Corporate Governance Regulation, rectified by Resolution R-CNMV-2023-04-MV

The present document was prepared by the Securities Market Superintendence with the purpose of facilitating the consultation of the current and unified provisions of the Corporate Governance Regulation approved through the Single Resolution of the National Securities Market Council, dated April two (2), two thousand nineteen (2019) R-CNMV-2019-11-MV and the Fourth Resolution of the National Securities Market Council, R-CNMV-2023-04-MV, dated February seven (7), two thousand twenty-three (2023); which are published at https://simv.gob.do/resoluciones/

CORPORATE GOVERNANCE REGULATION

TITLE I
GENERAL PROVISIONS

CHAPTER I
OBJECT, SCOPE, AND APPLICABILITY

Article 1. Object. This Regulation aims to establish the minimum principles and guidelines that market participants must implement to adopt an adequate corporate governance framework, in order to transparentize the relationships between the administrative, management, and control bodies, shareholders, and interested third parties of the company.

Article 2. Scope. This Regulation identifies and defines the minimum criteria and norms that market participants must adopt for the establishment of a governance system that establishes the roles of the board of directors and senior management, and that encompasses the delegation of powers, the liability regime, and the separation of functions, inherent to an adequate internal control and risk management system.

Article 3. Scope of Application. The provisions of this Regulation, except for the exceptions contemplated in Law No. 249-17 on the Securities Market of the Dominican Republic dated December nineteen (19), two thousand seventeen (2017) (hereinafter, the "Law"), apply to market participants registered in the Securities Market Registry (hereinafter, the "Registry") and are mandatory for:
a) Centralized securities depositories;

b) Self-regulatory entities (administrating companies of centralized trading mechanisms and central counterparty entities); c) Securities intermediaries; d) Investment fund management companies; e) Listed companies; f) Trust companies conducting public offerings of securities; and, g) Securitization companies.

Paragraph I. The provisions of this Regulation are voluntary compliance for the following entities:
a) Investment advisors; b) External auditors; c) Issuers of fixed-income securities; d) Risk rating agencies; e) Price-supplying companies; and, f) Joint-stock companies with voluntary registration in the Registry.

Paragraph II. The entities indicated in Paragraph I of this article that, voluntarily, decide to adhere to the corporate governance provisions established in this Regulation will adopt as a reference framework the General Corporate Governance Regime for Participants in the Securities Market set forth in Title II of this Regulation.

Paragraph III. The companies detailed in Paragraph I that decide to adhere to the provisions of this Regulation may adopt and implement, literally or with the adjustments they deem pertinent, all or some of the corporate governance provisions, and annually report to the market the degree of compliance with the corporate governance provisions or, if applicable, the explanation of omission, partial compliance, or adjustments made in the implementation of said provisions. The Securities Market Superintendence (hereinafter, the "Superintendence") will develop a specific instructional guide to facilitate the application of the "comply or explain" principle by these companies.

CHAPTER II
DEFINITIONS

Article 4. Definitions. For the purposes of this Regulation, the following definitions are established:

