New Dutch legislation with regard to annual accounts (1) - Shortened filing period annual accounts
On 26 June 2013, Directive 2013/34/EU of the European Parliament and of the Council (the Accounting Directive) entered into force. The Accounting Directive repeals the Fourth (78/660/EEC) and Seventh Directive (83/349/EEC). The objects of the Accounting Directive are to harmonise, simplify and modernize EU accounting law, to reduce administrative costs for small and medium sized companies and to facilitate the comparison of annual accounts. The Dutch Parliament passed the Accounting Directive Implementation Act (the Act) on 30 September 2015 to bring the Accounting Directive into effect in domestic legislation.
The Act applies to all legal entities that are subject to Title 2.9 of the Dutch Civil Code (DCC), i.e. private limited liability companies (B.V.'s), public companies (N.V.'s), cooperatives, mutual insurance associations, (commercial) associations and foundations, and non-Dutch companies to which the Act on Companies Formally Registered Abroad applies.
A significant change that is introduced by the Act is the reduction of the extended production period and the ultimate filing period for annual accounts.
Reduction filing period annual accounts/report
Currently the board of the entity must produce (drafting and signing) the annual accounts and annual report within: 4 months for listed companies; 5 months for B.V.'s and non-listed N.V.'s; and 6 months for (commercial) foundations and associations, cooperatives and mutual insurance associations, after the end of the financial year. This production period can be extended with an additional period of 6 months for B.V.'s and (non-listed) N.V.'s and 5 months for (commercial) foundations and associations, cooperatives and mutual insurance associations.
Once the board (of a B.V.) has produced the annual accounts, these accounts must be adopted by the general meeting of shareholders within 2 months and filed with the Dutch trade register (Trade Register) within 8 days thereafter. If all shareholders are also the directors, the signing of the annual accounts by all directors is considered as adoption of the annual accounts. In that case the ultimate filing period is 11 months and 8 days. The articles of association can, however, exclude this statutory provision. In other situations, the board must file the annual accounts with the Trade Register ultimately 13 months from the end of the financial year (the extension period taken into account). In case the annual accounts are not adopted within 2 months after the accounts have been produced, taken into account the extension period, interim (draft) accounts must be filed with the Trade Register.
The initial production period remains unchanged. The extension of the deadline for production the accounts is being reduced by 1 month. This could mean that if all shareholders of a B.V. are also the directors, and the articles of association do not state otherwise, the annual accounts should be filed within 10 months and 8 days. The ultimate filing deadline is also being changed from 13 months to 12 months. Once the Act takes effect, the annual accounts and the annual (management) report must be published within a period of not more than 12 months.
The Act entered into force on 1 November 2015 and applies to financial years starting on or after 1 January 2016. The current ultimate filing period of 13 months still applies to the financial year 2015.
Non-compliance with the abovementioned statutory filing requirements will result in an economic delict.
In practice, significantly more important is that - in case of a bankruptcy - the directors (of a B.V. and N.V.) are liable towards the estate (the bankrupt entity), for the amount of liabilities to the extent that these cannot be satisfied out of the liquidation of the other assets, if the director has been apparently negligent, which could result from an overdue filing.
Dutch law imposes an obligation for managing directors of a B.V. and N.V. (and for supervisory directors - in relation to their supervisory tasks) to file annual accounts and other financial information with the Trade Register within the required statutory periods. If the board does not fulfill this obligation, 2 statutory presumptions take effect:
- the presumption that there has been apparent negligence; and
- the presumption that the apparent negligence is a significant cause of the bankruptcy
This instrument is frequently practiced by trustees of bankrupt estates.
Significance and recommendation
The changes imposed by the Act apply to and affect the statutory periods with the regard to the annual accounts of:
- private limited liability companies (B.V.'s), public companies (N.V.ls), cooperatives, mutual insurance associations, (commercial) associations and foundations that are resident in the Netherlands;
- private limited liability companies (B.V.'s), public companies (N.V.'s), cooperatives, mutual insurance associations, (commercial) associations and foundations that are resident outside of the Netherlands; and
- Non-EU companies to which the Act on Companies Formally Registered Abroad applies.
The articles of association of an entity usually contain references to the preparation, adoption and filing procedure of the annual accounts and the annual report. To avoid the risk of non-compliance with the statutory requirements in relation to the filing of the annual accounts, we suggest monitoring whether the correct periods are taken into account and preferably to amend the articles of association in such way that the stated periods reflect the statutory periods.