The legal deadline for annual approval of the financial statements is due course. Brazilian corporate law determines that on an annual basis, in the first 4 (four) months following the end of the fiscal year, the accounts of the management shall be taken, as well as the financial statements discussed and voted on.
To this end, the report of the management, the balance sheet, the opinion of the independent auditors, if any, and the report of the fiscal council, if any, must be made available for the quotaholders and shareholders, as the case may be, at least 1 (one) month in advance of the date scheduled for the meeting of quotaholders, in the case of limited liability companies (article 1.078, §1st, of the Civil Code), or the general shareholders’ meeting, in the case of corporations (article 133 of Law No. 6,404/1976).
Depending on the type and size of the company, it is mandatory to publish such documents in the Federal Official Gazette and in a large circulation newspaper:
Limited liability companies
The publication is mandatory only for the so-called large companies, that is, the companies or group of companies under common control that, in the previous fiscal year, had total assets worth more than R$ 240 million or gross annual revenue greater than R$ 300 million (article 3 of Law No. 11,638/2007).
This obligation is the subject of several lawsuits, individual and collective, filed by large companies and associations. The Board of Trade Offices require the publication of the financial statements as a condition to register the minutes of the quotaholders’ meeting, unless the company is the beneficiary of a judicial decision that recognizes the non-obligation or presents a declaration signed by its administrators, attesting to have not reached the thresholds mentioned above in the previous fiscal year.
Corporations
The general rule is that it is mandatory, both for publicly-held and closely-held corporations, to publish the financial statements (article 133, § 3, of Law No. 6,404 / 1976), with the exemption of closely-held companies with a net worth of up to R$ 10 million and less than 20 shareholders (Article 294 of Law No. 6,404/1976).
Until last year, the exemption included only closely held companies with a net worth of up to R$ 1 million and less than 20 shareholders, but the limit was increased to R$ 10 million by Law No. 13,818/2019, published on April 25th, 2019.
It is valid to emphasize that Provisional Measure No. 892/2019, which temporarily allowed the publication of the financial statements and other mandatory documents on the Securities and Exchange Commission website and at the company’s website, was legally questioned in court and ended on March 12th, 2019, without having been converted into law.
There is no financial penalty determined in law for the event of non-fulfillment or late fulfillment of the annual meetings, as well as there is no penalty for the failure to publish the financial statements in cases where it is mandatory (although the Board of Trade Offices may, of their own discretion, generate administrative blocks in the records of companies that do not comply with the obligations mentioned above).
It is worth remembering, however, that the regular approval of the company’s accounts, without reservations, exonerates the members of the management and, if any, the members of the fiscal council.
It is also important to consider that the performance of such obligations is usually verified in the regular course of business activities. That is what regularly occurs, for example, in the context of public biddings, as a requirement for participation or as a condition for the execution of contracts with public entities. In the private sphere, likewise, the verification of the regularity of the accounts occurs on a recurring basis within the scope of internal or external audits, carried out due to compliance programs, for registration of suppliers, granting of loans and in M&A transactions, among others.
The L.O. Baptista Corporate team is at your disposal in connection with the adoption of the necessary measures for the annual review of the management accounts and the approval of the financial statements.
