Guidelines and Practices

Corporate Governance Structure

According to the Brazilian Corporate Governance Institute ("IBGC"), corporate governance is a system by which companies are managed and monitored, involving relationships between shareholders, board of directors, executive officers, independent auditors and fiscal council. The basic principles that guides this system are: (i) transparency; (ii) equity; (iii) accountability; and (iv) corporate responsibility.

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 Board in 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 26, 2004, Natura signed an agreement with B3, complying with the listing requirements of the “New Market” segment. Companies that become part of this segment, voluntarily, must submit to certain corporate governance practices and disclose some additional information to those already required by Brazilian law, as an example, (i) issue only common shares, (ii) maintain, at least, 25% of company’s total share outstanding, (iii) at least 20% of the total board of directors must be independent, (iv) detail and include additional information in the quarterly results, annual results and standardized financial statements (v) provide annual financial statements available in English, in accordance with the accounting principles internationally accepted.

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.

Nowadays, Natura’s Board of Directors is composed by 4 independents members (50% of the total members).

IBGC’s Code of Corporate Governance Best Practices

Among the corporate governance practices already recommended by the "Code of Corporate Governance Best Practices" published by the Brazilian Corporate Governance Institute (IBGC), our Company adopts the following practices:

  • Issuance of only common shares;

  • Policy "one share, one vote";

  • Hiring of an 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 Bylaw regarding the (i) call notice of General Meetings; (ii) Board of Directors and Executive Officers assignments; (iii) voting system, election, dismissal and mandate of the members of the Board of Directors and of the Executive Officers;

  • Transparency in the disclosure of the management annual report;

  • Disclosure of relevant documents to matters included in the agenda of the Shareholders Meetings, since the date of the first 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 minutes of general meetings or other meetings, when requested;

  • Ban to the use of insider information and existence of disclosure of relevant information policy;

  • Statutory arbitration forecast as a way of solving any conflicts between shareholders and Company;

  • Board of directors with operational and financial experience;

  • Ban the access to information and voting rights of directors in situations of conflict of interest;

  • 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 the participation in premium paid by the control, if any;

  • and The Board of Directors is composed by at least 9 (nine) and at most 11 (eleven) members.

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 descriptors are reviewed annually by those who are responsible for their execution. In addition, the area executes, with the support of specialized partners, effectiveness tests of the controls and also monitors the implementation of action plans to mitigate any detected nonconformities. All the works are evidenced with specific documentation, that is provided to the Company’s Independent Auditor which, at its discretion, can analyzes and do complementary additional tests. The results of the tests carried out by both the Company and its Independent Auditor are reported to the managers responsible for the 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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