Pursuant to the previous legislation, it was concluded in the Supreme Court’s case law that the six-month period for convening the annual general meeting counted from the end of the last accounting period also determines the last day of usability of the regular financial statements as a basis for profit distribution. In practice, this meant that, after the expiry of this period, the conclusions of the regular financial statements for the previous accounting period were not considered sufficiently relevant for the general meeting’s decision on profit distribution, so new, extraordinary financial statements had to be prepared to make a decision on dividends.
Nevertheless, the above rules will not apply under the new legislation, i.e. amendments to the Business Corporations Act, which was also confirmed by the Supreme Court in its decision in case Ref. No. 27 Cdo 3885/2017. Although the Business Corporations Act continues to stipulate that the decision on profit share distribution is made by the general meeting based on regular or extraordinary financial statements, while laying down the time limit for discussing the regular financial statements, it also includes the provision on the “insolvency test”, which prevents the distribution of the company’s profit in cases where such distribution would lead to the insolvency of the company, potentially affecting also its creditors. In essence, this fulfils the aims of the previous legislation and the case law based on it, so it is no longer necessary to continue to apply the rules described in the preceding paragraph.
This means that since 1/1/2014 it has not been necessary to prepare extraordinary financial statements before each decision of the general meeting on profit distribution in the joint-stock company, but the statutory body must assess whether the regular financial statements can still be used or whether it needs more up-to-date information, i.e. from the extraordinary financial statements.
