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Governance Practices and NYSE Recommendations

Corporate Governance

Corporate Governance is a competitive advantage and a strategic tool to create value, and is supported by two pillars: equal rights, by preserving the rights of its shareholders, and management transparency, and integrated communication with strategic audiences.

  Our relationship with investors and the market is based on transparency. We comply with all legal and regulatory requirements applicable to publicly-held companies whose securities are traded in Brazil and abroad.      

Banco Santander Brasil’s Governance structure comprises the Board of Executive Officers and its Executive Committee, which consists of the Chief Executive Officer, Senior Vice-President Executive Officers and Vice-President Executive Officers, and the Board of Directors and its Advisory Committees, namely: Audit, Risk and Compliance, Sustainability, Compensation, and Nomination and Governance.

Banco Santander Brasil is recognized by the market as a company with very advanced corporate governance practices and processes. We voluntarily commit to a strict set of governance practices that supplement those set forth by the prevailing legislation, and comply with specific requirements required only for companies listed in Level 1.  Among the corporate governance practices adopted by Banco Santander Brasil, we can highlight:

• Voting rights to preferred shares in certain situations;
• Assembly of operating rules, how to call, documentation, achievement and participation of shareholders;
• Provisions on the number of directors, mandate, renewal and dismissal, independence and technical qualifications, assumptions of replacing and vacancy, performance evaluation and adoption of internal rules;
• 20% of members of the Board of Directors must be Independent Member;
• No elections for alternate members;
• The Board of Directors has Advisory Committees, which have their own internal rules;
• Devices on the number of directors, mandate, technical qualifications, duties of directors individually and of the board, rules for replacing directors in absence cases both temporary as definitive;
• Tag along right (tag along), definition of controlling shareholder, arrangements for its public offering and preparation of the evaluation report;
• Arbitration clause; and

In addition, part of the list of good Banco Santander´s practices in line with the IBGC´s recommendations: 

• Adoption of the Code of Conduct; 
• Adoption of  Policy for Related-Party Transactions; • Convocation of General meetings with at least 30 days;
• Members of the Board of Directors enjoy free access to the information and facilities of the Bank;
• Integration program of new members;
• Annual assessment of Board members;
• Existence of governance secretariat to support the Board of Directors and Committees in the exercise of their activities; and
• Transparency in the public disclosure of the Board´s Annual Report.

For more information on the corporate governance practices adopted by Banco Santander Brasil, see section 12. Shareholders’ Meeting and Management of the Reference Form (in Portuguese only) and section 16.G. Corporate Governance of the 20-F Form, available on this website, in the Publications and Documents section - Reports.

Rights of Banco Santander's Common Shares, Preferred Shares and Units


Common and Preferred Shares
Each common share gives its holder the right to a vote at general meetings. In their turn, the preferred shares do not grant voting rights in our shareholders’ general meetings, except as related to the following matters:
• Change of corporate status, merger, consolidation or spin-off;
• Approval of agreements entered into between us and our controlling shareholder, directly or indirectly, and agreements with other companies in which our controlling shareholder has an interest, whenever the law or the By-Laws provide that they must be approved at a shareholders’ general meeting; and
• The appraisal of assets to be contributed to increase our capital stock.  

As regards the election of members of the board of directors, the Brazilian Corporate Law sets forth that, when members of the board of directors are elected, minority holders of shares in public companies holding a minimum of 15% of the total number of voting shares, or holders of preferred shares without voting rights, or with restricted voting rights, representing 10% of the capital stock, or holders of common and preferred shares who jointly represent at least 10% of the capital stock, have the right to elect one member of our board of directors in a separate vote. Nevertheless, these rights can only be exercised by the holders of shares that maintained their holding for at least three months before the date of the annual shareholders’ meeting. The Brazilian Corporate Law also permits a multiple vote procedure to be adopted, upon request by shareholders representing at least 10% of our voting capital. The securities regulation on multiple votes to elect members of the board of directors in public companies with capital stock exceeding R$100 million establishes the percentage needed to call for a multiple vote for this purpose in 5%.

