In maintenance of Generation, there
were major impacts attributed to Covid-19, affecting the level of investments, such as delays in the delivery of equipment and
delays in bidding processes.
SPE’s - standstill programs
offered by financial institutions have improved the SPEs’ cash position, reducing the need for investments, totaling BRL
650 million by Eletrobras Companies. Furnas made investments in Holding Brasil Ventos for a total of BRL 22 million (23% of the
total budget) to meet SPE costs and expenses and in the subsidiaries Baleia and Punaú, to cover the reimbursement of studies
and, in Itaguaçu da Bahia, to Aneel’s penalty payment connected to energy outsourcing. SINOP and ESBR – Jirau
did not demand disbursements, previously estimated at BRL 202 million due to the adhesion to the standstill. Teles Pires also joined
the standstill but received disbursements totaling BRL 29 million to cover the deficit (payment of debentures). With the sale of
the Campos Neutrais Wind Complex by the Holding, the expected total investments of BRL 91 million were not necessary.
Investments in Expansion, Reinforcements
and Improvements accounted for 62% of Corporate Investment in the segment.
The divestments in the Transmission
segment, including maintenance, were a result of Covid-19, due to supplier delays, in addition to problems with labor, preventive
measures, bidding processes owing to high exchange rates, and obtaining environmental licenses. There were also delays and absences
from Aneel authorizations, delays in bidding processes, optimization of costs resulting in less disbursement, and commissioning,
among others.
Our investments
in affiliated and controlled companies are listed in note 20 to the 2020 Consolidated financial statements.
On August 1, 2020, Eletrobras released
its 2020-2035 Strategic Plan to the market, where Sustainability is the premise that governs the Company’s guidelines, strategies
and processes, and its entire business-making.
The Company’s current position,
different from the previous Strategic Plan, due to the agility with which changes are taking place in the most diverse spheres:
social, environmental, conjunctural, structural; with a strong tendency to decarbonization; diversification of sources; increase
in distributed generation; technological disruption; accelerated scanning; the way in which Brazil will evolve socioeconomically;
and, consequently, the evolution of the demand for electricity. These and other trends in the electricity industry have led to
adjustments in the way the company should operate, which has resulted in such new positioning.
The
new 2020-2035 Strategic Plan, in addition to defining a new corporate identity ─ Purpose, Vision and Values ─,
establishes a set of guidelines and objectives aimed at the growth and streamlining of Eletrobras and in line with the new trends
in the energy industry.
The
figure below presents the strategic transformation challenge that Eletrobras proposes in this period:
The Strategic Plan is unfolded
in the Business and Management Steering Plan (PDNG), updated annually, with a five-year horizon. In December 2020, 2021-2025 PDNG
was approved by the Board of Directors, which is a natural update of the 2020-2024 PDNG.
Among the main initiatives developed to achieve the goals established
in 2020-2024 PDNG, we highlight the following main achievements:
Similarly to 2020-2035 PE, 2021-2025
PDNG establishes guidelines and objectives on relevant topics for the company to overcome market challenges.
2021-2025 PDNG unfolds the Strategic
Guidelines into Strategic Objectives to which efforts that will be developed over the period, to accomplish the Plan, are linked.
All Strategic Guidelines are associated with indicators with
goals established to be achieved year by year, covering the period of the Plan.
The investment forecast for the
2021-2025 PDNG period totals more than BRL 41 billion, segmented as follows:
Corporate investments in the Generation
and Transmission segments total BRL 39.1 billion for the 5-year period, of which 72.1% are expected to be made with own resources
and 28.1% with Third Party Resources, as shown below:
Considering the entire period covered by the
2020-2035 Strategic Plan, the total investment in expansion of Generation and Transmission in the scenario without capitalization
is BRL 95.3 billion and BRL 201.9 billion, considering the capitalization scenario.
Eletrobras System, on December 31,
2020, consisted of the Holding and seven subsidiaries, six of which were operational, 50% of the interest of Itaipu Nacional, the
Electric Energy Research Center (Cepel) and the company of Participações Eletropar. Eletrobras also has an equity
interest in 94 Special Purpose Entities (SPE’s) in Brazil ― being 69 generation SPE’s, 20 transmission SPE’s,
and three service SPE’s ―; two power generation plants abroad ― Rouar and Inambari ―; and 25 affiliate
companies.
In accordance with the guidelines of its strategic
planning, Eletrobras has sought, in recent years, to rationalize the shareholdings portfolio. In December 2016, the company held
interest in 178 SPEs. Since then, 11 SPE’s have been closed; there was merger of 20; there was reduction of two (02), by
means of an exchange with a member; and there was sale of 51 SPE’s, yielding more than BRL 2.2 billion for the Company’s
cash. Among these operations, 42 took place in 2020. With this, Eletrobras ended the fiscal year 2020 with a total of 94 SPE’s,
that is, a decrease of 84 SPEs compared to December 2016.
The SPE Rationalization Project will continue
with the 2021-2025 Business and Management Steering Plan (PDNG), as it is a strategic and priority project. Out of the 94 SPE’s,
15 are in process of reversal of cross ownership for subsequent merger; one (01) in sale process; 14 in merger process, and 15
in closing process. Out of the 14 SPE’s in the process of being merged, Eletrobras already has a 100% interest in 12 ―
11 of the Pindaí I, II and III Complexes and TGO ― and in the other two, the takeover process depends on submitting
member’s proposals for appraisal of Eletrobras. With such operations, the Company expects to reduce another 45 companies
in 2021, ending the year with 49 SPE’s.
The merger of Eletrosul by CGTEE, resulting
in the subsidiary Companhia de Geração e Transmissão de Energia Eletrica do Sul do Brasil (CGT Eletrosul),
was concluded on 01/02/20.
Eletrobras sold and transferred one (01) Amazonas
Energia D common share, which was residual as a result of the privatization process, to the Juruá Consortium, and is no
longer part of the distribution company’s corporate structure.
The totality of shares held by Eletrobras in
SPE Companhia de Transmissão Centroeste de Minas S.A., accounting for 49% of the total capital stock, was sold to Cemig.
The increase in Eletrobras’ capital stock,
in the amount of BRL 7,751.9 million, was ratified by the issuance of 201,792,299 new common shares and 14,504,511 new class B
preferred shares, which were subscribed and paid up, under the terms of the Company’s Special Shareholders’ Meeting
held in November 2019. The Company’s capital stock is now BRL 39,057,271,546.52. The operation was carried out through the
payment of BRL 4,054 million for the AFAC of the Federal Government, in addition to raising approximately BRL 3,7 billion from
the capital market.
Eletrobras transferred to Eletronorte 497,946,334
common shares representing the capital stock of Amazonas GT, according to the 176th Special Shareholders’ Meeting,
in the amount of BRL 3,130.2 million.
Eletrobras capital increase in SPE Chapada
do Piauí I Holding, in the amount of BRL 17.1 million, by way of the issuance of 17,150,000 common shares.
Sale of the entire 49.5% interest of Eletrobras
in SPE Manaus Transmissora de Energia (MTE) to Evoltz Participações S/A., for the amount of BRL 232 million.
Sale of the entire 49% shareholding interest
in Eletrobras, in the SPE Eólica Mangue Seco 2 to Fundo de Investimento em Participações Multiestratégia
Pirineus (FIP Pirineus), for the amount of BRL 33 million.
Eletronuclear’s capital increase, in
the amount of BRL 1,885.7 million, by issuing 22,081,709,937 shares, of which 17,256,190,449 common shares and 4,825,519,489 preferred
shares, with the conversion of Advance credits to Future Capital Increase (AFAC) in the amount of BRL 850 million, and the conversion
of financial credits of BRL 1,035.7 million.
Sale and transfer of the entire shareholding
of Eletrobras in SPE Eólica Santa Vitória do Palmar Holding S.A. (78%), Hermenegildo I S.A., Hermenegildo II S.A.,
Hermenegildo III S.A. and Chuí IX S.A. (99.99%, respectively), for the total amount of BRL 618.1 million.
Sale and transfer of 4.77% of Eletrobras’
interest in AES Tietê Energia, equivalent to 1,509,602 Units or 0.38% of AES Tietê's capital stock, to AES Holding
Brasil II SA, for the amount of BRL 25.8 million.
In addition, over the months of February, March,
April, May, August and December 2020, Eletrobras carried out AFAC for Eletronuclear, in the total amount of BRL 1,202 million,
of which BRL 1,052 million were for the Critical Path Acceleration Plan of the Angra-3 power plant.
In January 2021, Chesf completed the purchase
of all the shares belonging to Sequoia Capital Ltda, in the SPE’s of the Pindaí I, II and III Wind Complex, for the
amount of BRL 20.6 million.
On February 19, 2021, the amount of R $ 2,291.8
million has been paid, as intermediary dividends for the year 2021, to the reversal of the entire balance of the special retained
dividend reserve, pursuant to §§ 4 and 5 of article 202 of Law 6,404 / 1976.
The Electric Energy Research Center
(Cepel) has been contributing to the maintenance of an advanced Research, Development and Innovation (“R&D+I”)
technological infrastructure in equipment and systems, in order to meet the unique characteristics of the Brazilian electricity
industry. In 2020, about 70 projects of the Institutional Portfolio and another 30 projects for different clients were developed.
The development of these projects accounted for BRL 193.3 million in contracts for R&D projects, technological services, program
licensing, and testing. Eletrobras Companies were responsible for investing BRL 192 million, in compliance with the obligation
under the Articles of Incorporation. The remainder accounted for the contribution of other Special Associates, in addition to own
resources obtained through the licensing of their products and the provision of specialized technological services.
In 2020, the continuous improvement
projects focused on using agile methodologies to define and optimize the cycles, especially to manage strategic agreements, the
process of closure, consolidation and analysis of the accounting statements and of the complaint management system.
The planning of efforts that support
strategic needs is aligned and linked to Business and Management Steering Plan (PDNG). All needs are part of the IT project portfolio,
which allows for greater management and monitoring, in addition to formalizing the alignment and service to PDNG.
In 2020, about BRL 13 million was
invested in the purchase of equipment for the protection of the data network and Internet access and about BRL 40 million among
SAP licenses, support services, and ERP SAP Instância Única and Solução Fiscal deployment
services.
United in the face of today’s
greatest crisis, Eletrobras Companies have, since the beginning of the pandemic, followed the recommendations of the Ministry of
Health and the governments of the states and cities where their headquarters and operational units are located. In addition to
guaranteeing the essential Electricity Generation and Transmission services for Brazil, Eletrobras Companies joined efforts, by
means of donations, to contribute to Brazilian society in the fight against covid-19. In collaboration with the government and
local communities, in 2020, there was approval of BRL 23.7 million
for health and assistance donations across the country, focusing on the municipalities and states where strategic Generation and
Transmission assets operate. The contributions were applied as follows:
Due to a need to preserve their
essential activities, the Company, as far as possible, anticipated vacations, approved comp time; authorized teleworking; restricted
domestic travel and meetings attended by a large number of people; prohibited international travel; and quarantined employees with
symptoms of Covid-19. It also asked its service providers to equally abide by all the guidelines of the Ministry of Health, in
addition to taking, monitoring and updating preventive measures against Covid-19, with the following protocols created at Eletrobras
Companies:
The impacts of the pandemic on our
businesses and people will be addressed in their respective chapters.
To reestablish the electric power
of the State of Amapá, which occurred in November 2020, Eletronorte hired, on an emergency basis, and according to Ordinance
406 of the Ministry of Mines and Energy, 45 MW of additional
thermal generation, of which 20 MW were installed in the Santa Rita substation and 25 MW in the Santana substation, owned by the
distribution company CEA.
Additionally, in compliance with
Aneel Order No. 3,341/20, Eletronorte recovered and returned to commercial operation Santana TPP, with two generating units of
15 MVA of power each, guaranteeing a continuous and uninterrupted generation of 30 MVA, which are also installed in Santana substation,
owned by the distribution company CEA.
The effort was part of the support
operation for the resumption of electricity in the region, which had its shutdown caused by the fire at the Macapá substation
transformer. The fixed and variable costs associated with the said generation will be covered by means of sector charges forecasted
for cases of restriction of the operation of SIN, upon approval by Aneel.
The total costs for the reestablishment
of energy was R$ 9.7 million, of which 7.1 million were spent on rental of generator sets, R$ 1.8 million related to fuel for emergency
generation and 0.8 million with third-party personnel and services (equipment maintenance, surveillance, among others).
The fixed and variable costs associated
with the aforementioned generation will be covered by means of sectoral charges provided for cases of restriction of the operation
of the SIN, upon approval of ANEEL.
Eletrobras conducts its activities
in a committed manner concerning Human Rights, Social Inclusion, and Sustainable Development in the territories in which it operates
and in the neighborhoods with which it engages, in a complementary way to the compulsory programs and conditions of environmental
licensing. The company has a comprehensive scope of operations that involves communication and commitment to generate value among
its stakeholders.
In 2020, the Stakeholder Engagement
Project of the Value Chain to Raise Awareness about the Human Rights Theme (Projeto Engajamento dos Stakeholders da Cadeia de
Valor para Sensibilizar sobre o Tema Direitos Humanos) was developed, part of the Sustainability 4.0 Program. This project
aims to promote training, awareness-raising and risk assessment efforts concerning the Human Rights theme among the different stakeholders
of Eletrobras Companies, such as employees, suppliers and partners, and the neighborhoods living in the territories where it operates.
It is also worth mentioning the adhesion of all Eletrobras Companies to Na Mão Certa Program, which seeks the involvement
of companies to combat the sexual violence of children and adolescents.
Executions of Project 3.0.
Subprojects
|
Adjustment
|
3.1) Assessment of business impact on Human Rights in working relationships
|
Documentary research considering laws, pacts and principles from the perspective of labor relations. The result brought proposals for efforts that should be evaluated by the Subcommittee on Human Rights and, subsequently, presented to the areas involved with the issue in companies.
|
3.2) Assessment of business impact on Human Rights in relations with the local neighborhood
|
Preparation of a roadmap of issues
and aspects that should be considered in a documentary evaluation of the projects, from the perspective of Human Rights and analysis
of the laws, pacts, and principles.
|
3.3) Assessment of Human Rights risks (due diligence) from level 1 suppliers
|
There was a definition of critical
suppliers that should be submitted for assessment of Human Rights in 2021:
¨ Outsourcing of continuous
service with allocated labor
¨ Works
¨ Transportation Services
|
3.4) Assessment of Human Rights risks (due diligence) of joint ventures/SPE’s
|
A meeting was held with the representatives of Norte Energia to qualify the relationship between Eletrobras and SPE aiming at a long-term partnership for carrying out works focused on Human Rights.
|
3.5) Human Rights risk mitigation plans in joint ventures/SPE’s
|
This subproject will start after subproject 3.4, which will map the possible Human Rights risks in joint ventures/SPE’s.
|
Subprojects
|
Adjustment
|
3.6) Dissemination actions on human rights issues
|
The schedule prepared under the Eletrobras Companies Communication Plan has been used as a reference for the dissemination efforts on themes pertaining to Human Rights. A spreadsheet with mapped cases was handed over to the Subcommittee on Human Rights, aiming to offer a database of good practices, so that they can be replicated/adapted in companies. The schedule foreseen in the action plan of Na Mão Certa Program was included.
|
3.7) Hiring the On the Right Way (Na Mão Certa) Program to obtain specialized materials and services on the subject, aiming at (i) raising stakeholders’ awareness (subproject 3.6); and having subsidies to analyze and specify in a policy (or another corporate document) the activities and sectors that require greater care in combating the sexual exploitation of children and adolescents
|
Eletrobras joined Program na Mão Certa (On The Right Way) as a sponsor benefiting seven Eletrobras companies: Holding, Amazonas GT, Cepel, CGT Eletrosul, Chesf, Eletronorte and Eletronuclear.
|
3.8)
Training of Human Rights employees
|
The program will be divided into
7 chapters:
1.
Human Rights and its Characteristics
2.
Child Labor
3.
Forced or Compulsory Labor
4.
Discrimination and Diversity
5.
Sexual and Moral Harassment
6.
Free trade union association and right to collective
association
7.
Indigenous peoples and traditional communities
|
3.9) Certification of the Social Responsibility Management System
|
After studying the standard, documentary research, meetings with certification specialists, with EDF ― a company certified by SA8000 ― and other internal meetings, technical information was prepared with the recommendation of adhesion to the SA8000 standard by Eletrobras.
|
Social
Projects
Projects
selected in the 2019 Social Call for Tenders
In line with ODS 8 – Decent
Work and Economic Growth and ODS 4 – Quality Education, the projects “Nutrindo o Saber” (“Nurturing
Knowledge”) and “Ateliê Escola de Lutheria Teixeira de Freitas - Neojiba Program” were selected in the
2019 Social Call for Tenders and expected to be executed in 2020.
Ateliê Escola de Lutheria
Teixeira de Freitas: project of the Bahia State Youth and Children Orchestras (Núcleos Estaduais de Orquestras Juvenis
e Infantis da Bahia — Neojiba) program, trains young apprentices and benefits children, adolescents and young people
by way of the repair and maintenance of their musical instruments. In addition, it provides for the maintenance and expansion of
the activities of the Neojiba Teixeira de Freitas Territorial Nucleus. Transfer Amount: BRL 105.5 Thousand.
Nourishing Knowledge (Nutrindo
o saber): the project carried out social and professional qualification of 135 young people and adults in the areas of
technical cuisine and bakery/patisserie. Developed in the neighborhood of Lagoa Azul, in the City of Natal, Rio Grande do Norte
State, and focused on the food sector, the program aims to strengthen and integrate social work efforts for the integral preparation
of human beings violated in their rights, for full exercise of citizenship and construction of a more equitable society. Transfer
Amount: BRL 124.5 Thousand.
Owing to the pandemic, the projects
had amendments signed and will end in 2021.
Kayapó
Project
Eletrobras continued its participation
in projects with Kayapó indigenous communities in the region of médio rio Xingu, in Southern Part of the State of
Pará, covering approximately 4,500 indigenous people and 40 villages. As a result of the commitment undertaken in the licensing
of Belo Monte Hydropower Plant, these projects are carried out in partnership with the National Indian Foundation (Funai), Norte
Energia and the Kayapó representative institutions. The main results are: the institutional strengthening of the executing
indigenous associations; the inspection and protection of the indigenous lands involved; the fostering of sustainable business
activities; and the cultural appreciation of the Kayapó ethnic group. The projects are financed by Norte Energia, and Eletrobras
is responsible for monitoring and managing the relationship with the communities, in a region of strategic interest for the company’s
business in the Xingu River basin. Owing to the pandemic, many of the planned activities of the project were suspended, and the
focus was on support and prevention efforts relating to Covid-19, seeking to prioritize maximum isolation from the neighborhoods
in its villages. The Kayapó are being vaccinated and having their awareness raised by campaigns of Instituto Kabu e Floresta
Protegida on the importance of the vaccine.
Sector
Projects and Actions supported by Eletrobras in 2020
Centro Comunitário
de Produção Bonecas Negras (Black Dolls Community Production Center — CCP):
The Community Production Centers
(Centros Comunitários de Produção — CCPs) are projects that result from Eletrobras’ partnership
with communities of small producers, fostering the improvement of local production by the furthering of efficient and productive
use of electricity, generating work and income, as well as socioeconomic empowerment of seamstress women, in the city of Armação
dos Búzios, Rio de Janeiro State. With an investment of about BRL 28 thousand, the project was carried out throughout 2019
and 2020 and ended in November 2020.
Sponsorships
In 2020, in the face of the covic-19
pandemic, Eletrobras established a protocol so that the entire available budget of companies for donations, sponsorships, and social
projects was reverted to donations to tackle the pandemic, and financial complementation to reach the recommended amount.
Before
the protocol established, 4 sponsorships supported by direct choice were in negotiations and were contracted.
Projects Encouraged
by the Rouanet Act Table 26
Contract
|
Project
|
Contracted
|
Amount under Contract (BRL)
|
001/2020
|
Álvaro Alberto - Um Homem à Frente de seu Tempo (A Man Ahead of His Time)
|
Madai Produçoes Eireli – EPP
|
300,000.00
|
002/2020
|
Harps Festival - 2020
|
Carpex Empreendimentos e Promoções Ltda
|
200,000.00
|
003/2020
|
GROTA Cultural Space - 25 years forming talents;
|
Reciclarte
|
200,000.00
|
004/2020
|
2020 Season and Annual Activity Plan - Brazilian Symphonic Orchestra
|
Fundação Orquestra Sinfônica Brasileira (FOSB)
|
300,000.00
|
|
|
|
1,000,000.00
|
In
2020, funds were also transferred for seven projects selected in the Eletrobras Companies Sponsorship Program for Electric Sector
Events of 2019, which included the participation of five Eletrobras Companies: Holding, Furnas, Chesf, Eletronuclear and Eletronorte.
The program was launched with an investment of up to BRL 1.5 million.
Non-Supported Projects
|
Table
27
|
Project
|
Amount under Contract (BRL)
|
Fórum Abinee Tec e IX Ciertec – FIEE Smart Energy (Abinee Tec and IX Ciertec Forum – FIEE Smart Energy)
|
120,000.00
|
Encontro Nacional de Agentes do Setor Elétrico – Enase (National Meeting of Electricity Industry Agents – Enase)
|
20,000.00
|
Workshop Electricity for All
|
50,000.00
|
16º Congresso Brasileiro de Eficiência Energética - Cobee 2019 (16th Brazilian Congress of Energy Efficiency - Cobee 2019)
|
79,680.00
|
10º Congresso de Licenciamento e Gestão Socioambiental no Setor Elétrico - Lase (10th Congress of Licensing and Social and Environmental Management for the Electricity Industry - Lase)
|
64,870.00
|
25º Seminário Nacional de Produção e Transmissão de Energia Elétrica (25th National Seminar on the Production and Transmission of Electric Power) – SNPTEE
|
69,860.00
|
6º Seminário Socioambiental Eólico (6th Wind Social and Environmental Seminar)
|
40,000.00
|
|
444,410.10
|
In
addition, three sponsorship projects were paid in 2020, contracted by direct choice in 2019, in the total amount of BRL 68,5 thousand.
Eletrobras Holding's
External Social Indicators
|
Table
28
|
(In
BRL)
External Social Indicators: Amounts Transferred
|
Holding
|
2020
|
2019
|
1
|
Social Projects and Actions
|
|
|
1.4
|
Generation of Work and Income
|
230,110.08
|
28,060.54
|
Subtotal Social Projects and Actions
|
230,110.08
|
28,060.54
|
|
Donation for emergency or public calamity
|
2,500,000.00
|
0.00
|
|
Subtotal of Donations
|
2,5000,000.00
|
0.00
|
5.1
|
Investment in the mobilization of volunteers
|
9,212.98
|
685.80
|
5.2
|
Investments in support of volunteer activities
|
5,600.00
|
50,374.22
|
5.3
|
Employee time invested in volunteering
|
6,871.58
|
26,585.95
|
Subtotal Volunteering
|
21,684.56
|
77,645.97
|
6.1
|
Sports Sponsorships Not Subsidized
|
0.00
|
0.00
|
6.2
|
Subsidized Sports Sponsorships (Sport Promotion Law)
|
0.00
|
296,988.85
|
Subtotal Sports Sponsorships
|
0.00
|
296,988.85
|
7.1
|
Cultural Sponsorships (Rouanet Law)
|
1,000,000.00
|
1,500,000.00
|
7.2
|
Institutional Sponsorships (Not Subsidized)
|
512,910.00
|
80,000.00
|
Subtotal Subsidized and Non-Subsidized Sponsorships
|
1,512,910.00
|
1,580,000.00
|
Total Investments Transferred
|
4,264,704.64
|
1,982,695.36
|
Advertising
and Communication
Investments in Advertisement and Communication
|
Table
29
|
(In
BRL)
Product
|
2020
|
2019
|
Institutional Advertising of Eletrobras
|
1,616,314.77
|
15,913,560.29*
|
Official (Legal) Advertising
|
4,735,742.08
|
4,329,256.19
|
Institutional Communication (including Internal Communication)
|
649,976.32
|
974,571.31
|
Total
|
7,002,033.17
|
21,217,387.79
|
*The
value of the investments made in Institutional Advertising in the year 2019
were
adjusted, as there were payments for the year 2019 offset in 2020.
|
Social
Initiatives during the COVID-19 Pandemic
|
Since March 2020, surprised by the Covid-19 pandemic, Eletrobras
Companies have contributed to the fight against the virus by donating BRL 23.75 million to social work and health efforts across
the country, focusing on the surroundings of their generation and transmission assets. Approximately BRL 19 million was donated
to “Salvando Vidas” (Saving Lives) campaign, coordinated by BNDES, which made it possible to purchase and distribute
protective equipment to health professionals in 109 hospitals and charity hospitals of SUS. Of this amount, BRL 2.4 million pertain
to a donation made by the Holding. The remaining BRL 100 thousand donated by Eletrobras was invested in the Máscaras
+ Renda campaign.
|
Mask + Income Project (Projeto
Máscara + Renda): carried out by the Vale Institute, the project contributed to the prevention of Covid-19 and the
economy of neighborhoods in social vulnerability by making protective masks, made by local seamstresses, which were intended for
associations, institutions and groups of residents of the neighborhood itself, free of charge, through the allocation of BRL 100
thousand from the Holding to the project.
In this way, Eletrobras’ participation
enabled the generation of income for 18 seamstresses and the production of protective masks contributed to the health and safety
of its own employees, since there is coexistence in this territory.
Eletrobras Companies, by means of
the Sponsorship and Social Call for Tenders subcommittees, prepared four (4) calls for tenders, which will be published in 2021:
Cultural Call for Tenders, Electric Industry Events, Sponsorship Call for Tenders and Social Call for Tenders. The latter considered
the insertion of the environmental theme in its scope, becoming known as the Socio-Environmental Call for Tenders, choosing SDGs
10, 13 and 15 as priorities and establishing criteria that align the reduction of social inequalities with the conservation of
biodiversity.
Solidary Selective Collection
Program (Programa de Coleta Seletiva Solidária): the reduction of recyclable materials produced in the company
posed a direct impact on the operation of the partner cooperative associations of waste pickers. Thus, in order to minimize such
effects, members of the Solidary Selective Collection Commission team up for the voluntary supply of basic baskets for Recooperar
in the period from April to September. As of October, Cooperecológica benefited from the donation of resources for the purchase
of hygiene and cleaning materials.
Eletrobras Volunteer Program
(Programa Eletrobras de Voluntariado): since the beginning of the pandemic, the concern of volunteers with the neighborhoods
served by partner institutions was evident, especially with the neighborhoods surrounding the company’s headquarters. The
Eletrobras Volunteer Program was the most used as an intermediary between such social demands and the employees’ will to
contribute, even though they are in social isolation.
127 hours of volunteer work were
dedicated, including the hours and planning and execution of efforts, which pinpoints the philanthropists’ commitment to
social causes, even in circumstances of social isolation, reaching a total of 762 people.
Since
March 2020, donation efforts have been implemented, ranging from hygiene and cleaning materials, foodstuffs, clothing, footwear
and school supplies for children served by the institutions, including financial resources that enabled the purchase of basic food
baskets. It is estimated that the values of
donations of materials and financial resources totaled, until December, BRL 35 thousand.
Other Donations:
|
·
|
Christmas Campaign: disbursed
BRL 3,100 for the purchase of basic baskets delivered to the neighborhoods of Providência and Coroa, located downtown Rio
de Janeiro, carried out by SOS Favelas.
|
|
·
|
Specialized Social Assistance Reference
Center: collection of hygiene items, books, notebooks, clothes, diaries, and Christmas messages for the homeless, totaling
BRL 4,400.
|
|
·
|
Pequenas Vozes do Carmelo (Little
Voices of Carmelo), Association São Martinho and Creche das Mães Trabalhadoras (Working Mother’s Day Care):
received a donation of 230 snack kits, totaling BRL 3.4 thousand.
|
Gender, Race and Diversity
Committee:
For 15 years, Eletrobras has participated
in the work of the Gender, Race and Diversity Committee of the Ministry of Mines and Energy and Related Entities (Cogemmev). In
this atypical year, it contributed to the structuring and technological support necessary for the performance of 08 webinars, covering
topics such as “Racial Equality;” “Diversity; Gender Equity;” “Engagement of Men and Women in the
Home and Work Context in Times of Home Office;” “Management of Diversity and Inclusion in Public Organizations;”
“Human Rights of Children and Adolescents;” and the “Role of Public Organizations for Human Rights.”