Significant Shareholder. That shareholder who alone or by virtue of an agreement with other shareholders, holds voting rights exceeding a certain limit, fixed at ten percent (10%) of the total voting rights.
Senior Management: It is composed of a part of the key management personnel and specifically the general manager or chief executive and the persons who report directly to him. The members of senior management are responsible for planning, directing, and controlling the strategies and operations of the company that have been previously approved by the board of directors.
Risk Appetite. It is the aggregate limit based on the types of risks that the board of directors and senior management are willing to assume and manage to meet their business objectives.
Associate. It is a commercial company over which the market participant has significant influence and is not a subsidiary entity nor constitutes a participation in a joint venture.
Risk Capacity. The maximum level of risk that an organization can withstand in the pursuit of its objectives.
Corporate Governance Code. A document whose purpose is to compile and reveal in an orderly and systematic manner the main practices regarding the governance of the company or financial group that have been adopted – via legislation, regulation, or self-regulation – and implemented through their bylaws, internal regulations, policies, or other equivalent instruments, with the objective of generating competitiveness, transparency, and trust.
Board of Directors Committee(s). These are study and support bodies with the capacity to present proposals to the board of directors on matters within their competence. They are created by the board of directors, exclusively composed of directors, and may, eventually, exercise by delegation certain functions established by the internal regulations governing the committee.
Board of Directors. It is the highest collegiate body elected by shareholders, attributed with all administrative and representation powers of the company, contemplated in the company bylaws, and is responsible for ensuring the good performance of senior management in ordinary management.
Independent External Directors of the Board of Directors. These are persons of recognized professional prestige who can contribute their experience and knowledge to the administration of the company and whose link with it, its shareholders, directors, and senior management members is restricted exclusively to the condition of member of the board of directors, which does not prevent the holding of a small percentage of shares of the company or financial group, which in no case may exceed three percent (3%) of the subscribed and paid-in capital.
External Equity Directors of the Board of Directors. These are shareholders or shareholder representatives, natural or legal persons, or persons who have a personal or professional relationship with shareholders, who are not laborally linked to the company and are external to its daily management, and whose membership in the board of directors derives, directly or indirectly, from the equity participation in the company's capital or from the will of a specific shareholder or group of shareholders acting in concert.
Internal or Executive Directors of the Board of Directors. These are members, shareholders or not, who maintain a stable and remunerated labor relationship with the company with executive competencies and senior management functions in the company or its affiliated companies.
Internal Control. Set of tools and processes designed to provide the board of directors, senior management, and other executives with reasonable assurance in achieving objectives related to the effectiveness and efficiency of the company's operations, compliance with applicable norms, and the reliability that financial information is generated reasonably.
Corporate Governance. Set of minimum principles and norms that govern the design, integration, and interaction between the board of directors, senior management, shareholders, employees, related parties, and other stakeholder groups that seek to manage conflicts, mitigate management risks, and achieve adequate strengthening of administration, improving transparency, remuneration policies of market participants, and the manner in which the company's objectives are established and achieved.
Chief Executive: Individual position within the company that reports to the board of directors. The chief executive is the highest responsible person for the management of the company, and the majority of senior management members report directly to him.
Risk Group: It is the set of two or more natural or legal persons linked as established in Article 7 (Scenarios of Linkage) of this Regulation.
Significant Influence. It is the power to intervene in the financial and operating policy decisions of the company, without reaching absolute control or joint control thereof.
Annual Corporate Governance Report. It is a document approved by the board of directors that explains the corporate governance practices adopted by the company and the main changes produced during the year.
Joint Venture. It is a contractual agreement pursuant to which two (2) or more persons undertake an economic activity to share control and requires the unanimous consent of the parties sharing control, as established in Article 7 (Scenarios of Linkage) of this Regulation.
Material Transaction. It is any transaction between affiliated companies that is not within the ordinary course of business of any of them or that is not carried out under market conditions, or that, if it is a transaction within the ordinary course and under market conditions, exceeds the approval powers granted in the company bylaws or board of directors agreement to the legal representatives.
Significant Participation. Significant participation is considered to be the direct or through third parties control of ten percent (10%) or more of the subscribed and paid-in capital of a company.
Interested Party. Natural or legal person (shareholders, board of directors, senior management, employees, or third parties) that may affect or be affected and may have benefit or prejudice from the activities or operations of an entity. The regulator, the State, guilds, and the community in general may also be considered interested parties.
Related Parties. These are the natural or legal persons indicated in Article 252 of the Law (Affiliated Companies) and the scenarios provided for in Article 7 (Scenarios of Linkage) of this Regulation.
Key Management Personnel. These are persons who have authority and responsibility to plan, direct, and control the activities of the entity, whether directly or indirectly.

