Corporate Governance Practices and Novo Mercado

In 2000, Bovespa (now B3) introduced three special listing segments, known as Levels 1 and 2 of Differentiated Corporate Governance Practices and the New Market. The aim was to create a secondary market for securities issued by publicly traded Brazilian companies that follow better corporate governance practices.The listing segments are intended for the trading of shares issued by companies that voluntarily commit to comply with good corporate governance practices and higher disclosure requirements than those already imposed by Brazilian legislation. In general, such rules expand shareholders’ rights and improve the quality of information provided to shareholders.

To be listed on the Novo Mercado, in addition to the obligations imposed by current Brazilian law, an issuer must meet all of the following requirements:

– issue only common shares;

– grant tag-along rights to all shareholders in connection with a transfer of control of the company, the acquirer being required to hold a public offer for acquisition of the shares to the other shareholders, at the same price per share paid for the controlling block;

– ensure that shares of the issuer representing at least 25% of its total capital are effectively available for trading;

– adopt offering procedures that favor widespread ownership of shares whenever making a public offering;

– comply with minimum quarterly disclosure standards;

– follow stricter disclosure policies with respect to transactions made by controlling shareholders, directors and officers involving securities issued by the issuer;

– submit any existing shareholders´ agreements and stock option plans to the Bovespa;

– disclose a schedule of corporate events to the shareholders;

– have a board of directors comprised of at least five members with a term limited to one year;

– within two years after listing shares on the Novo Mercado, prepare annual financial statements in English, including cash flow statements, in accordance with international accounting standards, such as U.S. GAAP or International Financing Report Accounting Standards (IFRS);

– adhere exclusively adopt the rules of the arbitration regulation of B3, by which B3, the Company, the controlling shareholder, the administrators, and the members of the Company’s Fiscal Council, if established, commit to resolve any and all disputes or controversies related to the listing regulation through arbitration;

– hold public meetings with financial analysts and any other interested third parties at least once a year to present information regarding its financial and economic position, projects and prospects; and

– if a decision to delist from the Novo Mercado is made, the issuer´s controlling shareholder must launch a tender offer for the acquisition of all outstanding shares at a minimum price to be established based on an independent appraisal.

In 2024, B3 submitted to public consultation new proposals for the evolution of the Novo Mercado, including the requirement for a statutory audit committee and adjustments to the arbitration model, aimed at strengthening the corporate governance seal and increasing the segment’s attractiveness to investors.

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Regulation of the Brazilian Securities Market

The Brazilian securities markets are regulated by the CVM, which has regulatory authority over the stock exchanges and securities markets, by the National Monetary Council and by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions. The Brazilian securities markets are governed by the principal law governing the Brazilian securities markets, by the Brazilian Corporation Law, and by regulations issued by the CVM, the CMN and the Central Bank. These laws and regulations provide for, among other things, disclosure requirements, restrictions on insider trading and price manipulation and protection of minority shareholders. However, the Brazilian securities markets are not as highly regulated and supervised as U.S. securities markets.

Under the Brazilian Corporation Law, a company is either publicly held and listed, a “Companhia aberta”, or privately held and unlisted, a “Companhia fechada”. All listed companies are registered with the CVM and are subject to reporting and regulatory requirements. To be listed on the Bovespa, a company must apply for registration with the Bovespa and the CVM and is subject to regulatory requirements and information publishing requirements.

A company registered with the CVM may trade its securities either on the Brazilian exchange markets, including the Bovespa, or in the Brazilian over-the-counter market. Shares of companies listed on the Bovespa may not simultaneously trade on the Brazilian over-the-counter market. The shares of a listed company may also be traded privately, subject to several limitations.

The Brazilian over-the-counter market, whether or not organized, consists of trades between investors through a financial institution registered with the CVM, and authorized to trade in the Brazilian capital market. No special application, other than registration with the CVM, is necessary for securities of a public company to be traded in the non-organized over-the-counter market. The CVM must receive notice of all trades carried out in the Brazilian over-the-counter market by the respective intermediaries.

