As a consequence of COVID-19, Royal Decree-Law 19/2020 establishes that the three-month period for preparing annual accounts and other legally required documents will be calculated from June 1, 2020 (and not from the end of the state of emergency), and reduces to two months (instead of three months) the period for approving the annual accounts from the end of the preparation period. Therefore, the deadline for preparing the annual accounts would be August 31, 2020.
We inform you that with effect from May 28, 2020, Royal Decree-Law 19/2020, of May 26, has been approved, which adopts complementary measures in agricultural, scientific, economic, employment and Social Security matters and tax matters to mitigate the effects of COVID-19, which includes measures that affect the annual accounts, establishing a new deadline for the formulation and approval of the annual accounts for the 2019 financial year.
We remind you that, regarding the preparation, verification, and approval of the annual accounts of various companies and entities, Articles 40 and 41 of Royal Decree-Law 8/2020, of March 17, on urgent extraordinary measures to address the economic and social impact of COVID-19, established an extraordinary regime. This extraordinary regime was subsequently modified by the amendment introduced by the first final provision of Royal Decree-Law 11/2020 (published in the Official State Gazette on April 1).
Specifically in this regulation:
a) The suspension of the three-month period from the close of the financial year for the preparation of annual accounts was established , which would resume for another three months from the end of the state of alarm
In the event that the annual accounts had already been prepared on the date of the declaration of the state of alarm, the deadline for their verification by auditors was extended until two months after the end of the state of alarm.
Accordingly, the deadlines for the meetings of the ordinary general meetings for the approval of accounts (three months after the date on which the deadline for preparing the accounts ended); and if these had already been called before the declaration of the state of alarm and their date of celebration was later, the place and time of celebration could be modified or the call could be revoked.
b) In the case of listed companies, the obligation to publish and submit the annual financial report and the audit report of annual accounts to the CNMV was extended to six months from the close of the financial year and it was established that the ordinary general meeting could be held within ten months from the close of the financial year.
New deadline for the preparation and approval of the 2019 annual accounts
Therefore, with effect from May 28, 2020, Royal Decree-Law 19/2020 establishes that the three-month period for preparing annual accounts and other legally required documents will be calculated from June 1, 2020 (and not from the end of the state of emergency). Furthermore, the period for approving the annual accounts is reduced to two months from the end of the period for their preparation.
Furthermore, although it is not expressly considered in the new regulation, June 1 also marks the start of the four-month period for the legalization of books, in accordance with the interpretation made by the Directorate General of Legal Security and Public Faith in its resolution of April 10, 2020, regarding the impact on the legalization of business books resulting from Article 40 of Royal Decree Law 8/2020.
Taking the above into account, the Commercial Registry published a notice on its website on May 28, 2020, regarding the legalization of books and the filing of accounts corresponding to the financial year ending December 31, 2019, stating that, in accordance with Final Provision 8 of Royal Decree-Law 19/2020, of May 26 (Official State Gazette 05/27/2020), which amended sections 3 and 5 of Article 40 of Royal Decree-Law 8/2020, the deadlines for submitting the legalization of books and the Annual Accounts within the established timeframe are as follows:
- Preparation of annual accounts: A period of three months from June 1st is established to prepare the annual accounts for the 2019 financial year. Consequently, the deadline for preparing the Annual Accounts would be August 31st, 2020.
Notwithstanding the foregoing, the preparation of annual accounts within the period of the state of alarm will be valid.
- Deadline for submitting the legalization of the books on time: 30, 2020
- Deadline for holding the ordinary general meeting that approves the accounts and the application of the result: 31 OCTOBER 2020
Attention. From the date of the general meeting notice, any member may obtain from the company, immediately and free of charge, the documents that must be submitted for approval at the meeting, as well as the management report and the auditor's report, if any.
- Deadline for filing the annual accounts on time: One month from the day on which the meeting for the approval of the Annual Accounts was held, October 31 (if deadlines are pushed to the limit and the meeting is held on October 31) the deadline will be November 30, 2020.