TITLE II
GENERAL CORPORATE GOVERNANCE REGIME FOR PARTICIPANTS IN THE SECURITIES MARKET

CHAPTER I
COMMON PROVISIONS

Article 5. Availability and Access to Shareholder Documentation. The president of the board of directors of market participants must ensure that shareholders have access to all documents related to matters to be addressed in general shareholder meetings, by any communication medium established by the company and known to shareholders, fundamentally by electronic means; without prejudice to the other responsibilities established by the General Law of Commercial Companies and Limited Liability Individual Enterprises No. 479-08 and its modifications (hereinafter, the "Companies Law").

Article 6. Corporate Governance Code. Market participants are obligated to prepare and publish on their website a corporate governance code that generally describes the various adopted and regulated practices related to corporate governance, following the following scheme:

Preamble: Presentation of the code and declaration of the company's commitment to corporate governance.
Mission.
Vision.
Summary of strategic objectives.
Description of the company:
a) Brief history. b) Corporate purpose. c) Nature of the company. d) Shareholding structure (distribution of social capital). e) Description of the financial group (if applicable).
Commitment to corporate governance:
a) Background: Brief description of the process of adoption and implementation of corporate governance practices. b) Description of the pillars supporting the governance model adopted by the company (for example, current norms, self-regulation, structure of corporate documents, transparency, etc.) c) Relationships between the companies forming the financial group and description of how the market participant relates to the controlling company.

d) Cite the main current policies (for example, treasury shares or self-held shares, dividends, information disclosure and communication, transactions with related parties, remuneration of the board of directors, risks, among others), indicating the responsible body for approval and the date of the last version.
7) Ownership:
a) Shareholder rights and their equitable treatment. b) Political and economic rights derived from share ownership:
i. Type or class of existing shares.
ii. Modification of rights derived from shares.
iii. Right of association among shareholders.
iv. Right to choose members of the board of directors.
c) Shareholder information rights:
i. Information communication mechanisms developed by the company (for example, website, informational meetings, newsletters, responsible person and shareholder service office, among others).
ii. Information requests by shareholders.
iii. Right to convene a general shareholder meeting.
iv. Right to introduce resolution proposals or topics on the agenda of shareholder meetings.
8) Shareholder Meeting:
a) Types of shareholder meetings. b) Notice period. c) Convening mechanisms. d) Agenda. e) Quorum for constitution and decision. f) Shareholder information rights regarding the general shareholder meeting. g) Shareholder representation mechanisms in meetings. h) Powers of shareholder meetings. i) Shareholder meeting regulations (if any).

Board of Directors:
a) Composition of the board of directors. b) Number of board members. c) Structure and positions of the board of directors. d) Process for electing board members. e) Requirements to be a board member.
i. Requirements to be an independent external board member, if applicable.
ii. Requirements for complementary experience profiles, competencies, knowledge, and gender.
f) Resignation and dismissal of board members. g) Duties of board members. h) Rights of board members.
i. Right to information.
ii. Right to receive advice.
iii. Right to interact with senior management.
iv. Right to remuneration adjusted to responsibilities.
i) Powers of the board of directors. j) Support committees of the board of directors. k) Method of board evaluation.
Control Architecture or Environment. Description of the following functions:
a) Compliance with anti-money laundering, counter-terrorism financing, and counter-proliferation of weapons of mass destruction. b) External audit. c) Regulatory compliance. d) Internal control system.
Ordinary Management Structure:
a) Company organizational structure. b) Senior management, indicating the main individual positions (company organogram). c) Main committees. d) Senior management remuneration policy.
Transparency and Information Disclosure.
a) Standards for information disclosure. b) Communication media.
Description of the content of current policies on conflicts of interest and transactions with related parties.
Description of Rules of Conduct and Code of Ethics.
Alternative methods for dispute resolution with shareholders and board members.
a) Mediation. b) Conciliation. c) Arbitration. d) Others.

