Annual Approval of Company Accounts - Deadline 31/07/2020

According to Brazilian legislation, the partners of limited liability companies (Ltda.) or of corporations (S.A.) must meet annually within the first four months of the fiscal year to resolve on the following matters:

(i) approval of the management accounts and financial statements for the previous fiscal year;

(ii) allocation of net income for the year and the distribution of dividends calculated in the previous fiscal year, if any; and

(iii) appointment of directors, if necessary.

Due to the impacts of COVID-19, the deadline for deliberation of the matters was extended to July 31, 2020.

It is the duty of directors to render justified accounts of their administration to the partners. The approval of the accounts without reservation, by the partners, exonerates the members of the administration from liability for the acts performed, except in cases of error, malice, fraud or simulation.

The company that does not approve its accounts may encounter obstacles, such as difficulty in obtaining financing and disqualification in bids.

The corporate act that approves the company's accounts must be registered at the Board of Trade to produce effects before third parties.

In the case of S.A. and Ltda. of large size*, the Board of Trade also requires the submission of proof of publication of the financial statements in the official gazette and in a widely circulated newspaper (cf. Deliberação nº 02/2015 JUCESP). The requirement for Limitada de grande porte is being judicially challenged, and it is possible to obtain a court decision waiving the submission of proof of publication of the financial statements, which implies, in practice, that it is not necessary to publish them.

The company or group of companies under common control which has, in the previous fiscal year, total assets higher than two hundred and forty million reais (R$ 240,000,000.00) or annual gross revenue higher than three hundred million reais (R$ 300,000,000.00) is considered a large company.

Closed-capital S.A. companies with less than 20 shareholders and net equity of up to R$ 10 million are exempt from publishing financial statements, provided that these documents are registered together with the minutes of approval of the accounts.

Barcellos Tucunduva remains entirely at your disposal to assist you in this and other corporate law matters.