One of the essential commitments that entrepreneurs must assume is to properly keep the mandatory accounting and corporate books. Among them are: the journal and the inventory and annual accounts book (article 25 of the Commercial Code “CC”), the minutes book of meetings and collegiate bodies art. 26 CC and article 106 of the Mercantile Registry Regulations “RRM”), as well as the shareholders’ register book in the case of limited companies (article 27 and article 28 of the Commercial Code).
Likewise, company directors have the obligation to prepare the annual accounts within three (3) months following the end of the financial year (article 253 of the Capital Companies Act “LSC”) and to submit them for approval by the General Meeting within the first six (6) months of the following financial year (article 164 of the Capital Companies Act LSC).
1) Preparation and approval of annual accounts
The administrative body must prepare the annual accounts within a maximum period of three (3) months after the close of the financial year. The accounts include the balance sheet, profit and loss account, notes to the accounts, management report (if applicable), and the proposed application of results, as well as consolidated accounts where applicable. Thus, if the financial year ends on December 31, 2023, the deadline for preparation will be March 31, 2024.
The approval of the accounts must be made within the first six (6) months of the new financial year, so the maximum deadline would be June 30, 2024.
Once approved, the accounts must be filed with the Mercantile Registry within one (1) month from their approval (article 279 of the Capital Companies Act and article 365 RRM). If they are approved on June 30, 2024, the filing must be done before July 30, 2024.
Recommendations before preparing the accounts:
- Confirm whether the company can use the abbreviated accounts format.
- Evaluate the obligation to audit the accounts, auditor renewal or exemption.
- Verify if the company must consolidate accounts with other group entities.
- Check if the desired result can be applied, for example, by allocating the legal reserve with 10% of the profit.
- Analyze additional obligations arising from bylaws, shareholders’ agreements, or investment agreements.
Failure to comply with these obligations may result in financial penalties, liabilities for directors, and other negative consequences. More details in this other article about penalties for not submitting annual accounts.
2) Legalization of commercial books
The legalization of the books must be carried out within four (4) months following the end of the financial year (article 333 RRM). Following the previous example, if the financial year ends on December 31, 2023, the deadline will be April 30, 2024.
- The minutes book must be legalized if there have been meetings or sessions of the administrative body.
- The shareholders’ register book must be legalized if there have been transfers, creation, or charges on company shares.
Key dates if your company closed the financial year on 12/31/2024:
- Preparation of annual accounts: until March 31, 2025
- Legalization of books: until April 30, 2025
- Approval of accounts: until June 30, 2025
- Filing of accounts: until July 30, 2025
Be careful! Failing to comply with the preparation of accounts and legalization of books may lead to legal and tax penalties, and compromise directors’ liability.
Let us help you!
At Metricson, we can assist you with the legalization of your accounts to comply with the legal and statutory requirements of your company.
We will review all relevant corporate documentation to correctly carry out the call.
If the calling process presents numerous difficulties, we can propose the necessary bylaw amendments to streamline the process effectively, complying with legal requirements and adapting them to current practice.
If it is not possible to call the meeting on time, and this modality is foreseen in the bylaws, we can prepare a written minutes without a session approving the annual accounts.
If your company ultimately requires holding a universal general meeting of shareholders to approve the annual accounts, we will ensure it is held in compliance with the law.
Once the meeting is held, we can draft the minutes, coordinate its signing, and prepare the appropriate certification for submission and registration with the Mercantile Registry.
If you want to avoid risks, prevent possible non-compliance and corresponding penalties, let us help and advise you.
Article written by:
Lawyer – Corporate and M&A
pilar.casasnovas@metricson.com
About Metricson
Metricson is a pioneering firm in legal services for innovative and technological companies and specialized in commercial law. 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 want to contact us for any legal advice, do not hesitate to write to us at contacto@metricson.com. We look forward to talking with you!