In addition, the lecture “Equidade
de Gênero, Vieses Inconscientes” (“Gender Equity, Unconscious Biases”) was held, in reference to the
16 days of activism for the end of violence against women carried out by Movimento de Mulheres em São Gonçalo
(Women's Movement in the City of São Gonçalo), and aimed at young apprentices and interns.
|
|
|
03.19.2021
|
ANNEX 8 - Capital Budget Proposal
ELETROBRAS
2021 Capital Budget Proposal
Eletrobras'
capital budget of R$ 4,417 million for the year 2021 was part of the Business and Management Master Plan 2021 - 2025 (“PDNG”),
approved by the Board of Directors on December 23, 2020. Accordingly, the company is proposing to withhold R$ 1,471.2 million
based on Article 196 of Law 6,404. As can be seen, the company has a capital budget that aims, in particular, works at the Angra
III plant, through the contribution of the Holding company with its own resources (R$ 2,447 million) and the amortization of financial
debts (R$ 1,970 million) highlighting the nature of Eletrobras holding.
Angra III Investment Project
|
|
|
2,447
|
|
million
|
Debts Amortization
|
|
|
|
1,970
|
|
million
|
Total budget for art 196 retention proposal
|
4,417
|
|
million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
amount foreseen for this capital budget will be served exclusively by own resources from the Company's operation.
Rio de Janeiro, March 19, 2021.
Annex 09
NET
PROFIT DESTINATION
CVM
INSTRUCTION 481, DECEMBER 17, 2009 (ANNEX 9-1-II)
1.
To inform the Net Profit of the Fiscal Year
The Company's net income for the year
ended December 31, 2020 was R$ 6.338.688 thousand.
2.
To inform the total amount and the value per share
of the dividends, including pre-paid dividends and interest on equity already declared
There was no declaration or payment of
dividends or interest on equity in advance for the year ended December 31, 2020.
However, in 2018, due to the Company's
financial incapacity, a special reserve of retained dividends was established (article 202, § 4 and 5 of Law 6404), in the
amount of R $ 2,291,889 (two billion, two hundred and ninety and one million, eight hundred and eighty-nine thousand reais), duly
approved by the 59th Ordinary General Meeting, of April 29, 2019.
On January 29, 2021, after a reassessment
of the Company's capacity, Eletrobras' Board of Directors approved, under the terms proposed by the Executive Board, the payment
of the total amount of R$ 2,291,888,692.48 (two billion, two hundred and ninety-two one million, eight hundred and eighty-eight
thousand, six hundred and ninety-two reais and forty-eight cents), as interim dividends for the fiscal year ending December 31,
2021, on account of the reversal of the entire reserve balance withholding dividends, under the terms of §§ 4 and 5 of
article 202 of Law No. 6,404/1976 (“Intermediate Dividends”).
The payment was made, on February 19,
to the preferred and common shareholders, observing the priority in the payment of the dividends of the preferred shares established
in paragraphs 1 and 2 of article 10 of the Bylaws, as well as the percentage of 10% (ten) for each preferred share in relation
to each common share, also provided for in paragraph 4 of the aforementioned article 10.
Amounts paid as mandatory dividends withheld
from 2018, as intermediary dividends from 2021:
Class
|
R$/Share
|
R$
|
PREF "A"
|
2.076526491
|
305,083.27
|
PREF "B"
|
1.578642595
|
441,927,408.73
|
COMMON
|
1.435129631
|
1,849,656,200.48
|
TOTAL
|
|
2,291,888,692.48
|
Considering that the annual minimum
dividend payment obligation to preferred shareholders, established in paragraphs 1 and 2 of article 10 of the Bylaws, was
fully complied with in 2021, any other dividend distribution that may be declared and paid, even in the year of 2021, it
should only observe the provisions of paragraphs 3 and 4 of article 10 of the Bylaws, which establishes that, after the
minimum dividends are guaranteed to the preferred shares, as was the case with the reversal of the special reserve of
retained dividends mentioned above, each preferred share will be entitled to dividend
rights, for each share, at least 10% greater than those attributed to each common share.
Accordingly, the gross amount of the Dividends
to be declared, related to the net income for the fiscal year ended on December 31, 2020, if the Management Proposal is approved
by the Annual General Meeting, will be as follows:
Class
|
R$
|
PREF "A"
|
152,524.04
|
PREF "B"
|
290,619,325.38
|
ORDINÁRIA
|
1,216,366,820.78
|
TOTAL
|
1,507,138,670.19
|
3.
To inform the percentage of net income for the
year distributed
|
(R$ thousand*)
|
Net Profit in the Fiscal Year
|
6,338,688
|
Total Dividend to be distributed
|
1,507,139
|
Percentage of Net Profit for the Year Distributed
|
23.78%
|
*Exept Percentage
|
|
4.
To inform the total amount and the value per share
of dividends distributed based on the profit of previous years
In 2018, due to the Company's financial
incapacity, a special reserve of retained dividends was established (article 202, § 4 and 5 of Law 6404), in the amount of
R$ 2,291,889 (two billion, two hundred and ninety and one million, eight hundred and eighty-nine thousand reais), duly approved
by the 59th Ordinary General Meeting, of April 29, 2019.
On January 29, 2021, after a reassessment
of the Company's capacity, Eletrobras' Board of Directors approved, under the terms proposed by the Executive Board, the payment
of the total amount of R$ 2,291,888,692.48 (two billion, two hundred and ninety-two one million, eight hundred and eighty-eight
thousand, six hundred and ninety-two reais and forty-eight cents), as interim dividends for the fiscal year ending December 31,
2021, on account of the reversal of the entire reserve balance withholding dividends, under the terms of §§ 4 and 5 of
article 202 of Law No. 6,404/1976 (“Intermediate Dividends”). The payment was made, on February 19, to the preferred
and common shareholders, observing the priority in the payment of the dividends of the preferred shares established in paragraphs
1 and 2 of article 10 of the Bylaws, as well as the percentage of 10% (ten) for each preferred share in relation to each common
share, also provided for in paragraph 4 of the aforementioned article 10.
Thus, the amounts paid as dividends in
2021, based on profits determined in previous years referring to a dividend in addition to what will be proposed for the fiscal
year to end on December 31, 2021, were:
Class
|
R$/Share
|
R$
|
PREF "A"
|
2.076526491
|
305,083.27
|
PREF "B"
|
1.578642595
|
441,927,408.73
|
COMMON
|
1.435129631
|
1,849,656,200.48
|
TOTAL
|
|
2,291,888,692.48
|
5.
To inform, after deducting the pre-paid dividends
and interest on equity already declared:
(a)
The gross amount of dividends and interest
on equity, segregated, per share of each type and class
There was no statement of any dividend
or prepaid Interest on Equity in the 2020 financial year. Therefore, the gross amount of the dividend to be declared, if the Management
Proposal is approved, will be as follows:
Class
|
R$
|
Per share
|
PREF "A"
|
1.03814345290052
|
152,524.04
|
PREF "B"
|
1.03814345290052
|
290,619,325.38
|
COMMON
|
0.94376677536411
|
1,216,366,820.78
|
TOTAL
|
|
1,507,138,670.19
|
(b)
The form and term of payment of dividends
and interest on equity
The payment of the Dividends, if approved,
will be made by depositing them in the current account of the shareholders, as each of them informed Banco Bradesco S.A., responsible
for the bookkeeping of the shares issued by the Company. The dividends related to the shares held in custody at CBLC will be paid
to this entity, which will transfer them on to the shareholders through the Depository Brokers. As proposed by the Company's Management,
if approved, the dividends will be paid on a date to be resolved by the shareholders at the Annual Shareholders' Meeting to be
held on April 27, 2021, being proposed by Management, however, to occur until December 31, 2021.
(c)
Possible interest rate and interest on
dividends and interest on shareholders' equity
On the dividends to be declared will
be added monetary update based on the variation of the SELIC Rate, pro rata temporis from January 1, 2020 until the date of the
effective beginning of the payment, the definition of which shall occur by means of a resolution of the Company's shareholders to be taken at the Annual
Shareholders' Meeting to be held on April 27 2021, in accordance with Decree 2673/1998.
(d)
Date of the declaration of payment of dividends
and interest on equity considered for the identification of the shareholders who will be entitled to their receipt
Shall be entitled to the dividends
to be declared at the annual shareholders ' meeting scheduled for April 27 2021, if approved, those shareholders who hold preferred
shares of Classes A and B and common shares, issued by the company on the date of the holding of the said General Meeting that
will deliberate.
6.
In the event that there has been a declaration
of dividends or interest on equity based on profits calculated in semiannual balance sheets or in shorter periods
(a)
To inform the amount of dividends or interest
on equity already declared
There was no declaration of dividends
or Interest on Equity in 2020 on the basis of profits calculated in half-annual Balance Sheets or in shorter periods.
(b)
To inform the date of the respective payments
Not Applicable.
7.
Provide comparative table indicating the following
values per share of each type and class:
(a)
Net profit for the fiscal year and the
previous 3 (three) years
|
2020
|
|
2019
|
|
2018
|
|
2017
|
Profit/Net Loss (R$ thousand)
|
6,338,688
|
|
11,193,321 (a)
|
|
12,842,677
|
|
1,763,805
|
Profit/Net Loss per Share (R$)
|
4.0
|
|
7.13(b)
|
|
9.46
|
|
(1.3)
|
(a) The
result for the year ended December 31, 2019 was restated, due to Circular Letter CVM/SNC/SEP/Number 04/2020, with the additional
profit of R$ 182,523, treated, in the Financial Statements of the fiscal year ended in 2020, as retained earnings from the previous
year and adjusted in Shareholders' Equity.
(b) Earnings
per share were calculated based on the composition of the share capital after an increase approved on February 17, 2020. If calculated
on the capital in effect on 12/31/2019, its value would be 8.3.
(b)
Dividend and interest on equity distributed
in the previous 3 (three) years
|
2020
|
2019
|
2018
|
Dividend Distributed (R$ tousand)*
|
2,595,716
|
1,324,414
|
0
|
JCP Distributed (R$ thousand)
|
-
|
-
|
-
|
*In addition to the dividend amounts in
the previous table, we inform that, on February 19, 2021, the amount of R$ 2,291,888,692.48 (two billion, two hundred and ninety-one
million, eight hundred and eighty-eight thousand) was paid, six hundred and ninety-two reais and forty-eight
cents), as intermediary dividends for the year 2021, due to the reversal of the entire balance of the special reserve of dividends
retained, pursuant to paragraphs 4 and 5 of article 202 of Law No. 6,404/1976 (“Intermediate Dividends”).
The dividends in the table
above were declared and paid in the same year, more referring to the allocation of the profit determined in the immediately preceding
year. Example: the dividend of R$ 2,595,716 thousand was declared by the 2020 Annual General Meeting and paid in the same year,
based on the net income determined in the year of 2019.
8.
If there is a profit allocation to the legal reserve
(a)
Identify the amount allocated to legal
reserve
The amount proposed for allocation
to the legal reserve for the year ended December 31, 2020 is R$ 316,934 thousand, corresponding to
5% of the Company's net income.
(b)
To detail how the legal reserve is calculated
|
2020
|
|
R$ thousand
|
Net Profit of the Fiscal Year
|
6,338,688
|
(-) Legal Reserve (5%)
|
316,934
|
Net profit for the year adjusted by the constitution of the Legal Reserve
|
6,021,754
|
Pursuant
to the Brazilian Corporation Law, 5% of the net income for the year will be applied before any other destination, in the constitution
of the legal reserve, which shall not exceed 20% (twenty percent) of the capital stock. In the year in which the balance of the
legal reserve plus the amount of capital reserves, referred to in paragraph 1 of article 182 of the Brazilian Corporation Law,
exceeds 30% (thirty percent) of the capital stock, there is no obligation to allocation of part of the net income for the year
to the legal reserve.
9.
If the company holds preferred shares entitled
to fixed or minimum dividends
(a)
To describe the form of calculations of
fixed or minimum dividends
As provided for in the Company's Bylaws,
shareholders are entitled to receive a mandatory dividend of 25% (twenty-five percent) of net profit of the fiscal year, adjusted
in accordance with the Brazilian Corporate Law ("Minimum Dividend").
The Minimum Dividend will be distributed
among the Company's shareholders subject to the following conditions:
|
1.
|
Class "A"
preferred shares shall have priority in the distribution of dividends, such incidents at the rate of 8% (eight percent) per year
over the capital belonging to that type and class of shares, to be equally apportioned among them.
|
|
2.
|
Class "B"
preferred shares shall have priority in the distribution of dividends, such incidents at the rate of 6% (six percent) per year
over the capital belonging to that type and class of shares, to be equally apportioned among them.
|
|
3.
|
To the preferred shares
will be further assured to participate, under equal conditions, with the common shares in the distribution of the dividends, after
which the minor of the minimum dividends provided in items 1 and 2 above will be guaranteed, subject to the provisions of item
4 below.
|
|
4.
|
To the preferred shares
will be further assured the right to receive dividend, for each share, at least ten percent greater than that attributed to each
common share.
|
(b)
To inform if the profit for the year is
sufficient for full payment of the fixed or minimum dividends
In the fiscal year of 2020, a net income of
R$ 6,338,688 thousand was registered. Therefore, in view of the legal and statutory provisions
on mandatory dividends, the portion corresponding to 25% (twenty-five percent) of adjusted net income for fiscal year 2020, corresponding
to R$ 1,507,139 thousand should be distributed to the shareholders of the Company,
including the portion to be allocated to holders of class "A" and "B" preferred shares.
In 2018, due to the Company's financial
incapacity, a special reserve of retained dividends was established (article 202, § 4 and 5 of Law 6404), in the amount of
R$ 2,291,889 (two billion, two hundred and ninety and one million, eight hundred and eighty-nine thousand reais), duly approved
by the 59th Ordinary General Meeting, of April 29, 2019.
On January 29, 2021, after a reassessment
of the Company's capacity, Eletrobras' Board of Directors approved, under the terms proposed by the Executive Board, the payment
of the total amount of R$ 2,291,888,692.48 (two billion, two hundred and ninety-two one million, eight hundred and eighty-eight
thousand, six hundred and ninety-two reais and forty-eight cents), as interim dividends for the fiscal year ending December 31,
2021, on account of the reversal of the entire reserve balance withholding dividends, under the terms of §§ 4 and 5 of
article 202 of Law No. 6,404/1976 (“Intermediate Dividends”).
The payment was made, on February 19,
to the preferred and common shareholders, observing the priority in the payment of the dividends of the preferred shares established
in paragraphs 1 and 2 of article 10 of the Bylaws, as well as the percentage of 10% (ten) for each preferred share in relation
to each common share, also provided for in paragraph 4 of the aforementioned article 10.
The payment was made, on February 19, 2021,
to the preferred and ordinary shareholders, observing the priority in the payment of the dividends of the preferred shares established
in paragraphs 1 and 2 of article 10 of the Bylaws, as well as the percentage of 10% (ten) percent more for each preferred share
in relation to each common share, also provided for in paragraph 4 of the aforementioned article 10.
Therefore, considering that Article 10 of the
Bylaws provides that preferred shares A and B will have priority in the distribution of dividends, these incidents at the rate
of 6% (six percent) and 8% (eight percent) per year on capital. belonging to this type and class of shares, respectively, the annual
minimum dividend payment obligation to preferred shareholders, established in paragraphs 1 and 2 of article 10 of the Bylaws, has
already been fully complied with in 2021. Thus, any other distribution of dividends that will be declared and paid, in the year
2021, should only observe the provisions of paragraphs 3 and 4 of article 10 of the Bylaws, which establish that, after the minimum
dividends are guaranteed to the preferred shares, the each preferred share the right to dividends, for each share, at least 10%
greater than those attributed to each common share.
That said, the additional dividends that will
be paid to the preferred shares are as follows in the table below, and it is certain that the minimum preferred dividend provided
for in the bylaws has already been guaranteed to the preferred shares:
Class
|
R$/Per Share
|
R$
|
PREF "A"
|
1.99153557855
|
292,596.41
|
PREF "B"
|
1.49365168208
|
418,134,934.03
|
TOTAL
|
|
418,427,530.44
|
That said, the Company proposes the following
allocation of the result for the fiscal year ended on December 31, 2020:
About the above proposal, we clarify:
·
As provided for in the Brazilian Corporation Law,
5% (five percent) of the net income for the year, corresponding to R$ 316,934 thousand, should be allocated to the Legal
Reserve;
·
As provided for above, the Company's Management
will also submit to the approval of the Annual Shareholders' Meeting hereby convened the Capital Budget Proposal, so that a portion
of net income for the year equivalent to R$ 1,471,208 thousand is retained;
·
As provided for in Article 57, II, of the Company's
current Bylaws, 50% (fifty percent) of the net income for the fiscal year ended December 31 shall be allocated to the Statutory
Reserve of Investments. Accordingly, Management proposes that the amount of R$ 3,169,344 thousand be allocated to the Statutory
Reserve of Investments.
·
As provided in Article 57, I, of the Company's
current By-Laws, 1% (one percent) of net income for the fiscal year ended December 31 shall be allocated to the Statutory Reserve
for Studies and Projects. Accordingly, Management proposes that the amount of R$ 63,387 thousand be allocated to the Statutory
Reserve for Studies and Projects.
·
As provided for in article 56, first paragraph,
of the Bylaws, 25% (twenty-five percent) of the adjusted net income for the fiscal year ended on December 31 is paid as mandatory
dividends. Accordingly, Management proposes that the aforementioned mandatory dividend amounts of R$ 1,507,139 thousand
be declared and paid by December 31, 2021, as provided for in the third paragraph of article 205 of the Brazilian Corporation Law,
in compliance with paragraphs 3 and 4 of article 10 of the Bylaws.
(c)
Identify if any overdue part is cumulative
Not applicable, since the Articles of
Incorporation of the Company does not provide for cumulative dividends.
(d)
Indentify the global amount of the fixed
or minimum dividends to be paid to each class of preferred shares
The annual minimum dividend payment obligation
to preferred shareholders, established in paragraphs 1 and 2 of article 10 of the Bylaws, was fully complied with in 2021, as mentioned
above, and any dividend distribution that may be declared and paid, in the year 2021, must only observe the provisions of paragraphs
3 and 4 of article 10 of the Bylaws, which establishes that, after the minimum dividends are guaranteed to the preferred shares,
the right to dividends will be guaranteed for each preferred share, for each at least 10% higher than those attributed to each
common share.
Regarding the right established in paragraphs
3 and 4 of article 10 of the Bylaws, the shareholders holding preferred shares are entitled to the following dividends that were
paid on February 19, 2021, by resolution of the Board of Directors on January 29 2021:
ASCERTAINMENT OF TOTAL DIVIDENDS
|
Class
|
R$
|
PREF "A"
|
292,596
|
PREF "B"
|
418,134,934
|
(e)
Identify the fixed or minimum dividends
to be paid per preferred share of each class
Considering the right established in paragraphs
3 and 4 of article 10 of the Bylaws, the shareholders holding preferred shares are entitled to the following dividends that were
paid (per share) on February 19, 2021, by resolution of the Board of Directors on January 29, 2021:
ASCERTAINMENT OF UNIT DIVIDENDS
|
|
Class
|
R$/Share
|
PREF "A"
|
R$ 1.99153557855
|
PREF "B"
|
R$ 1.49365168208
|
|
|
10.
In relation the mandatory dividend
(a)
Describe the method of calculation established
in the bylaws
As established in the Bylaws of the
Company, the shareholders are guaranteed the right to receive a mandatory dividend of 25% (twenty-five percent) of the fiscal year
net earnings, adjusted as per the terms of the Corporations Act (“Minimum Dividend”).
The Minimum Dividend will be distributed
among the Company's shareholders in adherence to the following conditions:
|
1.
|
Class "A"
preferred shares will have priority in the distribution of dividends, calculated at a rate of 8% (eight percent) per year of the
equity from that kind and class of shares, to be prorated among them equally.
|
|
2.
|
Class "B"
preferred shares will have priority in the distribution of dividends, calculated at a rate of 6% (six percent) per year of the
equity from that kind and class of shares, such dividends to be prorated among them equally.
|
|
3.
|
For preferred shares,
participation will also be guaranteed, in equal conditions with the common shares, in the distribution of dividends, after having
been ensured the lesser of the minimum dividends established in items 1 and 2 above, while observing the provisions from Item 4
below.
|
|
4.
|
To the Preferred shares
will be guaranteed the right to receipt of dividend for each share at a rate at least ten percent higher than that attributed to
each common share.
|
Considering that the annual minimum
dividend payment obligation to preferred shareholders established in paragraphs 1 and 2 of article 10 of the Bylaws (items 1 and
2 above) was fully complied with in 2021, any dividend distribution that may be declared and paid, in the year 2021, only the provisions
of paragraphs 3 and 4 of article 10 of the Bylaws must be observed, which establishes that, after the minimum dividends are guaranteed
to the preferred shares, the right to dividends will be guaranteed to each preferred share, for each share, at least 10% higher
than those attributed to each common share.
Thus, the mandatory dividend will
be distributed according to paragraphs 3 and 4 of article 10 of the Bylaws (items 3 and 4 above).
(b)
Report if this is being paid in full
In fiscal year of 2020, the net
profit determined was R$ 6,338,688 thousand. Thus, given the legal and statutory
provision regarding the mandatory dividend, a 25% portion (twenty five percent) of the adjusted net profit of fiscal year of
2020, corresponding to R$ 1,507,139 thousand, it shall be distributed in full to the
Company's shareholders, after its approval at the annual general meeting, subject to the provisions of paragraphs three and
four of article 10 of the Company's Bylaws.
(c)
Report any amount withheld
Not Applicable
11.
If a mandatory dividend is withheld due to the
company's financial standing
(a)
Report the amount withheld
Not Applicable
(b)
Describe in detail the financial situation
of the company, addressing aspects relating to analysis of liquidity, working capital, and positive cash flows
Not Applicable
(c)
Justify the withholding of dividends
Not Applicable
12.
If there is allocation of earnings to contingency
reserve
(a)
Identify the amount allocated to the reserve
Not applicable.
(b)
Identify the loss considered probable and
its cause
Not applicable.
(c)
Explain why the loss was considered likely
Not applicable.
(d)
Justify the establishing of the reserve
Not applicable.
13.
If there is allocation of earnings to an unrealized
earnings reserve
(a)
Inform the amount allocated to the profit
reserve to realize
Not applicable.
(b)
Inform the nature of the unrealized earnings
resulting in the reserve
Not applicable.
14.
If there is allocation of earnings to statutory
reserves
(a)
Describe the clauses from the Bylaws that
establish the reserve
Article 57. The General Meeting shall
allocate, in addition to the legal reserve, calculated on the net profits for the year:
I - one percent as a reserve for studies
and projects, intended to cover the execution of studies and projects of technical-economic feasibility of the electric energy
sector, whose accumulated balance may not exceed two percent of paid-in capital; and
II - fifty percent, as a reserve for
investment, intended for the investment in concessionaires of public electric utility companies, whose accumulated balance may
not exceed seventy-five percent of the paid-in capital.
(b)
Identify the amount allocated to the reserve
As provided
in Article 57, I, of the current Company's Bylaws, 1% (one percent) of the net income for the fiscal year ended December 31 shall
be allocated to the Statutory Reserve for Studies and Projects. Accordingly, Management proposes that the amount of R$
63,387 thousand
be allocated to the Statutory Reserve of Investments.
Pursuant
to Article 57, II, of the current Company's Bylaws, 50% (fifty percent) of the net income for the fiscal year ended December 31
shall be allocated to the Statutory Reserve of Investments. Accordingly, Management proposes that the amount of R$
3,169,344 thousand
be allocated to the Statutory Reserve of Investments.
(c)
Describe how the amount was calculated
Income Distribution R$ Thousand
|
Net Income of the Period:
|
6,338,688
|
Constitution of Statutory reserve for investments (50% of Net Income)
|
3,169,344
|
Constitution of Statutory reserve of studies and projects (1% of Net Income)
|
63,387
|
15.
If there is withholding of earnings established
in capital budget
(a)
Identify the amount withheld
As provided for in article 196 of
the Brazilian Corporation Law, the Company, by resolution of the General Meeting, may approve a proposal from its Management to
retain part of the net income for the year provided for in the capital budget previously approved by it.
In this
sense, the Company's Management proposes to retain a portion of net income for the year equivalent to R$
1,471,208 thousand.
(b)
Provide a copy of the capital budget
ELETROBRAS
CAPITAL BUDGET
Eletrobras'
capital budget of R$ 4,417 million for the year 2021 was an integral part of the Business and Management Master Plan 2021 - 2025
(“PDNG”), approved by the Board of Directors on December 23, 2020.
Accordingly,
the company is proposing to withhold R$ 1,471,208 thousand based on Article 196 of Law 6,404. As can be seen, the company
has a capital budget that aims, in particular, works at the Angra III plant, through the contribution of the Holding company with
its own resources (R$ 2,447 million) and the amortization of financial debts (R$ 1,970 million) highlighting the nature of Eletrobras
holding.
Angra III Investment Project
|
|
|
2,447
|
|
million
|
Debts Amortization
|
|
|
|
1,970
|
|
million
|
Total budget for art 196 retention proposal
|
4,417
|
|
million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
amount foreseen for this capital budget will be served exclusively by own resources from the Company's operation.
16.
If there is allocation of earnings to a tax incentive
reserve
(a)
Report the amount allocated to the reserve
Not Applicable.
(b)
Explain the nature of the allocation
Not Applicable.
|
FISCAL COUNCIL
505th Meeting
|
|
03.19.2021
·
|
ANNEX 10 - OPINION ON THE CAPITAL
BUDGET PROPOSAL
ELETROBRAS
Capital budget proposal for the year 2021
Eletrobras'
capital budget in the total amount of R$ 4,417 million for the year 2021 was an integral part of the Business and Management Master
Plan 2021 - 2025 (“PDNG”), approved by the Board of Directors on December 23, 2020. Accordingly, the Company is proposing
the retention of R$ 1,471.2 million based on Article 196 of Law 6,404 /1976. As can be seen, the Company has a capital budget that
aims, in particular, works at the Angra III plant, through the contribution of the Holding company with its own resources (R$ 2,447
million) and the amortization of financial debts (R$ 1,970 million) highlighting the nature of Eletrobras holding.
Investment project Angra III
|
BRL 2,447 million
|
Amortization of ordinary debts
|
BRL 1,970 million
|
Total budget for purposes of retaining article 196
|
BRL 4,417 million
|
The amount foreseen for this capital
budget will be served exclusively by own resources from the Company's operation.
This Fiscal Council, in the use
of its attributions, opposes favorably the submission of this proposal to the resolution of the Company's Annual Shareholders'
Meeting.
Rio de Janeiro, March 19, 2021.
PATRICIA VALENTE STIERLI
|
EDUARDO COUTINHO GUERRA
|
Fiscal Council Chairman
|
Member
|
GIULIANO BARBATO WOLF
|
HAILTON MADUREIRA DE ALMEIDA
|
Member
|
Member
|
THAÍS MÁRCIA FERNANDES MATANO LACERDA
|
Member
|
|
FISCAL COUNCIL
505th Meeting
|
|
03.19.2021
|
ANNEX 11 - FINANCIAL
STATEMENT OPINION
12.31.2020
The Fiscal Council of Centrais
Elétricas Brasileiras S.A. - Eletrobras, within the scope of its legal and statutory attributions, learned of the Management
Report and examined Eletrobras' individual and consolidated financial statements for the fiscal year ended on December 31, 2019,
composed by Balance Sheet, Statement of Income for the Year, Statement of Added Value, Statement of Comprehensive Income, Statement
of Cash Flows and Explanatory Notes to the Financial Statements, accompanied by the Opinion of the Independent Auditors, as well
as found out about the proposal regarding the allocation the result of the fiscal year
This Fiscal Council, considering
the monitoring work of the Company, parent company and consolidated, the information provided by the Company throughout the year,
the analysis of the documentation presented and the Independent Auditors' Report - PWC, understands that the referred documents,
highlighting the emphasis contained in the Independent Auditors 'Report, they are in a position to be submitted to the deliberation
of the Company's Annual Shareholders' Meeting.
