Among the different mercantile obligations that the regulations require from the different Spanish companies, directors are in charge of the fulfillment of the set of actions, which end with the deposit of the Annual Accounts contained in article 279 of the Royal Legislative Decree 1/2010, of July 2, approving the revised text of the Spanish Companies Act (hereinafter the «LSC«).
For this purpose, we must focus on the following milestones:
- Formulation of the Annual Accounts: it is imposed by the legal obligation established in article 253 and following of the LSC. Specifically, the Directors are obliged to draw up the annual accounts for the last fiscal year-end close, within a maximum period of 3 months from the closing date.
- Approval of the Annual Accounts is imposed by the legal obligation established in article 163 of the LSC. Specifically, the General Meeting is obliged to meet within the first 6 months from the end of the last fiscal year, in order to approve the management of the Directors, approve the drawn up Annual Accounts and, where appropriate, approve the distribution of the result of the fiscal year proposed by the Directors (as a general rule, Spanish companies use to close their fiscal year ended on December 31, so before the following June 30, this obligation must be fulfilled).
- Deposit of the Annual Accounts: in accordance with the article 279 of the LSC, within a period of 1 month from the approval, the approved Annual Accounts must be deposited in the Commercial Registry.
Consequently, a company whose year-end is December 31 of each year, will be obliged to carry out the following actions the year immediately following, within the following terms:
- Formulation of the Annual Accounts: March 31.
- Approval of the Annual Accounts: June 30.
- Deposit of the Annual Accounts: 1 month after approval of the Annual Accounts.
What are the documents that make up the Annual Accounts?
On the one hand, the basic documents that make up the Annual Accounts of a company are: Balance Sheet, Profit and Loss Account, and the Annual Report.
The LSC establishes that those companies which do not exceed 2 thresholds of the 3 indicated, during 2 consecutive years, may formulate abridged Balance, Profit and Loss Account, and the Report. These thresholds are:
|Balance Sheet and Annual Report (art. 257 and art. 261)|
|Total assets||EUR 4,000,000|
|Net amount of annual turnover||EUR 8,000,000|
|Profit and Loss Account (art. 258)|
|Total assets||EUR 11,400,000|
|Net amount of annual turnover||EUR 22,800,000|
On the other hand, apart from the documents referred to above, the LSC details the existence of other 3 documents (Statement of Changes in Equity, Statement of Cash Flows and Management Report), which may and/or must be incorporated, according to the previous threshold system. These thresholds are the same as those established in article 257.1.
In conclusion, the documents that make up or may make up the Annual Accounts of a company are:
- Balance Sheet (abridged/ordinary).
- Profit and Loss Account (abridged/ordinary).
- Annual Report (abridged/ordinary).
- Statement of Changes in Equity (abridged/ordinary) – It is not mandatory in case of the formulating an abridged Balance Sheet.
- Statement of Cash Flows – It is not mandatory in case of the formulating an abridged Balance Sheet.
- Management Report – It is not mandatory in case of the formulating an abridged Balance Sheet.
Finally, it should be noted that the LSC establishes that those companies that do not exceed 2 thresholds of the 3 indicated, during 2 consecutive years, will not have the obligation to submit their Annual Accounts to verification by an auditor. These thresholds are:
|Audit Report (art. 263.2)|
|Net amount of annual turnover||5.000.000.-€|
Therefore, if an auditor is required to verify the Annual Accounts – or the company decides to do so voluntarily – it will be mandatory to incorporate the Audit Report into the set of documents that make up the Annual Accounts.
Well, after this brief analysis on the legal obligation regarding the deposit of Annual Accounts, there are many clients who wonder “is there some kind of legal consequence, in case of non-compliance?» The answer is yes.
As provided in the article 282 of the LSC – in conjunction with article 378 of Royal Decree 1784/1996, of July 19, which approves the Regulation of the Commercial Registry (hereinafter the “RRM” ) – , and in article 283 of the LSC – in conjunction with the eleventh additional provision of Royal Decree 2/2021, of January 12, which approves the Regulations for the development of Law 22/2015, of 20 July, Audit of Accounts –, the lack of deposit of the Annual Accounts, may lead to the following consequences:
- Closing of the registration sheet: if, one year after the end of the fiscal year, Annual Accounts have not been deposited, the corresponding Commercial Registry will prevent the registration of any document, except those related to the termination or resignation of directors, managers, general directors or liquidators, and the revocation or resignation of powers of attorney, as well as the dissolution of the company and the appointment of liquidators and those ordered by the Judicial or Administrative Authority – as long as the accounts of the last 3 financial years are not deposited.
- Financial penalty: In case of non-compliance with the deposit of the Annual Accounts, in the month following its approval, the Accounting and Auditing Institute may undertake disciplinary proceedings, even imposing a penalty from € 1,200. – to € 60,000. Likewise, maximum limit will be increased to € 300,000. – in case the non-compliant company has an annual turnover higher than € 6,000,000.
It is important to highlight that the Directors could be liable jointly and severally for said sanctions, in accordance with the article 236 and following of the LSC, from AFIENS we recommend ensuring strict compliance with the detailed legal obligations.
Finally, considering all the above, the consequences correspond to the lack of deposit of the Annual Accounts, what depends directly on its approval, if it does not occur within the legally established period, the Board would find itself in a controversial situation.
Consequently, if the General Meeting has not proceeded to the approval of the Annual Accounts in due time and form, the fact of submitting for registration, in the corresponding Commercial Registry, a certification with legitimate signatures in which it is stated that the Annual Accounts have not been still approved – every 6 months after the non-compliance would avoid the closing of the registration sheet, by virtue of article 378.5 of the RRM and could avoid the corresponding financial penalty.
This note is only a summary and not an exhaustive analysis. For more information do not hesitate to contact us.
Yours sincerely ,
Santiago Torrejón Luna
Managing Corporate department
Team AFIENS LEGAL, S.L.P.
91 192 00 63