Law n. 99-A/2021, of December 31, which made the first amendment to the Statute of the Order of Statutory Auditors (“EOROC”), introduced significant changes to the legal regime applicable to the legal certification of accounts, including for permanent representations of foreign companies in Portugal, better known as branches.
These changes were the result of the revoking of article 43 of the EOROC, which previously required the appointment of a Statutory Auditor (“ROC”) in various entities, including branches, when the legal requirements for this purpose were fulfilled.
Effectively, Law n. 140/2015, of September 7, which approved the current EOROC, had already established, in its article 43, that all entities were subject to the intervention of a ROC in cases where (a) this is the result of a legal, statutory or contractual provision or (b) they have or must have organized accounts under the terms of the applicable accounting framework and meet the requirements set out in n. 2 of article 262 of the Portuguese Commercial Companies Code (“CSC”). These include exceeding two of the following thresholds for two consecutive years: (i) a balance sheet total of more than 1,500,000 euros; (ii) total net sales and other income of more than 3,000,000 euros; and (iii) an average of more than 50 employees employed during the financial year.
However, Law n. 99-A/2021, of December 31, repealed article 43 of the EOROC, consequently raising the question of whether the obligation to appoint a ROC provided for in article 262(2) of the CSC for private limited companies, remains applicable to branches.
Specifically, since branches are merely permanent representations of foreign companies, with no legal personality of their own, the applicability of Article 262(2) of the CSC was debated as they are not included in the concept of a company.
However, the understanding of this issue has evolved, especially in light of Article 4(1) of the CSC, which requires branches in Portugal to also comply with the requirements of the Commercial Registry Code (“CRC”).
Although branches do not have legal personality, Article 10(d) of the CRC makes it mandatory for branches to make a financial reporting (“prestação de contas”).
In this context, Article 42 of the CRC sets out the documents required to register the rendering of accounts, including, among others, the legal certification of accounts by a ROC.
In these terms, the financial reporting (“prestação de contas”) of the permanent representation in Portugal must include the legal certification of accounts.
This certification is the exclusive competence of a ROC, as defined in the EOROC, so any permanent representation (branch) in Portugal is subject to the intervention of a ROC.
In this regard, it should always be noted that, if the articles of association of the represented company do not require the existence of a supervisory body (supervisory board or single supervisory board made up of a ROC/SROC), it is necessary to appoint an ad hoc ROC to carry out the financial reporting.
Finally, there are additional obligations regarding the disclosure of the accounts of the foreign company itself and of the respective branch in Portugal, resulting from the specific legislation of the respective sector of activity, namely with regard to credit institutions and financial companies – see Banco de Portugal Notice no. 1/2019, of January 22, 2019).
In conclusion, branches of foreign companies in Portugal must ensure the legal certification of their accounts, which must be carried out by ROC, thus complying with the registration requirements established by Portuguese law and avoiding potential sanctions for non-compliance.
by Amílcar Silva and Margarida Asseiceira, Practice Area – Commercial and Corporate