Rio de Janeiro, March 19, 2021.
PATRICIA VALENTE STIERLI
|
EDUARDO COUTINHO GUERRA
|
Fiscal Council Chairman
|
Member
|
GIULIANO BARBATO WOLF
|
HAILTON MADUREIRA DE ALMEIDA
|
Member
|
Member
|
THAÍS MÁRCIA FERNANDES MATANO LACERDA
|
Member
From:
|
Cristiane Vieira de Paiva Villela
|
To:
|
Rafael Gusmão Rodrigues de Andrade
|
Subject:
|
Management Proposal of the 61st Annual Shareholders’ Meeting of Eletrobras
|
Reference:
|
DFR- 006/2021 Memorandum
EMP–2021/0094
|
Mrs. Head of DFR sends us, by means
of the above memorandum, a matter requesting an analysis[1]
of this PRJC, from a legal point of view, of Eletrobras’ Management Proposal connected to the Shareholders’ Meeting
(“AGO”), to be virtually held on April 27, 2021, at 2p.m. to deliberate on the following agenda:
“Business to
be deliberated at AGO:
1.
To receive the Managers' accounts, examine, discuss and vote on
the Administration Report and the Complete Financial Statements of the Company for the financial year ending as of December 31,
2020;
2.
To deliberate on the proposal of the Company's management to allocate
the result connected to the accounting year ended on December 31, 2020, and on the distribution of dividends;
3.
Appoint, among the members of the Company’s Board of Directors;
4.
To elect the members of the Fiscal Board and their alternates;
and
[1]
It should be emphasized that this examination shall be limited to the legal aspects of the subject, with no regard for technical,
economic, financial aspects, and those that require the exercise of administrative discretion.
5.
To set the global compensation of the Managers, the members of
the Fiscal Board of the Company and the members of the Audit and Risk Committee created by the Articles of Incorporation.”
Having considered the facts, the
legal questions connected to the inquiry under examination are analyzed, and the convenience and timeliness of the contents of
the Management Proposal are not matters of a legal nature.
1. General Considerations connected
to the Shareholders’ Meetings
1.1. Call
Initially,
regarding the call, we would like to clarify that, in accordance with the provisions of Articles 124[2]
et seq of Act 6404/1976 (“LSA”), the regular
call of shareholders shall be made by means of
publication of notices, and shall include, in addition to the venue, date and time of the Shareholders’ Meeting, and the
agenda.
[2]
Article 124. The call shall be made by means of a notice published for a minimum of 3 (three) times,
stating, in addition to the venue, date, and time of the meeting, the agenda and, in case of amendment of the Articles of Incorporation.
Paragraph
1. The first call of the shareholders’ meeting shall be made:
I
- in the closely-held corporations, at least eight (8) days before the publication of the first notice; if the meeting is not being
held, a new notice will be published, in a second call, at least five (5) days in advance;
II
- in the publicly-held company, the deadline for the first call shall be 15 (fifteen) days, and the second call for 8 (eight) days.
Paragraph 2. Shareholders’
Meeting must be held, preferably, at the building where the company is headquartered or, following an event of force majeure, somewhere
else, provided it takes place in the same City of the headquarters and clearly identified in the call notice.
Paragraph 2-A. Without
prejudice of the extent set out in paragraph 2 hereof, the companies, either publicly-held or private, may hold digital meetings,
pursuant to the rules of the Securities and Exchange Commission (CVM) and of the competent authority of the Federal Executive Branch,
respectively.
Paragraph
3. In closed held corporations, a shareholder representing five percent (5%) or more of the capital stock shall be called
by telegram or registered letter, issued with the advance provided for in Paragraph 1, provided that he/she has requested it in
writing, to the company, indicating the full address and validity of the request, not exceeding two (2) fiscal years, and renewable;
this notice does not exempt the publication of the notice provided for in Paragraph 1, and failure to comply will entitled the
shareholder the right to compensation from the company’s managers for damages.
Paragraph
4. Regardless of the formalities foreseen in this article, the shareholders’ meeting to be attended by all the shareholders
shall be considered regular.
Paragraph
5. The Brazilian Securities and Exchange Commission may, at its sole discretion, by reasoned decision of its Collective Body, at
the request of any shareholder, and after hearing the company:
I
- increase, to up to thirty (30) days, as of the date on which the documents related to the matters to be resolved are made available
to the shareholders, the timely notice of publication of the first call notice of the shareholders’ meeting of the publicly-held
company, when it concerns operations that, due to their intricateness, require a longer period for them to be known and analyzed
by the shareholders;
It
should be noted that Article 124, Paragraph 6 of the LSA, which requires public-held companies to submit, on the date of publication
of the notice convening the annual and special meeting, documents related to the agenda on the Stock Exchanges on which their shares
are mostly negotiated. It is also noted that such obligation is additional to those required by Articles 133[3]
and 135[4],
Paragraph 3 of the same legal provision.
II
- discontinue, for up to 15 (fifteen) days, the course of the deadline prior to the call of a special shareholders’ meeting
of publicly-held company, in order to take cognizance and review the proposals to be submitted to the meeting and, if applicable,
inform to the company, until the termination of the discontinuance, the reasons why it considers that the proposed deliberation
to the meeting breaches legal or regulatory provisions.
Paragraph
6. Publicly-held companies with shares listed for trading on a stock exchange shall, at the date of publication of the notice convening
the meeting, send to the stock exchange on which their shares are mostly traded, the documents made available to shareholders for
deliberation in shareholders’ meeting.
[3]
Article 133. The managers should communicate, no later than one (1) month before the date scheduled
for the shareholders' meeting, by notices published in the manner set forth in Article 124, which are available to shareholders:
I
- the management’s report on the corporate business and the main administrative facts of the accounting year then ended;
II
- copy of the financial statements;
III
- the opinion of independent auditors, if any.
IV
- the opinion of the fiscal board, including dissenting votes, if any; and
V
- other documents relevant to the business included in the agenda.
Paragraph
1. The notices shall state the place or places where the shareholders may arrange copies of these documents.
Paragraph
2. The company shall submit a copy of these documents to the shareholders who request it in writing, under the conditions set forth
in Paragraph 3 of Article 124.
Paragraph
3. The documents referred to in this article, except for those included in items IV and V, shall be published at least five (5)
days before the date set for holding the shareholders’ meeting.
Paragraph
4. The shareholders’ meeting that gathers all shareholders may consider as remedied the absence of publication of notices
or failure to comply with the deadlines referred to in this article; but publishing the documents before the meeting is held is
mandatory.
Paragraph
5. The publication of the notices is exempted when the documents referred to in this article are published until one (1) month
before the date scheduled for holding the ordinary shareholders’ meeting.
[4]
Article 135. The special shareholders’ meeting that aims at the amendment
of the Articles of Incorporation shall be opened in the first call with the attendance of shareholders representing at least 2/3
(two thirds) of the voting capital, but may be opened, in a second instance, with any number.
(...)
Paragraph
3. The documents relevant for the matter to be discussed at the special shareholders’ meeting shall be made available to
the shareholders at the company's headquarters on the occasion of the publication of the first notice convening the shareholders'
meeting.
It should also be that Article
121 of LSA provides for the opening, holding and recording of the shareholders’ meeting: the online attendance of the publicly-held
company’s shareholder.
The primary objective of this innovation
was to suppress absenteeism of the company’s minority shareholders, which sometimes deem the costs connected to obtaining
information and traveling to the venue an obstacle to the intended corporate activism, and the underlying improvement of the capital
market. As stated by Modesto Carvalhosa, “online attendance does not hinder in any way the full exercise of the right
to participate, debate, protest and vote reasonably.”
Shareholders who participate online
in a shareholders’ meeting are entitled to participate in all discussions regarding the matters, being able to present their
motions, protests and dissenting votes, which shall be included as attachments to the respective minutes. In this regard, Articles
100[5], Paragraph 2, and 127[6],
sole paragraph, all of LSA, should be fulfilled.
[5]
“Article 100. In addition to the mandatory books for any merchandising
business, the company must have the following ones, which shall meet the same legal formalities:
(...)
Paragraph
2. In publicly-held companies, the books referred to in items I to V of the head
provision of this article may be replaced, subject to the rules issued by the Brazilian
Securities and Exchange Commission, with mechanical or electronic records.”
[6]
“Article 127. Before opening the meeting, shareholders shall sign the “Attendance Book,” stating their name,
nationality and residence, as well as the number, type and class of shares they hold.
It should be noted that pursuant
to Article 121, sole paragraph of the LSA[7], after amendment
to Act 14030/2020, the shareholder of publicly-held company is allowed to participate and vote in a general shareholders’
meeting remotely.
At this point, CVM Instruction
No. 481, as amended by CVM Instruction 622/2020, Article 4[8],
item III, determines that the call notice must include, if remote participation via electronic system is permitted, information
detailing the rules and procedures according to which shareholders may participate and vote remotely at the general shareholders’
meeting, including necessary and sufficient information for shareholders to access and use the system, and if the meeting will
be partially or exclusively held via digital means.
Paragraph 3of Article 5[9]
of the abovementioned Instruction allows the company to demand that the shareholder who intends to participate via electronic system deposit the documents listed
in paragraph 1 within 2 (two) days before the date in which the meeting is to be held.
Sole Paragraph. For all purposes
of this Law, a shareholder who registers his/her presence remotely is considered to be present at the shareholders’ meeting,
as provided for in the regulations of the Brazilian Securities and Exchange Commission.”
[7]
“Article 121. The shareholders’ meeting, called and opened in accordance with the law and the Articles of Incorporation,
has the power to decide on all business concerning the corporate purpose, and to take the resolutions it deems convenient for its
defense and development.
Sole Paragraph. In publicly-held
or private companies, the shareholder may remotely participate and vote at a shareholders’ meeting, in accordance with the
regulations of the Securities and Exchange Commission (CVM) and of the competent authority of the Federal Executive Branch, respectively.
[8]
“Article 4. The call notice for general shareholders’ meetings must include:
(...)
III – if remote participation
via electronic system is permitted, under the terms of Article 21-C, paragraph 2, item II, information detailing the rules and
procedures according to which shareholders may participate and vote remotely at the general shareholders’ meeting, including
necessary and sufficient information for shareholders to access and use the system, and if the meeting will be partially or exclusively
held via digital means.”
[9]
“Article 5 The call notice must list the documents required for shareholders to be admitted to the general shareholders’
meeting.
(...)
In spite of the above, the respected
doctrine has always admitted the possibility holding shareholders’ meeting entirely or partially via digital means.
According to jurist Nelson Eizirik:
“General Shareholders
Meetings may, at first, be held in different manners: (i) at the venue informed in the notice and with attendance in person of
shareholders; (ii) virtually, without the physical presence of participants, (iii) at the venue informed in the call
notice, with attendance in person of some participants and the possibility of remote participation by other shareholders, via screens,
telephone or videoconference, cable TV or internet, for instance (emphasis added)”[10]
In light of the above legislation,
the Management Proposal states that:
"Considering
the situation being reported about the COVID-19 (coronavirus) pandemic in Brazil, mainly due to the currently existing restrictions
on the circulation and gathering of people, the Shareholders’ Meeting will be exclusively held via digital means,
reason why the shareholder may only participate:
(a) via Voting Bulletin,
provided that detailed instructions on the documentation required for remote voting are contained in the Bulletin that may be accessed
on the above websites; and
(b) via Digital
Platform, in person or by a proxy duly appointed under the terms of Article 21-C, Paragraphs 2 and 3 of CVM Normative
Instruction No. 481, in which case the Shareholder may: (i) simply attend AGO, whether or not he has sent the Voting
Bulletin; or (ii) participate and vote at AGO. It should be
noted that for the Shareholder who has already sent the Voting Bulletin and intents to vote at the Meeting via Digital Platform,
all voting instructions received by means of the Voting Bulletin will be disregarded.” (Emphasis added)
Paragraph 3. The company may require
that the shareholder who intends to participate via electronic system, pursuant to Article 21-C, II, deposit the documents listed
in paragraph 1 within two (2) days before the date in which the meeting is to be held.”
[10]
EIZIRIK, Nelson. A Lei das S/A Comentada – artigos 80 ao 130, Vol. II SP: Quartier Latin, 2015, p. 313.
In view of the foregoing, there
is no legal impediment to holding the concerned shareholders’ meeting in an exclusively virtual format.
With
regard to the opening of AGO, Article 125[11] of
LSA establishes that the meeting is opened in the first call with the attendance of shareholders representing at least 1/4 of the capital
with voting rights and, on second call, any number thereof.
In
this regard, it should be noted that opening quorum is different from the deliberation quorum (Articles 129[12]
and 136[13]
of LSA). The first is the minimum number of shareholders that the law establishes
for the accomplishment of the bidding process, and the second stands as the minimum number of votes required to approve certain
matters and is therefore a requirement for the validity of the deliberations.
[11]
Article 125. Subject to the exceptions provided for by law, the shareholders' meeting shall be convened,
at first call, with the presence of shareholders representing at least 1/4 (one fourth) of the voting capital stock; and, on second
call, it shall be opened with any number.
Sole Paragraph.
Non-voting shareholders may attend the shareholders’ meeting, and discuss the matter referred for deliberation.
[12]
Article 129. The resolutions of the shareholders’ meeting, except for
the exceptions provided by law, shall be taken by absolute majority of votes, not counting blank votes.
[13]
Article 136. The approval of shareholders representing at least one-half of the voting shares is required
if a higher quorum is not required by the company’s Articles of Incorporation, and whose shares are not admitted to trading
on stock exchange or over-the-counter market, for a deliberation on:
I - the creation of preferred
shares or class increase of existing preferred shares, without proportion to the other classes of preferred shares, unless already
established or authorized by the Articles of Incorporation;
II - change in the preferences,
advantages and conditions of redemption or amortization of one or more classes of preferred shares, or creation of a new class
of higher preference;
III - reduction of the
mandatory dividend;
IV - consolidation of
the company, or its merger into another one;
V - participation in
a group of companies (Article 265);
VI - change of the corporate
purpose;
VII - end of the company’s
liquidation status;
With regard to the deliberation quorum,
it should be noted that, as a general rule, the LSA, in Article 129, established the majority principle while setting forth in
the head provision that the deliberations shall be taken by absolute majority of votes of the attending shareholders, not counting
blank votes, that is, those that do not contain any statement. Thus, the deliberations taken at a shareholders’ meeting regularly
called and opened, are binding on all shareholders, even absent or dissenting.
With
regard to the availability of documentation, pursuant to Article 133 of LSA, the managers should report, until one month before
the date set for the AGO, for notices published in the manner set forth in Article 124, that the documents provided for in its
head provision are available to shareholders, provided that such documents, except for the opinion of the fiscal board, and other
documents connected to matters included in the agenda[14],
shall be published within a period of not more than five (5) days before the date set for the publication of the
notices, when such documents are published up to one month before the date set for the holding of Shareholders’ Meeting.
It should be noted that failure to publish the notices or failure to comply with the deadlines referred to in Article 124 of LSA
may be remedied by the attendance at the Shareholders’ Meeting of all shareholders, but, however, publishing the documents
prior to the Shareholders’ Meeting is mandatory.
VIII - establishment
of the participation certificates;
IX - company’s
spin-off;
X - company’s dissolution.
Paragraph 1. In the cases
of items I and II, the effectiveness of the deliberation depends on prior approval or ratification, over a non-extendable term
of one year, by holders of more than half of each class of preferred shares impaired, gathered at a special meeting convened by
the managers, and instituted according to the formalities of said Law.
Paragraph 2. The Brazilian
Securities and Exchange Commission may authorize the reduction of the quorum provided for in this article in the case of publicly-held
company with dispersed shares in the market, whose 3 (three) last shareholders’ meetings have been held with the presence
of shareholders representing less than half of the voting shares. In this case, the authorization of the Brazilian Securities and
Exchange Commission shall be mentioned in the call notice and the deliberation with a reduced quorum may only be adopted on a third
call.
Paragraph 3. The provisions
of paragraph 2 of this article shall also apply to the special shareholders’ meetings referred to in paragraph 1.
Paragraph 4. It shall
be included in the minutes of the general meeting that deliberate on the matters under items I and II, if there is no previous
approval, that the resolution shall only be effective after its ratification by the special shareholders’ meeting set forth
in Paragraph 1.
[14]At
this point, we bring up the understanding of Modesto Carvalhosa, according to which “although the company is required
to disclose, prior to the shareholders’ meeting, the documents referred to in new items IV and V, Law 10303, of 2001,
in the new paragraph 3 of this Article 133, exempts these documents from the publication before the shareholders’ meeting
is held. Therefore, shareholders interested in analyzing these documents shall not be able to count on their publication before
the shareholders’ meeting, and they should arrange a copy at the places stated by the company in the published notices. Nevertheless,
the published notices should mention the opinion of the Fiscal Board and the existence of dissenting votes, if any, as well as
other documents referring to the matters included in the agenda.” (emphasis added.)
In addition, the Brazilian Securities
and Exchange Commission (CVM) issued CVM Instruction No. 481/2009, which established requirements related to the disclosure of
information that must be provided by management to shareholders prior to the holding of shareholders’ meetings of publicly-held
companies, mainly Articles 6 and 9 of said instruction[15].
[15]
“Article 6 The company should make available to the shareholders, through an electronic system on the CVM web page:
I - information and documents provided
for in the other articles of this Chapter III, and in Chapter III-A; and
II - any other information and documents
relevant to the exercise of the right to vote in the meeting.
Sole Paragraph. The documents and
information should be provided up to the date of publication of the first call notice of the meeting, except if Act 6404 of 1976,
this Instruction or other rule of CVM establish a longer term.
(...)
Art. 9 The company should provide,
not later than one (1) month before the date scheduled for the ordinary shareholders' meeting, the following documents and information:
I - the management’s report
on the corporate business and the main administrative facts of the accounting year then ended;
II – copy of the financial
statements;
III - managers’ comment on
the company’s financial situation, pursuant to item 10 of the reference form;
IV – report of independent
auditors;
V - opinion of the fiscal board,
including dissenting votes, if any; and
VI – the remote voting bulletin,
referred to under Article 21-F.
Sole Paragraph. By the date set
forth in the head provision, the company should also provide the following documents:
I – Standardized Financial
Statements Form - DFP;
It should also be noted that, considering
the items on the agenda of the meetings under analysis, the provisions under Articles[16]
10 and 12 of said Instruction should be met.
1.2. Voting Right
Initially, it is found that Eletrobras’
preferred shares do not grant their holders the right to vote at meetings, according to Article 9[17],
item II of the Company’s Articles of Incorporation[18],
giving it such prerogative only if the Company is in default with the payment of minimum
or fixed dividends, according to Article 111, paragraphs 1 and 2 of LSA[19].
II - proposal for the allocation
of net income for the year that establishes at least the information stated in Annex 9-1-II to this Instruction; and
III – opinion of the audit
committee, if any.”
[16]
Article 10. Whenever a shareholders’ meeting is called to elect managers or members of the fiscal board, the company should
provide:
I - at least the information indicated
in items 12.5 to 12.10 of the reference form, in relation to candidates appointed or supported by management or by controlling
shareholders; and II - the remote ballot paper, in the hypotheses referred to in Article 21-A.
(...)
Article 12. Whenever the shareholders’
meeting is called to set the compensation of the managers, the company shall provide, at least, the following documents and information:
I - the managers’ compensation proposal; and II - the information stated in item 13 of the reference form.
[17] Article 9 - Eletrobras’
shares shall be:
(...)
II - preferred, registered shares
without right to vote in Shareholders’ Meetings.
[18]
“Article 4 - Each ordinary share shall correspond to one vote in the deliberations of the shareholders’ meeting.
Sole Paragraph. Preferred
shares shall not have voting rights, shall be entitled to:
(...)
IV the right to elect and
dismiss a member of the Board of Directors in a separate vote, under the conditions established in Law 6404/76 and its amendments.”
[19]
Article 111. The Articles of Incorporation may fail to grant the preferred shares some of the rights
recognized to the common shares, including voting rights, or grant it with restrictions, subject to the provisions under Article
109.
Paragraph
1. Preferred shares without entitled to voting shall acquire the right to exercise such right if the company, over the period established
in the Articles of Incorporation, does not exceed three (3) consecutive years, fails to pay the fixed or minimum dividends to which
they are entitled, and such right shall be maintained until payment, if such dividends are not cumulative, or until the cumulative
arrears are paid.”
Paragraph
2. In the same hypothesis and under the same condition as in Paragraph 1, preferred shares with restricted voting rights shall
have their limitations on the exercise of that right suspended.
Nonetheless, LSA gives
preferred shareholders special voting rights for seats on the Board of Directors (“CA”) and Fiscal Board
(“CF”), respectively, under the terms of Articles 141[20],
paragraph 4, item “II” and Article 161[21],
paragraph 4, letter “a”. And, in
the case of Government-controlled companies, such as Eletrobras, respectively Articles 239 and 240 of LSA[22].
[20]
Article 141. In the election of directors, shareholders that represent at least 0.1 (one tenth) of the voting share capital, whether
or not provided for in the Articles of Incorporation, are allowed to request the adoption of the multiple voting process, with
each share being warranted as many votes as there are board members, and the shareholder being entitled to cumulate the votes in
a single candidate or to distribute them among several ones.
(…)
Paragraph 4. The right to elect and dismiss a member
and his alternate member of the board of directors, in a separate vote at the shareholders’ meeting, excluding the controlling
shareholder, the majority of the members, respectively: (Wording of Law No. 10303, of 2001)
(…)
II - preferred shares without voting rights or with restricted
voting rights issued by a publicly-held company, representing at least 10% (ten percent) of the capital, which have not exercised
the right provided for under the Articles of Incorporation, in accordance with Article 18.
[21]
Article 161. The company shall have a fiscal board and the Articles
of Incorporation shall provide for its operation, either permanently or in the accounting years in which it is established upon
request of shareholders.
(…)
4 In the establishment of the fiscal board, the following
rules shall be met:
a) holders of preferred shares without voting rights,
or with restricted voting rights, shall be entitled to elect, in a separate vote, 1 (one) member and respective alternate; minority
shareholders shall have the same right, provided that they jointly represent 10% (ten percent) or more of the voting shares;
[22]
Article 239. Government-controlled companies shall have a Board of Directors, with the minority having the right to elect one of
the directors, if more are not available to them through the multiple vote process.
Article 240. The functioning of
the fiscal board shall be permanent in the government-controlled companies; one of its members, and its alternate, shall be elected
for the minority common shares, and the other one for the preferred shares, if any.
In this context, in view of the
end of the terms of office of the Fiscal Board’s members, the Management Proposal explains that:
" • Shareholders
that hold Preferred shares:
They will be entitled
to voting exclusively in the elections, separately, for the vacancies in the Board of Directors and in the Fiscal Board, however,
they may not separately participate in the election for the vacancies in the Board of Directors and in the Fiscal Board earmarked
for shareholders holding common shares.
The statement of Nelson Eizirik[23]
regarding the quorum for the election in question is important pertaining to Government-Controlled Companies, such as Eletrobras,
in view of Article 240 of LSA:
“ (...) Unlike in
other companies, a minimum percentage of shares is not required for a government-controlled company to appoint representatives
of the holders of common and preferred shares.”
Furthermore, it should be noted
that CVM Instruction No. 481/2009, in its ANNEX 21-L-I, when setting a minimum percentage of a certain type of share, does so only
for the inclusion of candidates in the Distance Voting Bulletin, as per the prerogative warranted to the Regulator by Article 121,
sole paragraph of LSA. However, at the time of the meeting, as explained above, the provisions of Article 240 of the Corporations
Act shall be applied, that is, the appointment and election shall
be made without the requirement of any quorum, but the holding of 1 (one) preferred share.
[23]
A Lei das S/A Comentada – artigos 206 ao 300, Vol. IV, SP: Quartier Latin, 2015, p. 214.
1.3. Remote Voting
CVM, by amending CVM Instruction
481/2009, regulated the remote voting provided for in the sole paragraphs of Articles 121 and 127 of LSA, introducing into the
Brazilian capital market a tool for distance voting referred to as ballot paper.
In this vein, the ballot paper
for remote voting became mandatory[24]for publicly traded companies
with shares listed on the stock exchange.
Therefore, said companies are
required to make available to their shareholders the remote voting ballot paper up to one month prior to the date scheduled for
the ordinary shareholders’ meeting and the shareholders’ meetings convened to deliberate on the election of members
of the Board of Directors and Fiscal Board, abiding by the provisions of CVM Instruction 561/2015, without prejudice to distance
voting being used for shareholders’ meetings convened to deliberate on other matters, at the discretion of the company.
[24]
Article 21-A. The shareholder may exercise the vote in shareholders’ meetings
by completing and delivering the ballot paper.
Paragraph 1. Up to 1 (one) month
before the date set for the meeting, the company should make the remote ballot paper available:
I
– in the event of the shareholders’ meeting;
II – whenever the shareholders’
meeting is called to deliberate on the election of members:
a) of the fiscal board; or
b) of the board of directors, when
the election becomes necessary due to vacancy of the majority of the positions of the board, by vacancy in a board that has been
elected by multiple vote or to fill the vacancies dedicated to the separate election provided for under Articles 141, Paragraph
4 and 239 of Act 6404/1976; and
III - whenever a special shareholders’
meeting is called to occur on the same date scheduled for the shareholders’ meeting.
Paragraph 2. Without prejudice to
the provisions of item II of Paragraph 1, the company may allow the remote ballot paper at any special shareholders’ meeting,
abiding by the terms and conditions established in this Chapter III-A, except for Section IV.
Therefore, in light of CVM Instruction
481/2009, Eletrobras should make available to its shareholders the Remote Voting Bulletin, pursuant to the provisions under Article
21-F of said Instruction.
It should be noted that the OFFICIAL
LETTER/CVM/SEP/ No. 2/2020, issued by the CVM’s Superintendence of Corporate Relations (SEP), in its item 7.1.6, establishes
that “The adoption of remote voting in a given shareholders’ meeting should always cover all matters included in
the agenda, regardless of their presence or not in the list provided for under Article 21-A of CVM Instruction 481/09, as provided
for under Article 21-F, paragraph 1, item I of said Instruction.”
2. Business Object of Shareholders’
Meeting
In accordance with Article 131
of LSA[25], the Shareholders’ Meeting is ordinary when
it has as its object the matters listed in the exhaustive list in Article 132 of the same legal provision, and special in the other
cases[26].
In addition, AGO must be held annually,
in the first four months following the end of the accounting year, to deliberate privately on the matters listed in the items of
Article 132 of LSA, transcribed below:
“I
- take the accounts of the managers, examine, discuss and vote the financial statements;
II
- resolve on the allocation of the net income for the year and the distribution of dividends;
III
- elect the managers and members of the fiscal board, when applicable;
[25]
Article 131. The shareholders’ meeting is ordinary when it deals with the matters provided for
in article 132, and special in the other cases.
[26]
Article 132. Annually, in the first four (4) months following the end of the accounting year, there
shall be one (1) shareholders’ meeting to: I - take the accounts of the managers, examine, discuss, and vote on the financial
statements; II - resolve on the allocation of net income for the year and the distribution of dividends; III - elect the managers
and members of the fiscal board, when applicable; IV - approve the inflation adjustment of capital (Article 167) .
IV
- approve the inflation adjustment of the capital (Article 167)."
Once the general questions hereunder
are resolved, we will review the legal aspects of the Call for Tenders and draft Management Proposal.
