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Cemig

Cemig Generation and Transmission

Cemig Distribution

Internal Regulations - Audit Board

Chapter I - Purpose
Chapter II - Composition
Chapter III - Taking Office
Chapter IV - Impediments, Vacancies and Replacements
Chapter V - Remuneration
Chapter VI - Attributions
Chapter VII - Meetings
Chapter VIII - The Secretary
Chapter IX - Duties and Responsibilities
Chapter X - Assessment of Performance
Chapter XI - Contracting of External Consultants
Chapter XII - Policy for Prevention of Frauds and Undue Conduct
Chapter XIII - Program of Work
Chapter XIV - The Budget
Chapter XV - Audit Boards of the Subsidiaries and Affiliated Companies
Chapter XVI - General Provisions

 

Chapter I - Purpose

Clause 1: The purpose of these regulations is to set rules for the working of the Audit Boards of Companhia Energética de Minas Gerais – Cemig, Cemig Distribuição S.A. – Cemig D, and Cemig Geração e Transmissão S.A. – Cemig GT, defining their responsibilities and attributions, subject to the Bylaws of those Companies, the Corporate Law, and good corporate governance practices.


Chapter II - Composition

Clause 2: The company’s Audit Board shall function permanently and shall be made up of between 3 (three) and 5 (five) members and their respective substitute members, who shall be elected annually, on the occasion of the Annual General Meeting, and may be re-elected.

Sole sub-paragraph: The Audit Board shall elect its Chairman from among its members, and the Chairman shall call and chair the meetings.


Chapter III - Taking Office

Clause 3: Board Members are invested in their positions by signature of a term of investiture in the Book of Minutes of Meetings of the Audit Board. Signature of the Term of Consent specified in the Regulations of Level I of the Novo Mercado of BM&FBovespa S.A. (the São Paulo Stock, Commodities and Futures Exchange) is a prior condition for swearing-in.

Clause 4: At the first meeting that takes place after their election, the members of the Audit Board shall elect their Chairman, by vote of at least the majority of its members.

Clause 5: The Board Members must keep their personal information updated with Cemig’s Corporate Executive Office; provide a copy of their Identity Card, their taxpayer card (CPF) and résumé; and also make the statements required by the Bylaws and by the legislation and regulations in force.


Chapter IV - Impediments, Vacancies and Replacements

Clause 6. The function of member of the Audit Board cannot be delegated. In the event of resignation of the position, death, or impediment, a member of the Audit Board shall be replaced by his respective substitute, until the new member is elected, subject to the legislation in force, and such member shall be chosen by the same party that appointed the substitute.

Clause 7. In the event of any occasional absence, the Chairman of the Audit Board shall be substituted by any one of the other Members of the Audit Board, according to the indication of the majority.


Chapter V - Remuneration

Clause 8. The remuneration of the members of the Audit Board shall be fixed by the General Meeting of Stockholders which elects it, in accordance with the legislation from time to time in force.

Clause 9. Any Board Member, sitting or substitute, who is resident outside the municipality of Belo Horizonte shall be reimbursed his or her expenses on travel and accommodation necessary for attendance at meetings or for the performance of his or her functions, and shall also receive as cost assistance the equivalent of approximately 10% (ten per cent) of the total monthly remuneration of a Board Member, for each meeting he or she attends.


Chapter VI - Attributions

Clause 10. The responsibilities and powers of the Audit Board are those that are set by the Corporate Law.

Paragraph one: At least one of the members of the Audit Board shall attend any meetings of the Board of Directors at which decisions are taken on subjects on which the Audit Board should give an opinion.

Paragraph two: The Audit Board, on request by any of its members, may ask the external auditors for explanations or information necessary for investigation of specific facts.


Chapter VII - Meetings

Clause 11: The Audit Board shall meet ordinarily, once a months, and extraordinarily whenever necessary.

Sole sub-paragraph: When opening the business of a meeting, the Chairman shall state the order of the matters to be examined, taking into account the following priorities:

  • urgency or expiry date of a decision;
  • subjects not examined or decided upon at a prior meeting;
  • ordinary subjects;

Clause 12. Meetings shall be called by the Chairman of the Audit Board or, in the event of his or her absence or impediment, by at least 2 (two) Board Members jointly, as follows:

  • with minimum prior notice of 3 (three) days;
  • by e-mail, fax, letter or any other means of communication;
  • with indication of the agenda, date, time and place.

Clause 13: Meetings will be held at the head office of the Company and may also, exceptionally, be held at another location. On a basis of urgency, they may take place in virtual form, by conference call.

Clause 14: Meetings of the Audit Board shall be held with the presence of at least the majority of its members, and all decisions shall be taken by majority of those present.

Clause 15:  As well as the members of the Audit Board, the Secretary shall take part in the meetings, without the right to vote.

Clause 16: Members of the Executive Board, employees, consultants and members of the Board of Directors may be invited to take part in meetings, without the right to vote, remaining present for such time as the subject of their specialization is being discussed.

Clause 17. Minutes of the meetings of the Audit Board shall be transcribed in the Book of Minutes of the Audit Board.

 

Chapter VIII - The Secretary

Clause 18. The Audit Board shall have a Secretary, who shall obligatorily be an employee of the Company, to record business and to provide assistance to the Board Members.

Clause 19: The Secretary has the following attributions:

  • to accompany the business, advising the Chairman of the Audit Board on the progress of the activities;
  • to provide the complete logistics for the meetings;
  • to submit the relevant subjects in good time;
  • to formally record the meetings.
  • to file all minutes of the meetings of the Audit Board and all the documentation on which meetings are based, internally.


