Guidelines and Practices

Natura &Co Corporate Governance Framework:

Natura’s Board of Directors was created in 1998, as a closed company. Since then, corporate governance has undergone improvements, such as the creation of Board of Directors Committees and the Corporate Governance officer position 2005. Currently our governance structure is organized as follows:

 

 Adherence to B3 “New Market” segment and good Corporate Governance practices

In order to maintain the highest standard of corporate governance, on April 26th 2004, Natura signed an agreement with B3, complying with the listing requirements of the so called New Market segment, which is the highest corporate governance standards segment in Brazilian Stock Exchange market. Companies that become part of this segment voluntarily are subject to certain corporate governance practices and voluntarily disclose some additional information to those already required by Brazilian law, for instance:

1.    issue only common shares;

2.    maintain, at least, 25% of company’s total share outstanding, at least 20% of the total board of directors must be independent;

3.    detail and include additional information in the quarterly results, annual results and standardized financial statements;

4.    provide annual financial statements available in English, in accordance with the accounting principles internationally accepted; and

5.    relevant presence of independent members on the board of directors. The B3 New Market segment requires that the companies must have a minimum of 20% of independent members on the Board of Directors. Natura’s Board of Directors is currently composed by 4 independents members (50% of the total members).

 IBGC’s Code of Corporate Governance Best Practices

Natura adopts the following practices in accordance to "Code of Corporate Governance Best Practices" published by the Brazilian Corporate Governance Institute (IBGC – Brazilian Instituto of Corporate Governance).

  • Issuance of only common shares;
  • Adoption of "one share, one vote" policy;
  • External and independent audit firm to analyze its financial statements, which will not be hired to provide other services that may compromise its independence;
  • Clear Bylaws regarding (i) call notice of General Meetings; (ii) Board of Directors and Executive Officers assingments; (iii) voting system, election, dismissal and mandate of Directors and Executive Officers;
  • Transparent management annual report;
  • Disclosure of relevant documents related to the Shareholders Meetings’ agenda, on the date of the meeting’s first official call, detailing all the matters, aiming to hold the meetings on places and times that should allow the presence of the largest number of shareholders possible;
  • Record dissenting votes in general meetings or other meetings’ minutes when requested;
  • Ban of insider information’s use and disclosure of relevant information policy;
  • Statutory arbitration forecast as a way of solving any conflicts between shareholders and Company;
  • Board of Directors composed by operational and financial experts;
  • In case of conflict of interest, Natura adopts a policy that bans access to information and voting rights of directors;
  • The offer to purchase shares resulting in a transfer of control must be addressed to all shareholders, who will have the option to sell their shares under the same conditions as the controlling shareholder, including premium paid by control, if any; and
  • According to Natura Bylaws, the Board of Directors is composed by at least 9 (nine) and at most 11 (eleven) members.

Brazilian Corporate Governance Code

Natura has also recently adopted the Brazilian Corporate Governance Code (“BCGC”), which was issued on June 8th 2017. The code adopts the international practice “comply or explain” Its first report is due on October 31st 2018.

Natura’s internal teams are currently working along with local counsel, Natura &Co Corporate Governance Officer and the Audit Committee chairman to develop a high quality and transparent report that will be submitted to approval to Natura &Co’s Corporate Governance Committee on October 23rd 2018 and subsequently to the Board of Directors.

 Internal Controls

In pursuit of the highest standards of governance, improving and strengthening its control environment, Natura adopted, voluntarily, internal controls based on the criteria established in "Internal Control - Integrated Framework" issued by COSO - Committee of Sponsoring Organizations of the Treadway Commission, a US private entity whose purpose is the disclosure of principles and guides linked to internal control structures for companies. Since its inception, the Company's internal control matrix is always updated and the effectiveness of the controls is annually evaluated by its External Auditor. This matrix was originally created in 2010 to attend Brazilian operations and in 2016, was also implemented for Latin America operations.

The Company's Internal Controls and Risk Management director is responsible for maintaining the matrix of internal controls, for Brazil and international operations, always updated. The control indexes are reviewed annually by those who are responsible for their execution. In addition, effectiveness tests of the controls and also monitors the implementation of action plans to mitigate any detected nonconformities are ran periodically and supported by specialized partners. The work is evidenced with specific documentation, that is provided to the Company’s Independent Auditor which, at its discretion, can analyze and run additional tests. The results of the tests carried out by both the Company and its Independent Auditor are reported to the managers responsible for controls and to the Audit, Risk Management and Finance Committee.

Besides the Internal Controls and Risk Management Director, there is the Global Internal Audit structure, subordinated to the Audit, Risk Management and Finance Committee, that carries out about different Natura business processes, according to an audit plan validated annually by the Audit, Risk Management and Finance Committee. Any deficiencies detected in the Internal Audit reports are validated by those who are responsible for the business processes and presented to that Committee.

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