Entrepreneurs shall publish their financial statements in Commercial Register under penalty of dissolution

Novinky

Companies are obligated to publish their annual financial statements in the Collection of Deeds of the Commercial Register in which they are publicly available. Should a firm fail to comply with the obligation, it may be (repeatedly) fined up to CZK 100,000 by the Registration Court; in the most serious cases, the company in question may be dissolved and put to liquidation. Besides, the act of non-publishing of the statements may also be judged as an administrative delict punishable by a fine up to 3% of the value of the company’s assets by the Financial Authorities. Furthermore, failing to meet the obligation creates a presumption that the statutory body does not exercise due managerial care. Nevertheless, statistics produced by the Czech Ministry of Justice show that most companies do not honor the obligation to publish their annual financial statements with 81% firms not doing so by the deadline in respective years. The reasons may include reluctance of courts to impose more severe sanctions as well as unwillingness of companies to publish sensitive data concerning their business.

The status quo is to change, however, as the amendment to the Business Corporations Act, approved by the Czech government in June 2018, introduces tightening of sanctions for non-publishing of the financial statements. As the Ministry of Justice states, many companies are not more than empty “shells” without any property, and should Registration Courts aim to dissolve them, the Czech state would have to pay for such a firm with liquidation even more than CZK 10,000. Newly, the Registration Courts should have the possibility to dissolve these businesses without liquidation, which represents a far cheaper solution. The amendment, then, attempts to move courts to punish the non-publishing of the financial statements more often.

With regard to the threatening sanctions we strongly recommend that companies publish their financial statements duly and before the deadline (i.e. 12 months after the financial statement’s balance sheet date). It may be assumed that the courts will apply the above sanctions more often than before.