In today's article from our Compliance series, we would like to remind you of the reporting obligations imposed on companies (discussed in detail in the Compliance #3) and present the consequences of failing to comply with the obligations related to the correct preparation, approval and submission of reporting documents.
Postponement of deadlines for reporting obligations for 2021.
First of all, let us remind you that both partnerships and companies are subject to annual reporting obligations, which require the preparation, signing, approval and submission of financial statements and – depending on the circumstances, e.g. the size of the business or its legal form – other documents, such as the management report on the company's activities or the auditor's opinion on the audit of the financial statements.
It is also worth recalling that this year (as in the two previous years), pursuant to the Regulation of the Minister of Finance of March 7, 2022, the deadlines for certain reporting obligations were extended. In connection with this Regulation, a non-public company could prepare and sign its financial statements for 2021 by June 30, 2022, approve its financial statements by September 30, 2022, and the deadline for submitting its financial statements to the Financial Document Repository of the National Court Register was extended to October 15, 2022.
The deadline for approving and submitting the financial statements for 2021 has not yet passed, and yet we are receiving more and more signals about intensified inspections regarding the implementation by companies of their reporting obligations from previous years.
Who is responsible for fulfilling the company's reporting obligations?
Let's begin by defining the circle of individuals responsible for fulfilling the company's reporting obligations. It is incorrectly assumed that penalties for failure to fulfill these obligations in companies apply only to management board members. It is worth clearly emphasizing here that reporting obligations also apply to members of supervisory boards or other supervisory bodies of a given entity – for example, they are required to ensure that the financial statements, consolidated financial statements, management report, and group activity report meet the requirements of the Accounting Act (AoA). In the event of damage caused by an act or omission to comply with this obligation, supervisory board members and management board members are jointly and severally liable to the company (Article 4a of the AoA).
Now that we know what the company's reporting obligations are and have established the circle of people responsible for their implementation, let's move on to the consequences.
What are the consequences for failing to fulfill the obligation?
Sanctions for failure to submit financial statements are regulated in as many as four acts: the Accounting Act, the Fiscal Penal Code, the National Court Register Act and the Civil Procedure Code.
- Starting with the mildest consequences, in the event of failure to submit a financial report, the registry court will ex officio initiate so-called compulsion proceedings, requesting the submission of the required documents within seven days (Article 24 of the National Court Register Act), under penalty of imposing a fine. After the deadline, the National Court Register may impose a fine of up to PLN 15,000 to compel submission of the financial report. If the fine fails to produce the desired results, it may repeat the fine multiple times, up to a maximum of PLN 1 million.
It's worth remembering that there's no obligation to submit a separate financial report to the tax office. It's sufficient to submit the report along with other annual documents to the National Court Register (KRS). However, missing the deadline for submitting the report to the KRS also carries fiscal penalties.
- Failure to submit the financial report within the appropriate timeframe may result in the tax authority being held liable for a tax offence for which a fine may be imposed (Article 80b of the Penal Code) ranging from one tenth to twenty times the minimum wage.
- Criminal liability for failure to submit financial statements is provided for in Article 79, Section 4 of the Accounting Act. This carries the risk of a fine or imprisonment.
- The fine is imposed in daily rates, with the number of daily rates ranging from 10 to 540, and the amount of one daily rate ranging from PLN 10 to PLN 2,000.
- The penalty of restriction of liberty is imposed in months and years, with the shortest period being one month and the longest being two years.
This type of penalty will have significant consequences for the future, as it may also result in a ban on conducting specific business activities.
- Furthermore, if a company fails to submit reports for two consecutive financial years, the National Court Register (KRS) has the power to remove the company from the Register of Entrepreneurs. This procedure initiates proceedings to dissolve the company without liquidation. During the dissolution proceedings, the KRS examines whether the company is conducting business and whether it has transferable assets. If, during the proceedings, it determines that the company is conducting business or has transferable assets, it discontinues the proceedings. If, during the proceedings, it confirms that the company is not conducting business and has no assets, the KRS announces the company's dissolution without liquidation and its removal from the KRS.
Summarizing the above considerations, it must be concluded that the reliable preparation of financial documents, their approval, and their timely submission are among the most important responsibilities of those responsible. Failure to fulfill these obligations not only carries financial penalties for the company and its representatives, but may also lead to the imposition of a ban on conducting business activity or even a prison sentence. It is worth emphasizing that the company's deletion from the register of entrepreneurs does not prevent the authority from initiating proceedings against the former representative for failure to fulfill the obligations described above.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of September 28, 2022.
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