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PrimeGlobal member firm Mssantini discuss the corporate legislation in Brazil in the time of COVID-19.
Due to the current Governmental measures to restrict circulation and agglomeration of people, the public or privately held corporations, as well the limited liability companies have encountered difficulties to hold their Ordinary General Meetings (AGO – abbreviation in Portuguese) and the Ordinary Member Meetings (RSO – abbreviation in Portuguese), discuss urgent matters and file corporate acts at the Boards of Trade.
In face of this scenario and in an extra issue of the Brazilian Official Gazette (DOU – abbreviation in Portuguese) last Monday (30), the Federal Government published a provisional measure (MP 931/2020) that guarantees to the companies a longer time span to elaborate and register their AGOs and RSOs.
In practice, this extension applies to public or privately held corporations, limited liability companies and cooperatives that had their fiscal years closed between December 31, 2019 and March 31, 2020.
Fiscal Year is the 12 month-period that a determined company must consider in order to prepare the statements of all its accounting process in order to calculate the result of the operational performance of the organization and draw up the balance sheet. It is the temporal basis of a company.
Approval of The Accounts
Normally the companies hold an ordinary general meeting of the shareholders within four months after the fiscal year closure, which not necessarily coincides with the civil year, so as to analyze, besides other issues, the financial statements of the company, allocation of profits of the company and the distribution of dividends for the partners. There can be also a reform on the by-laws of the company. With the MP, these companies can hold their AGOs within seven months after the fiscal year ending, meaning they are granted an extension of three months on the original deadline.
In accordance with the MP, the extension is applicable to the public and privately held companies (S/As), limited liability companies (LTDAs), individual companies (EIRELIs) and to the cooperatives. The text also foresees the extension of the mandates of the members of the managing boards, inspection and other statutory bodies of those companies.
Distribution of Dividends or Profit
The distribution of dividends, for the S/As, can be decided by the managing board or by the board of directors, if there is no advisory board. It is not necessary to wait for the AGO to carry out the distribution of the profits of the shareholders. The measure also applies to the State companies and their subsidiaries.
Voting of Corporate Decisions
The MP establishes a remotely held voting (by electronic means) for meetings and general meetings for all kinds of companies. Such permission was already in place for public held companies (companies with stock traded at the Stock Exchange). The Securities and Exchange Commission (CVM – the abbreviation in Portuguese) may regulate such remotely held general meetings for the public held companies thus nowadays the participation of the shareholders in the AGOs may be online, but with one presential meeting taking place in the city where the companies have their headquarters.
Filing of Corporate Acts
The MP reassures that the corporate acts signed as from February 20th, 2020 may be filed up to thirty (30) days counting from the date the competent board of trade resumes its day to day activities.
CVM is also authorized to extend the regulatory deadlines for the public held companies to present their financial statements. MP 931/2020 modifies Laws 10,406, of 2002 (Civil Code, in the section that deals with the LTDAs), 6,404, of 1976 (concerning the equity companies) and 5,764, of 1971 (that regulates the cooperative associations). The text shall remain for up to 120 days and needs to be approved by a mixed committee of State parliament members and senators before being ratified by the House of Parliament (Câmara) and Senate (Senado).
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