There are four key dates in the schedule of companies registered at the Spanish Commercial Register that determine the fulfilment of accounting obligations imposed by the legislator in accordance with art. 32.1 of the Companies Act (hereinafter referred to as “LSC”).

Indeed, art. 25 of the Commercial Code (hereinafter referred to as “Ccom.”) establishes certain accounting obligations for entrepreneurs, one of which refers to “keeping an annual account book”. Now we will proceed to analyse carefully what this obligation entails and what are the deadlines for implementation.

The aforementioned Spanish Ccom. contains, under Title III “The accounting of entrepreneurs”, a second Section dedicated to the regulation of annual accounts. More specifically, art. 34.1 Ccom. stipulates that “At the financial year-end, the entrepreneur should prepare its company’s annual accounts”. This generic prevision is specified by art. 253 LSC which indicates that “The directors of a company are obliged to prepare the annual accounts within a maximum period of three months as from the financial year-end”. Therefore, in general the company’s directors have until 31st of March to prepare the annual accounts. We say “in general” because there are companies which, instead of ending the financial year on the 31st of December following the rule set forth in art. 26 LSC, finish the referred financial year at a different time of the year. In any case, as the above-mentioned legal provision says, this circumstance has to be reflected in writing in the company by-laws.

Very briefly, the above-mentioned annual accounts have to include:

  • Balance sheet (arts. 35.1 and 36.1 Ccom.): which shall reflect separately the assets, liabilities and net worth.
  • Profit and loss account (art. 35.2 and 36.2 Ccom.): which shall reflect the financial result, duly dividing incomes from expenses attributable to the financial year. There is a possibility to prepare an abbreviated profit and loss account if the requirements of art. 258 LSC are met.
  • Statement of changes in net worth (art. 35.3 and 36.2 Ccom.)
  • Cash flow statement (Art. 35.4 Ccom.)

In accordance with art. 257 LSC, it is possible to prepare an abbreviated balance sheet and statement of changes in net worth for those companies that, during two consecutive financial years, at the end of each of them, meet at least two of the following requirements:

  1. The total amount of the assets items does not exceed 4 million euros.
  2. The net amount of the annual turnover does not exceed 8 million euros.
  3. The average number of employees during the financial year does not exceed 50.

When it is possible to prepare an abbreviated balance sheet, then the statement of changes in net worth and the cash flow statement are no longer compulsory.

  • Report (art. 35.5 Ccom. and arts. 259 and following LSC): which shall complete, add and comment upon the information contained in the other documents that make up the annual accounts.

Secondly, the annual accounts must be submitted to an audit to verify whether they give a true view of the assets, the financial situation and the company’s results, according to art. 268 LSC. Nevertheless, under art. 263.2 LSC the auditor’s report won’t be necessary for:

“companies which, during two consecutive financial years, at the end of each of them, meet at least two of the following requirements:

a) The total amount of the assets items does not exceed 850.000 euros.

b) The net amount of the annual turnover does not exceed 700.000 euros.

c) The average number of employees during the financial year does not exceed 50”.

In any event, the accounts auditor will have at least one month to submit its report. According to art. 270.1 LSC, this period of time starts to run “from the moment the  annual accounts signed by the directors are handed over to the auditor”. Therefore, the auditor’s final deadline to submit his report would be in theory 30th April.

Finally, the annual general meeting of shareholders should take place within the first six months of each financial year in order to submit the annual accounts for approval, i.e., up to 30th June. However, the 2nd paragraph of art. 164 LSC points out that “the annual general meeting of shareholders will be valid although it has been called or held past the deadline”.

Within the month following approval of the annual accounts, the company directors shall have one month to deposit the annual accounts at the Commercial Register corresponding to the company’s corporate domicile (art. 279 LSC). This means that foreseeably, the annual accounts should have been deposited on 31st July.

Last but not least, it is important to note that, according to art. 282.1 LSC, the infringement by the company’s directors of the obligation to deposit the annual accounts within the stated deadline, will have the effect that “no further documents related to the company shall be registered at the Commercial Register, while the breach persists”. Furthermore, according to art. 283 LSC, this infringement will lead to the imposition of a fine upon the company for an amount of between 1,200 to 60,000 Euro. Moreover, as foreseen by art. 172.2.1º of the Insolvency Act, this circumstance could be relevant if the company is subject of an insolvency procedure and it is qualified as negligent , whereby the judgment of declaration could describe the company’s director as an affected person because of infringing the obligation of depositing the annual accounts.

 

 

Ana Roncel

Vilá Abogados

 

For more information, please contact:

va@vila.es

 

16th of June 2017