Governance Model


In 2000, the BOVESPA introduced three special listing segments, known as Level 1 and 2 of Differentiated Corporate Governance Practices and the Novo Mercado (New Market), aiming to foster a secondary market for securities issued by Brazilian companies, by prompting such companies to adopt good corporate governance practices. The listing segments were designed for the trading of shares issued by companies voluntarily undertaking to abide by certain corporate governance standards 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.

Direcional is listed on the Novo Mercado of BM&FBOVESPA. The rules of Novo Mercado require, in addition to the obligations imposed by current Brazilian legislation, an issuer must meet all of the following requirements:

  • Equity capital of Direcional consists solely of 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 tender offer to acquire the shares of the other shareholders, at the same price per share paid for the controlling block;
  • Ensure that shares representing at least 25% of the company’s total capital are effectively available for trading;
  • Adopt offering procedures that favor widespread share ownership;
  • Comply with minimum quarterly disclosure standards;
  • Follow stricter disclosure policies with respect to transactions by controlling shareholders, directors and officers involving the company’s securities;
  • Submit any existing shareholders’ agreements and stock option plans to the BOVESPA;
  • Disclose a corporate events schedule to the shareholders;
  • All members of the board of directors have a term limited in 2 years and it can be re-elected;
  • Board of Directors comprising at least five members, which at least 20% of them must be independent;
  • 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 practices, such as U.S. GAAP or International Financing Reporting Standards (IFRS);
  • Adhere exclusively to the arbitration rules of the BOVESPA, pursuant to which the BOVESPA, the company, the controlling shareholders, management and members of the Fiscal Council, if any, agree to resolve by arbitration any dispute or controversy related to the Novo Mercado listing rules;
  • Hold public meetings with financial analysts and any other interested third parties at least once a year to present information regarding the company’s financial and economic situation, projects and prospects; and
  • If a decision to delist from the Novo Mercado is made, the company’s controlling shareholder must launch a tender offer for the acquisition of all outstanding shares at a minimum price to be established by an independent appraisal.

Direcional’s capital stock consists of nominal common shares without par value only. Pursuant to its By-Laws, the holder of each common share has the right to one vote in each shareholders’ meeting. Except as provided for in the Brazilian Corporation Law, holders of the Company’s common shares have preemptive rights in connection with capital increases, proportionally to their holdings.

Holders of Direcional’s common shares are entitled to dividends and other distributions. Under the rules and regulations of the Novo Mercado, the Company’s common shares have the right to be included in a public tender offer of shares in case of sale of its control, at the same terms and conditions offered to the shares of its controlling shareholders.

Under the Brazilian Corporation Law, neither Direcional’s By-Laws nor actions taken at a shareholders‘ meeting may deprive any of its shareholders of certain rights, including:

  • the right to participate in the distribution of profits;
  • the right to participate in any remaining residual assets in the event of Direcional’s liquidation, in proportion to their respective interests in its share capital;
  • the right to supervise the management of its business, as specified in the Brazilian Corporation Law;
  • preemptive rights in the subscription of its common shares, debentures convertible into its common shares or warrants, except under circumstances specified in the Brazilian Corporation Law; and
  • right of withdrawal in the cases set forth under Brazilian Corporation Law.

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 BM&FBOVESPA, a company must apply for registration with the BM&FBOVESPA 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 BM&FBOVESPA, or in the Brazilian over-the-counter market. Shares of companies listed on the BM&FBOVESPA 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 BM&FBOVESPA 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 BM&FBOVESPA 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 BM&FBOVESPA.


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 include decisions 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.

Investors residing outside Brazil, including institutional investors, are authorized to purchase equity instruments, including Direcional’s common shares, on BM&FBOVESPA 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 Direcional’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.

Direcional structured an Investor Relations Department designed to meet the shareholders, investors and market regulators, as well as serve as a communication channel between the company and several stakeholders in its activities.