As for item 1, which refers
to the managers’ accountability and deliberation of the Financial Statements, this is a matter that reflects the
exercise per se, by the shareholders, of the essential right to inspect the management of corporate businesses, by virtue of
Article 109, III of LSA[27]. It essentially concerns the
accountability of managers, according to which they inform the shareholders that elected them about the equity situation and
result of the previous accounting year, in a reliable manner and abiding by all accounting and corporate regulations. The
approval of the managers’ proposal, at the AGO, has the capacity to release them from any responsibility, as well as
the Fiscal Board’s members that have expressed a favorable opinion[28],
except in cases of error, fraud, willful misconduct or simulation[29].
It should be noted, however, that the matter has a predominantly
economic-financial nature, and should be evaluated by the competent areas of the company.
[27]
Article 109. Neither the Articles of Incorporation nor the Shareholders’
Meeting may deprive the shareholder of the rights to:
(...)
III
- inspect, in the manner provided for under this Law, the management of corporate businesses;
[28]
In this regard, the warnings made by Nelson Eizirik are relevant in the sense that managers’ accountability unfolds in different
expository pieces: the financial statements, “in literal language”, and the management report, “in cursive language”,
being certain that the Shareholders’ Meeting may approve the first if found in compliance with accounting and corporate rules,
but reject the second for considering the management of social affairs somewhat reckless and vice versa (in this respect, see A
Lei das S/A Comentada – artigos 80 ao 137, Vol. II, SP: Quartier Latin, 2015, pp. 433-444).
[29]
Article 134. Once the shareholders’ meeting is opened, if required by
any shareholder, the documents referred to in Article 133 and the opinion of the fiscal board, if any, shall be read, and submitted
to the board for discussion and voting.
(...)
Paragraph
3. The unreserved approval of the financial statements and accounts relieves managers and auditors from liability, except for error,
fraud, willful misconduct or simulation (Article 286).
With
regard to item 2, which provides for the proposal of the Company’s management for the allocation of the results for the year,
pursuant to Article 192[30] of
LSA, it is incumbent upon the management bodies to present to AGO, together with the financial statements, a proposal on the allocation,
in full[31],
to be made to the net income for the year.
Regarding dividends, the provisions
under Article 202[32] of LSA, which establishes that mandatory
dividends are those set forth under the Articles of Incorporation and that, in the
event there is no such provision in said Articles, the mandatory dividend cannot be less than 25% (twenty-five percent) of the
adjusted net income, under the terms of said article.
[30]
Article 192. Jointly with the financial statements for the year, the company’s management bodies shall submit to the shareholders’
meeting, subject to the provisions of Articles 193 to 203 and the Articles of Incorporation, a proposal on the allocation to be
made to the net income for the year.
[31]
As provided for by Article 202, Paragraph 6 of LSA, according to which profits which are not allocated in Reserves should be distributed
as dividends:
[32]
Article 202. Shareholders are entitled to receive as a mandatory dividend, in each accounting year, the portion of the profits
established in the Articles of Incorporation or, if this is omitted, the amount set in accordance with the following rules:
I - half of the net income
for the year decreased or increased by the following amounts:
a) amount earmarked for
the constitution of the legal reserve (Article 193); and
b) amount earmarked for
the creation of the contingency reserve (Article 195) and reversal of the same reserve created in previous years;
II - the payment of the
dividend established pursuant to item I may be limited to the amount of net income for the year that has been realized, provided
that the difference is recorded as an unrealized profit reserve (Article 197);
III - profits recorded
in the unrealized profit reserve, when realized and if they have not been absorbed by losses in subsequent years, shall be added
to the first dividend stated after the realization.
Paragraph 1. The Articles
of Incorporation may establish the dividend as a percentage of profit or capital, or set other criteria to ascertain the said dividend,
provided that they are accurately and thoroughly regulated and do not subject minority shareholders to the discretion of the management
bodies or the majority.
Paragraph 2. When the
Articles of Incorporation does not provide for such matter and the shareholders’ meeting decides to change it to introduce
a rule on the matter, the mandatory dividend cannot be less than 25% (twenty-five percent) of the adjusted net income under the
terms of item I of this Article.
Paragraph 3. The shareholders’
meeting may, provided that there is no opposition from any attending shareholder, decide on the distribution of a dividend lower
than the mandatory amount, under the terms of this Article, or on the retention of the entire net income, in the following companies:
Therefore, the Articles of Incorporation
of the Company wherein the Shareholders’ Meeting shall be held shall be reviewed, for each case, when its agenda includes
the distribution of dividends, especially concerning any provision for priority in payment, in the case of preferred shares.
This is because, in addition to
the mandatory dividends, the Articles of Incorporation of the Company may provide for priority in the distribution of dividends
to preferred shareholders, which can be set, minimum or cumulative, according to Article 17, Paragraph 4, of LSA[33].
In this regard, the draft Management
Proposal states that:
“In the case of
the Company, Article 56, Paragraph 1 of the Articles of Incorporation establishes that this installment shall be equal to twenty-five
percent (25%) of the net income ascertained for the year, adjusted pursuant to the Brazilian Corporations Act. The same provision
is included in the Company’s Dividend Policy.
I - publicly-held companies
exclusively for raising funds through debentures not convertible into shares;
II - closely-held companies,
except those controlled by publicly-held companies that do not fit the condition provided for in item I.
Paragraph 4. The dividend
provided for in this Article shall not be mandatory in the accounting year in which the management bodies inform the shareholders’
meeting that it is incompatible with the company’s financial situation. The fiscal board, if in operation, shall issue an
opinion on such piece of information and, in the case of the publicly-held company, its managers shall forward to the Securities
and Exchange Commission, within 5 (five) days of the shareholders’ meeting, a reasoning concerning such information transmitted
to the meeting.
Paragraph 5. Profits
that are no longer distributed under the terms of Paragraph 4 shall be recorded as a special reserve and, if not absorbed by losses
in subsequent years, shall be paid as dividends as soon as the company’s financial situation so allows.
Paragraph 6. The profits
not allocated under the terms of Articles 193 to 197 shall be distributed as dividends.
[33]
Article 17. Preferences or advantages of preferred shares may consist of:
(...)
Paragraph 4. Unless otherwise established
under the Articles of Incorporation, the priority dividend is not cumulative, the share with a fixed dividend does not have interest
in the remaining profits, and the share with a minimum dividend has interest in the profits distributed on equal terms with the
common shares, after ensuring them a dividend equal to the minimum.
In the accounting year
2020, the parent company's net income was BRL 6,338,688 thousand, which after the adjustments
of legal reserve (-BRL 316,934 thousand) and the addition of the prescribed dividends (+BRL 4,044 thousand) and Revaluation
Reserve (+BRL 2,757 thousand), totaled an adjusted net income of BRL 6,028,555 thousand. Thus, in view of the provisions
under the law and under the Articles of Incorporation on the mandatory dividend, the portion corresponding to twenty-five percent
(25%) of the adjusted net income for the accounting year 2020, equivalent to BRL 1,507,139
thousand should be distributed to the Company's shareholders, subject to the provisions of Paragraphs 1 and 2 of Article 10
of the Company's Articles of Incorporation.
In 2018, due to the
Company's financial incapacity, a special retained dividend reserve (Article 202, Paragraphs 4 and 5 of Law 6404) was
restricted in the amount of Two Billion, Two Hundred and Ninety-One Million, Eight Hundred and Eighty-Nine Thousand Brazilian
Reais (BRL 2,291,889), and duly approved by the 59th Shareholders’ Meeting dated April 29, 2019. On January
29, 2021, after a reassessment of the Company's capacity, Eletrobras' Board of Directors approved, under the terms proposed
by the Executive Board, the payment of the total amount of Two Billion, Two Hundred and Ninety-two Million, Eight Hundred and
Eighty-eight Thousand, Six Hundred and Ninety-two Brazilian Reais and Forty-eight Cents (BRL 2,291,888,692.48), as
intermediate dividends for the year 2021, due to the reversal of the entire balance of the special reserve for retained
dividends, under the terms of Paragraphs 4 and 5 of Article 202 of Law 6404/1976 (“Intermediate Dividends”). The
payment was made, on February 19, to the preferred and common shareholders, abiding by the priority in the payment of
preferred shares dividends established in Paragraphs 1 and 2 of Article 10 of the Articles of Incorporation, as well as the
percentage of ten percent (10%) more for each preferred share in relation to each common share, also provided
for in Paragraph 4 of said Article 10.
Considering that the annual
minimum dividend payment obligation to preferred shareholders, established in Paragraphs 1 and 2 of Article 10 of the Articles
of Incorporation, was fully complied with in 2021, any dividend distribution that may be stated and paid, in the year 2021, should
only meet the provisions of Paragraphs 3 and 4 of Article 10 of the Articles of Incorporation, which establishes that, after the
minimum dividends are guaranteed to the preferred shares, each preferred share shall be entitled the right to dividends, per share,
of at least ten percent (10%) higher than those allocated to each common share.
In view of the foregoing,
Management proposes the following allocation of income for the accounting year ended December 31, 2020:
Calculation of Mandatory Dividends for 2020 and Allocation
|
(Thousand Brazilian Reais)
|
Net Income for the Year
|
6,338,688
|
(-) Legal Reserve (5% of Net Income)
|
(316,934)
|
(+) Realization of Revaluation Reserve
|
2,757
|
(+) Prescribed Dividends
|
4,044
|
(=) 2020 Adjusted Net Profit
|
6,028,555
|
(-) Mandatory Dividend of 2020 (25% of adjusted net profit)
|
(1,507,139)
|
(=) 2020 Balance to Allocate
|
4,521,416
|
(+) Retained earnings
|
182,523
|
(=) Total Balance to Allocate
|
4,703,939
|
(-) Investment Reserve created by the Articles of Incorporation (50% of Net Profit for 2020)
|
(3,169,344)
|
(-) Reserve created by the Articles of Incorporation of Assessments and Designs (1% of net profit of 2020)
|
(63,387)
|
(-) Retention of Profits (Article 196 LSA – Capital Budget)
|
(1,471,208)
|
Closing balance
|
0
|
Reserve of Capital Budget
Regarding the Retention
of profits, for the purposes of capital budgeting, as provided for in Article 196 of the Brazilian Corporations Act, the Company
explains that, on February 23, 2021, Provisional Measure 1031 was issued, which provides for the privatization of Eletrobras. The
substantiation of this scenario, as disclosed by the Company, by means of the Material Fact of December 23, 2020, which provided
for 2021-2025 Business and Management Steering Plan, alters the Company's investment capacity. Considering that the Provisional
Measure needs to be converted into Law, and that privatization depends on approval by the National Congress, the Company's investment
level, in the long run, implies some degree of uncertainty. Therefore, the Company decided to reevaluate the decision to state
the capital budget on a multi-annual basis, as occurred at the 60th Shareholders’ Meeting, and to resume annual
statement of the capital budget.
For the year 2021, the
Company revised its capital budget and the available sources, in addition to its cash availability, to meet the obligations already
incurred, risk of payment of legal expenses, especially pertaining to compulsory loans, investments, amortizations of debts, and
disbursements to be made in its subsidiary Eletronuclear, for the purpose of resuming the construction of Angra 3 Nuclear Power
Plant, and considered the proposed retention of BRL 1,471,208 thousand appropriate, to the capital budget reserve provided
for in Article 196 of the Brazilian Corporations Act, inasmuch as its investments in Angra 3, added to the debt amortizations above,
already discounted from amounts to be raised from other sources, amount to about BRL 4.4 billion.
(...)
• As
provided for in Article 56, Paragraph One, of the Articles of Incorporation, twenty-five percent (25%) of the adjusted net income
for the accounting year ended on December 31 is to be paid as mandatory dividends. Therefore, Management proposes that the above
mandatory dividend amounts of BRL 1,507,139 thousand be declared and paid until December 31, 2021, as provided for in paragraph
three of Article 205 of the Brazilian Corporations Act.”
With regard to the constitution
of reserves, Nelson Eizirik advocates that:
“Reserves are
made up of resources earmarked for a specific purpose. They are part of the net income that, due to a legal provision, provision
under the Articles or meeting resolution, is retained in the company (....).
The Corporations Act
establishes 2 (two) types of reserves: (i) capital reserve; and (ii) profit reserve.
(....)
The Corporations Act
provides for 7 (seven) different types of profit reserves, namely: (i) legal reserve; (ii) reserves under the Articles of Incorporation
(article 194); (iii) contingency reserve (article 195); (iv) reserve for tax incentives (article 195-A); (v) unrealized profit
reserve (article 197); (vi) retention of profits (article 196) and (vii) special reserve for mandatory undistributed dividends
(article 202, paragraph 5). The first is mandatory and the other ones are optional, as they depend on a provision under the Articles
(reserve under the Articles of Incorporation) or on the resolution of the shareholders’ meeting (reserve for contingencies,
reserve for tax incentives, retention of profits, reserve for unrealized profits and special reserve. ). ”
The legal reserve is that provided
for under Article 193[34] of LSA, which establishes that 5%
of the net income for the year will be allocated to the constitution of the legal reserve, which will not surpass 20% of the capital.
According to the law, the purpose of said reserve is to ensure the integrity of the capital and may only be used to offset losses
or increase capital, only allowing the company to stop constituting it in the year in which the balance of this reserve, plus the amount of
capital reserves referred to in Paragraph 1 of Article 182[35]
of Law 6404/76, surpasses 30% of the capital.
[34]
Article 193. Out of the net income for the year, five percent (5%) will be applied before any other allocation, in the constitution
of the legal reserve, which shall not exceed twenty percent (20%) of the capital stock.
Paragraph 1. The company
may stop constituting the legal reserve in the year in which the balance of said reserve, plus the amount of the capital reserves
referred to in paragraph 1 of Article 182, surpasses 30% (thirty percent) of the capital.
Paragraph 2. The purpose
of the legal reserve is to ensure the integrity of the capital and may only be used to offset losses or increase capital.
[35]
Article 182. The share capital account shall specify the amount subscribed
and, by deduction, the portion not yet realized.
Paragraph 1. Accounts that record
the following will be classified as capital reserves:
a) contribution of the subscriber
of shares that exceeds the nominal value and part of the issue price of shares with no par value that exceeds the amount used to
form the share capital, including in the cases of conversion into debenture stock or participation certificates;
b) the proceeds from the sale of
participation certificates and subscription bonus;
c) (revoked);
d) (revoked).
Article 194[36]
of Law LSA provides for the reserve under the Articles of Incorporation, which may only be created if the Articles of Incorporation
accurately and thoroughly establishes its purpose; to establish the criteria to determine the annual portion of the net profits
that will be allocated to its constitution; and establish the maximum reserve limit.
Reserves deliberated on meetings
are those provided for in Articles 195 to 197[37] of LSA, that
is, Contingency Reserves; Tax Incentive Reserve; Retention of Profits; and Unrealized Profit
Reserve. According to Article 198 of LSA “the allocation of profits to constitute the reserves referred to in Article
194 and the retention under the terms of Article 196 cannot be approved, in each year, to the detriment of the distribution of
the mandatory dividend (Article 202).” Article 199[38],
in turn, establishes the Company’s capital as the Limit of the Profit Reserve Balance.
[36]
Article 194. The Articles of Incorporation may create reserves provided that, for each one:
I - it accurately and
thoroughly appoints its purpose;
II - it sets the criteria
for determining the annual portion of net profits that will be allocated to its constitution; and
III - it establishes
the maximum reserve limit.
[37]
Article 195. The shareholders’ meeting may, at the proposal of the management bodies, allocate part of the net income to
the creation of a reserve with the purpose of offsetting, in a future year, the decrease in profit resulting from a loss deemed
probable, the amount of which can be estimated.
Paragraph 1. The management
bodies’ proposal shall establish the cause of the expected loss and justify, with the prudent reasons that recommend it,
the constitution of the reserve.
Paragraph 2. The reserve
shall be reversed in the year in which the reasons that justified its constitution cease to exist or in which the loss occurs.
Art. 195-A. The shareholders’
meeting may, at the proposal of the management bodies, allocate to the tax incentive reserve the portion of the net income arising
from donations or government subsidies for investments, which may be excluded from the tax base of the mandatory dividend (item
I of the head provision of the Article 202 of this Law).
Art. 196. The shareholders’
meeting may, upon proposal of the management bodies, resolve to retain a portion of the net income for the year provided for in
the capital budget previously approved by said meeting.
Paragraph 1. The budget,
submitted by the management bodies with the justification for the proposed profit retention, shall include all sources of funds
and capital investments, fixed or current, and may have a duration of up to 5 (five) years, except in the case of execution of
an investment project for a longer period.
Paragraph 2. The budget
may be approved by the shareholders’ meeting that decides on the balance sheet for the year and reviewed annually, when it
lasts longer than one accounting year.
Art. 197. In the year
wherein the amount of mandatory dividend, calculated under the terms of the Articles of Incorporation or Article 202, exceeds the
realized portion of net income for the year, the shareholders’ meeting may, upon proposal of the management bodies, allocate
the excess to the constitution of unrealized profit reserve.
Paragraph 1. For the
purposes of this Article, the portion of net income for the year that exceeds the sum of the following amounts is considered realized:
I - the positive net
result of equity accounting (Article 248); and
II – the net profit,
income or gain on operations or the book of assets and liabilities at market value, whose financial realization period occurs after
the end of the following accounting year.
Paragraph 2. The unrealized
profit reserve may only be used to pay the mandatory dividend and, for the purpose of item III of Article 202, the unrealized profits
of each accounting year that are the first to be realized in cash will be considered as part of the reserve.
[38]
Article 199. The balance of profit reserves, except for contingencies, tax incentives and unrealized profits, cannot exceed the
capital. When this limit is reached, the meeting shall deliberate on the application of the excess in the payment or in the increase
of the capital or in the distribution of dividends.
Article 196 of LSA establishes
that the retention of a portion of the profits should be proposed by the management bodies, to be deliberated by the shareholders at the Shareholders’
Meeting, and the law establishes that the proposal be based on a capital budget, which can be approved by the very AGO that resolves
on the balance sheet for the year. The only reservation is that retained earnings should be allocated after deducting the amount
sufficient to pay the mandatory dividend.[39]
[39]
CARVALHOSA, Modesto. Comentários à Lei de Sociedades Anônimas. v.3. tomo II. São Paulo: Saraiva,
2003, p. 752.
With regard to the special reserve,
provided for under Article 202[40], Paragraphs
4 e 5 of LSA, the Management Proposal informs that the said reserve was reversed by decision of the Eletrobras’ Board
of Directors, which approved, on January 29, 2021, its payment, as intermediate dividends, on February 19, to the preferred and
common shareholders.
Still regarding the reversal of
the special undistributed dividend reserve, reference is made to the external legal opinion expressed by Professor Nelson Eizirik,
attached to the draft Management Proposal.
Regarding the revaluation reserve,
it should be noted that it was extinguished by Law 11638/2007 and replaced by the “equity valuation adjustment,” according
to the amendment introduced in Paragraph 3 of Article 182[41]
of LSA.
[40]
Article 202. Shareholders are entitled to receive as a mandatory dividend,
in each accounting year, the portion of the profits established in the Articles of Incorporation or, if this is omitted, the amount
set in accordance with the following rules:
(...)
Paragraph
4. The dividend provided for in this Article shall not be mandatory in the accounting year in which the management bodies inform
the shareholders’ meeting that it is incompatible with the company’s financial situation. The fiscal board, if in operation,
shall issue an opinion on such piece of information and, in the case of the publicly-held company, its managers shall forward to
the Securities and Exchange Commission, within 5 (five) days of the shareholders’ meeting, a reasoning concerning such information
transmitted to the meeting.
Paragraph
5. Profits that are no longer distributed under the terms of Paragraph 4 shall be recorded as a special reserve and, if not absorbed
by losses in subsequent years, shall be paid as dividends as soon as the company’s financial situation so allows.
[41]
Article 182. The share capital account shall specify the amount subscribed
and, by deduction, the portion not yet realized.
(...)
Paragraph
3. The entries of increases or decreases in value attributed to assets and liabilities, as a result of their valuation at
fair value, will be classified as equity valuation adjustments, as long as they are not ascertained as income for the year under
the accrual basis regime, in the cases provided for in this Law or in rules issued by the Securities and Exchange Commission, based
on the accrual basis conferred by paragraph 3 of Article 177 of this Law.
However, Article 6 of Law No. 11.638
/ 2007 establishes that “The balances existing in the revaluation reserves shall be held until
their actual realization or reversed by the end of the accounting year in which this Law enters into force.” In this
way, a conclusion may be drawn that the realization of the reserve under review meets the applicable legal precepts.
Furthermore, it should be noted
that, according to Article 205[42]of LSA, the company
shall pay the dividend of registered shares to the person that, on dividend statement date, is stated as the owner or beneficial
owner of the share.
Therefore, the proposal of the
Company’s management on the allocation of the results for the year, in the opinion of this PRJC, is in line with the applicable
laws, with no legal hindrance to its deliberation, however, this Department refrains from expressing an opinion on the values proposed,
since they are devoid of a legal nature.
With regard to Item 3, the election
of the members of the Board of Directors, according to Article 146 head provision[43]
of LSA, which natural persons may only be elected to hold this position if they fulfill the provisions under Article 147[44]
of this same legal provision, which deals with the requirements for
[42]
Article 205. The company shall pay the dividend of registered shares to the
person that, on dividend statement date, is stated as the owner or beneficial owner of the share.
[43]
Article 146. Natural persons may be elected to members of the management bodies, and the officers shall reside in Brazil.
[44]
Article 147. When the law requires certain requirements for the investiture in a company management
position, the shareholders’ meeting may only elect persons who have produced the necessary evidence, from which an authentic
copy will be filed at the registered office.
Paragraph
1. Persons shall be disqualified for management offices, or those impeded by special law or convicted of bankruptcy, prevarication,
bribery, bribery, embezzlement, embezzlement, against the popular economy, public faith or Property or the criminal penalty that
prevents, even temporarily, access to public office.
Paragraph
2. Persons shall also be disqualified for management offices of public-held companies if established as that by an act of the Brazilian
Securities and Exchange Commission.
Paragraph
3. The director should have a trustworthy reputation, and except when exempt by a shareholders’ meeting, there may not
be election of those who:
I
- hold positions in companies that may be considered competitors in the market, especially in advisory board, board of directors
or fiscal boards; and
II
- has conflict of interest with the company.
Paragraph 4. Evidence
of compliance with the conditions set forth in paragraph 3 shall be made by means of a declaration signed by the director elected
under the terms established by the Brazilian Securities and Exchange Commission (CVM), taking into consideration to the provisions
under Articles 145 and 159, under the penalties of the law.
investiture in management positions
of companies, as well as ineligibility hypotheses, under the terms defined by CVM Instruction 367, dated May 29, 2002[45].
[45]
Article 2 Upon taking office, the board member of a publicly-held company shall, in addition to signing an Oath of Office, produce
a declaration, made under the penalties of the law and in a proper instrument, which shall be filed at the company’s headquarters,
that:
I
- is not prevented by special law, or condemned for bankruptcy crime, of prevarication, bribe or bribery, concussion, embezzlement,
crime against the popular economy, public faith or property, or criminal penalty that prevents, even if temporarily, his/her access
to public office, as provided for in paragraph 1 of Article 147 of Law No. 6404/76;
II
- the temporary suspension or disqualification imposed by the Securities and Exchange Commission, which makes it ineligible for
management positions as a publicly-held company, as set forth in Paragraph 2 of Article 147 of Law No. 6404/76;
III
- meets the requirement of unblemished reputation established by paragraph 3 of Article 147 of Law No. 6404/76;
IV
- does not occupy a position in a company that may be considered a competitor of the company, and does not have or represent an
interest conflicting with that of the company, in the form of items I and II of paragraph 3 of Article 147 of Law No. 6404/76.
Paragraph
1. For the purposes of item IV, a person who cumulatively does the following is presumed to have conflicting interest with those
of the company:
I
- was elected by a shareholder who also elected a board member in a competitor; and
II
- is subordinate to the shareholder who elected him.
Paragraph
2. The assumption referred to in item I of the previous paragraph is only effective if the board member of a competing company
is elected only with the votes of the shareholder, or if such votes alone are sufficient for his election.
Paragraph
3. The impossibility of the statement referred to in item IV does not prevent the investiture, imposing, in this case, that the
shareholders’ meeting expressly exempts the person so elected from such requirement, and that the statement contain detailed
clarifications on the reasons that prevent the statement mentioned above.
Paragraph 4. The Oath of Office referred to in the head provision
shall contain, under penalty of nullity, the indication of at least one domicile in which the manager will receive service of process
and subpoenas in administrative and judicial proceedings related to acts of his management, which will be considered fulfilled
through delivery at the address indicated, which can only be changed by means of written communication to the company.
Accordingly, in accordance with
the aforementioned regulations, the board member, upon taking office, shall, in addition to signing the Oath of Office, submit
the statements provided for in CVM Instruction.
Additionally, with the advent of
Law 13303/2016, it is necessary that the members of the Board of Directors of state-owned companies, as is the case of Eletrobras,
meet the requirements set forth in Article 17[46] of such Law.
[46]
Article 17. The members of the Board of Directors and the nominees for the positions of officer, including President, General Officer
and Chief Executive Officer, shall be chosen among citizens of unimpeachable reputation and of well-known knowledge, and one of
the requirements of letters “a,” “b,” and "c” of item I and, cumulatively, the requirements
of items II and III:
I - having professional experience
of at least:
a) 10 (ten) years, in the public
or private sector, in the area of business of the government-owned company and government-controlled company or in
an area related to that for which they are appointed in a senior management office; or
b) 4 (four) years occupying at least
one of the following positions:
1. position of management or senior
management in a company of similar size or corporate purpose to that of a government-owned company or government-controlled company,
with the position of senior management being understood as being situated in the two (2) highest non-statutory hierarchical levels
of company;
2. a commission or trust position
equivalent to DAS-4 or higher, in the public sector;
3. position of lecturer or researcher
in areas of business of the government-owned company or government-controlled company;
c) 4 (four) years of experience
as a self-employed professional directly or indirectly engaged in the area of business of the government-owned company
or government-controlled company;
II - having an academic background
consistent with the position for which he/she was appointed; and
III - not falling under the cases
of disqualification provided for in the letters of item I of the head provision of Article 1 of the Complementary
Law No. 64, dated May 18, 1990, as amended by Complementary Law No. 135, dated June 4, 2010.
Paragraph 1. The statute of government-owned
company, government-controlled company, and its subsidiaries may provide for the contracting of civil liability insurance by the
managers.
Paragraph 2. Appointing the following
to the Board of Directors and executive board is forbidden:
I - a representative of the regulatory
body to which the government-owned company or government-controlled company is subject, as Minister of State, Secretary of State,
Municipal Secretary, holder of a position, without permanent connection with the public service, of a special nature or senior
management and advice in the public administration, of statutory officer of political party, and holder of an office in the Legislative
Branch of any federation entity, even if under a license from such office;
II - a person who has acted for
the last 36 (thirty-six) months as a participant in the decision-making structure of a political party or in work connected to
the organization, structuring, and performance of an electoral campaign;
III - a person that holds a position
in a labor’s union;
IV - a person who has signed a contract
or partnership, as supplier or buyer, applicant or offerer, of goods or services of any nature, with the political-administrative
person controlling the government-owned company or government-controlled company or with the company itself for less than three
(3) years prior to the date of appointment;
V - a person who has or may have
any form of conflict of interest with the political-administrative person controlling the government-owned company or government-controlled
company or with the company itself.
Paragraph 3. The seal provided for
in Item I of Paragraph 2 extends also to blood relatives or similar up to the third degree of the persons mentioned therein.
Paragraph 4. Elected managers should
participate, in the investiture or on an annual basis, in specific training on corporate and capital market laws, or else those
of disclosure of information, internal control, code of conduct, Law 12846, dated August 1, 2013 (Antibribery Law), and other issues
connected to the activities of the government-owned company or government-controlled company.
