The administrators of all companies in Spain are required each year to file the Annual Accounts at the Commercial Registry within the month following their approval. This financial information then becomes publicly available and will be kept for a period of six years, so that any third party may request and obtain a copy of the yearly financial statements of any company. This procedure guarantees the transparency and legal certainty of our system.
However, what happens when a company does not file its Annual Accounts? In this case, the registry closure occurs. This means that the Commercial Registry will not register any document of the company if the latter does not file the Annual Accounts. The only exception to this general rule will be the removal or resignation of administrators and managers, the revocation or relinquishing of powers and the liquidation of the company and appointment of liquidators.
The law also provides for a monetary sanctions' regime, with fines in the order of € 1,200 to € 60,000. In the case of companies with an annual turnover exceeding € 6,000,000, the limit on the fine for each year of delay is € 300,000.
The registry closure, in practice, can lead to numerous problems and inconveniences for companies. For example, they may not register important deeds, such as the appointment of an administrator or director, a capital increase, a merger or a simple power of attorney which may be necessary to conclude a transaction.
Additionally, in the case that a supplier, customer or a bank entity consults the Commercial Registry, a poor impression of the company will be given in the event that the Registry replies that the Annual Accounts are not filed. Likewise, when issuing Extracts about the company, the Commercial Registry will always indicate the last tax year in which the accounts have been filed, so that this information will always be provided to third parties, even if they do not explicitly request it.
The company will also be constrained in other respects, since having filed the Annual Accounts is essential in the case that the company is considering filing for bankruptcy or a Collective Dismissal Procedure (ERE).
It is therefore essential for all companies to file the Annual Accounts every year on time at the Commercial Registry. If the company cannot meet this obligation, we always recommend studying the case and taking certain measures granted by law in order to prevent the effects of registry closure.
For example, if the Annual Accounts had not been filed because they were not approved by the Shareholders Meeting, registry closure will not proceed when the company proves this circumstance by means of certification by the administrative body in which the cause of the non-approval is noted or by authorized copy of the notarial minutes of the Shareholders Meeting in which the non-approval of the Annual Accounts is recorded.
By certifying such non-approval at the Commercial Registry, the company will prevent the consequences of registry closure, which will allow the company to continue to register its undertakings in the standard way. The reason for the non-approval of the accounts will be of no matter as long as the Shareholders Meeting has been convened for this purpose, which may be due to discrepancies between the shareholders, distrust of the accounts provided by the administrator, lack of quorum on the Shareholders Meetings, etc.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.