Legalisation of business books for limited companies

Legalisation of commercial books for limited companies.

One of the fundamental duties for entrepreneurs is the obligation to keep a register of inventories and annual accounts (Article 25 of the Commercial Code), as well as a journal (Article 25 of the Commercial Code), a book of minutes of general meetings and of the company’s collegiate bodies (Article 26 of the Commercial Code and Article 106 of the Commercial Register Regulations), and a register of shareholders for limited liability companies (Articles 27 and 28 of the Commercial Code).

The period granted to the management bodies to legalise their corporate books is four (4) months from the end of the financial year (Art. 333 of the Commercial Register Regulations). For example, if the financial year coincides with the calendar year, they will have until 30 April 2024 to carry out the legalisation of the corporate books.

With regard to the annual accounts, the company’s administrative body is obliged to prepare them within a maximum period of three (3) months from the end of the financial year, including the annual accounts, the management report and the proposal for the application of the result, as well as the consolidated accounts and management report (article 253 of the Capital Companies Act). Following the same example, if the financial year ends the same as the calendar year, the annual accounts must be prepared before 31 March 2024.

For the approval of the annual accounts, the deadline is extended to the first six (6) months of each financial year (Art. 164 of the Capital Companies Act). In other words, if the financial year ends with the calendar year, the annual accounts for the previous year must be approved before 30 June 2024.

The directors of public limited companies and limited liability companies, among others, are obliged to submit the annual accounts within one month of their approval (Article 365 of the Commercial Register Regulations and Article 279 of the Capital Companies Act). For example, if the annual accounts are approved on 30 June 2024, they must be filed by 31 July 2024.

In summary, if the company has closed the financial year on 31 December 2023, the important deadlines are as follows:

  • Preparation of annual accounts: 31 March 2024.
  • Legalisation of commercial books: 30 April 2024
  • Approval of annual accounts: 30 June 2024
  • Deposit of annual accounts: 31 July 2024

Failure to comply with the obligation to legalise the company’s books may result in liability for the company’s management body and could also be considered a tax offence.

What to do before preparing annual accounts?

Before proceeding with the formulation of the annual accounts, it is essential to carry out various checks in order to prevent possible legal breaches that could affect the liability of the company’s management body. These checks include:

  1. Checking whether the company has the possibility to formulate abridged annual accounts and determining the corresponding modality.
  2. Checking whether the company must be audited for the first time, re-elect an auditor, or whether it no longer meets the parameters for being audited.
  3. Assess whether the company is obliged to consolidate the annual accounts or whether it has been exempted from this obligation.
  4. Verify whether the company complies with the necessary requirements to apply the desired result or whether there are legal restrictions, such as the endowment of the legal reserve for ten percent (10%) of the positive results of the closed financial year.
  5. Review other obligations related to the annual accounts according to the articles of association or the company’s internal rules, e.g. from an investment agreement or shareholders’ agreement.

How NOT to legalise the annual accounts:

Once 30 June has arrived, all trading companies that have not yet held their General Meeting have until that date to do so, as established in the Capital Companies Act. On many occasions, urgency leads companies to opt for the fast track of universal meetings, which do not require prior notice in accordance with article 178 of the Capital Companies Act.

It is important to note that the common practice of some consultancies and management companies to send minutes and certificates of meetings in the form of universal meetings, without taking into account the complexity or conflictive nature of the companies, can put directors and board members at risk. It is essential to comply with the legal requirements for a General Meeting to be considered a universal meeting, which include the unanimous presence of all the shareholders or the total share capital, the unanimous will to hold the meeting and the unanimous acceptance of the Agenda.

In situations where it is difficult to properly convene the meeting and hold the meeting with the full representation of the share capital, some companies opt to hold universal meetings in an irregular manner, issuing false certificates of resolutions. This can have serious legal consequences, as set out in Articles 392 and 292 of the Criminal Code.

It should be remembered that the resolutions of shareholders forming part of capital companies must be adopted ‘at a general meeting’ (Article 159.1 of the Capital Companies Act) and that ‘all company resolutions must be recorded in the minutes’ (Article 202.1 of the Capital Companies Act). These minutes ‘must be approved by the general meeting itself at the end of the meeting or, failing that, within fifteen days, by the chairman of the general meeting and two shareholders, one representing the majority and the other the minority’ (Article 202.1 of the Capital Companies Act).

In some cases, consultancy firms and management companies have prepared a certificate of the resolutions of the shareholders’ meeting approving the annual accounts – required for filing with the Commercial Register pursuant to Article 279 of the Capital Companies Act– of a meeting that did not take place.

Article 109 of the Capital Companies Act states that the responsibility for certifying the minutes and resolutions of the collegiate bodies of commercial companies is assigned as follows:

(a) The Secretary and, where appropriate, the Deputy Secretary of the collegiate administrative body, whether or not a director, are empowered to issue certifications, always with the approval of the Chairman or, in his absence, the Vice-Chairman of that body.

b) The sole administrator or any of the joint administrators also has the power to certify.

c) In the case of joint administration, the administrators with power of representation.

In the above-mentioned cases, it is necessary that the persons issuing the certification hold office at the time of issue. In addition, in order to register the agreements contained in the certification, it is required that the office of the certifier is previously or simultaneously registered.

It is not permitted to certify resolutions that are not recorded in approved and signed minutes or notarial deeds.

The risk of certifying a deed that is not true and that has not been carried out according to legal procedures is significant and can have serious legal and ethical consequences.

By certifying a non-existent deed, the management body is asserting the veracity of its content, which may entail:

  1. Legal liability (offence of forgery in a commercial document under Article 290 of the Criminal Code).
  2. Damage to third parties
  3. Loss of confidence and reputation
  4. Breach of ethical duty
  5. Legal consequences for those involved

What happens if annual accounts are not submitted?

Failure to comply with the commitments linked to the presentation of annual accounts can have serious repercussions both for companies and for their managers or directors, as we told you previously in this other post on penalties and responsibilities in relation to the presentation of annual accounts.

Let us help you!

Metricson can help you with the legalisation of your accounts in order to comply with the legal and statutory requirements of your company.

We will review all the relevant corporate documentation in order to carry out the call for the meeting correctly.

In the event that the convening process poses numerous difficulties, we can propose the necessary statutory changes to streamline the process effectively, complying with the legal requirements and adapting them to current practice.

In the event of not being able to call a meeting in time, if this is provided for in the articles of association, we can prepare written minutes without a meeting, approving the annual accounts.

If your company finally requires a universal general meeting of shareholders to approve the annual accounts, we will ensure that it is held in compliance with the law.

Once the meeting is held, we can take the minutes of the meeting, coordinate their signature and prepare the appropriate certification for submission and registration with the Companies Registry.

If you want to avoid risks, prevent possible non-compliance and the corresponding sanctions, let us help and advise you.

Article by:

Guillermo J. UrbezGuillermo J. Urbez

Corporate and M&A lawyer

guillermo.urbez@metricson.com

About Metricson

Metricson is a pioneer in legal services for innovative and technology companies. Since its inception in 2009, it has advised more than 1,400 companies from 14 different countries, including startups, investors, large corporations, universities, institutions and governments.

If you need help regarding any legal aspect of your company, do not hesitate to write to us at contacto@metricson.com. We look forward to talking to you!

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