders the right to elect a director if they so require in the general shareholders’ meeting called for the election of the Board of Directors. Currently, all of our directors are appointed by our controlling shareholders; minority shareholders are represented through one effective member (and respective alternate) in our ‘Conselho Fiscal‘.
The Brazilian Corporate Law and the CVM establish rules in relation to certain qualification requirements and restrictions, compensation, duties and responsibilities of a company’s executives and directors.
b) Executive Sessions
NYSE corporate governance standards require non-management directors of a listed company to meet at regularly scheduled executive sessions without management.
According to the Brazilian Corporate Law, up to one-third of the members of the Board of Directors can also hold management positions. However, none of our directors holds a management position at this time and, accordingly, we believe we would be in compliance with this NYSE corporate governance standard.
c) Nominating/Corporate Governance and Compensation Committees
NYSE corporate governance standards require that a listed company have a nominating/corporate governance committee and a compensation committee each composed entirely of independent directors with a written charter that addresses certain duties. “Controlled companies” such as Ambev need not comply with this requirement.
In addition, we are not required under the Brazilian Corporate Law to have, and accordingly we do not have, a nominating committee or corporate governance committee. According to the Brazilian Corporate Law, Board committees may not have any specific authority or mandate since the role of the full Board of Directors may not be delegated. The role of the corporate governance committee is generally performed by either our Board of Directors or our executive officers.
d) Audit Committee and Audit Committee Additional Requirements
NYSE corporate governance standards require that a listed company have an audit committee composed of a minimum of three independent members that satisfy the independence requirements of Rule 10A-3 under the Exchange Act, with a written charter that addresses certain duties.
We maintain a permanent ‘Conselho Fiscal’, which is a body contemplated by the Brazilian Corporate Law that operates independently from our Management and from our registered independent public accounting firm. Its principal function is to examine the annual and quarterly financial statements and provide a formal report to our shareholders. We are relying on the exemption provided by Rule 10A-3(c)(3) and believe that our reliance on this exemption will not materially affect the ability of the ‘Conselho Fiscal’ to act independently and to satisfy the other requirements of Rule 10A-3.
e) Shareholder Approval of Equity Compensation Plans
NYSE corporate governance standards require that shareholders of a listed company must be given the opportunity to vote on all equity compensation plans and material revisions thereto, subject to certain exceptions.
Our existing stock ownership plan was amended and restated by the general shareholders’ meeting held on April 28, 2010.
f) Corporate Governance Guidelines
NYSE corporate governance standards require that a listed company must adopt and disclose corporate governance guidelines that address certain minimum specified standards, which include, director qualification standards, director responsibilities, director access to management and independent advisors, director compensation, director orientation and continuing education, management succession and annual performance evaluation of the Board.
We believe the corporate governance guidelines applicable to us under the Brazilian Corporate Law are consistent with the guidelines established by the NYSE. We have adopted and observe our Manual on Disclosure and Use of Information and Policies for Trading with Securities issued by Ambev which deals with the public disclosure of all relevant information as per CVM’s guidelines, as well as with rules relating to transactions involving the dealing by our Management and controlling shareholders in our securities.
g) Code of Business Conduct
NYSE corporate governance standards require that a listed company must adopt and disclose a code of business conduct and ethics for directors, officers and employees and promptly disclose any waivers of the code for directors or officers.
We have adopted a Code of Business Conduct that applies to all directors, officers and employees. There are no waivers to our Code of Business Conduct.
h) Certification Requirements
NYSE corporate governance standards require that each listed company’s chief executive officer certify to the NYSE each year that he or she is not aware of any violation by the company of the NYSE corporate governance standards.
As required by Section 303A.12(b) of the NYSE corporate governance standards, our Chief Executive Officer will promptly notify the NYSE in writing after our executive officer becomes aware of any material non-compliance with any applicable provisions of the NYSE corporate governance standards.