Paragraph. In case of changes in the corporate governance code, these must be presented at the next ordinary meeting of the board of directors.

Article 7. Scenarios of Linkage. Persons linked to the market participant, its shareholders, and the partners or shareholders of companies that, in turn, hold shares of the entity directly or through other companies. Likewise, indirectly linked are the spouse, separated or not in property, relatives within the second degree of consanguinity or first of affinity, and companies where they have a significant participation.

Paragraph I. A natural or legal person will be considered linked when they hold ten percent (10%) or more of the shares of a market participant. Likewise, a natural or legal person holding indirectly the same proportion through third parties or jointly with other companies considered linked according to the criteria set forth in this article will be considered linked.

Paragraph II. A company will be considered linked to a market participant if one of its partners simultaneously has a significant participation in the company and is linked to the entity. This linkage extends to all partners who have a significant participation in the company, both the linkage with the market participant and the participation in the company will be imputable when they occur directly, indirectly, or jointly with other members considered linked.

Paragraph III. Likewise, a company is linked to a market participant when any of the following conditions apply to it:
a) The company and the market participant are members of the same financial group (which means that each of them, whether holding, subsidiary, or other subsidiary of the same holding, are related parties to each other). b) A company is an associate or joint venture of the market participant (or an associate or joint venture of a member of a financial group of which the participant is a member). c) The company and the market participant are joint ventures of the same third party. d) The company is a joint venture of a participant and another distinct participant is an associate of the first.

Paragraph IV. Persons linked to the market participant through management are those persons who, without necessarily having ownership participation, exercise some degree of control over the decisions of the participant or any of its affiliated companies by the position they hold in them or by the powers granted by the corresponding corporate body.

Paragraph V. Companies in which any of the natural or legal persons mentioned in this article have a direct or indirect significant participation, through their companies or through relatives of the second degree of consanguinity or first of affinity, will also be considered linked to the market participant.

Article 8. Linkage Information. The market participant will notify the Superintendence of the existence of an indication of linkage no later than the next business day after identifying the presumed linkage.

Paragraph I. The Superintendence will notify in a motivated manner the existence of an indication of linkage at the moment it identifies it. The market participant will have a period not exceeding five (5) business days to substantiate to the Superintendence through the presentation of proof of the non-existence of linkage.

Paragraph II. Having expired that period without the participant presenting any proof, the Superintendence will proceed to qualify the operation as linked. If the participant presents proof within the aforementioned period, the Superintendence must evaluate it and decide on the presumed linkage within a period of three (3) business days.

Article 9. Policy on Transactions with Related Parties. Transactions with publicly offered securities that market participants carry out with members of their board of directors, senior management, and other persons linked to the entity according to what is established in Article 7 (Scenarios of Linkage) of this Regulation, must adhere to what is established in the policy or code of conduct approved by their board of directors and must cover, at a minimum, the following aspects:
a) The definition of related party and transactions between related parties that are coherent with what is provided in the Law and this Regulation. b) Classification of transactions according to objective criteria that take into consideration, at least, the recurrence of the operations, market conditions, and their materiality. c) General guidelines for the knowledge, approval, and disclosure of transactions with related parties. d) Regarding knowledge, it must foresee the obligation of members of the board of directors and senior management to inform the board of any substantial interest they have, directly or indirectly, in any of the company's operations. e) Regarding the approval process of transactions with related parties, the policy will regulate the non-participation of anyone who has declared a substantial interest in the decision-making process regarding the operation. f) Regarding disclosure, communication to the market through the Annual Corporate Governance Report of all details related to each of its material transactions with related parties and their conditions will be required.

Paragraph. In addition, the policy on transactions with related parties must contemplate any type of transaction, distinct from transactions with publicly offered securities, in

Corporate Governance Regulation, rectified by Resolution R-CNMV-2023-04-MV

Lineage: In force