Paragraph 5. The requirements set
forth in item I of the head provision may be dispensed with in the case of appointment of an employee of the government-owned company
or government-controlled company for the position of manager or as a committee member, provided that the following minimum requirements
are met:
I - the employee has joined the
government-owned company or government-controlled company by means of a public competition with tests or production of evidence
and degrees;
II - the employee has more than
10 (ten) years of effective work in the government-owned company or government-controlled company;
III - the employee has held a position
in the senior management of the government-owned company or government-controlled company, proving its capacity to undertake the
responsibilities of the positions referred to in the head provision.
At this point, as CVM[47]
has already stated, the regulation
provided by Law 13303/16, as a special legislation, overrides the provisions contained in Law 6404/76, when inconsistent. Such an interpretation is
supported by the provisions of Article 235[48]
of Law No. 6404/76 and in Article
16[49] of
Law No. 13303/16.
[47]
“BRAZILIAN SECURITIES AND EXCHANGE COMMISSION
ORDER - GEA-3
Subject: General Public Complaint
Centrais Elétricas
Brasileiras S.A.
Proceeding 19957.005517/2018-51
Dear Superintendent,
1. I refer to report No. 16/2019-CVM/SEP/GEA-3
(0684145), which reviewed the complaint that gave rise to the present process. Only the question involving an apparent conflict
between Article 147, Paragraph 3, of the Brazilian Corporations Act, and Article 17, V, of the State-Owned Companies Act, was pending.
2. Despite not having expressed
a definitive position in the above report, SEP referred the matter to PFE’s review already stating its preliminary positioning.
3. According to this position, people
who occupy positions in competing companies or are subject to conflicts of interest cannot be elected to management positions in
government-controlled companies, and the possibility of dismissal provided for in Article 147, Paragraph 3, of the Brazilian Corporations
Act, shall not be applicable to them.
4. When the matter was referred
to PFE, the latter expressed a conclusion in the same sense (0705287) and added additional grounds, with which we are in agreement.
Consequently, we ratify our preliminary position.”
[48]
“Article 235. Government-controlled corporations are subject to this Law, without prejudice
to special provisions of federal law. ” (Emphasis added)
[49]
“Article 16. Without prejudice to the provisions
of this Law, the manager of a state-owned company and of a government-controlled company is subject to the provisions under
Law 6404, dated December 15, 1976 .” (Emphasis
added)
Therefore,
people who occupy positions in competing companies or are subject to conflicts of interest cannot be elected to management
positions in government-controlled companies, and the possibility of dismissal provided for in Article 147, Paragraph 3, of Law
6404/76 is no longer applicable.
It should be noted that, at the
time of the election, the provisions of Article 22[50] of Law
No. 13303/2016.
[50]
Article 22. The Board of Directors should be comprised of at least 25% (twenty five percent) of independent
members or at least one (1), if there is a decision on the exercise of the multiple voting power by the minority shareholders,
pursuant to Article 141 of Law No. 6404, dated December 15, 1976.
Paragraph 1. The independent director is characterized
by:
I - having no connections with the public company
or the government-controlled company, except for equity interest;
II - not being a consanguineous spouse or relative,
up to the third degree or by adoption, as chief of the Executive Branch, Minister of State, Secretary of State or Municipality
or manager of the public company or government-controlled company;
III - not having, over the last Three (3) years,
a relationship of any kind with the public company, government-controlled company or its controlling shareholders, which may jeopardize
its independence;
IV - in the last Three (3) years, having not
been an employee or officer of the public company, government-controlled company or controlled, affiliated company or subsidiary
of the public company or government-controlled company, except for exclusive relationship with public education or research institutions;
V - not being a supplier or purchaser, either
direct or indirect, of services or products of the public company or government-controlled company, which would imply loss of independence;
VI - not being an employee or manager of a
company or entity that is offering or demanding services or products from the public company or government-controlled company,
in order to imply loss of independence;
VII - not receiving any other compensation
from the public company or government-controlled company other than that connected to the position of director, except for cash
proceeds from capital interest.
Paragraph 2. When, as a result of compliance
with the percentage mentioned in the head provision, there may be fractional number of directors, rounding up to the whole number
shall be done:
I - immediately higher, when the fraction is
equal to or greater than 0.5 (five tenths);
II - immediately below, when the fraction is
less than 0.5 (five tenths).
Paragraph 3. The number of vacancies assigned
to independent members shall not include those held by directors elected by employees, pursuant to Paragraph 1 of Article 19.
Paragraph 4. The number of vacancies for independent
members shall include those who are occupied by directors elected by minority shareholders, pursuant to Paragraph 2 under Article
19.
Paragraph 5 (VETOED).
As for the separate election, it
should be noted that this is a prerogative open to common and preferred minority shareholders to seek the occupancy of vacancies
on the Board of Directors, provided that they complete the quorums provided for each polling place, according to Items I and II,
respectively, of Paragraph 4 of Article 141[51] of LSA.
However, in the case of government-controlled
companies, such as Eletrobras, Article 239[52] of LSA conferred
on minority shareholders the right to elect one of the Board of Directors’ members.
At this point, the provisions of
Annex 01 of the draft Management’s Proposal should be highlighted:
[51]
Article 141. In the election of directors, shareholders that represent at least
0.1 (one tenth) of the voting share capital, whether or not provided for in the Articles of Incorporation, are allowed to request
the adoption of the multiple voting process, with each share being warranted as many votes as there are board members, and the
shareholder being entitled to cumulate the votes in a single candidate or to distribute them among several ones.
(...)
Paragraph
4. The right to elect and dismiss a member and his alternate member of the Board of Directors, in a separate vote at the Shareholders’
Meeting, except for the controlling shareholder, the majority of the members, respectively:
I
- shares issued by a publicly-held company with voting rights, accounting for at least fifteen percent (15%) of the total shares
with voting rights; and
II
- preferred shares without voting rights or with restricted voting rights issued by a publicly-held company, representing at least
10% (ten percent) of the capital, which have not exercised the right provided for under the Articles of Incorporation, in accordance
with Article 18.
[52]
Article 239. Government-controlled companies shall have a Board of Directors,
with the minority having the right to elect one of the directors, if more are not available to them through the multiple vote process.
"2.2.2.2. Separate
Election: Articles 141, Paragraph 4 and 5, 239 of the Corporations Act
Non-controlling shareholders
holding common shares may elect, by majority, up to one (01) member of the board of directors, based on:
(i) Article 239 of the
Corporations Act; or
(ii) Article 141, paragraph
four, of the Brazilian Corporations Act, and Article 32, III, Articles of Incorporation.
As provided for in Circular
Letter/CVM/SEP/No. 01/2021, Article 239 of the Brazilian Corporations Act is specifically addressed to shareholders holding common
shares and supersedes for government-controlled companies, as is the case with the Company, the mechanism of separate election
provided for in Article 141, Paragraph 4, item I and Paragraph 5. Therefore, if an election is held on the basis of the said Article
239, no shareholder holding common shares may participate in a separate election on the basis of Article 141 of the Brazilian Corporations
Act, Paragraph 4, Item I, or Paragraph 5, or in Article 32, III of the Articles of Incorporation."
Consider, however, that Article
110[53], Paragraph 2 of LSA precluded the so-called plural vote,
thus shareholders cannot cast the same shares to separately constitute quorums of polling places and for the multiple voting process,
discussed below in this opinion.
In all cases, in order to
qualify for specific polling places or mixed ones, the shareholder shall prove the ownership for three uninterrupted months,
prior to the Meeting, according to the provisions
under Paragraph 6 of Article 141[54]
of LSA.
[53]
Article 110. Each ordinary share corresponds to one (1) vote in the deliberations of the shareholders’
meeting.
(...)
Paragraph
2. It is forbidden to assign a plural vote to any class of shares.
[54]
Article 141. (...)
(...)
Paragraph
6. The right provided for in Paragraph 4 may only be exercised by shareholders that prove that they have uninterrupted ownership
of the shareholding required therein during the period of three (3) months, at least, immediately prior to the holding of the shareholders’
meeting.
It should also be noted that if
the quorum provided for in Article 141[55], Paragraph 4, item
II of LSA is not constituted, Paragraph 5[56] of the same provision
allows the establishment of a mixed polling place, made up of common and preferred shareholders, provided that they comprise shares
representing 10% of the company’s capital.
In addition to the separate voting
procedures discussed hereunder, it is certain that, in opposition to the majority vote for the Board of Directors, LSA is open
to shareholders who request the adoption of the multiple voting system.
That said, Eletrobras’ management
expresses the following view in Annex 01 of the draft Management Proposal regarding the multiple vote:
[55]
Article 141. (...)
(...)
Paragraph
4. The right to elect and dismiss a member and his alternate member of the board of directors, in a separate vote at the shareholders’
meeting, excluding the controlling shareholder, the majority of the members, respectively:
(...)
II
- preferred shares without voting rights or with restricted voting rights issued by a publicly-held company, accounting for at
least ten percent (10%) of the capital, which have not exercised the right provided for under the Articles of Incorporation, in
accordance with Article 18.
[56]
Article 141. (...)
(...)
Paragraph
5. If it is found that neither the holders of voting shares nor the holders of preferred shares without voting rights or with
restricted voting, respectively, amount to the quorum required in items I and II of Paragraph 4, they will be allowed to join their
shares to jointly elect a member and his alternate to the board of directors, in keeping with the quorum required by item II of
Paragraph 4.
"2.2.2.1. Multiple
Vote: Article 141 of the Corporations Act
As provided in article
141 of the Brazilian Corporations Act and in Articles 1 and 3 of CVM Instruction No. 165, dated December 11, 1991, as amended,
the Shareholders accounting for at least five percent (5%) of the Company’s voting capital may request the adoption of the
multiple voting process for electing the Company’s Board of Directors members.
In the case of request
for multiple voting process, the following shall be met:
The multiple voting process
will be applicable for electing eight (8) Board of Directors’ members, therefore, not considering the members who shall be
elected separately: (a) as a representative of the Company's employees; (b) by non-controlling shareholders holding common shares;
and (c) by the non-controlling shareholders holding preferred shares; and
Non-controlling shareholders
holding common shares who choose to participate in the separate election process for a member of the Board of Directors, pursuant
to Item 2.2.2.2. below, may not be able to participate in the election via the multiple voting process with the same shares
of their ownership, under penalty of exercising twice the voting right for the same share.
The adoption of this process
shall be requested up to forty-eight (48) hours in advance of the holding of the Shareholders’ Meeting to be held on April
27, 2021."
In this respect, it should be noted
that, under the terms of Article 141, head provision of LSA, “shareholders that represent at least one tenth (0.1) of
the voting share capital, whether or not provided for in the Articles of Incorporation, are allowed to request the adoption of
the multiple voting process, with each share being warranted as many votes as there are board members, and the shareholder being
entitled to cumulate the votes in a single candidate or to distribute them among several ones.”
In turn, CVM Instruction No.
481/2009 in its Article 4[57], item I, establishes that the
minimum percentage of participation in the voting capital required for requesting the adoption of a multiple vote shall mandatorily
appear in the call notice of meetings to elect the Board of Directors’ members. Article 3[58]
of CVM Instruction No. 165/1991 provides for similar understanding.
In this vein, the percentage of
voting capital should be defined by the company to request the adoption of a multiple vote, based on Article 1[59]
of said CVM Instruction No. 165/1991.
[57]
Article 4. The call notice for shareholders’ meetings must include:
I – in the meetings for the
election of members of the board of directors, the minimum percentage of participation in the voting capital required for requesting
the adoption of multiple vote;
[58]
Article 3. The minimum percentage of participation in the voting capital required for requesting the adoption of the multiple vote
will be mandatorily included in the notice for the Meetings aimed at the election of the members of the Board of Directors of publicly-held
companies.
[59]
Article 1. Depending on the value of the share capital of the publicly-held company, shareholders representing the share capital
with voting right, whether or not provided for in the Articles of Incorporation, are entitled to request the adoption of multiple
voting process for electing Board of Directors’ members, in keeping with the following table:
Range of Capital Stock
|
Minimum Percentage of Voting Capital for Multiple Voting Request
|
0 to 10,000,000
|
10
|
10,000,001 to 25,000,000
|
9
|
25,000,001 to 50,000,000
|
8
|
50,000,001 to 75,000,000
|
7
|
75,000,001 to 100,000,000
|
6
|
Above 100,000,001
|
5
|
Sole Paragraph. For purposes of
classification, the publicly-held company will consider its capital stock in effect on the last day of the month prior to the date
of the call for the Meeting, plus the reserve for inflation adjustment of the paid-up capital, if it still exists.
Such power should be exercised
“by the shareholders up to forty-eight (48) hours before the Shareholders’ Meeting, and it is incumbent on the board
that directs the work of the Shareholders’ Meeting to previously inform the shareholders, in reference to the “Attendance
Book,” about the number of votes required for the election of each member of the board,” under the terms of Paragraph
1 of Article 141[60] of LSA.
It should be noted, as carried
out to review the separate voting regime, that the multiple voting process also involves the preclusion of plural voting, so that
the company cannot use the same shares to constitute an opening and deliberation quorum on different modalities for electing Board
of Directors’ members.
In fact, it will be incumbent upon
the Board of the Meeting to inform the shareholders in advance, in the reference of the “Attendance Book,” the number
of votes required for electing each member of the Board of Directors, as provided in Paragraph 1 of Article 141 of LSA.
It should also be noted that, under
the terms of Paragraph 3 of Article 141[61] of LSA, the removal
by the shareholders’ meeting of any member, elected under such special procedure, will result in the removal of the other
components of the collective body, thus imposing a new election.
[60]
Article 141. (...)
Paragraph
1. The option provided for in this Article is expected to be exercised by the shareholders up to forty-eight (48) hours before
the shareholders’ meeting, and the board that directs the work of the meeting is expected to inform the shareholders in advance,
in reference to the “Attendance Book,” the number of votes required for the election of each board member.
[61]
Article 141. (...)
(...)
Paragraph
3. Whenever the election has been carried out by way of such process, the removal of any board of directors’ member by the
shareholders’ meeting will result in the removal of the other members, and a new election will ensue; in other cases of vacancy,
if there is no alternate, the first shareholders’ meeting will perform the new election of the entire board.
Finally,
it should be noted that the candidates appointed to compose the Board of Directors must comply with the requirements listed in
"Policy of Appointments in the Holding and Subsidiaries, Affiliates, Foundations and Associations of Eletrobras Companies".
In view of the foregoing, no legal
obstacles are foreseen for deliberation on Item 3 and the agenda.
With regard to item 4, election
of members of the Fiscal Board, LSA establishes, in its Article 162[62]
that only natural persons residing in Brazil, university graduates, or those
who have exercised for a minimum period of three years the position of company manager or fiscal director, may be elected to the
Fiscal Board, with the election of members of management bodies and employees of the company or controlled company or of the same
group being prohibited, not to mention the spouse or relative up to third degree of the company manager. In the same sense there
is provision under Paragraph 1 of Article 26[63] of Law No.
13303/2016.
It
is important to mention that the impediments to investiture provided for in Article 147[64]
of Law No. 6404/76, as set forth in Paragraph 2 of Article. 162 of LSA also apply.
[62]
Article 162. Only natural persons residing in Brazil can be elected to the fiscal board, or else university
graduates, or those who have worked for a minimum term of three (3) years as company managers or fiscal directors.
Paragraph
1. In places where there are not enough qualified persons to hold the office, the judge shall dismiss the company in compliance
with the requirements established in this article.
Paragraph
2. In addition to the persons listed in the paragraphs of Article 147, the members of the management bodies and employees of the
company, or those of a controlled company or of the same group may not be elected to the fiscal board, which includes the spouse
or relative up to third degree of THE company manager.
[63]
Article 26. In addition to the rules set forth in this Law, the provisions set forth in Law
no. 6,404, dated December 15, 1976, regarding its powers are applicable to the members of the Fiscal
Board of the government-owned company and government-controlled company, duties and responsibilities, requirements and impediments
to investiture and compensation, in addition to other provisions established in said Law.
Paragraph 1. Fiscal Board members may be individuals,
resident in Brazil, with academic qualifications consistent with the exercise of the office and who have exercised, for a minimum
period of three (3) years, a management or advisory position in the public administration or position of tax director or company
manager.
[64]
Article 147. When the law requires certain requirements for the investiture in a company management
position, the shareholders’ meeting may only elect persons who have produced the necessary evidence, from which an authentic
copy will be filed at the registered office.
Paragraph
1. Persons shall be disqualified for management offices, or those impeded by special law or convicted of bankruptcy, prevarication,
bribery, bribery, embezzlement, embezzlement, against the popular economy, public faith or Property or the criminal penalty that
prevents, even temporarily, access to public office.
Paragraph
2. Persons shall also be disqualified for management offices of public-held companies if established as that by an act of the Brazilian
Securities and Exchange Commission.
Paragraph
3. The director should have a trustworthy reputation, and except when exempt by a shareholders’ meeting, there may not
be election of those who:
I
- hold positions in companies that may be considered competitors in the market, especially in advisory board, board of directors
or fiscal boards; and
II
- has conflict of interest with the company.
Paragraph
4. Evidence of compliance with the conditions set forth in paragraph 3 shall be made by means of a declaration signed by the director
elected under the terms established by the Brazilian Securities and Exchange Commission (CVM), taking into consideration to the
provisions under Articles 145 and 159, under the penalties of the law.
Besides,
it should be noted that Article 240[65]
of LSA establishes that one of the members and
respective alternate of the Fiscal Board of government-controlled companies shall be elected for minority common shares and the
other by preferred shares, if any, as stated above.
Lastly, attention should be
drawn to Official Letter No. 227/2018/CVM/SEP/GEA-1, dated June 07, 2018, of the Brazilian Securities and Exchange Commission
- CVM, which expresses the understanding of this Commission in the sense that the preclusions established by Article 17[66], Paragraph 2 of Law No. 13303/2016
are also applicable to candidates for the Fiscal Board of public companies and government-controlled companies.
[65]
Article 240. The functioning of the fiscal board shall be permanent in the
government-controlled companies; one of its members, and its alternate, shall be elected for the minority common shares, and the
other one for the preferred shares, if any.
[66]
“Article 17. The members of the Board of Directors and the nominees for the positions of officer, including President, General
Officer and Chief Executive Officer, shall be chosen among citizens of unimpeachable reputation and of well-known knowledge, and
one of the requirements of letters “a,” “b,” and "c” of item I and, cumulatively, the requirements
of items II and III:
(...)
Paragraph 2. Appointing the following to the
Board of Directors and executive board is forbidden:
I - a representative of the regulatory body
to which the government-owned company or government-controlled company is subject, as Minister of State, Secretary of State, Municipal
Secretary, holder of a position, without permanent connection with the public service, of a special nature or senior management
and advice in the public administration, of statutory officer of political party, and holder of an office in the Legislative Branch
of any federation entity, even if under a license from such office;
II - a person who has acted for the last 36
(thirty-six) months as a participant in the decision-making structure of a political party or in work connected to the organization,
structuring, and performance of an electoral campaign;
III - a person that holds a position in a labor’s
union;
IV - a person who has signed a contract or
partnership, as supplier or buyer, applicant or offeror, of goods or services of any nature, with the political-administrative
person controlling the government-owned company or government-controlled company or with the company itself for less than three
(3) years prior to the date of appointment;
V - a person who has or may have any form of
conflict of interest with the political-administrative person controlling the government-owned company or government-controlled
company or with the company itself.”
In this sense, attention is also
drawn to CEMIG’s precedent, in which CVM collective body expressly recognized that the preclusions established under Article
17 of Law No. 13303/16 are also applicable to candidates appointed to the Fiscal Board, to wit:
“REQUEST
FOR DISCONTINUANCE OF ADVANCE TIME FOR CALLING THE SHAREHOLDERS’ MEETING OF LIGHT S.A. - CASE SEI 19957.004466/2018-41
Reg.
no. 1021/18
Rapporteur:
SEP
Regarding
Cemig's appointments of candidates for the fiscal board Marco Antônio de Rezende Teixeira, Paulo de Souza Duarte,
Izauro dos Santos Callais, Germano Luiz Gomes Vieira, Eduardo Martins de Lima and Moacir Dias Bicalho Júnior, SEP
initially analyzed the following legal issue: “are the preclusions established under Article 17 of the State-Owned
Companies Act also applicable to candidates for the fiscal board?” In view of the provisions of Precedent 2, although
it establishes that the reasoning followed for the extension of the requirements and preclusions established in the
State-Owned Companies Act for managers to members of the committee of appointment and evaluation does not automatically apply
to fiscal directors, SEP underscored that the fiscal board is a “relevant body of a company's governance system.”
In this line, it was pointed out that, in Precedent 2, the prevailing interpretation was that the essence of Article 17 of
the State-Owned Companies Act is aimed at improving governance structures, including by mitigating party political
indications within the scope of state-owned companies. Thus, SEP concluded that extending
“the preclusions of Article 17 of the State-Owned Companies Act also to the election of members of the fiscal board seems
to be the most natural extension of Precedent 2 to the specific case.”
(...)
On
the other hand, as regards the aforementioned appointments to Light's fiscal board, the Collective Body, by majority, following
the conclusions of the technical area, concluded that there was an illegality in such appointments, understanding that the preclusions
under Article 17, Paragraph 2 of the State-Owned Companies Act are also applicable to candidates for the fiscal board of state-owned
companies. Officer Henrique Machado presented a vote on this point, in which he explained that the joint reading of Article 26
of the State-Owned Companies Act, with Articles 162, Paragraph 2 and 147, Paragraph 1 of Law 6404/76 leads to the conclusion that
state-owned companies’ fiscal directors are subject to the general requirements and preclusions of corporations’ fiscal
directors provided for in Law 6404/76, among which is eligibility for the position of manager. In addition to agreeing with such
reasoning, President Marcelo Barbosa, in line with what was expressed by SEP, underscored his understanding expressed in Precedent
2 that the provisions under the State-Owned Companies Act should be interpreted in a systematic, teleological and historical manner,
considering their intention to improve the governance of state-owned companies and mitigate political-party influences and appointments.”
Notwithstanding,
in the case in question, the understanding above was the object of a lawsuit filed under No. 1006938-45.2018.4.01.3800 of the 21st
Federal Civil Court of the Minas Gerais State Judicial District.
However,
it should be noted that the “Appointment Policy in Holding and Subsidiaries, Affiliates, Foundations and Associations of
Eletrobras Companies,” in its item 5.1.2.2, extends such preclusions to members of the Fiscal Board, in line with the best
practices of
corporate governance and with the Note[67]
of Brazilian Institute of Corporate Governance - IBGC,
dated November 18, 2019.
[67]
“In defense of the adoption of the best practices and the provisions under the State-Owned Companies Act in its essence,
the Brazilian Institute of Corporate Governance (IBGC) underscores its conviction that one of the main developments in this law
rests with the effort to protect state-owned organizations from the influence of political, party and electoral interests, which
have led to notorious cases of inefficiency, corruption and damage to Brazilian society. The greatest expression of this purpose
is in Article 17, which defines minimum criteria for qualification and ineligibility. Requiring members of the fiscal board, therefore,
to comply at least with the same requirements and preclusions valid for managers is essential for the legislation to have the necessary
effectiveness and achieve its purpose of improving the governance of state-owned companies. Fiscal directors are responsible for
independently supervising the management acts. The selection process of its members should meet criteria that are considered sound
and that can mitigate conflicts of interest. Recent history has taught that any attempt to make the application of this or any
other principles of law and good governance in state-owned companies more flexible should be contained, given that it may lead
to relevant setback in the search for efficiency, responsibility, transparency, and integrity in the management of that type of
organization.”
With
regard to item 5, although not expressly listed in Article 132 of LSA, it should be noted that the AGO is responsible for establishing
the compensation of managers and Fiscal Board, since the managers’ compensation, and that of the members of the Fiscal Board,
should have a forecast in the budget, which must also be approved in said bidding, otherwise it shall not reliably represent the
Company’s expenses. Furthermore, the compensation is a matter arising under item III of Article 132 of LSA, which, when providing
for the election of managers, usually already includes the respective compensation.
Jurist Modesto Carvalhosa states in the
same sense, as follows:
“The shareholders’
meeting is the only competent body to set the overall compensation of both the directors and officers. The Articles of Incorporation
only establishes some parameters, bases or criteria for the deliberation at the shareholders’ meeting.
The
powers to determine the direct and indirect compensation and also the non-statutory share of the managers in the company profits
are of the ordinary shareholders' meeting, and should do so concurrently with the election of the managers and, if applicable,
annually, when one of their terms of office expires.[68]”
[68]
CARVALHOSA, Modesto. Comentários à Lei de Sociedades Anônimas. São Paulo: Saraiva, 2009, v. 3.
p. 263.
In due
time, the provisions of LSA, in the sense that the compensation of board directors and fiscal directors shall be set at the Shareholders’
Meeting, pursuant to Articles 152[69] and
162, Paragraph 3[70], respectively, of
said law, so that there is no obstacle to deliberation of the matter in the AGO.
Still regarding the managers’ compensation,
the information provided by the Company in the draft Management Proposal, to wit:
"It should be noted
that the process of setting the compensation of Eletrobras’ Managers, pursuant to Decree 10072/19, is governed by the guidelines
of the State-Owned Companies Coordination and Governance Secretariat (SEST), which in 2021 established that there should be no
adjustment of fees for all state-owned companies, regardless of the particulars of each organization.
In this context, it should
be noted that, from the Management’s standpoint, aspects capable of allowing comparison of compensation levels at Eletrobras
against those practiced by companies of similar size and features should be combined in order to make the current managers’
compensation consistent with the levels of challenge, complexity and responsibilities assigned to the positions of Managers and
members of the Company's Fiscal Board and Audit and Risk Committee created by the Articles of Incorporation. We understand the
non-correlation regarding the compensation difference of Eletrobras’ managers, consequent maintenance of payment of amounts
under those practiced by the market, implies in relevant risk to the Company, as it does not allow the effective retention and
attraction of talents and leaderships, which may compromise its results.
[69]
Article 152. The shareholders’ meeting shall determine the total or individual amount of the managers’ compensation,
including benefits of any nature and representation fees, taking into account their responsibilities, the time spent on their duties,
their professional competence and reputation, as well as the value of their services in the market.
Paragraph 1. The company's
Articles of Incorporation that establishes the mandatory dividend in twenty-five percent (25%) or more of the net income, may attribute
to the managers a share in the company’s profit, provided that its total does not exceed the annual managers’ compensation
nor 0.1 (one tenth) of profits (Article 190), whichever is the lower.
Paragraph 2. The managers
shall only be entitled to sharing of the profit of the accounting year in which the mandatory dividend referred to in article 202
is attributed to the shareholders.
[70]
Article 162 (....)
(...)
Paragraph 3. The compensation of
the fiscal board’s members, in addition to the compulsory reimbursement of travel expenses and accommodations necessary for
the performance of the position, shall be set by the shareholders’ meeting that elects them, and may not be lower for each
member in office, to ten percent of the average, attributed to each officer, not counting benefits, representation funds, and profit
sharing.
Notwithstanding the risks
pointed out, but considering guidelines set by SEST, the compensation proposal establishes that there is no adjustment in the fees
of each member of the Executive Board. As a consequence, there will also be no adjustment for the members of the Board of Directors,
Fiscal Board, and Audit and Risk Committee created by the Articles of Incorporation, the compensation of which is pegged to the
executive board’s compensation.
Attention should be drawn
to a recent understanding of the Collective Body of the Brazilian Securities and Exchange Commission – CVM, which, included
in the Official Letter CVM/SEP/No. 1/2021, establishes the non-inclusion of social security contributions in the sums of global
compensation subject to approval at a shareholders' meeting:
"It should be noted
that the CVM’s Collective Board expressed understanding at a meeting held on December 08, 2020 (CVM Process no. 19957.007457/2018-109)
that social security contributions under the employer’s responsibilities are not covered by the concept of "benefits
of any kind” provided for under Article 152 of Law 6404/76, therefore not including the sums of global or individual compensation
subject to approval by the shareholders' meeting."
