Annual Report 2005 - Tenaris

Explanatory notes
72. TenarisConfab
The company is responsible for contingent liabilities
from the time when it administered its ex-subsidiary Rio
Janeiro Refrescos S.A., sold in 1994. Additionally, in
accordance with the corresponding sale contract, the
company has a mortgage on its plant equipment assets
with a net book value of R$ 16.557.
The company also has law suits deemed by its legal advisors
to be possible losses, in the amounts of R$ 89,782
(R$ 59,554 on December 31, 2004), in the mother
company and R$ 90,803 (R$ 59,921 on December 31, 2004)
in the consolidated statements. From these suits, the
amount of R$ 14,737 (R$ 14,265 on December 31, 2004) is
related to the company Rio de Janeiro Refrescos S.A. Based
on the information from legal advisors and management
analysis, no provision was made for these contingencies.
The company also has ongoing law suits where a favorable
outcome is probable, involving the consolidated
amount of R$ 72,988 (R$ 57,136 on December 31, 2004)
net of legal fees, which will be recognized when realized.
The Company contested judicially the constitutionality
of the broadening of the calculation base determined
by the Law nº 9.718/98 with reference to the Programa de
Integração Social-PIS and the Contribution for the Financiamento
da Seguridade Social-COFINS. On November
9, 2005, in a plenary session, the Supreme Federal Court
(Supremo Tribunal Federal) ruled, in individual suits,
that the law is unconstitutional.
Since this decision only benefited the parties involved
in that case, and since the suits being brought by the
Company have not yet been judged, and based on the
guidelines released by the Securities and Exchange
Commission (Comissão de Valores Mobiliários-CVM)
in its Ruling nº 489/05 and by the Institute of Independent
Auditors (Instituto dos Auditores Independentes
do Brasil-IBRACON) through its bulletin nº 02/2006, the
reversal of the registration of the liability provisioned
and consequent recognition of revenue will only occur
after a favorable and irreversible court ruling.
15. Shareholders equity
a. Capital
At the Extraordinary General Meeting on May 31st,
2004, the Council deliberated on the split of the company's
shares such that each share in existence on the date
of the EGM would be attributed with two new shares
of the same type, with no alteration in capital value.
With the share split deliberated on May 31, 2004, the
Company by-laws authorized the increase in capital to
a total limit of 422,822,400 shares (before the split, the
limit allowed for was 140,940,800), respecting the proportionality
amongst the existing classes of shares, the
Council being the competent body for such deliberation.
It is also within the Council's competence to determine
the conditions applicable based on the authorized capital
as well as the applicability or not of the preference rights
of the current shareholders under the terms of Article
172 of Law nº. 10.303/2001.