The trading of securities on the Bovespa may be suspended at the request of a company in anticipation of a material announcement. Trading may also be suspended on the initiative of the Bovespa or the CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or the Bovespa.

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Disclosure and Use of Information

Pursuant to CVM Rule # 358, of January 3, 2002, the CVM revised and consolidated the requirements regarding the disclosure and use of information related to material facts and acts of publicly held companies, including the disclosure of information in the trading and acquisition of securities issued by publicly held companies.

Such requirements include provisions that:

– establish the concept of a material fact that gives rise to reporting requirements. Material facts includecisions made by the controlling shareholders, resolutions of the general meeting of shareholders and of management of the Company, or any other facts related to the Company’s business (whether occurring within the Company or otherwise somehow related thereto) that may influence the price of its publicly traded securities, or the decision of investors to trade such securities or to exercise any of such securities’ underlying rights;

– specify examples of facts that are considered to be material, which include, among others, the execution of shareholders’ agreements providing for the transfer of control, the entry or withdrawal of shareholders that maintain any managing, financial, technological or administrative function with or contribution to the Company, and any corporate restructuring undertaken among related companies;

– oblige the officer of investor relations, controlling shareholders, other executive officers, members of its board of directors, members of the audit committee and other advisory boards to disclose material facts;

– require simultaneous disclosure of material facts to all markets in which the corporation’s securities are admitted for trading;

– require the acquirer of a controlling stake in a corporation to publish material facts, including its intentions as to whether or not to de-list the corporation’s shares, within one year;

– establish rules regarding disclosure requirements in the acquisition and disposal of a material stockholding stake; and

– restrict the use of insider information.

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Investment in SYN’s common shares by non-residents of Brazil

Investors residing outside Brazil, including institutional investors, are authorized to purchase equity instruments, including SYN’s common shares, on Bovespa provided that they comply with the registration requirements set forth in Resolution No. 2,689 of the National Monetary Council, which the Company refers to as Resolution 2,689, and CVM Instruction No. 325.

With certain limited exceptions, under Resolution 2,689 investors are permitted to carry out any type of transaction in the Brazilian financial capital market involving a security traded on a stock exchange, futures exchange or organized over-the-counter market. Investments and remittances outside Brazil of gains, dividends, profits or other payments under SYN’s common shares are made through the new unified exchange rate market.

In order to become a Resolution 2,689 investor, an investor residing outside Brazil must:

  • appoint a representative in Brazil with powers to take actions relating to the investment;
  • appoint an authorized custodian in Brazil for the investments, which must be a financial institution duly authorized by the Central Bank and CVM; and
  • through its representative, register itself as a foreign investor with the CVM and the investment with the Central Bank.

Securities and other financial assets held by foreign investors pursuant to Resolution 2,689 must be registered or maintained in deposit accounts or in the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading by foreign investors is generally restricted to transactions involving securities listed on the Brazilian stock exchanges or traded in organized over-the-counter markets licensed by the CVM.

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Rights of SYN’s common shares

Each share in the Company grants the respective holder the right to a vote at the annual and extraordinary general meetings of the Company. Pursuant to the Company’s Bylaws and the Regulations of the Novo Mercado listing segment, SYN may not issue shares that do not grant holders the right to vote or that restrict voting rights in any way.

Furthermore, pursuant to the Company’s Bylaws and to Brazilian Corporate Law, holders of shares in SYN have the right to receive dividends or other distributions carried out related to the shares, in the proportion of their interests in the Company’s total capital stock.

In the case of the winding-up of the Company, holders of the common shares have the right to receive capital, in the proportion of the shares held, following the fulfillment of all of the obligations of SYN. Shareholders also hold the right of first-refusal in any subscription of new common shares issued by the Company, except in specific situations provided for by Brazilian Corporate Law.