In
view of the foregoing, no obstacle is seen, from a legal point of view, for deliberating on Item 5, however, this Department refrains
from expressing an opinion on the amounts and
rationale for setting individual compensation, since they are devoid of a legal nature.
Lastly, regarding the compensation
of the members of the Audit and Risk Committee of the Company, Article 16[71],
item III of Eletrobras’ Articles of Incorporation is the subject matter of the shareholders’ meeting, reflecting provision
of Paragraph 8 of Article 38[72]
of Decree No. 8946/2016.
Again,
under the terms of Article 38[73], Paragraph 9 of said Decree,
if there are members of the company’s Board of Directors occupying a position on the Audit and Risk Committee, they are expected
to opt for the compensation of a member of such Committee.
As for the internal approval of
the issue, it should be approved by the Executive Board, in accordance with Article 48[74],
item I of ELETROBRAS’ Articles of
[71] Article 16 - The
Shareholders’ Meeting shall be held within the first four months following the end of the accounting year, at a date and
time previously set, to:
(...)
III - elect and remove the members
of the Board of Directors and those of the Fiscal Board, and set the compensation of the managers, Fiscal Board members, members
of the Audit and Risk Committee and of the external members of the other Committees under the Articles of Incorporation, in compliance
with the applicable laws.
[72]
Article 38. The state-owned company must have an Audit Committee created by the Articles of Incorporation as an auxiliary body
to the company’s Board of Directors, if any, or to its parent company, to which it will report directly, subject to the provisions
of Article 16.
(...)
Paragraph 8. The compensation of
the members of the Audit Committee created by the Articles of Incorporation shall be set by the Shareholders’ Meeting and
shall not be lower than the Fiscal Directors’ compensation.
[73]
Article 38. (...)
(...)
Paragraph 9. Board of Directors’
members may occupy a position in the Audit Committee created by the Articles of Incorporation of the company itself, provided that
they opt for the compensation of a member of such Committee.
[74]
Article 48- In the exercise of its duties, the Executive Board shall especially:
(...)
I – prepare, properly support
with information, and submit to the Board of Directors the matters that depend on the said Board’s decision, including the
core guidelines of Eletrobras’ administrative organization, previously stating its view when there is no conflict of interest,
except for matters that pertain to appointments for positions of Executive Officers of Eletrobras itself, which shall be submitted
to the Board of Directors directly by the Company’s CEO;
Incorporation, followed by the
referral to the Company’s Board of Directors, based on Article 36[75],
item LXIII Eletrobras’ Articles of Incorporation, for subsequent call of the shareholders’ meeting of Eletrobras, in
accordance with Article 142[76], item IV of LSA.
It should also be noted that approving
or not the terms of the Management Proposal reviewed hereunder stands as a question of administrative merit, lacking legal status.
Therefore, such analysis is not the responsibility of this advisory, it rather lies with the judgment of convenience and timeliness
of the manager.
It should be noted that the legal
understanding set out in this opinion is purely opinionated, which is the position which we think is more in line with the legal
provisions applicable to this case.
As a result, in accordance with
paragraph 4 of the Manual of Good Consulting Practice of the Office of the General Counsel for the Federal Government, we would
like to render it clear that any stamps in the documents forwarded to PRJC merely stand as a mechanism for certification of the
sheets actually reviewed by the counsel, and thus not replace or disregard the corresponding legal opinion.
In view of the foregoing, pursuant
to the judgment on the merits, and subject to the above considerations and considering the favorable position of the competent
Departments, the Management Proposal for the 61st Shareholders’ Meeting of Eletrobras is hereby
approved for the purpose of controlling the discussions by this PRJC, given that the Financial Department is responsible for the
content of such document.
[75] Article 36 - In
the exercise of its duties, the Board of Directors is also responsible, without prejudice to the powers set forth in the applicable
laws, for:
(...)
LXIII - convene the Shareholders’
Meeting, in the cases provided for in Law 6404 of 1976, or whenever deemed appropriate; and
[76]
Article 142. The Board of Directors shall:
(...)
IV - call
the shareholders’ meeting when it deems it feasible, or in the case of Article 132;
For appraisal of higher instance.
Cristiane Vieira de Paiva Villela
Lawyer
Agreed.
To DFR.
Rafael Gusmão Rodrigues
de Andrade
Legal
Counseling Department Manager – PRJC
Opinion requested
by Centrais Elétricas Brasileiras S.A. – Eletrobras and prepared by Nelson Eizirik.
Rio de Janeiro, January 21, 2021.
I – INQUIRY
We received
from Centrais Elétricas Brasileiras S.A. – Eletrobras (“Eletrobras,” “Company,” or “Inquirer”),
through a Term of Reference that was submitted to us on January 8, 2021 (“Term of Reference”), a request for a Legal
Opinion on legal matters relating to the distribution of intermediate dividends by the Company (the “Legal Opinion”),
particularly with regard to the reversal of the special undistributed dividend reserve set up by Eletrobras at the Shareholders’
Meeting held on April 29, 2019, under the terms of the inquiry transcribed as follows (“Inquiry”):
“1 – Company’s
Profile:
Centrais Elétricas
Brasileiras S/A - Eletrobras is a government-controlled publicly traded company, with the federal government holding 51.00% of
its common shares. Eletrobras is the largest holding company in the electricity sector in Latin America, and has shares traded
on the São Paulo Stock Exchange (Bovespa), Level 2 ADRs on the New York Stock Exchange (NYSE), and in Madrid (LATIBEX).
Since its incorporation in 1962, the corporate purpose of Eletrobras has been to carry out assessments, projects, and undertake
the construction and operation of power plants and electric power transmission and distribution lines.
The following companies
in the electric power generation and transmission sectors are under the control of Eletrobras: Eletrobras Chesf, E. Furnas, E.
Eletronorte, E. Eletronuclear, and CGT Eletrosul. Additionally, Eletrobras Holding controls Eletrobras Participações
S.A. – E. Eletropar and, jointly, Itaipu Binacional, pursuant to the terms of the International Treaty executed between the
Governments of Brazil and Paraguay. In addition, Eletrobras carries out research and development activities through the Electrical
Energy Research Center - Eletrobras CEPEL, established 38 years ago and deemed to be the largest institution of its kind in the
Southern Hemisphere.
This group of companies
forms the so-called Eletrobras System, which currently has an installed production capacity of 42,987 MW — 34% of the domestic
total —, distributed across 45 hydropower plants, 125 thermoelectric power plants, eight wind power plants, and two nuclear
power plants. The transmission lines reach 61,534 km, which accounts for about 60% of the Brazilian power network. The operation
of the Eletrobras System is governed by policies and guidelines established by its Board of Directors.
Eletrobras also operates
as an energy selling agent and manager of agreements within the scope of the PROINFA program — Incentive Program for Alternative
Electric Energy Sources — the main purpose of which is to increase the share of the electricity produced by projects based
on wind sources, small hydropower plant (SHP) and biomass, within the National Interconnected System (SIN).
2 – Introduction
The opinion of jurist Nelson
Eizirik (“external opinion”), dated March 26, 2019concerned the legal aspects of the allocation of net income for the
accounting year and the distribution of dividends, the content of which reviews legal aspects relating to the Special Undistributed
Dividend Reserve (“Special Reserve”).
At the shareholders’
meeting held in 2019 (“AGO”), the Special Reserve was established to allow Eletrobras, in case the financial situation
permits it, to revert this retention of profits and thus perform its distribution in the form of intermediate dividends, as advised
by the external opinion.
There are relevant aspects
arising from the regime applicable to interim dividends that impact how the Company will pay its shareholders, which are not directly
addressed by the external opinion but should be reviewed, given that they will impact which portion of dividends should be earmarked
for each type of Eletrobras' shareholders, as well as the relationship between the declared intermediate dividends and any mandatory
dividends resulting from the deliberation about the allocation of income for the accounting year 2020, or 2021, at a shareholders’
meeting.
Accordingly, this Term
of Reference seeks to supplement the inquiry carried out when the opinion was issued.”
Given the foregoing,
the Inquirer asked a series of Questions, which will be addressed in Chapter II.4 of this Opinion, as provided.
II – OPINION
II.1. THE MANDATORY DIVIDEND
SYSTEM AND PROFIT RETENTION SCENARIOS
Making profit
is the essence of corporations, standing as one of its fundamental elements, as provided for in Article 2 of Law No. 6,404/1976
(“Brazilian Corporations Law”)[77]. Thus, every corporation has as
its primary purpose, inherent in the business activity carried out, the earning of profits, which can be divided among members
from time to time.
In addition to
classifying profit sharing as one of the essential rights of shareholders (Article 109, item I), the corporate law sought to ensure
its effectiveness, thus establishing the mandatory dividend regime.
As such, Article 202
of Law No. 6,404/1976, correcting the distortion from the previous legal system, in which corporate profits were permanently capitalized
to the detriment of distribution, established that, if a company makes profit, it is required to allocate part of it to shareholders
as a dividend.
As provided in the heading
of Article 202 of the Brazilian Corporations Law, “shareholders are entitled to receive, as a mandatory dividend, in each
year, the portion of profits established in the Articles of Incorporation, or, if this is omitted, half of the net profit for the
year,” reduced or increased by certain amounts expressly provided for in Article 202 itself, namely, the amounts allocated
to the restriction of the legal reserve (Article 193) and those arising from the restriction and reversal of the reserve for contingencies
(Article 195).
Accordingly,
the mandatory dividend consists of the minimum portion of the profit that the company undertakes to distribute to all its shareholders,
which are holders of preferred and common shares. This entails the discharge of an obligation on the part of the company, the compliance with which
the shareholders are entitled to demand, provided that the company posts profits in the accounting year[78].
[77]
“Article 2 - Company may have as object any business with a profitable purpose, not contrary to the law, public policy,
and good customs.” (emphasis added)
[78]
ALFREDO LAMY FILHO e JOSÉ LUIZ BULHÕES PEDREIRA. A Lei das S/A.. Rio de Janeiro, Renovar: 1996. p. 501
Also aiming to underline the shareholder’s
right to receive dividends, Law No. 10,303/2001 introduced Paragraph 6 to Article 202 of the Brazilian Corporations Law, which
precluded the unjustified retention of profits by corporations, by establishing that “profits not allocated under
the terms of Articles 193 to 197 shall be distributed as dividends.”
Such provision aimed to prevent the
prior practice adopted by several companies that distributed to shareholders only the mandatory dividend provided for in their
Articles of Incorporation and retained the remaining earnings, in an account usually referred to as “retained earnings,”
without any justification for doing so[79].
Said Paragraph 6 of Article 202 of
the corporate law started to require companies to justify any and all retention of profits and to distribute, as a dividend, any
profit that exceeds the retained earnings provided by law.
Since the enactment of Law 10,303/2001,
the portion of profit for the year that exceeds the mandatory dividend and cannot be included in any of the allocations expressly
provided for in Articles 193 to 197 of the Brazilian Corporations Law (legal reserve[80],
reserves created by the articles of incorporation[81], reserve for contingencies[82],
reserve for tax
[79]
MODESTO CARVALHOSA e NELSON EIZIRIK. A Nova Lei das S.A.. São Paulo: Saraiva, 2002, pp. 363-364.
[80]
Article 193 of the Brazilian Corporations Law requires companies, before any other allocation, to transfer 5% of the net income
for the year to the restriction of the legal reserve, which cannot exceed 20% of the capital. The purpose of such a reserve is
to ensure the integrity of the capital, which is why the Brazilian Corporations Law precludes its use for the payment of dividends,
otherwise establishing that it can only be used to offset losses or to increase capital itself.
[81]
Article 194 of the Brazilian Corporations Law authorizes the Articles of Incorporation to provide for the so-called reserves created
by the articles of incorporation, according to the specific characteristics and needs of each company. For such reserves created
by the articles of incorporation to be legitimately established, the Articles of Incorporation should: (a) set forth, in a precise
and complete manner, the purpose of the reserve; (b) establish the criteria to determine the portion of the profits that will be
allocated to its restriction; and (c) establish the maximum reserve limit.
[82]
The reserve for contingencies, provided for in Article 195 of the Brazilian Corporations Law, can be restricted as a result of
management’s proposal and approval by the shareholders’ meeting, with the purpose of offsetting, in a future year,
the decrease in profit resulting from a loss deemed likely, the value of which can be estimated.
incentives[83],
retention of profits provided for in the capital budget approved at the shareholders’ meeting[84]
and reserve for unrealized profits[85]) should be mandatorily distributed to
shareholders as a dividend.
However, the distribution
of profits cannot be made arbitrarily, under the risk of impacting the company's creditors. In order to uphold the essence of the
transfer of corporate profits to shareholders, the Brazilian Corporations Law, in Article 202, Paragraph 4[86],
establishes that the dividend “shall not be mandatory” in the accounting year in which the management bodies
report to the shareholders’ meeting that it is inconsistent with the company’s
financial condition.
[83]
Pursuant to Article 195-A of the corporate law, the reserve for tax incentives may be created by the shareholders’ meeting,
at the proposal of the management bodies, with the purpose of recording the portion of the net profit resulting from donations
or government subsidies for investments.
[84]
The retention of profits provided for in the capital budget is provided for in Article 196 of the Brazilian Corporations Law, which
allows the company to retain an additional portion of the net profit for the year, not included in any specific reserve, provided
that a capital budget is approved at a shareholders’ meeting supporting such profit retention.
[85]
The unrealized profit reserve, provided for in Article 197 of the Brazilian Corporations Law, aims to prevent the company from
being required to pay dividends in an amount higher than the amount of net income for the year actually received in currency. Thus,
profits that, although included in the income for the year, were not financially realized, are allowed to be accounted for in the
unrealized profit reserve.
[86]
Article 202 – (...) Paragraph 4. The dividend provided for
in this Article shall not be mandatory in the accounting year in which the management bodies report to the shareholders’
meeting that it is inconsistent with the company’s financial condition. The fiscal board, if in operation, shall issue
an opinion on this information and, in the case of a publicly-held company, its managers shall forward to the Securities and Exchange
Commission, within five (5) days from the shareholders’ meeting, a reasoning concerning such information transmitted to the
meeting.” (emphasis added)
In
this case, the profits earned will be reverted to a special reserve, under the terms of Article 202, Paragraph 5, of the Brazilian
Corporations Law[87], so that, if they are not absorbed by losses in future accounting
years, they shall later be distributed to shareholders as dividends, as soon as the company’s financial condition so allows.
The rule which addressed
the special reserve of mandatory undistributed dividends aims to reconcile the principle of mandatory payment of dividends with
the preservation of the company’s financial stability, assuming that the distribution of the mandatory dividend is suspended
in the accounting year in which the management bodies report to the shareholders’ meeting that it is inconsistent with the
company’s financial condition.
The dividend
retention based on this provision is temporary, since Paragraph 5 of Article 202 itself establishes that profits that are no longer
distributed under the terms of Paragraph 4, if not absorbed by losses in subsequent years, shall be paid as dividends as soon as
the company’s financial condition so permits.
In order to restrict
the special reserve for undistributed dividends, the company’s management shall prepare a justification with the reasons
for the inconsistency between its financial condition and the distribution of dividends, which shall be submitted to the Fiscal
Council, if in operation, and, in the case of publicly-held companies, shall also be forwarded to the Brazilian Securities and
Exchange Commission – CVM, within five days of the shareholders’ meeting.
In fact, the special
reserve of mandatory undistributed dividends is based on the essential principle that the distribution of dividends to shareholders,
although one of the main purposes of the corporate law, cannot be made at a loss or jeopardizing the financial condition
of the company, which also entails the restriction of the unrealized profit reserve[88].
[87]
“Article 202 – (...) paragraph five Profits that are no
longer distributed under the terms of paragraph four shall be recorded as a special reserve and, if not absorbed by losses
in subsequent years, shall be paid as dividends as soon as the company’s financial situation so allows.” (emphasis
added)
[88]
In this regard, the doctrine emphasizes that “The interpretation of the provisions under Article 202 allows the following
fundamental rule of the legal regime of the mandatory dividend to be noted: the right to the dividend is subordinated to the
company's ability to pay it without jeopardizing its financial stability – which is implied in the legal provision that
excludes the profit used to restrict the reserve for contingencies from the calculation base of the mandatory dividend; thus allowing
the deferral of the dividend payment in the case of unrealized profits; as well as when the management bodies consider it inconsistent
with the company's financial condition. (...) In addition to creating a reserve for unrealized profits, the law provides
– in Paragraphs 4 and 5 of Article 202 – that the mandatory dividend is not paid in the accounting year in which the
management bodies report to the Shareholders’ Meeting that it is inconsistent with the company's financial situation. This
deferral reflects the recognition by the Law that the company's ability to pay dividends in currency depends on the degree of
liquidity of its assets and the amount and timing of the maturity of its obligations. Therefore, even if all the profit
for the year has been realized in currency, the company's financial situation may recommend the deferral of the mandatory dividend.”
(emphasis added) LUIZ CARLOS PIVA. “Lucros, Reservas e Dividendos”. In: Alfredo Lamy Filho e José Luiz Bulhões
Pedreira (Coord.). Direito das Companhias. 2ª edição, atual. e ref., Rio de Janeiro: Forense, 2017, pp.
1.244 e 1.245.
The retention of
the mandatory dividend in the special reserve is extraordinary, meaning it should be paid as soon as the company’s
financial condition so allows. Accordingly, waiting for the end of the accounting year or the holding of a shareholders’
meeting before the amount allocated to the special reserve can be distributed is not necessary, and such distribution may take
place at any time during the year, based on the Company’s interim financial statements.
It should also
be noted that, in order to ensure capital integrity, the Brazilian Corporations Law clearly establishes, in the heading of Article
201, the only amounts out of which dividends can be paid are net profits for the year, profit reserves and, exceptionally,
capital reserves.
Thus, profit reserves
can be distributed to shareholders as dividends, except in exceptional circumstances, like in the case of losses, in which case
they should firstly be absorbed and only then can the remaining balance, if any, be distributed.
In fact, it should
be noted that profit reserves originate from positive results reported by the company in prior years and which in accordance with
the law, Articles of Incorporation or resolution of a shareholders’ meeting, were not distributed to the shareholders, being
retained as part of the company’s equity for a specific purpose. That is, they are restricted from the company’s profits,
in accordance with Paragraph 4 of Article 182 of the Brazilian Corporations Law[89].
Therefore, its natural destination is for distribution to shareholders, which should be carried out as soon as
the purpose that triggered its restriction is resolved or there is a deliberation by the shareholders against its retaining.
[89]
“Article 182. (...) paragraph four Accounts formed by restricting
the company’s profits shall be classified as profit reserves.”
II.2. PRIORITY DIVIDENDS OF PREFERRED
SHARES
Although the receipt
of dividends is an essential right of shareholders, not all of them share in corporate profits on equal terms, since certain types
and classes of shares may confer on their holders economic advantages over the holders of others.
In this regard,
Article 17, item I, of the Brazilian Corporations Law establishes, as one of the possible equity advantages to be attributed to
preferred shares, as a counterpart to the suppression or restriction of voting rights created by the Articles of Incorporation,
the “priority in the distribution of dividends, either in fixed or minimum amounts.”
The phrase “priority
in the distribution of dividends”, set outestablished in this provision, means, as defined in the Articles of Incorporation,
the advantage assured to the preferred shareholder of receiving his share of the profits distributed by the company before
the allocation of dividends to the holders of common shares, and even if the profits to be distributed are not sufficient
for them to receive any dividends.
Thus, legal doctrine
highlights that “this advantage entitles the preferred shareholder to receive his share in the company’s profits
before and regardless of the granting of the same right to the holders of any other shares. In other words, the preferred
share with priority dividend creates an order of preference in the distribution of profits: firstly, profits are allocated
among the preferred shares, up to the amount of the priority dividend, which is guaranteed to them, after which the sharing of
profits among the common shares begins (...)”[90] (emphasis added).
[90]
LUIZ GASTÃO PAES DE BARROS LEÃES. “Dividendos Mínimos Cumulativos e Participantes”. Pareceres.
v. II, São Paulo: Editora Singular, 2004, p. 765.
The
fixed dividend is an amount previously provided for in the Articles of Incorporation, which shall be attributed to each preferred
share prior to the distribution of any dividend to the common shares, the amount of which can be defined, for instance, based on
(i) a sum in Brazilian Reais previously quantified or quantifiable; (ii) a percentage of the par value of the preferred
share, capital or shareholders’ equity of the company.
The shareholder
with a fixed dividend is entitled to receive only the amount previously established in the Articles of Incorporation. Once this
amount is reached, such shares do not have a share in the remaining profits that may be distributed, even if the amount of dividends
paid to common shares exceeds that of the fixed dividend.
The minimum dividend,
in turn, consists of the accumulation of the advantage granted to the holders of shares entitled to a fixed dividend with the possibility
of having a share in the remaining profits under the same conditions as the common shares. In other words, preferred shares with
a minimum dividend are entitled to a portion of the profit as a priority, which is provided for in the Articles of Incorporation.
After the payment of the minimum dividends for preferred shares, the same amount shall be allocated to common shares. Lastly, the
remainder of the profit to be distributed, if any, shall be shared between common and preferred shares in equal proportion[91].
Thus, the common
thread between preferred shares with fixed dividends and those with minimum dividends is that both have priority in receiving such
dividends, that is, both have the guarantee that only after they are guaranteed the minimum or fixed dividends is that any remaining
balance will be used to pay dividends on common shares.
The priority
is not as material when the company makes sufficient profit to pay the priority dividend on preferred shares and the same
dividend on common shares. However, in accounting years in which the profit is lower, the priority becomes relevant since the
preferred shares are entitled to receive
their fixed or minimum dividend and the common shares receive only the remaining profit, or no dividend, if all profit is used
to pay the priority dividend[92].
[91]
NELSON EIZIRIK, “Ações Preferenciais.
Não Pagamento de Dividendos. Aquisição do Direito de Voto”, Revista de Direito Mercantil, Industrial,
Econômico e Financeiro. São Paulo: Malheiros, v. 146, abril-junho, 2007, p. 24.
[92]
JOSÉ LUIZ BULHÕES PEDREIRA e ALFREDO LAMY
FILHO. “Ações como Participação Societária”. In: Alfredo Lamy Filho e José
Luiz Bulhões Pedreira (Coord.). Direito das Companhias. 2ª edição, atual. e ref., Rio de Janeiro:
Forense, 2017, p. 185.
Nonetheless,
the receipt of the priority dividend, either in fixed or minimum amounts, is not guaranteed for the preferred share under any circumstances,
since its payment assumes, as well as any other type of dividend, profits in the year or previously recorded profit reserves
and the absence of retained losses, pursuant to Articles 189 and 201 of the Brazilian Corporations Law.
The
priority of fixed or minimum dividends that are, pursuant to the Articles of Incorporation, attributed to holders of preferred
shares without a vote is also provided for in the provisions of Article 203 of the Brazilian Corporations Law, which establish
other characteristics which distinguish it from the dividend for common shares, in addition to a priority relating to its receipt.
Pursuant to Article
203 of the Brazilian Corporations Law, “the provisions under Articles 194 to 197,
and 202, shall not jeopardize the right of preferred shareholders to receive fixed or minimum dividends to which they have priority,
including in arrears, if cumulative.”
That
is, the retention of profits referred to in Articles 194 (reserves created by the articles of incorporation), 195 (contingency
reserves), 195-A (tax incentive reserve), 196 (investment retention), 197 (unrealized profit reserve), as well as the payment of
the mandatory dividend, should not prejudice the right of shareholders holding preferred shares to receive minimum or fixed dividends.
In other words, except
for the legal reserve, priority dividends are not impacted by any other scenario in which profits
are retained retention , even in cases where the company’s financial condition is inconsistent with the payment of dividends,
when a special reserve is restricted[93].
[93]
CVM/SJU (Securities and Exchange Commission/Judicial System) Opinion No.
082/1982.
In
fact, pursuant to the provisions of Article 203 of the Brazilian Corporations Law, fixed or minimum dividends to which preferred
shares have priority cannot be adversely impacted when profits are no longer distributed in the accounting year in which the management
bodies, pursuant to Paragraph 4 of Article 202, reports to the company that they are inconsistent with the company’s financial
condition[94].
Therefore, we
may gather that the payment of dividends by the companies shall abide by the criteria established by law and in the Articles of
Incorporation for their distribution among the different types and classes of shares, so that, in the event of shares with a fixed
or minimum priority dividend, their respective holders are expected to receive their share of the profits for the year before the
allocation of dividends to the holders of common shares, to whom dividends shall only be paid based on any remaining profit.
II.3. THE DISTRIBUTION OF INTERMEDIATE
AND INTERIM DIVIDENDS
Article 202
of the Brazilian Corporations Law requires the company to pay the mandatory dividend to its shareholders annually. As the
distribution of the mandatory dividend is based on the financial statements prepared by the company at the end of the accounting
year, it is logical that its payment would generally take place after this period.
However, the
Brazilian Corporations Law, in its Article 204, allows for the distribution of dividends in less than one year, based on
the balance sheets drawn up in the respective periods, in addition to allowing the distribution of income based on profits regularly
reported in previous years. As such, Article 204 of the Brazilian Corporations Law reads that:
[94]
MARIA THERESA WERNECK MELLO, “Dividendo Obrigatório”.
In: Geraldo de Camargo Vidigal e Ives Gandra da Silva Martins (Coord.). Estudo Jurídico nº 17 (Série Sociedades
por Ações). São Paulo: Resenha Universitária, 1979, p. 1.128, points out that: “Article
203 is clear in establishing that the provisions of Article 202 will not impact the priority dividend to be paid to preferred shareholders.
If Article 202 and its paragraphs address the mandatory dividend, a concept primarily connected to common shares, it is clear that
the specific provisions that govern the distribution regime, including those that authorize its non-payment owing to being inconsistent
with the financial situation (Paragraph 4 and Paragraph 5), do not apply to the priority dividend, and cannot prevail to undermine
the right to priority in receiving fixed, minimum, and cumulative dividends, which have been attributed to the preferred shares
under the Articles of Incorporation.”
“Intermediate
dividends
Article 204 - The company
that, by virtue of the law or provision under the Articles of Incorporation, assess a half-yearly balance sheet, may report,
by resolution of the management bodies, if authorized by the Articles of Incorporation, dividend under the account of the profit
assessed in this balance sheet.
Paragraph 1 - The company
may, under the terms of the Articles of Incorporation, assess a balance sheet and distribute dividends over shorter periods,
provided that the total dividends paid in each semester of the accounting year does not exceed the amount of capital reserves
referred to in Paragraph 1 of Article 182.
Paragraph 2 - The Articles
of Incorporation may authorize the management bodies to declare intermediate dividends under the account of retained earnings
or profit reserves existing in the last annual or half-yearly balance sheet.” (emphasis
added)
As can
be seen, the provision set out above governed the following hypotheses for the distribution of dividends in periods of less than
one year: (i) declaration of dividends based on the assessment of a half-yearly balance sheet, in order to distribute profits assessed
in the ongoing year (heading of Article 204); (ii) declaration of dividends based on balance sheets for periods of less than six
months, aiming at the distribution of profits assessed in the current year, provided that the total dividends paid in one semester
does not exceed the amount of capital reserves of the company (Paragraph 1 of Article 204)[95];
and (iii) declaration of dividends
based on retained earnings and profit reserves existing in the last annual or half-yearly balance sheet (Paragraph 2 of Article
204)[96].
[95]
The restriction on the payment of dividends pertaining to profits calculated in periods of less than six months to the value of
the capital reserves is intended to protect the interests of creditors, so that the capital that is used as collateral will not
be reached in the event of undergoing subsequent losses. However, it should be noted that such limitation, established in Paragraph
1 of Article 204 of the Brazilian Corporations Law, applies only to the distribution of dividends for periods shorter than six
months, which concerns the distribution of profits recorded in balance sheets assessed in a period greater than half-yearly, thus
the restriction does not prevail, with no limit for the distribution of the dividend, except for the amount of the profits
recorded on the balance sheet.
