Companies Act 19,550 · Article 66 — Management report

The board's management report: what it must disclose (LGS art. 66)

Section 66 of the General Companies Law specifies the contents of the management report: the report in which directors explain to shareholders or members the company's condition and the outlook for its operations. It must explain changes in assets and liabilities, reserves, dividend policy, prospects and relationships with group companies.

Source: Act 19,550

What article 66

Section 66 establishes the minimum contents of the management report accompanying the financial statements.

Official text · Act 19,550, art. 66

The directors shall report in the management report on the condition of the company in the different activities in which it has operated and their judgment regarding the outlook for operations and any other matters considered necessary to explain the company's present and future situation. The report shall state:

1) The reasons for significant changes in asset and liability items;

2) An adequate explanation of extraordinary expenses and income and their origin, and of adjustments for income and expenses from prior financial years, when significant;

3) The reasons for proposing the creation of reserves, explained clearly and in detail;

4) The causes, set out in detail, for proposing the payment of dividends or the distribution of profits otherwise than in cash;

5) An estimate or guidance regarding the prospects for future operations;

6) Relationships with controlling, controlled or affiliated companies and changes in the respective equity interests and in receivables and payables;

7) Items and amounts not shown in the income statement because they form, in whole or in part, part of the cost of assets.

Source: Law 19,550, art. 66 - InfoLEG (updated official text)

Commentary

The management report is the qualitative narrative that complements the figures in the financial statements: directors explain what happened and what they expect. It is not a mere formality; a poor or generic report signals deficient accountability and may support a challenge to approval of management.

The section requires an explanation of matters that are significant: changes in financial position, extraordinary results, the reasons for reserves and dividend policy, and transactions with group companies. It is a key tool for a shareholder seeking to understand the company's actual course of business.

Distinctions often confused

Management report is not the same as Financial statements. The financial statements show the figures; the management report explains them and provides an outlook. They are considered together by the ordinary shareholders' meeting.

Practical impact

A complete management report protects directors (accountability) and shareholders or members (information). Deficiencies may support challenges to approval of management and the financial statements.

Frequently asked questions

What is a company's management report?

It is the directors' report explaining the company's condition and the outlook for its operations, accompanying the financial statements.

What must the management report explain?

Significant changes in assets and liabilities, extraordinary results, the reasons for reserves and dividend policy, prospects and relationships with group companies.

This page is informational and does not constitute legal advice nor replace professional consultation. It quotes the official text of the rule; for its application to a specific case, consult a licensed professional.

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