On 1 February 2021, Decree 2/2021 came into force, introducing a series of new developments regarding the penalty regime applicable for failure to file annual accounts.
The penalty regime in the Capital Companies Act for failing to file Annual Accounts
The Capital Companies Act, in its article 283, establishes the penalty regime in the event of failure to comply with the obligation by the directors to file the annual accounts within the deadline established by law (one month from the date of approval of the annual accounts), with fines ranging from 1,200 to 60,000 euros which could increase up to 300,000 euros for each year of delay, if the turnover of the company or group of companies is more than 6,000,000 euros.
The aforementioned article also establishes that the imposition of such fines would fall to the Institute of Accounting and Auditing (ICAC), after the file has been processed in accordance with the procedure established by regulation.
New developments in the penalty regime
On 1 February, the following came into force: Decree 2/2021, of 12 January, approving the Regulations implementing Law 22/2015, of 20 July, on Auditing, which has introduced a series of new developments regarding the penalty regime for failure to file annual accounts:
1) Penalty proceedings managed by registrars
On the one hand, provision is made for the possibility of entrusting the management of and proposed decisions on penalty proceedings to the commercial registrars with jurisdiction based on the company's registered office. In return, they will receive fees for this, to be determined by the ICAC and the Directorate General for Legal Certainty and Public Faith.
The aim is to encourage Registrars to collaborate in managing these proceedings and to allow greater control of the filing obligation, which until now had been difficult due to the volume of companies and the limited resources allocated to these control tasks.
2) Deadline for resolving the penalty proceedings
On the other hand, it regulates the deadline for resolving and notifying the decision in the penalty proceedings established in article 283 of the Capital Companies Act, setting it at six months from the adoption by the President of the ICAC of the decision to initiate proceedings, without prejudice to the suspension of the proceedings and the possible extension of that deadline, in accordance witharticles 22,23and 32 of the Common Administrative Procedure Law for Public Administrations.
3) Amounts of the penalties
Finally, section 2 of the Eleventh Additional Provision establishes the criteria for determining the amount of the penalty, in accordance with the limits established in the Capital Companies Act, these criteria being the following:
- The the penalty will be from 0.5 per thousand of the total amount of the asset items, plus 0.5 per thousand of the sales figure of the entity included in the last tax return filed with the Tax Administration, the original of which must be provided during the proceedings.
- In case of not providing the tax return mentioned above, the penalty will be set at 2 percent of the share capital according to the data held in the Commercial Registry.
- If the tax return is provided, and the result of applying the aforementioned percentages to the sum of the asset items and sales is greater than 2 percent of the share capital, the penalty will be set at the latter, reduced by 10 percent.
Other consequences of failing to file the Annual Accounts
Notwithstanding the above, in addition to these financial penalties which, until now, seemed to be rarely applied and we will have to wait and see whether these new developments encourage their application, we should not forget that there are other consequences that failure to file may entail which are especially relevant not only for the company, but also for the members of its management body:
- Provisional closure of the registry sheet if the accounts are not filed within one year of the end of the financial year. This registry closure will entail the impossibility of registering any document in the Commercial Registry, except for the exceptions provided for in article 378.1 of the Commercial Registry Regulations (i.e. removal or resignation of directors, revocation or waiver of powers of attorney, dissolution of the company, etc.).
- Possible derivation of liability to the directors. Filing the annual accounts is one of the obligations of the company's directors, so failure to do so could be considered a breach of their duty of diligence and, therefore, they could be held liable if any damage is caused to the company.
- Liability of directors for corporate debts in the event of the company's insolvency. Failure to comply with the obligation to file the accounts in any of the three financial years prior to the declaration of insolvency would lead to the insolvency being classified as culpable and, consequently, the director would have to answer for the company's debts with their personal assets.
For all these reasons, in order to avoid any type of penalty or derivation of liability, it is advisable to file the annual accounts of the companies for the last three financial years or, where appropriate, to dissolve the company.
