By João A. Branco, Cristina A. Berry, Marcelo Natale and Renata Britto

Law 11638/2007 entered into force on 1 January 2008, updating the corporate law set forth in Law 6404/1976 and consolidating the effort of the Brazilian Securities Commission in adapting Brazilian legislation to international standards (IFRS).

One of the changes made is the introduction of a mandatory audit of financial statements for entities or groups of entities under the same control that have:

Consequently, a company falling within the above criteria, regardless of its form (i.e. limited liability company, corporation, etc.), must follow the annual independent audit rules for financial statements, as currently applicable to publicly traded companies.

Law 11638/2007 also included changes in Brazilian accounting procedures, such as the recognition of purchase accounting and assets revaluation, among others. These changes are applicable to all legal entities and must be observed as from 2008 financial statements.

With respect to reporting requirements, public companies also are required to adopt IFRS as of calendar year 2010. For calendar year 2009, IFRS reports are optional. Publication of financial statements is mandatory for both closed and publicly held corporations. It is currently unclear, however, whether limited liability companies that meet the above-mentioned criteria are obliged to publish their audited financial statements.

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