The holders of preferred shares are entitled to the following rights according to our By-Laws:

• Right to receive dividends and interest on shareholders’ own equity in an amount 10% higher than those attributed to common shares, as well as priority in the distribution;
• Participation on equal terms with the common shares conditions, in capital increases arising from the capitalization of reserves and income, as well as in the distribution of bonus shares created by the capitalization of accrued income, reserves or any other resources;
• Priority in reimbursement of capital, without payment of premium, in the case of liquidation; and
• Right to be included in a public offering arising from the transfer of our control of the same price and on the same conditions as those offered to the controlling shareholder transferor, as defined in our By-Laws.

Common shares not belonging to the controlling shareholders also give their holders tag-along rights in the event that our control is transferred on the same terms and conditions as those granted to our controlling shareholders.

The shareholders’ general meeting may decide on conversion of the preferred shares into common shares.

The Brazilian Corporate Law sets forth that shares without voting rights or shares with restricted rights, including our preferred shares, shall be granted unrestricted voting rights if the company ceases to distribute, during three consecutive fiscal years, any fixed or minimum dividend granted to these shares, until the respective distributions are made.

According to our By-Laws, the dividends that are not claimed by shareholders within three years, from the beginning of their payment, shall prescribe to our benefit.

Under the Brazilian Corporate Law, any change in the preferences or that have an adverse financial effect on the rights of the holders of our preferred shares, or any change that results in the creation of a more favored class of preferred shares, must be approved by a resolution at a general shareholders’ meeting and will become valid and effective only after approval by a majority of our preferred shareholders in a shareholders’ meeting.

Brazilian Corporate Law also sets forth that the following shareholders’ rights cannot be repealed by our By-Laws or decisions made at shareholders’ meetings:

• the right to vote at general meetings, in the case of holders of common shares;
• the right to share in the distribution of dividends and interest on shareholders’ equity, and to share in the surplus assets in the event of our liquidation;
• preemptive rights in subscribing for shares or convertible securities in specific circumstances;
• the right to monitor the management; and
• the right of withdrawal in the circumstances established by law, including our consolidation, merger and spin-off.

Units
The Units are share deposit certificates, each representing 1 common share and 1 preferred share, all of them free and unencumbered. The shares represented by the Units shall be registered in a trust account as linked to the Units, and ownership can only be transferred by means of a transfer of the corresponding Units, upon written instructions from the holder. Earnings from the Units and the amount received in the case of redemption or repayment shall only be paid to the holder of the Units registered in our books in its role as custodian.

None of the shares underlying the Units, the earnings thereon or the corresponding redemption or repayment amounts may be pledged, encumbered or in any other way given in guarantee by the holder of the Units, nor may they be subject to attachment (penhora), seizure (arresto), impounding (sequestro), search and seizure (busca e apreensão), or to any other lien or encumbrance.

The Units are held by us, as the custodian, in book-entry form in an account opened in the holder’s name and the transfer of ownership is effected by debiting the seller’s Unit account and crediting the buyer’s Unit account according to a written transfer order issued by the seller or a court authorization or transfer order delivered to us. We will retain all the written transfer orders sent by the holders of the Units, as well as the court authorizations or transfer orders. Dividends, interest on shareholders’ equity and/or cash bonuses shall be paid to us and we shall then transfer the amount to the custody agents for payment to the Unit holders. The pledge, usufruct, right of succession, fiduciary transfer in guarantee and any other conditions, onus or encumbrances on the Units must be registered in the custodian’s records, as well as noted in the corresponding statement of account of Units.

We shall provide Unit holders with a statement of account at the end of each month in which there is movement and, even if there is no movement, at least once a year. The statement shall show the date and place of issue, the name and details of the holder of the Unit account, an indication that it is a statement of Unit account, details of the shares deposited, a statement that the shares deposited, their earnings and any amounts received in the event of redemption or repayment shall only be paid to the holder of the Unit account or to the holder’s order in writing, our charge for the deposit, if any, and the addresses where Unit holders may obtain assistance.

