As the year ended, accounting periods in most companies ended as well, triggering several important duties for companies.
What are these duties? First and foremost, certain documents must be prepared and discussed at the annual General Meeting (GM). Also as of 2018, companies are required to register their beneficial owners.
1. General Meeting
The statutory body (typically executive directors or the board of directors) convenes a GM at least once per accounting period. Annual GMs are usually held in May or June, as the GM has to discuss the financial statements within six months of the end of the accounting period.
Prior to the GM taking place, a number of documents should be prepared, some of which must be published in advance. The GM has to be duly convened in advance.
1.1 Report on Relations
The most pressing duty of the members of the statutory body is to prepare a report on relations of the company with its controlling entity (usually its parent company), if there is one, and with other persons controlled by the same controlling entity (other companies belonging to the same group). The report on relations must be prepared within three months from the end of the accounting period of the controlled entity. For the majority of companies, this deadline will expire on 31 March. If the corporate relationships within the group of companies are rather complex, preparation of the report can prove a demanding and time-consuming task. Therefore, we recommend to start preparing the report as soon as possible.
The duty to prepare the report falls on all companies in which another entity is able to exercise a decisive influence. The statutory body of the controlled company is responsible for the proper preparation of the report. If the report is not prepared duly or on time, the statutory body faces the risk of breaching its duty of care.
1.2 Convening the General Meeting
The GM is convened by the company's statutory body. The GM is notified to the shareholders via an invitation satisfying all legal requirements at least 15 days (in a limited liability company) or 30 days (in a joint-stock company) prior to the GM. In some cases, this may include publishing the invitation on the company's website.
The GM may also be held without being properly and timely convened, provided that all the company's shareholders agree to this at the GM at the latest. However, in case of a joint-stock company, such procedure must be expressly permitted in its Articles of Association.
If the company has a sole shareholder, the GM is not convened, and the sole shareholder only sends out its decision in writing.
1.3 Prior to the General Meeting
Joint-stock companies are obliged to publish their financial statements (or the essential data contained therein), the report on the company's business activities, and the state of its assets, and the report on relations (with an opinion of the supervisory body - typically the Supervisory Board, if established) on their website at least 30 days prior to the GM. For the sake of clarity, these documents are usually published together with the invitation to the GM.
Depending on whether or not certain statutory economic criteria have been achieved, some companies are also obliged to have their financial statements audited. These companies are then required to publish their annual report as well.
1.4 At the General Meeting
The GM discusses the company's financial statements and a proposal for profit distribution or coverage of loss. As part of the discussion, the shareholders acquaint themselves with its content, and have an opportunity to pose questions to the members of the statutory body.
Furthermore, if the company is a controlled company required to prepare the report on relations, the GM usually discusses the report. In case of a joint-stock company, the GM usually discusses the report on its business activities and the state of its assets. Finally, the GM of a company subject to an audit also discusses its annual report.
If a supervisory body (Supervisory or Administrative Board) is established, documents related to its activities are also discussed. These include the report of the supervisory body on its activities, the report on the review of the financial statement, and the proposal for profit distribution or coverage of loss and, where appropriate, the opinion of the supervisory body on the report on relations.
The vote on the approval of the financial statements and the distribution of profits or coverage of loss typically takes place directly at the GM. In case of a limited liability company, it is possible to vote subsequently, unless provided otherwise in its Articles of Association. Therefore, a shareholder who was absent from the GM may subsequently exercise their voting right in writing within seven days after the GM.
1.5 After the General Meeting
The report on relations, financial statements (unless included in the annual report) and, where applicable, the proposal for profit distribution or coverage of loss, including their final form (unless they are part of the financial statements), and, where appropriate, the auditor's report on the financial statements and the annual report (if prepared), must be filed with the Collection of Documents.
2. Resolutions adopted outside of the General Meeting (per rollam)
Shareholders may also adopt their resolutions outside of the GM. In case of a limited liability company, this option is permitted by law per se, whereas for a joint-stock company, this procedure must be allowed in its Articles of Association.
When adopting a resolution per rollam, the statutory body (or other person authorised to convene a GM) sends the relevant resolution proposal to all shareholders. The resolution proposal must contain the text of the proposed resolution, the deadline for receipt of the shareholder's opinion, the documents necessary for its adoption, and any other information prescribed by the Articles of Association. The resolution is adopted if the majority of shareholders required for its adoption deliver their consent in time. The result of the voting is then communicated to all shareholders.
3. The Register of Beneficial Owners
As of 1 January 2018, a new duty is imposed on companies to register their beneficial owners with a non-public register. The filing is particularly important for participants in public procurement award procedures. The identity of their beneficial owner is no longer evidenced by copies of the relevant documents and affidavits, but it is ascertained from the Register of Beneficial Owners.
Companies are required to register their beneficial owners in the register by 1 January 2019. During this period, companies that were established before 2018 are exempt from the fee for registration of their beneficial owner.
Beneficial owner means an individual who can in a de facto or lawful capacity exercise, directly or indirectly, a decisive influence in the company. If the company does not have a beneficial owner or such cannot be determined on the basis of rebuttable presumptions stipulated by law, the company shall register a natural person serving as its statutory body (or a member of the statutory body) or in a position similar to the position of a member of the statutory body.
If the statutory body is a legal entity, then the individual representing that legal entity in the statutory body shall be entered in the register. It can, therefore, be concluded that each company must have a record of its beneficial owner in the Register of Beneficial Owners.
Bird & Bird is an international law firm providing its clients with comprehensive legal services, and is one of the leading advisors in the field of corporate law. Our experienced team of lawyers has in-depth understanding of all key issues, both from a legal and commercial perspective.
This article is for guidance only and includes only a basic overview of the most common situations. Therefore, it may not correspond to all the subtleties of a particular case. This article does not constitute legal advice.
Do you require any assistance with preparing for a GM, managing the procedure, or drafting relevant documents? Please contact us should you be interested in a consultation.