Attention. November 30, 2020 is the deadline for filing the 2019 annual accounts on time, provided that the approval of the accounts was carried out on the last day of the established period, that is, October 31, 2020, two months after the end of the three-month period for preparing the annual accounts.
| Annual accounts 2019 |
| Procedure |
Maximum term |
| Preparation of the Annual Accounts |
August 31, 2020 |
| Legalization of official books |
September 30, 2020 |
| Approval of the Annual Accounts |
October 31, 2020 |
| Filing of Annual Accounts |
November 30, 2020 |
| The preparation, approval and filing of accounts prior to this date will be considered valid and within the established timeframe |
The annual accounts
The Annual Accounts will comprise:
- The balance
- The profit and loss account,
- A statement that reflects the changes in net worth for the year (ECPN),
- A statement of cash flows (SCF) and
- The memory
These documents form a single unit and must be clearly drafted, accurately reflecting the company's assets, financial position, and results in accordance with legal requirements. Thus, the accounting treatment of transactions will consider their economic substance, not just their legal form.
Attention. Under current accounting regulations, the Statement of Cash Flows is NOT REQUIRED when annual accounts are presented in SME or Abbreviated format; while the Statement of Changes in Equity (SCE), which was mandatory with the approval of the PGC, is ALSO NOT REQUIRED from 1 January 2016, with the accounting reform introduced by Royal Decree 602/2016, of 2 December, when annual accounts are presented in SME or Abbreviated format.
Who is required to submit the annual accounts?
The company's directors, who must submit to the Commercial Registry of the company's registered office a certificate of the resolutions of the shareholders' meeting approving said accounts, the application of their result, as well as, where applicable, the management report and the auditor's report, when the company is required to have an audit or this has been agreed upon at the request of the minority.
The annual accounts are subject to publicity and anyone can consult them and obtain information from the Commercial Registry of all the documents deposited.
Attention. The company directors are responsible for convening the shareholders' meeting to submit the accounts for approval and, once approved, for filing them with the Commercial Registry within the following month.
And with the fulfillment of this requirement to publicize the annual accounts, the cycle that we must carry out each year ends, in addition to the legalization of the official books.
If the accounts are not deposited
If you submit the accounts late, your company may be subject to the following penalties:
- A fine of between €1,200 and €60,000. The specific amount will be determined based on the assets and sales figures declared in the last Corporate Income Tax return. If the company (or group of companies) has an annual turnover of more than €6 million, the maximum fine can reach €300,000.
- Furthermore, if a year passes from the end of the financial year without the annual accounts being filed, the Companies Registry will be "closed" to your company. This means that until you file them, you will not be able to register most company resolutions (for example, a deed of change of registered office or a capital increase).
Attention. If the annual accounts have not been filed because they have not been approved by the General Meeting, the closure of the company's registration can be avoided if this circumstance is certified by the board of directors, stating the reason for the lack of approval. If this situation persists, the certification must be submitted every six months.
However, even if a year passes without your company submitting annual accounts, you can still register certain documents in the Commercial Registry: the dismissal of the administrator, a revocation of powers, the dissolution of the company, and the appointment of liquidators.
Furthermore, if they fail to comply with their obligation to submit the annual accounts to the Commercial Registry of the company's registered office within one month of their approval, the directors would be in breach of current legislation with the following consequences:
- No document relating to the company may be registered while the non-compliance persists, meaning that, among other things, administrators cannot be appointed, nor powers of attorney granted, until the accounts have been filed.
- In the case of directors, failure to file accounts implies a lack of due diligence expected of a prudent businessperson. Consequently, if this results in harm to the company, the company itself, its shareholders, or a third party could claim damages. Furthermore, if the company is insolvent, the director's negligence in failing to file accounts could make them liable for the company's debts. The Insolvency Law establishes as grounds for culpable insolvency the failure to prepare annual accounts, to have them audited if required, or to file them with the Mercantile Registry in any of the three fiscal years prior to the declaration of insolvency.
- There may even be criminal liability in the case of committing fraudulent acts such as falsifying annual accounts, as established in article 290 of the Penal Code.
Attention. When a company is not required to have an audit, shareholders representing at least 5% of the share capital (individually or collectively) may request the registrar to appoint an auditor to review the accounts. The request must be made within three months of the close of the financial year for which the accounts are to be audited.
As always, we will be at your disposal to provide you with any further information you may need, and to carry out any necessary procedures you may request.
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A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.
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