 

Chapter IX - Duties and Responsibilities

Clause 20: The Members of the Audit Board have the same duties as the Managers in the exercise of their positions and must:

  • exercise their functions in the exclusive interest of the Company, subject to satisfaction of the requirements of the public good and the Social Function of Companies;
  • serve the Company, and its subsidiaries, affiliated companies and wholly-owned subsidiaries, with loyalty, and maintain secrecy about its business;
  • maintain secrecy about information not yet disclosed to the market that has been obtained by reason of their position;
  • reserve and maintain time available in their schedules so as to comply with the convocations of meetings of the Audit Board, based on the previously published timetable.

Clause 21. Members of the Board may not:

  • receive loans or funds from the Company, or use assets belonging to the company in their own interest;
  • receive any type of advantage by reason of exercise of their position;
  • use, to their own benefit or that of another person, with or without loss being caused to the Company or its subsidiaries, affiliates or wholly-owned subsidiaries, commercial opportunities of which they become aware by reason of the exercise of their position;
  • be omiss in the exercise or protection of rights of the Company or its subsidiaries, affiliated companies or wholly-owned subsidiaries;
  • acquire, for resale at a profit, an asset or right that they know to be necessary to the Company or that the Company intends to acquire;
  • make use of confidential information to obtain an advantage for themselves or any other party, through purchase or sale of securities;
  • intervene or take part in transactions or operations that have an interest conflicting with that of the Company or any subsidiary, affiliate or wholly-owned subsidiary, and, in this event, they must state the causes of their impediment in minutes;
  • directly or indirectly participate in trading of securities issued by the Company or referenced to it:
    • before disclosure to the market of a material event or fact taking place in the Company;
    • within 15 (fifteen) days prior to disclosure of the Company’s Quarterly Information (ITR) or annual information (DPF or IAN); or
    • in the event of any intention existing to carry out an absorption, partial or total split, merger, transformation or corporate reorganization.

Clause 22: The members of the Audit Board shall be liable for damages resulting from omission to comply with their duties and for acts carried out with negligence or malicious intent.

Clause 23. Members of the Audit Board are not responsible for unlawful acts of other members, unless they have colluded with them or taken part in the practice of the act.

Clause 24: The liability of the members of the Audit Board for omission in compliance with their duties is held jointly, but a dissident member who causes his disagreement to be stated in minutes of a meeting of the body and advises the bodies of Management and the General Meeting of Stockholders is exempt from such liability.

Clause 25: Members of the Audit Board must immediately advise the General Manager of the Company’s Corporate Executive Office of any changes in their holdings of shares in the Company, in accordance with the conditions and in the manner specified by the Securities Commission (CVM), especially in relation to the provisions of Normative Instruction 358/2002, as amended, and also in accordance with the conditions specified in the Company’s Information Disclosure Policy.

 

Chapter X - Assessment of Performance

Clause 26: Annually, the Audit Board shall make an assessment of its performance, aiming to improve its functions, and the methodology adopted must be previously approved by the Members of the Board and be part of the general process of assessment of the internal procedures and controls.

 

Chapter XI - Contracting of External Consultants

Clause 27. The Audit Board may, so as better to analyze and assess questions of importance for the company, requisition the contracting of external consultants with the objective of issuing opinions to support the taking of decisions, subject to the following:

  • the process of contracting of services must be subject to the Company’s rules for contracting;
  • the funds must be contained in the Company’s Annual Budget;
  • the limits of reasonableness and probity must be obeyed in the incurring of such expenses, which must be compatible with similar services contracted by the Company.

 

Chapter XII - Policy for Prevention of Frauds and Undue Conduct

Clause 28. The Audit Board shall receive, compile and assess any accusations relating to fraud or undue conduct of matters relating to the financial statements and to disclosure of results or of reports submitted to the regulatory bodies, through the anonymous reporting channel, made available by the Company; and also any such other accusations as the Audit Board considers to be material in relation to the equity of the Company.

Sole sub-paragraph: The Audit Board shall ensure protection for the reporting party against attempts of pressure or threats until the accusation has been finally investigated, and if valid, submit it to the public bodies responsible for applying the law.

 

Chapter XIII - Program of Work

Clause 29. The Audit Board shall prepare a program of work, aiming to comply with its attributions in accordance with the rules laid down by law, which must contain:

  • definition of the scope and depth of the analyses to be carried out;
  • sufficient scope to ensure the certification of the relevant information for inclusion in the various instruments of disclosure;
  • approval by the Audit Board.

Sharing of tasks shall be allowed, to facilitate its analysis.

 

Chapter XIV - The Budget

Clause 30. Annually, within the budgeting process, the Company shall prepare the budget for the subsequent year with the objective of guaranteeing the funds necessary for compliance with the functions under the law and under the Bylaws.

Paragraph one: The Annual Budget of the Audit Board shall include a special allocation of funds to allow the contracting of consultants or independent auditors able to help it in assessment of specific matters, approved during a meeting.

Paragraph two: The Secretary shall provide all the infrastructure necessary to enable the Audit Board to have access to the information requested.

 

Chapter XV - Audit Boards of the Subsidiaries and Affiliated Companies

Clause 31: Positions on the Audit Boards of the subsidiary and affiliate companies of Cemig or of Cemig GT, appointment of which is in the power of those Companies, must be approved by the Executive Board, as provided for in the Bylaws.

 

Chapter XVI - General Provisions 

Clause 32: These internal regulations come into force on the date of their approval by the Audit Board, which may change them at any time by a vote in favor by of the majority of its members.

 

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