Upon a written order issued by the holder of the Unit account to a broker authorized by the stock exchange where the Units are traded, the custodian shall block the corresponding Units and transfer them to the buyer upon receipt of a communication from the stock exchange with confirmation of the sale. 

The Unit holder shall have the right, at any time, to instruct a broker to cancel Units and transfer the underlying shares. The broker must request to us, as agent, to transfer the Units to the share deposit accounts held by the custodian in the holder’s name. The Unit holder shall bear any transfer and cancellation costs involved. Similarly, the holder may instruct a broker to assemble Units by transferring the number of shares that jointly represent a Unit, which shall be registered by the custodian in a trust account linked to the Units.

The right to cancel Units may be suspended in the event of a public offering for distribution of Units, either in the domestic or the international market, in which case the suspension may not last longer than 180 days. Units subject to any lien or encumbrance may not be cancelled.
 

The following rules apply to the exercise of the rights granted to the shares represented by Units:

• Dividends and share redemption or repayment amounts delivered to us, as depository of the shares, shall be paid by us to the Unit holder;
• Only the Unit holder shall have the right to attend our general meetings and to exercise all of the prerogatives conferred on our shareholders by the shares represented by the Units;
• In the event of a stock split, cancellation or reverse stock split or new issuance of shares by us while the Units are in existence, the following rules will be observed:

(1) In the event there is a change in the number of shares represented by Units as a result of a reverse stock split or cancellation of shares, we will debit from the Unit accounts the number of cancelled shares of each Unit holder and proceed with the automatic cancelation of Units, observing the ratio of 1 common share and 1 preferred share issued by us to each Unit. We will deliver to the shareholders those shares that are insufficient to constitute a Unit in the form of shares, rather than Units; and

(2) In the event there is a change in the number of shares represented by the Units as a result of a stock split or new issuances of shares, the custodian will register the deposit of the new shares and issue new Units, registering them in the accounts of their respective holders, so as to reflect the new number of shares held by unit holders, maintaining a ratio of 1 common share and 1 preferred share issued by us and represented by Units, and will deliver to holders those shares that are insufficient to constitute a Unit in the form of shares rather than Units;

• In the event of a capital increase by means of the issue of shares that may be converted into new Units, Unit holders may exercise the preemption rights belonging to the shares represented by their Units. We shall create new Units in the register of book-entry Units and credit them to their holders so as to reflect the new number of common and preferred shares issued by us, subject to the current proportion of ordinary and preferred shares to constitute the Units. Shares that are too few to constitute a Unit shall be delivered to the shareholders as shares, rather than Units. There shall be no automatic credit of Units in the event of the exercise of preemption rights in the issue of securities other than shares; and

• Unit holders will be entitled to receive any shares issued as a result of our spin-off, consolidation or merger.

Anti-Money Laundering

Click here to access information on Anti-Money Laundering policies and procedures adopted by Banco Santander Brasil (portuguese only).

NYSE Recommendations

In addition to the national stock market rules and regulations, we are also subject to the NYSE corporate governance listing standards. As a foreign private issuer before the NYSE, the standards applicable to us are considerably different than the standards applied to U.S. listed companies. Under the NYSE rules, we are required only to: (i) have an audit committee or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below, (ii) provide prompt certification by our Chief Executive Officer of any material non-compliance with any applicable NYSE corporate governance rules (iii) submit an executed written affirmation annually to the NYSE and submit an interim written affirmation each time a change occurs to the board or any of the committees subject to Section 303A of the NYSE rules, and (iv) provide a brief description of the significant differences between our corporate governance practices and the NYSE corporate governance practice required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below, as required for foreign private issuers by NYSE Rule 303A.11.

Majority of Independent Directors
The NYSE rules require that a majority of the board must consist of independent directors. As a company with a majority of our voting shares being beneficially owned by another entity (Santander Spain), we are not required to comply with this rule. Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company. Currently, our board of directors must have at least five members, among which at least 20.0% must be independent, as determined pursuant to Article 14 of our By-Laws. Currently, five members of our board of directors are deemed independent (representing 55,56% of the composition of our Board of Directors). Also, Brazilian Corporate Law, the Brazilian Central Bank and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation, duties and responsibilities of, as well as the restrictions applicable to, a company's executive officers and directors. While we believe that these rules provide adequate assurances that our directors are independent and meet the requisite qualification requirements under Brazilian law, we believe such rules would permit us to have directors that would not otherwise pass the test for director independence established by the NYSE.