[96]
LUIZ ANTONIO DE SAMPAIO CAMPOS. “Algumas Notas Sobre a Utilização do Lucro do Exercício em Curso: Dividendo
e Recompra”. In: Marcelo Vieira von Adamek (Coord.). Temas de Direito Societário e Empresarial Contemporâneos.
São Paulo: Malheiros, 2001, p. 430.
That is,
Article 204 of the Brazilian Corporations Law governs the payment of dividends to the profit account for the ongoing accounting
year and those recorded in past years and which have not yet been distributed or absorbed by subsequent losses. In this regard,
although the Brazilian Corporations Law, in the heading of Article 204, mentions only the intermediate dividends, it is understood
that this provision also refers to the so-called interim dividends.
The intermediate
dividends and the interim dividends have certain common traits, but are not to be mistaken one for the other. Intermediate
dividends are those paid in one year on account of retained earnings in the preceding year, that is, in connection with balance
sheets already approved by shareholders’ meeting. Interim dividends, on the other hand, are those distributed based
on profits recorded in balance sheets assessed during the accounting year itself and before approval by shareholders[97].
The fundamental
difference, therefore, between intermediate and interim dividends is that, in the first case, there is prior approval of the balance
sheet by shareholders’ meeting, while in the second, such prior approval is not required. Interim dividends, therefore, are
an exception to the principle that profits can only be distributed after approval of the balance sheet by shareholders’ meeting.
[97]
NELSON EIZIRIK. A Lei das S/A Comentada. v. III, 2ª edição, rev. e ampl., São Paulo: Quartier
Latin, 2015, p. 565.
As common feature
of intermediate and interim dividends, that is worth mentioning is the fact that both depend on an express provision in the Articles
of Incorporation for them to be distributed.
In addition, another
essential feature of intermediate or interim dividends is that they do not stand as provisional dividends, so that they are not
subject to any confirmation in the annual balance sheet to be calculated at the end of the year[98].
Furthermore, the
CVM has already expressly recognized the definitive and irrevocable nature of intermediate dividends[99].
As a result, such
dividends, once paid, are unrepeatable, even if the annual balance sheet for the year reports losses. In other words, the amounts
distributed as intermediate or interim dividends should not — except in the event that they have been received in bad faith
— be returned to the company.
Therefore, the
only consequence resulting from any incurrence of losses in the annual balance sheet, after the distribution of intermediate or
interim dividends, is the impossibility for the company to declare additional dividends until such loss is fully absorbed by future
profits[100].
[98]
EGBERTO LACERDA TEIXEIRA e JOSÉ ALEXANDRE TAVARES GUERREIRO. Das Sociedades Anônimas no Direito Brasileiro.
São Paulo: Ed. José Bushatsky, 1979. v. 2. pp. 602-603.
[99]
CVM Administrative Proceeding No. RJ2014/12058, Rapporteur Officer Pablo Renteria, tried on October 25, 2016. Available at www.cvm.gov.br.
[100]
NELSON EIZIRIK. A Lei das S/A Comentada. v. III, 2ª edição, rev. e ampl., São Paulo: Quartier
Latin, 2015, p. 568.
II.4 – ANSWERS TO QUESTIONS
1st QUESTION
“Payment of the Special
Reserve before the payment of the 2020 Mandatory dividends: Considering that the special dividend reserve was restricted in
relation to the profit for the 2018 accounting year, if intermediate dividends are reported to the account of that reserve before
the calculation of the 2020 income and 2021 shareholders’ meeting , in what form and order of priority should they be distributed,
given that minimum dividends were paid to the preferred shareholders, in keeping with the shareholders’ meeting in which
such reserve was restricted? In other words, when assessing the amount of dividends per share that may be declared owing to the
said special reserve, should we firstly calculate the minimum dividends of the preferred shares (6% and 8%,respectively) and then
start the payment of common shareholders in accordance with Paragraph 4 of Article 9 of the Articles of Incorporation of Eletrobras?”
ANSWER
Article 9 of Eletrobras’
Articles of Incorporation (“Articles of Incorporation”) provides for the advantages and rights conferred on the different
classes of preferred shares issued by the Company. Pursuant to Paragraph 1 of Article 9, class “A” preferred shares
issued by Eletrobras shall have priority in receiving dividends distributed in each accounting year, at the rate of eight percent
per year, on the shareholders’ equity for such type and class of shares, to be apportioned among them equally.
Class “B”
preferred shares, in turn, shall have priority in receiving dividends distributed in each accounting year, at the rate of six percent
per year, on shareholders’ equity for such type and class of shares, to be apportioned among them equally, in accordance
with the provisions of Paragraph 2 of Article 9 of the Articles of Incorporation.
That is, both
class A preferred shares and class B preferred shares are entitled to receive priority dividends.
As mentioned,
the priority dividend granted to preferred shares gives its holders the guarantee that only after the respective fixed or minimum
dividends are assured will any remaining balance be allocated to the payment of dividends on common shares.
The priority dividend
granted to class A and B preferred shares issued by Eletrobras refers to a minimum dividend, given that, in addition to
having the right to priority receipt of the portion of the profit established under Paragraphs 1 and 2 of Article 9 of the Articles
of Incorporation, they also have a share, together with the common shares, in the distribution of any remaining profit.
To this end, Article
9, Paragraph 3 of the Articles of Incorporation, confers to class A and B preferred shares the right to share in the distribution
of dividends on equal terms with common shares after they are assured the lowest of the minimum dividends referred to in Paragraphs
1 and 2 of the Articles of Incorporation provision in question.
In addition, class
A and B preferred shares issued by Eletrobras are entitled to an increased dividend, pursuant to Article 9, Paragraph 4, of the
Articles of Incorporation, which guarantees them the right to receive dividends, per share, at least ten percent (10%) higher than
those allocated to each common share.
These provisions
of the Articles of Incorporation give holders of preferred shares issued by Eletrobras the right to receive minimum priority
dividends, ensuring, once the priority dividends in question have been paid, that the holders of preferred shares receive dividends,
per share, in an amount at least ten percent (10%) higher than that given to common shares.
In 2018, Eletrobras
recorded net income of Thirteen Billion Two Hundred Sixty-two Million Three Hundred Seventy-eight Thousand Brazilian Reais
(BRL13,262,378 thousand). Accordingly, in view of the legal provisions and the provisions of the Articles of Incorporation on the
mandatory dividend[101], the portion corresponding to twenty-five percent of
the adjusted net income for the accounting year 2018, equivalent to Three Billion One Hundred and Fifty-five Million, Five Hundred
and Fourteen Thousand Brazilian Reais (BRL3,155,514 thousand) should be distributed to the Company’s shareholders,
fulfilling the preference in the receipt of dividends by the holders of preferred shares of classes A and B.
In addition, the
balance of realized profits included in the unrealized profit reserve was, on December 31, 2018, Three Hundred and Eighty-six Million
Three Hundred Seventy-five Thousand Brazilian Reais (BRL386,375 thousand). In accordance with the provisions of Article
202, item III, of the Brazilian Corporations Law, the profits recorded in the unrealized profit reserve, which have not been used
to absorb prior losses, when realized, shall be added to the first dividend declared after realization.
[101]
According to Article 55, Paragraph 1, of the Articles of Incorporation, “in each accounting year, the distribution of
a dividend of not less than twenty-five percent of the net profit, adjusted under the terms of the Law, in compliance with the
Dividend Distribution Policy, will be mandatory.”
Thus, in 2019,
the Company should, in principle, distribute the sum of the mandatory dividends for the year of December 31, 2018 with the realized
profits recorded under the unrealized profit reserve, which totaled Three Billion, Five Hundred and Forty-one Million, Eight Hundred
and Eighty-nine Thousand Brazilian Reais (BRL3,541,889 thousand).
However, according
to the information provided by the Company’s management, at the time, the payment of the unrealized profit reserve balance,
added to the mandatory dividend, would generate a cash imbalance at Eletrobras, in order to meet its obligations. Thus, the Company’s
management understood that the distribution of the entire mandatory dividends would be inconsistent with its financial condition,
which was confirmed by the opinion of the Fiscal Council.
In view of this,
Eletrobras’ management proposed and the Company’s Shareholders' Meeting held on April 29, 2019 (“2019 AGO”)
approved “the payment of BRL368,868 thousand to be distributed among the holders of class A and B preferred shares, pursuant
to paragraphs one and two of Article 8 of Eletrobras’ Articles of Incorporation, in the form of dividends in addition to
the payment of BRL881,132 thousand to holders of common shares and the retention of BRL2,291,889 thousand, in a special dividend
reserve, based on Article 202, paragraphs four and five, of the Brazilian Corporations Law, to be distributed when the Company's
financial condition so allows” (emphasis added).
Eletrobras
intends, if its financial condition allows, to revert the retention of the profits that were allocated in the 2019 AGO to the special
reserve of undistributed dividends (“Special Reserve”), through a payment of intermediate dividends to the shareholders.
As class A
and B preferred shares issued by Eletrobras are entitled to receive minimum priority dividends, before making any dividend distribution
to the common shares, the Company is required to ensure the payment of such priority dividends to the preferred shares.
This
priority granted to preferred shares applies to any dividend that may be declared by the Company over the accounting year,
until the amount corresponding to the percentages provided for in Paragraphs 1 and 2 of Article 9 of the Articles of Incorporation
is reached, and not only to the mandatory dividend that may be distributed based on the net income recorded in the prior accounting
year.
Therefore, if
the reversal of the amount allocated to the Special Reserve is decided by the Company before the declaration of the mandatory dividend
for the 2020 accounting year, the amount corresponding to the Special Reserve shall be paid as an intermediate dividend, primarily
to the holders of preferred shares of issuance of Eletrobras, until the percentages established in Paragraphs 1 and 2 of Article
9 of the Articles of Incorporation are reached.
This conclusion
is not changed by the fact that, in the accounting year in which the Special Reserve was restricted, the distribution of the minimum
dividends was guaranteed to the holders of preferred shares.
In fact, the same
understanding set out in the answer to the 5th Question of our Opinion dated March 26, 2019 (“2019 Opinion”)
with regard to unrealized profit reserve applies to the Special Reserve, considering that both reserves play a similar role, that
is, to prevent the company from being required to distribute dividends when this is inconsistent with its financial condition.
In other words,
the amount allocated to the Special Reserve is not “earmarked” for payment only to holders of common shares because,
in the year in which such reserve was restricted, the Company had already paid the minimum dividend owed to the preferred shareholders.
As a matter of
fact, in companies whose preferred shares are entitled to receive the minimum dividend, as is the case with Eletrobras, common
shareholders are always subject to the risk that all the profit distributed by the company will be allocated to the preferred shareholders,
without this ensuring them any right to be “offset” with the priority payment of such amount in subsequent years.
On the contrary, in the subsequent years, the Company should again use the distributable profit to pay in priority the minimum
dividend owed to the holders of preferred shares, distributing only the remaining balance to the holders of common shares, accordingly.
Therefore, when
calculating the amount of dividends per share that may be declared as a result of the reversal of the Special Reserve, the Company
is expected to abide by the order of priority established in the Articles of Incorporation, first calculating the minimum dividends
for class A and B preferred shares, then subsequently, if there is any remaining portion, making the payment to the holders of
common shares, however always ensuring a 10% higher payment to preferred shareholders, as provided for in Article 9, Paragraph
4, of the Articles of Incorporation.
2nd QUESTION
“Payment of Special Reserve
after payment of mandatory dividends in 2020: in the event of the declaration and payment of the Special Reserve that was restricted
from the Income for the Year 2018 after the payment of mandatory dividends for 2020 (which were paid in 2021), how would this Special
Reserve be distributed among the preferred and common shareholders, if also paid in the 2021 accounting year? In other words, when
calculating the amount of dividends per share with respect to this reserve, should we first calculate the preferred dividends,
or, given that the preferred shareholders would have already received the mandatory dividend for the year 2020 (payment of which
is due in 2021), should we add the dividends from the reserve to the dividends that would have already been distributed in 2021,
and distribute to common shares, up to the limit that it is possible to maintain the 10% additional payment per preferred share?”
ANSWER
Pursuant to Article
9, Paragraphs 1 and 2, of the Articles of Incorporation, the priority dividend granted to class A and B preferred shares corresponds,
as the case may be, to six percent or eight percent per year on the share of capital represented by each class of shares.
Accordingly,
Eletrobras is not required to pay twice, in the same year, the amount of the priority dividend provided for in the these
provisions of the Articles of Incorporation, namely, in this case, one with the reversal of the Special Reserve and the other with
the net profit for the year.
On the contrary, once
the amount corresponding to the minimum dividend of class A and B preferred shares has been paid (regardless of the origin of the
funds used for this purpose), the Company fulfilled its payment obligation to the preferred shareholders and the subsequent profit
to be distributed in the year should necessarily be allocated to holders of common shares, until they receive the amount corresponding
to the minimum reduced dividend of ten percent, in accordance with the provisions of Article 9, Paragraph 4, of the Articles of
Incorporation.
The very concept of
minimum dividend prevents Eletrobras, after having paid the holders of the class A and B preferred shares the amount of the priority
dividend owed to them, from distributing any additional dividends to the holders of such preferred shares before ensuring that
the holders of common shares receive an amount equivalent to the amount granted to each preferred share, in keeping with the ten
percent higher dividend provided for in Article 9, Paragraph 4, of the Articles of Incorporation.
Therefore, in the event
that the reversal of the Special Reserve balance happens in 2021 and after the declaration of the mandatory dividend for the 2020
accounting year, and if this has already been sufficient to allow the payment of priority dividends owed to the A and B preferred
shares, the amount allocated to the Special Reserve should be distributed to the holders of common shares, until they receive the
same amount paid to the preferred shareholders less the amount corresponding to the percentage of ten percent more assured to the
preferred shares.
3rd QUESTION
“Application or non-application
of Payment of the Special Dividend Reserve to the 2020 Mandatory Dividend: if the declaration and payment of the Special Reserve
by means of intermediate dividends happens before the 2021 shareholders’ meeting, could the mere payment of this, if in
sufficient amount, be applied as a mandatory dividend payment for the 2020 or 2021 accounting years? In other words, could the
Company subsequently distribute all net income for 2020 or 2021 among reserves, subject to the respective limits of each type,
distributing additional dividends only in case of excess profit? For example: supposing that, after calculating the 2020 income,
the total amount of the 2020 Mandatory Dividend is BRL2.5 Billion and the Company decides to distribute the Special Dividend Reserve
before the 2021 Shareholders’ Meeting, in the amount of BRL2.3 Billion, would the Company still be required to pay mandatory
dividends only in the amount that exceeds the Special Reserve (BRL200 million in this case), or should it pay the total of BRL4.8
Billion (sum of BRL2.5 from the 2020 Mandatory Dividend and BRL2.3 Billion from the Special Dividend Reserve) in 2021? In this
case, would the same reasoning be valid if the application is levied (or not) on the mandatory dividend calculated in the year
2021?”
ANSWER
As discussed above,
the retention of the mandatory dividend in the Special Reserve is temporary and extraordinary, since, under the terms of
Paragraph 5 of Article 202 of the Brazilian Corporations Law, the amounts allocated to the Special Reserve can only be used
for absorption by losses undergone in subsequent years or the distribution as dividends, which shall be performed “as
soon as the company’s financial condition so allows.”
That is, the amounts
recorded in the Special Reserve cannot be allocated to any of the other reserves and retentions provided for in Articles 193 to
197 of the Brazilian Corporations Law, and, they should not be absorbed by subsequent losses and should necessarily be distributed
as dividends to shareholders.
The restriction
of the Special Reserve is a scenario of postponement of the payment of dividend to shareholders when the financial condition of
the company is not consistent with its distribution. Consequently, the amount recorded in the Special Reserve cannot receive any
destination other than distribution to shareholders as a dividend, except in the case of absorption by subsequent losses.
The heading of
article 202 of the Brazilian Corporations Law, in turn, establishes that shareholders are entitled to receive as a mandatory dividend,
in each accounting year, the portion of profits established in the Articles of Incorporation, which, in the case of Eletrobras,
corresponds, as mentioned, to twenty-five percent of the adjusted net income as provided in said law, pursuant to Article 55, Paragraph
1, of the Articles of Incorporation.
Thus, considering,
on the one hand, the exceptional and temporary nature of the Special Reserve and, on the other, the mandatory nature of the distribution
of the dividend provided for in Article 55, Paragraph 2, of the Articles of Incorporation, we may conclude that the dividends that
may be distributed owing to the reversal of the Special Reserve cannot be applied to the amount of the mandatory dividend
pertaining to the accounting year of 2020, to be distributed to Eletrobras' shareholders in 2021.
A
contrary understanding would allow amounts that
should necessarily be distributed to shareholders, whether due to the reversal of the Special Reserve or as a mandatory dividend,
to be retained by the Company in other reserves provided for by law or in the Articles of Incorporation.
Therefore, the
fact that dividends are distributed owing to the reversal of the Special Reserve, in amounts higher than those that would be owed
as a mandatory dividend in the current accounting year, does not authorize Eletrobras to allocate to other reserves the entire
amount of net income assessed in 2020. On the contrary, even in such a situation, the Company will continue to be required to pay
its shareholders the amount corresponding to twenty-five percent of the adjusted net income of such accounting year.
In the example
mentioned by the Company in this Question, if, after calculating the 2020 net profit , the amount of the mandatory dividend to
be distributed to shareholders is BRL2.5 billion and Eletrobras, before the shareholders' meeting ("AGO") to be held
in 2021, had already reversed the Special Reserve — whose balance is about BRL2.3 Billion, the Company’s shareholders
should receive, in such accounting year, dividends totaling at least BRL4.8 billion, which corresponds to the sum of
amounts paid as a result of the reversal of the Special Reserve and mandatory dividends calculated in respect of the 2020 net income.
Therefore, if
the amount recorded in the Special Reserve is paid to Eletrobras' shareholders as intermediate dividends, the Company’s shareholders
should receive, in the 2021 accounting year , the amounts allocated to this reserve plus the full mandatory dividend calculated
in relation to the 2020 accounting year.
Dividends that
may be distributed in 2021, owing to the reversal of the Special Reserve, cannot be applied to the amount of the mandatory dividend
connected to subsequent years, such as that calculated based on any net income assessed in 2021, to be paid to shareholders in
2022.
In fact, according
to legal doctrine, the profits retained in the Special Reserve, “when released, will not revert to the dividend calculation
base for subsequent years, but should be paid immediately”[102], since
this is the only destination that the corporate law established to them, in addition to the possible use for the absorption of
subsequent losses.
The impossibility
for dividends distributed from the reversal of the Special Reserve to be applied to the dividend amount for subsequent years is
applicable both to the amount pertaining to the mandatory minimum dividend and to the value of any remaining profits.
Paragraph 6 of
Article 202 of the Brazilian Corporations Law now requires companies to distribute, as a dividend, any profit that exceeds the
legally established retention hypotheses. In fact, the portion of the profit for the year that exceeds the mandatory dividend and
cannot be included in any of the allocations expressly provided for in Articles 193 to 197 of the Brazilian Corporations Law should
be mandatorily distributed to shareholders as a dividend.
[102]
MARIA ISABEL BOCATER, JOSÉ LUIZ BRAGA e CARLOS MARTINS NETO, “Deferral of payment of mandatory dividends due to incompatible
financial situation: considerations on the application of art. 202, Paragraph 4, of the Brazilian Corporations Law,” Revista
semestral de direito empresarial. Rio de Janeiro: Renovar, n. 8, January - July, 2011, p. 11.
Thus, if there
is any remaining balance after it is determined that there is sufficient net profit in the 2021 accounting year for the payment
of the mandatory dividend to all shareholders and the restriction of mandatory reserves, this remaining balance must be distributed
to shareholders as dividends, as long as this remaining balance cannot be earmarked for any of the profit reserves and retentions
provided for by law. This distribution will be applicable even if the shareholders receive dividends in the 2021 accounting year
in an amount higher than the dividend set forth in Paragraph 6 of Article 202 of the Brazilian Corporations Law as a result of
the reversal of the Special Reserve.
If the payment
of dividends resulting from the reversal of the Special Reserve was allocated to any remaining profit assessed in the 2020 or 2021
accounting years, for example, it could allow the amount of the remaining profit to be distributed as dividends, under the terms
of article 202, paragraph six, of the Brazilian Corporation Law, to be retained by the Company in other reserves set forth in the
law or in the Bylaws.
Therefore, the
intermediate dividends distributed as a result of the reversal of the Special Reserve cannot be applied to the amount of the mandatory
dividend or any remaining profits, whether with regard to the 2020 accounting year or subsequent accounting years.
Nonetheless, this
conclusion does not apply to other scenarios of profit reserves which are not exclusively destinated for the distribution to shareholders
as dividends or the absorption of subsequent losses.
In the case of
a reserve created by the Articles of Incorporation, for example, the payment of intermediate dividends resulting from its reversal
in the current year could be considered for the purpose of paying the mandatory dividend owed to shareholders in 2021.
This is
because, as opposed to the Special Reserve or unrealized profit reserve, other types of profit reserves do not have the
obligation to be distributed as dividends, which means that the Company is allowed to keep the amounts allocated to the
reserves, as long as the purpose that triggered the
restriction remains in place. The Company would also be allowed to perform a capitalization, pursuant to Article 169 of the Brazilian
Corporations Law, or distribute them as dividends.
Thus, if the Company
decides to distribute the amounts recorded in this profit reserve as intermediate dividends, which could have been kept as reserves,
nothing prevents the amount distributed as a result of its reversal to be applied to the minimum mandatory dividend owed to the
shareholders in such accounting year, provided that the relevant authority to declare intermediate dividends expressly orders such
decision, as explained in the answer to the 4th Question.
It should be noted
that, if Eletrobras distributes interim dividends by reversing the Special Reserve, such intermediate dividends shall be considered
declared and paid in 2021 for all legal purposes, despite the restriction of the Special Reserve in 2019 with part of the net income
for the accounting year 2018.
The right to receive
dividends is an expectation right of the shareholder. Once the company’s balance sheet is assessed and approved, the existence
of net income is verified and the dividend distribution is approved, the shareholder, who already had the potential right to receive
the Company’s profits, becomes entitled to enforce the right to receive dividends; i.e., the shareholder becomes a creditor
of the company.
Thus,
the fundamental effect of the declaration of the dividend by the relevant authority is the transformation of the right to receive
dividends into a typical credit right, net and certain for the shareholder against the company[103].
After the declaration of dividends, the amount set out for distribution is extracted from the company’s shareholders’
equity and becomes a payable liability[104].
In practice, the
declaration of the dividend also stands as the confirmation that all conditions for the distribution of those dividends have been
met. Such confirmation may happen at the shareholders’ meeting or by the managers.
Article 202, paragraph
four, of the Brazilian Corporations Law establishes that the minimum dividend “shall not
be mandatory in the accounting year in which the management bodies report to the shareholders’ meeting that it
is inconsistent with the company’s financial situation.” As a supplement, Paragraph 5 of said provision establishes
that “the profits that are no longer distributed under the terms of Paragraph 4 shall be recorded as a special reserve and,
if not absorbed by losses in subsequent years, shall be paid as dividends as soon as the company’s financial situation
so allows.”
If the law provides
that dividends are not mandatory in the accounting year in which the company’s financial situation is inconsistent and that
the respective resources may subsequently be absorbed by losses in subsequent years, it is evident that the amount allocated to
the Special Reserve was not also declared, since the main consequence of the declaration of dividends is to convert the shareholder’s
right to receive dividends into a credit right and, with that, extract the corresponding
value from the shareholders’ equity, making it a payable liability[105].
[103]
MARCELO BARBOSA. “Obrigações dos Acionistas”. In: Alfredo Lamy Filho e José Luiz Bulhões
Pedreira (Coord.). Direito das Companhias. 2ª edição, atual. e ref., Rio de Janeiro: Forense, 2017, p.
232.
[104]
BRUNO ROBERT. Dividendo mínimo obrigatório nas sociedades por ações brasileiras: apuração,
declaração e pagamento. São Paulo: Quartier Latin, 2011, p. 165.
[105]
In this regard, the opinion cast by CVM’s Officer, Luiz Antonio de Sampaio Campos, in the records of CVM Sanctioning Administrative
Proceeding No. 03/02, tried on February 12, 2004, in which a company’s default in paying dividends that had already been
declared, makes express reference to the fact that the resources allocated in the special reserve provided for in Article 202,
Paragraph 4, have not yet been actually declared as dividends, as follows: “That is, choosing to declare the mandatory
dividend or failing to declare it on account of financial inconsistency, thus restricting the special reserve is a decision
that pertains to the discretion of the managers and shareholders and it is not for CVM to replace the judgment of such people,
especially after the facts and without any responsibility for the success or the failure of their administrative suggestions, which,
in this regard, will remain in the realm of theory.” (emphasis added)
Accordingly, the
resources allocated to the Special Reserve will only be effectively declared by Eletrobras when the Company decides to pay them
as intermediate dividends, which should happen, as determined by Article 202, paragraph 5, of the Brazilian Corporations Law, as
soon as its financial situation allows. Only after this declaration the distribution of dividends from the Special Reserve will
become effectively mandatory.
Considering that
the intermediate dividends will be declared and distributed after the accounting year to which Eletrobras’ 2020 financial
statements refer, the accounting for this payment will not be reflected in such financial statements.
However, if the
declaration happens before the date of authorization to issue the financial statements for 2020, in accordance with the provisions
of Technical Pronouncement CPC No. 24 of the Accounting Pronouncements Committee, approved by CVM Deliberation No. 593/2009 (“CPC
24”), such dividends should be treated as subsequent events.
According to CPC
24, “an event subsequent to the period to which the financial statements refer is the event, whether favorable or unfavorable,
that happens between the end date of the period to which the financial statements refer and the date on which the issuance of such
financial statements is authorized.”
For
Eletrobras, the financial statements are considered authorized for issuance when the Company’s management authorizes their
submission to the Board of Directors, Fiscal Council, and Audit and Articles of Incorporation’s Risk Committee – CAE.
Pursuant to items
12 and 13 of CPC 24, any declaration of dividends in addition to the legal provisions or the provisions of the Articles of Incorporation
or any other form of distribution of income after the balance sheet date and before the date of authorization to issue such statements
will not cause a liability to be recorded on the balance sheet date, as it also does not stand as an obligation present
on the date in question. However, such dividends should be disclosed in the explanatory notes in accordance with the applicable
accounting standards, stating that the amount to be paid should be considered for the purposes of the payment of the priority dividends
of the class A and B preferred shares owed in 2021, as a result of the net income calculated in 2020.
On the other hand,
in the financial statements for the 2021 accounting year, to be considered at the 2022 Shareholders’ Meeting, the payment
of intermediate dividends from the reversal of the Special Reserve shall be properly accounted for and, consequently, the Special
Reserve shall no longer be recorded as an integral part of Eletrobras’ shareholders’ equity.
4th QUESTION
"If the answer to the
previous question results in a deduction, which are the requirements and formalities to be adopted by Eletrobras so that the intermediate
dividends are used as payment of the mandatory dividends?"
ANSWER
According to the
answer to the 3rd Question, the intermediate dividends distributed owing to the reversal of the Special Reserve cannot
be applied to the amount of the mandatory dividend, either with respect to the 2020 accounting year or to subsequent years.
On the other hand,
in the case of other scenarios of profit reserves whose destination is not exclusively the distribution to shareholders as dividends
or the absorption of subsequent losses, the payment of intermediate dividends resulting from their reversal, in the ongoing year,
could be applied to the amount of mandatory dividend due to shareholders in 2021.
In this regard,
it should be noted that the interim dividends, as they are distributed based on profits for the ongoing year, recorded in balance
sheets assessed over the year itself, and before approval by the shareholders, should necessarily be considered for the calculation
of the mandatory dividend based on net income to be assessed at the end of the ongoing year.
Intermediate dividends
are paid on account of retained earnings from the prior year, i.e., relating to balance sheets already approved by the shareholders’
meeting. As a result, there is no way to use them for the mandatory dividend automatically, and it is required that the relevant
authority for the declaration of the respective intermediate dividends makes express reference to the fact that the amount used
for its payment should be considered, at the end of the year, as part of the mandatory dividend to be assessed.
