Last chance to approve financial statements and distribute 2012 profit is approaching
Penalties for failure to meet your statutory obligations concerning the approval and publication of financial statements could be more costly. Therefore, it is advisable to comply with the law. The deadline for fulfilling such duties is 30th June. What could your company face after this date? The deadline for companies to approve and publish their financial statements is approaching fast. Under applicable law, limited liability companies and joint-stock companies are required to approve their financial statements within six months from the end of the accounting period. Where the accounting period is a calendar year (which is usual), the deadline for approving the financial statements is 30th June. The financial statements are approved by the general meeting. If the company has a sole shareholder, the financial statements are approved by the sole shareholder exercising the powers of the general meeting. After the financial statements are approved or audited (whichever occurs later), a 30-day period begins, during which the company shall ensure that the financial statements are published in the Collection of Deeds at the Commercial Register. The penalty for failure to comply with these statutory obligations might be substantial. In respect of the obligation to publish the financial statements, the most frequently and increasingly used penalty is a procedural fine. This may be imposed repeatedly by the Commercial Court and could be as high as CZK 20,000. However, even more considerable damage could be caused by a penalty imposed by the tax authority, reaching up to 3% of the value of a company’s assets. An extreme solution, involving the company’s dissolution as a penalty for failure to hold a general meeting, would be unjustified but not unthinkable. Failure to publish financial statements may even be considered an economic crime relating to the distortion of information on business and property management and assets. Legal entities may also be prosecuted for this crime. If the company wishes to distribute profit, its decision shall meet the same deadline. The Supreme Court has held that, after this deadline, no resolution may be adopted regarding the company profit distribution based on the financial statements to be approved. If a company’s directors or executives decide to pay dividends based on a later resolution of the general meeting, the directors and officers may held liable for any damage incurred to the company.