Preparation, adoption and publication of financial statements: what are the rules again?

Preparation

Pursuant to Section 2:210 of the Civil Code, the management board of a private limited liability company (BV) or public limited company (NV) must prepare annual accounts and make them available for inspection at the company's offices within five months of the end of the financial year, subject to a maximum five-month extension on account of special circumstances.

In the Brens/Sarper judgment of June 11, 1993, the Supreme Court ruled, among other things, that it is of no importance to creditors whether the period for the annual accounts has been formally properly extended. The question of whether or not the period for preparing has been extended is important in the context of the relationship between the management board (which would like to be granted more time for preparing the annual accounts) and the company's shareholder(s) (for whom the annual accounts contain important information). For creditors, it is not relevant.

The annual accounts shall be signed by all directors and supervisory directors of the company. If the signature of one of them is missing, this shall be stated and the reasons given. A managing director or supervisory director may not have the annual accounts signed by another managing director or supervisory director on the basis of a power of attorney.

Adoption

The annual accounts are adopted by the general meeting after their preparation by the management board. Adoption of the annual accounts does not automatically discharge a director or supervisory director from (internal) liability. However, if all shareholders are also managing directors of the company, the signing of the annual accounts by all managing directors and supervisory directors shall also constitute adoption of the annual accounts, provided that all other persons entitled to attend meetings (if any) have been given the opportunity to take note of the annual accounts and have agreed to this manner of adoption. An adoption in this manner does discharge the directors and supervisory directors from (internal) liability. Such a manner of adoption of the annual accounts may be excluded in the articles of association of the company. In order to determine the moment at which the annual accounts shall be deemed to have been adopted, it is therefore important to check what provisions have been included on this subject in the company's articles of association.

Publication

Section 2:394(1) of the Civil Code stipulates that the legal entity is obliged to make the annual accounts available for public inspection within eight days of their adoption by filing them with the trade register. If the annual accounts have not been adopted within two months after the maximum period for preparation (five months + any extension period) of the annual accounts has elapsed, the management board of the company must publish the prepared (but not yet adopted) annual accounts by filing them with the trade register. Section 2:394(3) of the Civil Code stipulates that the annual accounts must in any case be published, adopted or not, within twelve months after the end of the financial year.

Consequences of late publication

Failure to file the annual accounts within 12 months of the end of the financial year constitutes an economic offense and may result in a fine. Furthermore, Section 2:248 (2) of the Dutch Civil Code stipulates that if the company goes bankrupt and the annual accounts have not been disclosed within 12 months of the end of the fiscal year, the company's management board is deemed to have improperly performed its duties and the improper performance of duties is presumed to be a major cause of the bankruptcy. In principle, this leads to liability of the directors for the deficit in the bankruptcy. Does this sanction also apply if the financial statements are not filed within eight days of their adoption, as described above?

According to the judgment of the Arnhem/Leeuwarden Court of Appeal of April 16, 2024 (ECLI:NL:GHARL:2024:2564), this is not the case. In that case, although the annual accounts had not been filed within eight days of their adoption, the filing did take place within the maximum period of (then) thirteen months (under current legislation twelve months). The court of appeal ruled that for the sanction of Section 2:248 (2) of the Civil Code to apply, only the twelve-month period of Section 2:394 (3) is relevant. According to the court of appeal, the exceeding of the eight-day period of Section 2:394 (1) counts as an immaterial omission, as referred to at the end of Section 2:248 (2).

It is important to pay close attention to the deadlines for preparation, adoption and disclosure of financial statements, both in connection with possible director liability and to avoid penalties for late filing.