Brazil’s House Commission of Economic Development, Industry and Commerce on July 15 approved a law project that requires all large companies, including limited liability companies, to publish their financial statements.
Law project 4272/2008 was presented to the House of Representatives on November 11, 2008 by lawmaker Rodovalho. It amends article 3 of Law No. 11,638/2007, which amended Brazil’s Corporations Act (Law 6,404/76) and introduced a set of complex requirements that change accounting rules and financial statements for Brazilian corporations and large companies not formed as corporations.
Since enactment article 3 of Law No. 11,638/2007 subjects large companies not formed as corporations to many of its requirements, such as those concerning bookkeeping, financial statements, and the need for registered independent auditors. The requirements affect many large companies formed as limited liability companies (limitadas), as they are by far the most popular form of legal entity. Until Law No. 11,638/2007, limitadas were excluded from following most Corporations Act requirements.
Under article 3 of Law 11,638/2007, for legal purposes, a large company is a company or group of companies under common control that, in the preceding year, had assets in excess of BRL 240 million (approximately $120 million) or annual gross income above BRL 300 million (approximately $150 million).
Project 4272/2008 adds a new requirement to article 3 of Law No. 11,638/2007: large companies falling under the article shall make public (by publication in newspapers) their annual financial statements. Lawmaker Rodovalho argues that Brazilian large companies formed as limitadas have historically opposed to publication of financial statements. The new requirement will benefit the market as a whole and give more transparency and credibility to financial statements of large companies not formed as corporations.
The project now follows to the House Commission of Constitution and Justice. The commissions have conclusive powers, meaning that if both approve the law project, it will be forwarded directly to the Senate with no need for a vote by the chamber.
David Roberto R. Soares da Silva