After seven years in the legislative process, Law 11.638/07, which amends the Brazilian Corporations Law (Law 6.404/76) was enacted. The new Law creates obligations for "large companies", which are defined as a "company or group of companies under common control which had, in the previous financial year, total assets greater than R$240 million or annual gross revenues greater than R$300 million."
In Brazil, corporations or sociedades anônimas are subject to the stricter requirements on preparation and disclosure of financial information contained in the Brazilian Corporations Law. In contrast, other forms of business organizations, such as the limited company (sociedade limitada, similar to a limited liability partnership) have historically had no obligation to prepare, much less disclose, financial statements. By making the Brazilian Corporations Law's provisions on preparation of financial statements applicable to all "large companies", regardless of their form of organization, Law 11.638/07 has made a significant change in the law.
The new legislation has sparked a number of debates. Article 3 of the Law states that the provisions of the Brazilian Corporations Law concerning the "preparation of financial statements and the requirement for independent audit by an auditor registered with the CVM" apply to large companies. However, the digest of the Law refers to "preparation and disclosure" of the financial statements. Are large companies required only to prepare financial statements in accordance with the Brazilian Corporations Law, or did the Law also create an obligation to publish and disclose the statements as well?
Some argue that a systematic interpretation of the Law leads to the conclusion that publication is required, since preparation of financial statements necessarily results in their publication, pursuant to articles 176 and 289 of the Brazilian Corporations Law. Furthermore, they contend, the legislator's objective in introducing this provision was precisely to ensure that the financial statements are published.
Others believe that article 3 merely makes large companies subject to the provisions of the Brazilian Corporations Law on preparation of financial statements (including the requirement for an independent audit), without addressing the issue of publication. This school of thought argues that if the legislator wanted to impose an obligation to publish financial statements on large companies, he should have done so expressly.
The CVM, in a communication to the market, has stated that "although there is no express reference to the obligation to publish these financial statements, in any voluntary disclosure, including disclosure in response to specific requests (creditors, suppliers, clients, employees, etc.), the financial statements must be duly transparent and totally in line with the new Law."
Bill 3.741 of 2000 (which after various changes became Law 11.638/07) can assist in attempting to understand the legislator's intention, while at the same time observing the traditional limitations on the interpretation of legal provisions that create obligations. Article 2 of the Bill in fact provided expressly for publication of the financial statements of large companies, as well as their preparation.
However, as the Bill made its way through the House of Representatives, the obligation to publish disappeared. At the time, a new paragraph was added to article 3 of the Bill, requiring disclosure of financial statements on the "worldwide web of computers", but this provision also failed to find its way into the final version submitted to the National Congress.
Moreover, the obligation to publish financial statements was discussed in several of the parliamentary commissions through which the Bill passed on its way to enactment, and the discussions revealed a lack of consensus on the question, to the extent of inciting debate on the obligation to publish financial statements imposed on corporations in article 289 of the Brazilian Corporations Law. In fact, an amendment to article 289 was proposed, but was not included in the Bill presented to National Congress.
If publication of financial statements and their disclosure on the internet were both expressly proposed but removed from the Bill before it was submitted to a vote, there is reason to doubt that the legislator intended to impose an obligation to publish financial statements on large companies.
Furthermore, Complementary Law 95/98, which deals with legislative drafting, provides that a Law must be structured in three parts, a preliminary part (digest, preamble, etc.), a normative part and a final part, and states that the normative part must contain the text of the substantive rules related to the matter governed by the legislation. Thus, it is doubtful that a reference to "disclosure" in the digest of the Law, with no mention of disclosure in the normative provisions, would have the effect of making disclosure of financial statements, or even their publication, compulsory.
Although this interpretation is not yet fully consolidated, most commentators to date agree that Law 11.638/07 did not create an obligation to publish financial statements. This does seem to be the best understanding of the Law, although only time and the actual application of the Law will produce a definitive interpretation.
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