In addition to their primary and ancillary tax obligations, companies are subject to various legal duties, including corporate obligations. Limited liability company are generally less burdensome than joint-stock companies in this regard, but both require attention to document regularity.
Key points regarding limited liability companies include:
• Shareholders must hold an annual meeting within the first four months following the end of the fiscal year to: (i) review the accounts of the managers and deliberate on the balance sheet and income statement; and (ii) appoint new managers, if applicable;
• Limited liability companies are not required to publish their financial statements in newspapers. If the limited liability company is legally classified as a large company (i.e., if it or a group under common control had total assets exceeding BRL 240 million or gross annual revenue exceeding BRL 300 million in the previous fiscal year), its financial statements must be prepared according to corporate standards (Article 3 of Federal Law No. 11.638/2007). However, even in this case, there is no obligation for limited liability companies to publish their financial statements;
• Limited liability companies must formally maintain a book of minutes for shareholder meetings (Article 1.075, I, of the Civil Code), which must be updated at least annually. In practice, this book may become redundant since signed minutes by shareholders are typically accepted for all relevant purposes. Nevertheless, it is incorrect to say that limited liability companies never require corporate books.
For joint-stock companies, obligations are more extensive and include:
• An annual general shareholders’ meeting must be held within four months after the end of the fiscal year to: (i) review the accounts of the managers, examine, discuss, and vote on the financial statements; (ii) decide on the allocation of net income and dividend distribution; and (iii) elect the managers and audit board members, if applicable;
• Financial statements of corporations must be published before the date scheduled for the annual general meeting;
• Corporate books must be kept up to date. Mandatory books include the book of registered shares and the book of meeting minutes;
• Unlike limited liability companies, managers of joint-stock companies cannot remain in office indefinitely. Their term is limited to three years, with indefinite re-elections permitted. Therefore, it is common for corporate managers to be elected or re-elected regularly;
• Publicly held companies must submit specific information to the Brazilian Securities and Exchange Commission in accordance with securities market regulations (e.g., registration and reference forms). Failure to comply with these obligations may result in administrative sanctions or personal liability for shareholders or managers. Continuous legal support is recommended to ensure compliance and uphold good corporate governance.
2. What Is the Review of Managers’ Accounts?
The review of managers’ accounts is a legal corporate obligation for both joint-stock companies and limited liability companies. This formality consists of shareholders’ deliberation on management accounts.
The legal deadline for holding the meeting that addresses the accounts is four months after the end of the fiscal year. Despite this deadline, the review can still be conducted later. It is recommended to carry it out to ensure corporate regularity and mitigate legal risks, such as:
a) Personal Liability of the Manager
Failure to approve the accounts may result in managers being personally liable for acts performed in the previous fiscal year.
b) Losses in Banking, Contractual, and Investment Operations
Many financial institutions, investment funds, and commercial partners require proof of corporate compliance to grant credit or engage in contracts. The absence of account reviews can:
• Hinder or prevent debt renegotiation or access to bank credit;
• Trigger restrictions in internal audits or due diligence processes;
• Lead to disqualification in bidding processes; and
• Reduce credibility and transparency in the eyes of the market and investors.
3. How to Proceed?
If your company has not yet reviewed its managers’ accounts following the end of the fiscal year, it is important to seek legal guidance for corporate regularization.
Contact our office and schedule a consultation. We are available to assist you in ensuring your company’s compliance.
Franco Advogados
