Role of the Management Body in the Annual Closing of Accounts

The annual approval of company accounts contributes to the transparency of the accountability process and the disclosure of relevant information to partners/shareholders, suppliers, customers and other stakeholders, facilitating the assessment of their performance.

The Commercial Companies Code defines in a separate and detailed section the main steps of an account closing process, including their sequence, the parties involved and their respective responsibilities, as well as the documents to be produced and the formalities to be complied with. It mentions that the general duty of companies to render accounts is broken down into two fundamental duties:

a) Preparation of relevant statutory information: Management Report, Financial Statements and notes thereto, and other accountability documents, including the proposed appropriation of profits;

b) Submission of the above documents for approval by the General Meeting (members or shareholders).

This duty of accountability, as well as compliance with the respective statutory procedures and actions, is the responsibility of the Management Body (Managers or Directors) in office on the date of preparation and presentation of the accountability documents. These documents must be signed by all managers or directors, and any refusal must be expressly justified.

This process involves the preparation and convening of:

Management Report and financial statements by the Management Body (Management or Administration);
Financial statements by the Certified Accountant;
Audit/review by the Statutory Auditor/External Auditor, where applicable (being a public limited company, or complying with the requirements of Article 262 of the Commercial Companies Code);
Convocation of the General Meeting:

i) In limited companies, the General Meeting may be convened by any manager of the company, by giving at least 15 consecutive days’ notice, unless the articles of association establish other formalities or a longer period;

ii) In public limited companies, the General Meeting is convened by the chairperson of the board, by publishing the notice of meeting, except when all shares are registered, in which case the notice may be sent by registered letter or, with prior consent to that effect, by email with read receipt, at least 21 days in advance.

The Management Report (the content of which is set out in the Companies Act), the Financial Statements for the Financial Year and other documents (e.g. Legal Certification of Accounts, Report and Opinion of the Supervisory Body, other relevant financial reports prepared by the company) must be made available to members or shareholders prior to the date of the Annual General Meeting, sufficiently in advance to allow for informed analysis.

At the General Meeting, members or shareholders consider and vote on:

The Management Report, the Financial Statements for the Financial Year and other accounting documents;
The proposal for the allocation of profits contained in the management report (which may include the distribution of profits – dividends and balance sheet bonuses – as well as their transfer to reserves – capital accumulation);
Assessment of the performance of the Management/Administration and supervision of the company.

After the accounts have been approved, they must be registered by the 15th day of the seventh month following the end of the financial year, which includes:

Submission of Simplified Business Information (IES) and payment of the respective registration fee;
Submission of the annual accounting and tax information statement to the Tax Authority;
Filing of accounts with the Commercial Registry;
Provision of information for statistical purposes to the National Statistics Institute and the Bank of Portugal.

Failure to comply with these obligations may result in the following consequences:

Prevention of registration of certain facts relating to the company, namely, registration of amendments to the articles of association;
If the failure to register accounts occurs for two consecutive years, it may give rise to the initiation of proceedings for the ex officio dissolution of the company.

In summary:

i) Ensures the smooth running of the company;

ii) Safeguards the rights of members and shareholders;

iii) Ensures compliance with applicable legal and tax requirements;

iv) Avoids significant constraints, namely limitations on the registration of corporate acts;

v) Avoids the risk of informal dissolution.

It is the responsibility of the Management Body to ensure compliance with this process, contributing to the soundness, credibility and sustainability of the company. Transparency of information is highly valued by stakeholders.