If there is no
express reference in the event of declaration of the intermediate dividend, the application of its payment for purposes of defining
the amount of the mandatory dividend cannot be made in the calculation of the latter. In this case, the amount assessed as mandatory
dividend should be fully paid by the company, without the possibility of offset.
The
advance payment of the mandatory dividend by ways of the reversal of profit reserves, in cases where such advance may be made,
necessarily implies the following procedure[106]:
|
(i)
|
The corporate body competent
to declare the intermediate dividend decides to pay such dividend to the profit account restricted in prior years with the express
declaration that such amount will be applied to the mandatory dividend owed at the end of the year;
|
|
(ii)
|
In the AGO that recognizes
the existence of net income for the year, the mandatory dividend is calculated to be offset against the payment made with the reversal
of the profit reserve and, if such payment has been less than the mandatory dividend owed, the company has an obligation to declare
the difference at the AGO;
|
|
(iii)
|
If the advance payment
is equal to or greater than the mandatory dividend assessed at the AGO, there will be no difference to be distributed to shareholders;
and
|
|
(iv)
|
The portion of the profit
for the year corresponding to the mandatory dividend paid in the form of an intermediate dividend should reconstitute the profit
reserve used to make such payment feasible.
|
According to the literature on the topic,
“the offset of the advance with the declared mandatory dividend and its allocation as a replacement for the account used
for the early distribution are of the essence of the advance payment: if the mandatory dividend assessed at the AGO could not replace
the accounts that gave rise to the advanced dividend, by definition, it would not be an advance, but rather the distribution of
an intermediate dividend entirely detached from the mandatory dividend.”[107]
[106]
LUIZ CARLOS PIVA. “Lucros, Reservas e Dividendos”. In: Alfredo Lamy Filho e José Luiz Bulhões Pedreira
(Coord.). Direito das Companhias. 2ª edição, atual. e ref., Rio de Janeiro: Forense, 2017, pp.1.246-1.247.
[107]
LUIZ CARLOS PIVA. “Lucros, Reservas e Dividendos”. In: Alfredo Lamy Filho e José Luiz Bulhões Pedreira
(Coord.). Direito das Companhias. 2ª edição, atual. e ref., Rio de Janeiro: Forense, 2017, p. 1.247.
Therefore, the procedures above are those
that should be adopted by Eletrobras so that any intermediate dividends paid from the reversal of profit reserves that may be maintained
by the Company are applied to the amount of mandatory dividends, which, however, is not valid for the Special Reserve, which
is not subject to this type of application, according to the answer to the 3rd Question.
5th QUESTION
“What is the deadline for the payment of such dividends
after the declaration? Can the Company's management assign a payment date during the course of the year in which it is declared,
in accordance with the general rule of paragraph 3 of Article 205, of Law 6404/1976, or does the reversal of the Special Reserve
require its payment ‘immediately’ when declaring it, as a result of the disappearance of the financial reason for its
restriction and deferral of dividends?”
ANSWER
5.1. The General Rule of Article
205, paragraph 3, of the Brazilian Corporations Law
The Brazilian
Corporations Law established, in Article 205, paragraph 3, the general rules that should be met by the companies in setting the
deadline for payment of dividends declared at shareholders’ meeting, as follows:
“Article 205 (...)
Paragraph 3. Unless decided otherwise at the shareholders’ meeting, the dividend shall be paid within sixty (60) days from
the date on which it is declared and, in any case, within the accounting year.”
This provision
can be divided into two parts. The first part gives the shareholders’ meeting the jurisdiction to deliberate on the deadline
of the payment of dividends, given that, in case the meeting does not decide, the payment should be made within sixty days. Thus,
the shareholders’ meeting can establish the period it deems convenient to start the payment of dividends in each accounting
year.
After the term
set by the meeting ends, the shareholder is entitled to file a collection suit against the company to receive the dividends owed
to them.
The second
part of the provision restricts the powers conferred on the shareholders’ meeting to deliberate on the final term for the
payment of dividends, which cannot be set for a date after the end of the accounting year. The legislative intent was to guarantee
the integrity of the right to the dividend, thus preventing its indefinite postponement.
The maximum
period of sixty days provided for in Paragraph 3 of Article 205, of the Brazilian Corporations Law is supplementary in nature,
and the shareholders’ meeting may decide on the payment of dividends in a period greater than sixty days, provided that it
does not exceed the end of the accounting year.
In the absence
of a resolution by the shareholders’ meeting, the supplementary rule becomes mandatory, since compliance with the provision
stated therein starts being required from the parties.
Although Paragraph
3 of Article 205 of the corporate law makes express reference only to a shareholders’ meeting, this rule also applies to
intermediate and interim dividends declared by the management bodies of the companies under the terms of Article 204 of the Brazilian
Corporations Law[108].
Thus, the management
bodies that are authorized by the Articles of Incorporation to distribute intermediate or interim dividends may postpone the payment
of such dividends beyond the sixty days provided for in Article 205, paragraph 3, of the Brazilian Corporations Law, provided that
the payment term does not exceed the end of the accounting year in which the dividends are declared.
[108]
NELSON EIZIRIK. A Lei das S/A Comentada. v. III, 2ª edição, rev. e ampl., São Paulo: Quartier
Latin, 2015, p. 564.
5.2. The Specific Rule for Payment
of Profits Allocated in the Special Reserve
As previously
mentioned, the retention of the mandatory dividend in the Special Reserve is exceptional and, therefore, the amounts allocated
to this reserve are subject to a specific legal regime[109], including for its
distribution to shareholders.
In this regard,
Paragraph 5 of Article 202 of the Brazilian Corporations Law provides that, if they are not absorbed by losses, the profits allocated
to the Special Reserve "shall be paid as dividends as soon as the company's financial situation so allows"
(emphasis added).
When using
the word “paid” in the above provision, the legislator established a special rule for the payment of the amounts
held in the Special Reserve, thus the general rule of Article 205, paragraph 3, of the Brazilian Corporations Law, shall not apply
to the distribution of profits allocated in such reserve.
The obligation
to pay the profits allocated in the Special Reserve as soon as possible stems from one of the main objectives of the Brazilian
Corporations Law to safeguard the sharing of shareholders in the profits of companies. The exception for this objective is when
there is need to preserve the continuity of the company’s activities.
As soon as
the distribution of the amounts allocated to the Special Reserve no longer puts the company’s financial condition at risk,
its retention is no longer justified, and the essential right of shareholders to share in corporate proceeds prevails and the immediate
distribution of the amounts included in the Special Reserve is mandatory, as recognized by the literature:
[109]
In this regard, when asserting that, “only the contingency reserves (Article 195) and unrealized profits (Article 197)
may, under the LSA regime, harm the mandatory dividend,” Luiz Antonio de Sampaio Campos justified the absence of “reference
to the special dividend reserve owing to financial inconsistency, provided for in Article 202, Paragraph 4, as it is subject to
a totally different regime” (LUIZ ANTONIO DE SAMPAIO CAMPOS. “Notas sobre destinação do lucro do
exercício: a reserva de lucros a realizar e a destinação a ela do lucro excedente do dividendo obrigatório”.
In: Alberto Venâncio Filho, Carlos Augusto da Silveira Lobo, Luiz Alberto Colonna Rosman (Org.). A Lei das S.A. em seus
40 anos. 1ª edição, Rio de Janeiro: Forense, 2017, p. 429).
“Destined to a
special reserve, the retained amount should be declared as a dividend (relating to the year in which the profits were assessed)
as soon as the company’s financial situation so allows, unless it is absorbed by subsequent losses.
Therefore, also in this
case, this refers to the deferral of mandatory dividends, given that the retained earnings, when released, will not revert to the
calculation base of dividends for subsequent years, but should be paid immediately.”[110]
(emphasis added)
Nonetheless,
this does not mean that the payment should be made on the same day or the day after the declaration of dividends by the corporate
bodies.
In fact, requiring
payment to happen simultaneously with its declaration would not be feasible, especially in the case of publicly-held companies
with a high number of shareholders, as a reasonable period is required for the company’s management to adopt the operational
measures for the payment.
Thus, the legal
provision under Article 202, paragraph 5, of the Brazilian Corporations Law should be understood as an obligation to pay the dividends
declared to the Special Reserve account as soon as possible, in order to allow the adoption of the necessary procedures for the
its operationalization.
[110]
MARIA ISABEL BOCATER, JOSÉ LUIZ BRAGA e CARLOS MARTINS NETO, “Deferral of payment of mandatory dividends due to incompatible
financial situation: considerations on the application of art. 202, Paragraph 4, of the Brazilian Corporations Law,” Revista
semestral de direito empresarial. Rio de Janeiro: Renovar, n. 8, January - July, 2011, pp. 14-15.
5.3. Concrete Case Analysis
As stated in
the Term of Reference, Eletrobras intends to reverse the retention of profits earmarked for the Special Reserve by resolution of
the 2019 AGO and carry out its distribution in the form of intermediate dividends to shareholders.
The payment
of dividends that Eletrobras intends to distribute owing to the reversal of the Special Reserve shall comply with the provisions
of Article 202, paragraph five, of the Brazilian Corporations Law, according to which it shall happen as soon as the Company’s
financial situation so allows. For this reason, the distribution of amounts retained in the Special Reserve can be made at any
time over the year, including as an intermediate dividend, as the Company intends to do.
Once competent
corporate bodies determine that the distribution of the amounts retained in the Special Reserve is now consistent with Eletrobras’
financial situation, payment to shareholders should be made in the shortest possible time, which means the time necessary for the
Company’s management to be in a condition to adopt the operational measures required for the distribution of dividends.
Accordingly,
the payment of the amounts allocated to the Special Reserve cannot be postponed, based on the provisions of Article 205, Paragraph
3, of the Brazilian Corporations Law, until the end of the accounting year. This is because the authorization established in this
provision is inconsistent with the specific rule of Article 202, Paragraph 5, of the same provision, according to which the distribution
of the amounts held in a Special Reserve shall occur as soon as the Company’s financial situation so allows.
Lastly, it
is recommended that the declaration of dividends by competent bodies of the Company expressly state the date on which the dividends
will be paid from the Special Reserve account, thus avoiding any questions regarding the time in which the payment may be demanded
by the shareholders.
6th QUESTION
“Does the provision of the Articles of Incorporation
that grants the Board of Directors the power to declare intermediate dividends reserve jurisdiction of the corporate body or can
the matter be resolved at the Shareholders' Meeting? In the case of a declaration upon deliberation of the Board of Directors,
is a new statement required from the Fiscal Council or from the Audit and Risk Committee (“CAE”)?”
ANSWER
The shareholders’
meeting stands as the highest body of the corporation, bringing together all shareholders, with or without the right to vote or
with a restricted vote. When convened and conducted in accordance with the Brazilian Corporations Law, the shareholders’
meeting has the jurisdiction to decide on all of the company’s businesses and to defend its interests and its development.
In this regard, Article 121 assigns to
it “powers to decide all business pertaining to the corporate purpose and to take the resolutions it deems
convenient for its defense and development” (emphasis added).
Therefore, under Brazilian law, the principle
of sovereignty of the shareholders’ meeting is in force, which can, in principle, consider any matters of interest to
the company, even if powers have not been expressly conferred on it by law or by the Articles of Incorporation.
This general rule is exempted only
when other corporate bodies are assigned, on an exclusive basis, the function of performing certain acts or deliberating
on specific matters, as in the cases provided for in Articles 138, Paragraph 1[111],
and 142[112] of the Brazilian Corporations Law. In this regard, Article 139 establishes
that “the assignments and powers conferred by law to the management bodies cannot be granted to another body, created
by law or by the Articles of Incorporation” (emphasis added).
[111]
“Article 138. (...) Paragraph 1 The board of directors is a collective
decision-making body and is an exclusive representation body of the company's directors.”
[112]
“Article 142. The Board of Directors
shall:
I - establish the
general direction of the company's business;
II - elect and remove
the company’s officers and establish their duties, in compliance with the provisions of the Articles of Incorporation;
III - inspect the
management of officers, examine, at any time, the books and papers of the company, and request information on contracts executed
or about to be executed and any other acts;
IV - call the shareholders’
meeting when it deems it feasible, or in the case of Article 132;
V - state its opinion
on the report of the management and the executive boards’ accounts;
VI - express previously
about acts or contracts, when the Articles of Incorporation so requires;
VII - resolve, when
authorized by the Articles of Incorporation, on the issuance of shares or subscription bonuses;
VIII - authorize,
if the Articles of Incorporation does not provide for otherwise, the disposal of items of noncurrent assets, the perfection of
security interests, and the posting of bonds for third-party obligations;
IX - choose and remove
independent auditors, if any.”
Article 36 of Eletrobras’ Articles
of Incorporation establishes matters that should, in principle, be the object of consideration by the Board of Directors, including
the deliberation “on the declaration of intermediate dividends” (item XXIX).
However, this provision does not
confer on the Board of Directors reserved jurisdiction to decide on the matter, thus the sovereignty of the Shareholders’
Meeting prevails, which can also validly decide on the declaration of dividends based on reserves restricted in previous years.
There is no
provision in the Brazilian Corporations Law or in the Articles of Incorporation that expressly establishes that the decision on
the reversal of the Special Reserve would be the reserved for the jurisdiction of the management bodies.
In fact, Article
204 of the Brazilian Corporations Law does not remove the power of the shareholders’ meeting to resolve on the distribution
of dividends based on reserves previously restricted by the company. This provision only establishes that, when authorized by the
Articles of Incorporation, the decision about the distribution of such reserves may be taken by the management bodies.
With the inclusion
of this rule, the Brazilian Corporations Law intended to reduce the red tape for the approval of the distribution of intermediate
dividends. In this regard, under the prior regime, the prevailing understanding was that the distribution of intermediate dividends
necessarily depended on approval by the shareholders’ meeting, since Decree-Law No. 2627/1940 — which was replaced
by the Brazilian Corporations Law — did not provide for the possibility of the Articles of
Incorporation to authorize management bodies to declare intermediate or interim dividends[113].
[113]
In this regard, the sole paragraph of Article 132 of Decree-Law No. 2627/1940 only established that:
“Companies that, under the law or as provided
in the Articles of Incorporation, should assess half-yearly balance sheets, may pay the corresponding dividends every six months,
if the Articles of Incorporation so establish.”
Thus, Article
204 of the Brazilian Corporations Law expressly permitted the Articles of Incorporation to provide for the possibility that intermediate
dividends may be declared by management bodies, without, however, removing the jurisdiction of the shareholders’ meeting
to decide on the matter.
In addition, the fact that Article 17
of the Articles of Incorporation expressly gives the shareholders’ meeting powers to decide on certain matters does not prevent
it from deciding any other matters whose jurisdiction has not been reservedly conferred on the Board of Directors —
as is the case with those powers conferred by Article 36 of the Articles of Incorporation.
In this regard, the heading of Article
17 of the Articles of Incorporation makes it clear that the matters established in its items are not exhaustive and establishes
that the shareholders’ meeting shall meet whenever the Board of Directors “deems it convenient.”
Therefore, a conclusion may be drawn that
the Board of Directors of Eletrobras is competent, based on the provisions of Article 204 of the Brazilian Corporations Law, and
Article 36, item XXIX, of the Articles of Incorporation, to declare intermediate dividends, including those resulting from the
reversal of the amounts held in the Special Reserve. However, this does not prevent the matter from also being validly resolved
at a Shareholders’ Meeting.
If the matter is resolved by the Shareholders’
Meeting, the Fiscal Council shall be previously consulted, as expressly provided for in Article 163, item III, of the Brazilian
Corporations Law.
The prior opinion
of the Fiscal Council will not be required, however, if the dividends are directly distributed following a decision of Eletrobras’
Board of Directors, in the exercise of the jurisdiction guaranteed by Article 204 of the Brazilian Corporations Law and by Article
36, item XXIX, of the Articles of Incorporation.
Article 163,
item III, of the Brazilian Corporations Law and Article 53, item III, of the Articles of Incorporation provide for the jurisdiction
of the Fiscal Council to give an opinion on proposals from the management bodies regarding the distribution of dividends “to
be submitted to the shareholders’ meeting.” As the resolution is not submitted for approval by Eletrobras’
shareholders’ meeting, there will be no need to submit the matter to the Company’s Fiscal Council.
The Audit and
Risk Committee (“CAE”) is an advisory body to the Board of Directors, as expressly established in Article 40 of the
Articles of Incorporation[114].
Under the terms
of its Bylaws, CAE is competent to, among other matters, “review and issue recommendations on the remuneration of shareholders,
as well as its consistency with the existing policies on dividends and the capital and free cash flow structure” (item
5.1, sub-item XXXIX).
Thus, even
in cases where the distribution of dividends from the amounts held in the Special Reserve is decided directly by the Board of Directors,
a new statement by the CAE is necessary.
In view of the foregoing, a conclusion
may be drawn that the shareholders’ meeting of Eletrobras can validly decide on the distribution of dividends from the Special
Reserve account. In this case, a new statement is necessary, not only from CAE, but also from the Fiscal Council.
[114]
“Article 40. The Board of Directors shall have the support of the Audit and Risk Committee and the Management,
People and Eligibility Committee.” (emphasis added)
Nevertheless, the declaration of dividends
due to the reversal of the Special Reserve may also be made directly upon resolution of Eletrobras’ Board of Directors, in
which case arranging a new statement from CAE will suffice, and the matter is not required to be submitted to the prior opinion
of the Company’s Fiscal Council.
7th QUESTION
“Once the Special Reserve has been declared as
dividends following the decision of the Board of Directors, when will we need to start updating the amount of the credit of the
shareholders, considering the provisions of Article 1, Paragraph 4 of Decree No. 2673/1998?”
ANSWER
Article 185,
which was in the original wording of the Brazilian Corporations Law, providing for inflation adjustment of the financial statements,
was revoked by Article 29 of Law No. 7730/1989[115]. Likewise, the inflation
adjustment of the financial statements referred to in Law 7799/1989 and Article 1 of Law No. 8200/1991 was extinguished by Law
No. 9249/1995, whose Article 4, sole paragraph, expressly precluded the use of any system of inflation adjustment of the financial
statements, including for corporate purposes.
Accordingly, no inflation
adjustment is required for any of the amounts that make up the financial statements of corporations, including the Special Undistributed
Dividend Reserve referred to in Article 202, Paragraphs 4 and 5, of the Brazilian Corporations Law.
For this reason,
the inflation adjustment of dividends declared by companies is also not due. In this regard, CVM Instruction No. 72/1987, which
provided for inflation adjustment of dividends, was expressly revoked by CVM Instruction No. 604/2018, having been included in
the public hearing report that resulted in the issuance of this Instruction that:
[115]
“Article 29. As of February 1, 1989, Article 185 of Law 6404, dated December 15, 1976, as well as the rules for inflation
adjustment of the balance sheet provided for in Decree-Law No. 2341, dated June 29, 1987, except as provided in the following article.”
“CVM
revokes CVM Instruction No. 72, dated November 30, 1987, which provides for inflation adjustment of dividends. The inflation adjustment
of the financial statements was revoked by Law 9249, dated December 26, 1995, which also prohibits the use of any inflation adjustment
system, including for corporate purposes. Even though it was already tacitly revoked, the lack of this express reference was already
the object of doubts and the decision was to proceed to the express revocation of such rule.”[116]
Thus, in practice,
companies can declare the distribution of dividends at the shareholders’ meeting held in April and only effectively pay dividends
in December, at the end of the year, as established by Article 205, Paragraph 3, of the Brazilian Corporations Law, without applying
any adjustment to the value of the dividends until their actual payment.
Specifically
with regard to federal state-owned companies, Article 1, Paragraph 4, of Decree No. 2673/1998 establishes that “on the
values of
dividends and interest, as remuneration on equity, owed to the National Treasury and to other shareholders, financial charges
equivalent to the SELIC rate will apply, from the end of the accounting year until the day of the actual payment, without prejudice
to the levy of default interest when such payment does not happen on the date established by law, meeting or deliberation of the
Board of Directors, which should be considered as the daily rate, for adjusting such amount over the period of five business days
prior to the date of payment, the same SELIC rate disclosed on the fifth business day that precedes the day of the actual settlement
of the obligation” (emphasis added).
This a provision
is of an exceptional nature, as it precludes the application of the general principle that the amounts recorded in the financial
statements of corporations are not subject to inflation adjustment, and consequently, should be subject to a restrictive interpretation,
applying only to the cases governed by this provision.
[116]
SDM Public Hearing Analysis Report No. 06/18. CVM SEI Proceeding No. 19957. 009015/2018-08.
Article 1,
Paragraph 4, of Decree No. 2673/1998, reproduced in Article 55, Paragraph 2, of Eletrobras’ Articles of Incorporation, then
applies only to the cases of dividend distribution regulated therein, which consist of payments by federal state-owned companies
for dividends and interest on shareholders’ equity due to net income assessed in the previous fiscal year based on the financial
statements prepared at the end of the year. In effect, the said provision refers to the “closing of the accounting year”
as an initial milestone for the levy of the SELIC rate.
The definition of
the scope of application of the rule provided for in Article 1, Paragraph 4, of Decree No. 2673/1998 requires an analysis of this
provision in the light of the heading of the Article in which it is included. This is because the heading is in the core of the
Article and encompasses all its other components (paragraphs, items, sub-items, etc.).
In
this case, the heading of Article 1 of the said Decree addresses the mandatory dividend owed to shareholders in each accounting
year, establishing that the Articles of Incorporation of government-controlled companies should have a provision for “remuneration
to shareholders equivalent to, at least, twenty and five percent of the adjusted net income, calculated in each accounting year”
(emphasis added).
As
previously mentioned, the essential characteristic of the mandatory dividend is the annual character of its payment, which is based
on the financial statements prepared by the company at the end of the accounting year.
Thus, it appears
that Article 1 of Decree No. 2673/1998 deals, both in the heading and in Paragraph 4, with dividends paid annually by federal state-owned
companies based on the net income assessed in the prior accounting year.
In this specific
case, however, the dividends that may be declared by Eletrobras due to the reversal of the Special Reserve do not fall within the
the hypotheses for the distribution of dividends regulated by Article 1 of Decree No. 2673/1998.
In this
regard, the amounts distributed due to the reversal of the Special Reserve do not fall within the mandatory dividend dealt
with in the heading of Article 1 Decree No. 2673/1998. As provided for in Article 202, Paragraph 4, of the Brazilian
Corporations Law, the amounts allocated to the Special
Reserve are no longer mandatory when their distribution is inconsistent with the company’s financial situation.
In addition,
the amounts to be distributed due to a possible reversal of the Special Reserve also do not stand as net income assessed in the
previous accounting year based on the annual financial statement (scenario of Paragraph 4 of Article 1 of the Decree under analysis).
As mentioned in the Term of Reference, such amounts refer to profits assessed in the 2018 accounting year which were allocated
to the Special Reserve following the resolution of the 2019 Shareholders’ Meeting of the Company.
In this regard,
it is worth mentioning that updating the amounts that may be distributed by Eletrobras by the reversal of the Special Reserve from
the end of 2018 until the actual payment is not possible, and not even from the beginning of the current accounting year.
This would be equivalent to applying inflation adjustment to the Special Reserve, which was prohibited by Law 9249/1995, as previously
mentioned.
In addition,
the CVM Collective Board itself has already expressed its understanding regarding the impossibility of applying inflation adjustment
to the amounts held in the Special Reserve, not even at the time of their distribution:
“17. Therefore,
I conclude that there is no basis to justify the levy of interest and/or inflation adjustment on the amounts included
in the special reserve when distributed to shareholders.”[117]
(emphasis added)
Therefore,
it is not possible to correct the dividend values either
from the year in which the Special Reserve was created, or from the beginning of the current accounting year.
[117]
CVM Administrative Proceeding No. SP2016/0264, Rapporteur Officer Gustavo Tavares Borba, tried on September 11, 2018. Available
at www.cvm.gov.br.
It should be
noted, moreover, that the same understanding applies to the intermediate dividends that may be distributed by Eletrobras based
on other profit reserves recorded in prior years.
It is also
not possible to apply the SELIC rate between the declaration of dividends resulting from the reversal of the Special Reserve and
the actual payment of such amounts, as this scenario is not provided for in Paragraph 4 of Article 1 of Decree No. 2673/1998. And,
as previously mentioned, this provision should be subject to a restrictive interpretation, and it is not possible to expand its
application to hypotheses that are not directly addressed by it.
In addition,
as previously mentioned, the payment of dividends under the Special Reserve shall happen immediately after their declaration
by the competent corporate body, and it is not possible to postpone their payment until the end of the accounting year, as is done
with dividends distributed under the general rule of Article 205, Paragraph 3, of the Brazilian Corporations Law.
As it is not
accepted that there is a long period between the declaration of the dividends reversed from the Special Reserve and their payment,
there is no justification for applying the inflation adjustment between the declaration and the actual payment.
In fact, an
inflation adjustment is nothing more than a way of readjusting the original value of a credit as a result of the time that has
elapsed since its constitution, with an understanding in jurisprudence and case law as to its appropriateness for long-term credits.
Thus, in addition
to not having a legal basis, the application of the SELIC rate between the date of the declaration of dividends and its actual
payment has no economic justification, since the payment of any dividends by Eletrobras as a reversal of the Special Reserve should
happen as soon as possible after their declaration.
Therefore,
as the updating scenario provided for in Decree No. 2673/1998 does not apply to the distribution of intermediate dividends due
to the reversal of the Special Reserve, a conclusion may be drawn that Eletrobras’ managers cannot apply the said inflation
adjustment to the distribution of the dividends under review in this Opinion.
8th QUESTION
“Still on the payment
of intermediate dividends, if the company declares dividends from reserves other than the special dividend, but which are the result
of allocations of income from prior years, what would be the form and order of distribution of said amounts among the preferred
and common shareholders if this payment was made before the payment of the mandatory dividends for the current year? What would
be the form and order of distribution of said amounts to the preferred and common shareholders if this payment was made after the
payment of the mandatory dividends for the current year? In that case, would there be ‘continuity in payment’ if it
happens in the same year?”
ANSWER
The conclusions
set out in the answers to Questions 1 and 2 above apply to any intermediate dividend that may be distributed by Eletrobras before
or after the declaration of the mandatory dividend referring to this accounting year, regardless of the nature of the reserve that
may substantiate such intermediate dividend, considering that the priority in receiving dividends given to shares with fixed or
minimum dividends prevails in any event of dividend distribution made by the company, without any restriction.
Thus, in the event
intermediate dividends are declared, prior to the distribution of the mandatory dividend for the current year, based on reserves
previously restricted by the company, other than the Special Reserve, priority dividends shall be initially paid to class A and
B preferred shares, until the amount corresponding to the percentages provided for in Paragraphs 1 and 2 of Article 9 of the Articles
of Incorporation is reached.
On the other hand,
if the distribution of intermediate dividends happens in 2021 and after the declaration of the mandatory dividend for this accounting
year, and this has already been sufficient to allow the payment of priority dividends due to class A and B preferred shares, the
intermediate dividends shall be distributed, initially, to the holders of common shares, until they receive the same amount paid
to the preferred shareholders, subtracted from the amount corresponding to the percentage of 10% higher assured to the preferred
shares, as provided for in Paragraph 4 of Article 9 of the Articles of Incorporation.
This is our opinion.
Rio de Janeiro, January 21, 2021.
Nelson Eizirik
SIGNATURE
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: April 5, 2021
CENTRAIS ELÉTRICAS BRASILEIRAS S.A. - ELETROBRÁS
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By:
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/S/ Elvira
Baracuhy Cavalcanti Presta
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Elvira Baracuhy Cavalcanti Presta
CFO and Investor Relations Officer
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FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements.
These statements are statements that are not historical facts, and are based on management's current view and estimates offuture
economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes",
"estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended
to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal
operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends
affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect
the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected
events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic
and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual
results to differ materially from current expectations.
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