Brazilian Corporate Law requires that our directors shall be elected by our shareholders at an annual shareholders' meeting. Currently, all of our directors are elected by our shareholders after recommendation of the Nomination and Governance Committee, for a term of 2 years.

Executive Sessions
NYSE rules require that the non-management directors must meet at regularly scheduled executive sessions without management present. Brazilian Corporate Law does not have a similar provision. According to Brazilian Corporate Law, up to one-third of the members of the board of directors can be elected from management members. There is no requirement that our non-management directors meet regularly without management. As a result, the non-management directors on our board do not typically meet in executive session.

Committees
NYSE rules require that listed companies have a nominating/corporate governance committee and a remuneration committee composed entirely of independent directors and governed by a written charter addressing the committee's required purpose and detailing its required responsibilities. As a company whose majority of voting shares is held by another group, we are not required to comply with this rule. The responsibilities of the nominating/corporate governance committee include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company. The responsibilities of the remuneration committee, in turn, include, among other things, reviewing corporate goals relevant to the Chief Executive Officer's compensation, evaluating the Chief Executive Officer's performance, approving the Chief Executive Officer's compensation levels and recommending to the board non-chief executive officer compensation, incentive-compensation and equity-based plans.

In January 2016, our board of directors approved the terms for the establishment of our Nomination and Governance Committee. The Nomination and Governance Committee oversees corporate governance and compliance at Santander Brasil.

CMN rules require us to have a compensation committee of at least three members. We have created the compensation committee, whose function is to advise our board of directors on matters in connection with, but not limited to (i) fixed and variable remuneration policies and benefits and (ii) the long-term incentive plan.

Pursuant to Brazilian Corporate Law, the aggregate compensation for our directors and executive officers is established by our shareholders.

Audit Committee and Audit Committee Additional Requirements
NYSE rules require that listed companies have an audit committee that (i) is composed of a minimum of three independent directors who are all financially literate, (ii) meets the SEC rules regarding audit committees for listed companies, (iii) has at least one member who has accounting or financial management expertise and (iv) is governed by a written charter addressing the committee's required purpose and detailing its required responsibilities.
CMN rules require us to have an audit committee of at least three independent members. The audit committee is elected by the board of directors. SEC Rule 10A-3 provides that the listing of securities of foreign private issuers will be exempt from the audit committee requirements if the issuer meets certain requirements. Our audit committee allows us to meet the requirements set forth by this rule.

Shareholder Approval of Equity Compensation Plans
NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions. Under Brazilian Corporate Law, shareholders must approve all stock option plans. In addition, any issuance of new shares that exceeds our authorized share capital is subject to shareholder approval. Our shareholders do not have the opportunity to vote on all equity compensation plans.

Code of Business Conduct and Ethics
NYSE rules require that listed companies adopt and disclose a code of conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Applicable Brazilian law does not have a similar requirement. We adopted a Code of Ethical Conduct on February 27, 2009, last revised on September 28, 2016, which regulates the set of ethical principles that shall guide the conduct of our employees, officers and directors of Santander Brasil, as well as of its affiliates. Our Code of Ethical Conduct complies with the requirements of the Sarbanes-Oxley Act and the NYSE rules.

Internal Audit Function
NYSE rules require that listed companies maintain an internal audit function to provide management and the audit committee with ongoing assessments of the company's risk management processes and system of internal control.


Our internal audit department works independently to conduct methodologically structured examinations, analysis, surveys and fact finding to evaluate the integrity, adequacy, effectiveness, efficiency and economy of the information systems processes and internal controls related to our risk management. The internal audit department reports on an ongoing basis to the audit committee. In carrying out its duties, the internal audit department has access to all documents, records, systems, locations and professionals involved with the activities under review.

Governance Practices and NYSE Recommendations