Pursuant to Brazilian Corporate Law, the Bylaws of SYN and the resolutions adopted by the Company’s shareholders at the general meetings of shareholders may not deny shareholders any of the following rights:

  • the right to participate in the distribution of profits;
  • the right to participate, in the proportion of the shareholder’s interest in the capital stock of SYN, in the distribution of any remaining assets in the event of the winding-up of the Company;
  • the right of first refusal in the subscription of shares, debentures convertible into shares or warrants, except in certain circumstances provided for by Brazilian Corporate Law;
  • the right to oversee, as provided for by Brazilian Corporate Law, the management of the company’s business; and
  • the right to withdraw from the Company in the cases provided for by Brazilian Corporate Law.

Regulation of the Brazilian Capital Markets


The Brazilian securities market is regulated by the CVM (Brazilian Securities and Exchange Commission), which has the authority to supervise and issue general rules regarding the disciplinary power and administration of stock exchanges and financial institutions registered with the CVM, which are part of the Brazilian securities market, as well as by the CMN (National Monetary Council) and BACEN (Central Bank of Brazil), which, among other powers, are responsible for authorizing the incorporation and operation of securities brokerage firms and regulating foreign investments and foreign exchange transactions.

The Brazilian securities market is regulated by the Securities Market Law, the Corporations Law, and regulations issued by the CVM, CMN, and BACEN. These laws and regulations, among other provisions, establish disclosure requirements, restrictions on trading securities based on insider information and price manipulation, and the protection of minority shareholders. However, the Brazilian securities market does not have the same level of regulation and supervision as the U.S. securities markets.

According to the Corporations Law, a corporation is classified as publicly held if its securities are admitted for trading in the Brazilian securities market, or closely held if its securities are not publicly traded in the Brazilian securities market. All publicly held companies must be registered with the CVM and are subject to regulatory and disclosure requirements.

A company registered with the CVM may trade its securities on B3 or in the Brazilian over-the-counter (OTC) market. Registration with both B3 and the CVM is required for a company to have its shares listed on B3. Shares of companies listed on B3 cannot be simultaneously traded in the Brazilian OTC market. Shares of a company listed on B3 may also be traded in private transactions, subject to various restrictions.

The Brazilian OTC market, whether organized or not, consists of trading between investors through a financial institution authorized to operate in the Brazilian capital markets and registered with the CVM. No special request, other than registration with the CVM, is required for trading the securities of a publicly held company in the unorganized OTC market. The CVM requires the respective intermediaries to notify it of all trades carried out in the Brazilian OTC market.

Trading of securities on B3 may be halted at the request of the issuing company prior to the publication of a material fact. Trading may also be suspended by initiative of B3 or the CVM, based on or due to, among other reasons, indications that the company has provided inadequate information regarding a material fact or has given insufficient responses to inquiries made by the CVM or B3.

Disclosure and Use of Information


CVM Instruction No. 358 (replaced in 2021 by CVM Resolution No. 44) regulates the disclosure and use of information about material acts or facts relating to publicly held companies, providing the following:

  • establishes the concept of a material fact, which includes any decision by the controlling shareholder, resolution of a general shareholders’ meeting or of the management bodies of a publicly held company, or any other act or fact of political-administrative, technical, business, or economic-financial nature that occurs or is related to the company’s business, which may have a significant influence on: (i) the price of securities; (ii) investors’ decisions to buy, sell, or hold such securities; and (iii) investors’ decisions to exercise any rights inherent to the ownership of securities issued by the company;

  • provides examples of potentially material acts or facts, including, among others, the execution of an agreement or contract for the transfer of the company’s control, the entry or withdrawal of a shareholder who maintains with the company an operational, financial, technological, or administrative contract or partnership, mergers, spin-offs, or incorporations involving the company or related entities;

  • obliges the Investor Relations Officer, controlling shareholders, executive officers, members of the fiscal council, and any technical or advisory bodies to report any material fact to the CVM;

  • requires the simultaneous disclosure of a material fact in all markets where the company’s shares are listed for trading;

  • obliges the acquirer of control of a publicly held company to disclose a material fact, including its intention to delist the company within one year of the acquisition;

  • establishes rules regarding the disclosure of the acquisition or disposal of a relevant equity interest in a publicly held company; and

  • restricts the use of insider information.