Disclosing financial statements and potential sanctions when not fulfilling the duty

Entities registered in the Commercial Register are obliged to disclose their financial statements by uploading them in an electronic form into the Collection of Documents at their respective court maintaining the Commercial Register.

Scope of the disclosed financial statements

The scope of the disclosed financial statements depends on the classification of the entity. For example, micro entities disclose only the abbreviated version of the balance sheet, and they do not have to disclose the profit and loss statement. On the contrary, entities that are subject to statutory audits disclose the balance sheet and the annual report in the form in which it was audited, including the auditor's report.

Deadline for disclosing

The duty to disclose the information must be fulfilled within 12 months of the balance sheet date of the given disclosed financial statements, regardless of whether the financial statements are properly approved. Entities that are subject to the statutory audit must disclose the information within 30 days of the auditor's verification and approval made by a respective body (e.g. the general meeting).

Sanctions when disclosing is not performed

When the duty is not fulfilled, an entity can be sanctioned under the Accounting Act (up to 3% of the value of its assets). In addition, the court maintaining the Commercial Register can impose a fine (up to CZK 100,000), and if the duty is not fulfilled repeatedly or not fulfilling the duty can cause serious consequences to third parties, the court maintaining the Commercial Register can initiate procedures for winding up the corporation with liquidation.

Despite the risks stated above, corporations very often do not fulfil the duty in real life. Sometimes it is a simple omission, sometimes the given entities are not active, and sometimes it is intentional because the entities do not want to disclose their business data regarding their activities. This situation is also caused by the attitude of the authorities, which impose sanctions only rarely.

New possibility to wind up a company in court

The prepared amendment to corporations should impose sanctions more frequently on entities that do not upload their financial statements in the Collection of Documents for two consecutive accounting periods, and at the same time, that are impossible to contact (i.e. it is not possible to deliver them a summons repeatedly). These are inactive entities. The court will be able to decide legitimately about winding-up such corporations without liquidation, which is a quicker and less expensive procedure.