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Governance Information

Corporate Governance Practices and Novo Mercado

In 2000, B3 (formerly Bovespa) introduced three special listing segments: Levels 1 and 2 of Differentiated Corporate Governance Practices and Novo Mercado. These segments aim to create a secondary market for securities issued by Brazilian public companies that adopt sound corporate governance practices, enhancing shareholder rights and improving the quality of disclosed information.

Novo Mercado is the highest governance level, intended for companies that voluntarily undertake commitments beyond those required by Brazilian law. The rules increase minority shareholder protections and promote greater transparency.

Main Novo Mercado Requirements

In addition to legal requirements, companies listed on Novo Mercado must comply with the following:

  • Issue only common shares (with voting rights);

  • Tag along: Provide all shareholders with the right to sell shares at the same price offered to controlling shareholders in the event of a change of control;

  • Maintain a minimum free float of 25% of total capital, unless otherwise approved by B3;

  • Promote shareholder dispersion in public offerings;

  • Disclose quarterly financial information per B3 standards;

  • Adopt stricter disclosure policies for trading by controlling shareholders, board members, and executives;

  • Submit shareholders’ agreements and stock option plans to B3;

  • Publish an annual corporate events calendar;

  • Limit board terms to two years, with reelection permitted, and ensure at least two or 20% of members (whichever is greater) are independent;

  • Prepare annual financial statements according to international accounting standards (IFRS);

  • Use B3’s arbitration rules exclusively to resolve listing-related disputes;

  • Hold at least one annual public meeting with analysts and stakeholders;

  • Conduct a tender offer in case of delisting from Novo Mercado, based on the company’s economic value assessed by an independent appraiser.

Rights of HBR Realty Common Shares

HBR Realty’s common shares grant their holders the following rights:

Each common share entitles its holder to one vote at Ordinary and Extraordinary General Meetings. Under Novo Mercado regulations, HBR Realty cannot issue shares with no or restricted voting rights.

Additionally, as per the Bylaws and Brazilian Corporate Law (Law No. 6,404/76), holders are entitled to receive dividends or other distributions in proportion to their ownership.

In the event of the Company’s liquidation, shareholders are entitled to proportional reimbursement of capital after all obligations are settled. Shareholders also have preemptive rights in future capital increases, although they are not obligated to subscribe.

Rights Guaranteed by the Brazilian Corporate Law

The Corporate Law, HBR Realty’s Bylaws, and shareholder resolutions cannot deprive shareholders of the following fundamental rights:

  • Participation in profit distribution;

  • Proportional participation in the distribution of remaining assets in case of liquidation;

  • Preemptive rights in subscribing to new shares, convertible debentures, or subscription warrants, unless legally exempted;

  • Oversight of management as permitted by law;

  • Right to withdraw under specific legal conditions.

Brazilian Capital Market Regulation

The Brazilian securities market is regulated by three main entities:

  • 1. CVM (Securities and Exchange Commission of Brazil) – Supervises and issues rules for exchanges and registered market participants.
  • 2. CMN (National Monetary Council) – Defines general guidelines for the financial system.
  • 3. BACEN (Central Bank of Brazil) – Regulates foreign exchange and investment operations, and authorizes brokerages.

Regulation is based on the Securities Market Law (Law No. 6,385/76), the Corporate Law (Law No. 6,404/76), and rules issued by CVM, CMN, and BACEN. The rules cover:

  • Disclosure obligations;
  • Prohibition of insider trading and price manipulation;
  • Minority shareholder protection.

Despite being comprehensive, Brazil’s market oversight is not as stringent as in the U.S.

Classification of Corporations

Under Corporate Law, a corporation may be:

  • Public: Its securities are traded on public markets.
  • Private: Its securities are not publicly traded.

Public companies must register with the CVM and comply with disclosure requirements.

Trading of Securities

A company registered with the CVM may trade its securities:

  • On B3: Registration with both CVM and B3 is required. Securities listed on B3 cannot be traded on the OTC market.
  • In the Brazilian OTC market: Trades are conducted via authorized institutions. OTC markets may be organized or not, and trades require CVM registration only.

The CVM mandates that intermediaries report all OTC trades.

Suspension of Trading

Trading on B3 may be suspended:

  • By request of the issuer, prior to disclosing a material fact;
  • By B3 or CVM, in cases of:
    • Suspected misinformation regarding a material fact;
    • Unsatisfactory responses to CVM or B3 inquiries.

Disclosure and Use of Information – CVM Resolution 44

CVM Resolution 44 regulates the disclosure and use of material information related to public companies, including:

  • Definition of a Material Fact: Any decision by controlling shareholders, board or management resolutions, or political, administrative, technical, business, or financial developments that may significantly affect:

    • 1. The price of the company’s securities;
    • 2. Investor decisions to buy, sell, or hold securities;
    • 3. The exercise of investor rights.

  • Examples include:

    • 1. Signing agreements involving transfer of control;
    • 2. Entry or exit of strategic partners;
    • 3. Mergers, acquisitions, or spin-offs.

  • Mandatory Communication: The Investor Relations Officer, controlling shareholders, executives, fiscal council members, and advisory board members must disclose material facts to the CVM and the market simultaneously.

  • Simultaneous Disclosure: Disclosure must occur at the same time in all markets where the company’s securities are listed.

  • Acquisition of Control: Buyers of control must disclose a material fact and their intention to cancel public registration, if applicable, within one year.

  • Relevant Shareholdings: Rules govern the disclosure of material acquisitions or divestitures of shareholdings as per regulatory thresholds.

  • Insider Trading Prohibition: Use of undisclosed information to gain undue advantage in securities trading is prohibited.

Arbitration Chamber

According to Article 51 of the Bylaws, the Company, its shareholders, executives, and fiscal council members must settle disputes via arbitration before the Market Arbitration Chamber.

The arbitration will be conducted per its regulations and cover disputes involving the status of issuer, shareholder, executive, or fiscal council member, especially those arising from:

  • Law No. 6,385/76 and the Corporate Law;
  • The Company’s Bylaws;
  • Rules issued by CMN, BACEN, and CVM;
  • Other capital market regulations;
  • Novo Mercado and B3 listing rules and participation agreements.