How to approve the financial statements in a limited liability company?

The obligation to prepare financial statements does not depend on the form of business activity or the size of the company. The key factor is the method of keeping accounting records; all entities that maintain full accounting records are required to submit financial statements.

The obligation to prepare annual financial statements lies with the persons managing the company; the Accounting Act refers to them as the entity’s managers. In a limited liability company (sp. z o.o.), these persons will be the members of the management board or the liquidators in liquidation proceedings, or the receiver in bankruptcy proceedings. If the body managing the entity consists of several people, the report must be signed by all members of that body. The financial statements may be prepared by an accounting firm, but responsibility for their content will still rest with the members of the management board. The financial statements are a source of information on the company’s financial position for its shareholders.

The financial statements contain information on the company’s financial position. They include:

• A balance sheet showing the company’s assets and liabilities as at the balance sheet date,
• A profit and loss account showing the company’s revenue, costs, profits and losses,
• Notes to the financial statements, which provide explanations and describe the accounting policies adopted.

The company has three months from the balance sheet date to prepare the financial statements. If the financial year coincides with the calendar year, the financial statements must be prepared by 31 March.

The financial statements are approved at the annual general meeting. This rule derives directly from Article 231 of the Commercial Companies Code. The annual general meeting should be held within six months of the end of each financial year; in most companies, the deadline will therefore be June.

It is the duty of the management board to convene the ordinary general meeting. During the liquidation of the company, this duty rests with the liquidators. If the management board or the liquidators fail to fulfil this duty within the prescribed time limit, this power passes to the supervisory board or the audit committee.

The Accounting Act requires the company to make the annual financial statements and the management report available to the shareholders no later than 15 days before the shareholders’ meeting, so that they may familiarise themselves sufficiently with these documents.

The regulations set out the agenda for the ordinary general meeting:

• consideration and approval of the management board’s report on the company’s activities and the financial statements for the previous financial year;
• adopting a resolution on the distribution of profits or the coverage of losses, unless this has been excluded from the competence of the shareholders’ meeting;
• granting discharge to members of the company’s governing bodies for the performance of their duties (discharge must be granted to all persons who served as members of the management board, supervisory board or audit committee during the last financial year).

The management board should initiate a discussion covering the matters contained in the management board’s report on the company’s activities and in the financial statements.

The general meeting may approve the reports or refuse to approve them; it may also return the report to the management board for supplementation or correction and resubmission. Any objection to the approval of the reports must be substantiated.

Once approved, the reporting documents must be filed with the Register of Entrepreneurs of the National Court Register. All documents should be filed within 15 days of their approval by the shareholders’ meeting. Failure to file the documents within the prescribed time limit is punishable by a fine.

The company must file:

• financial statements,
• a resolution of the shareholders approving the financial statements,
• a report on the entity’s activities,
• an auditor’s report on the audit of the financial statements, if the financial statements required an audit,
• a resolution on the coverage of losses or the distribution of profits.

This can be done electronically via the Financial Documents Repository; this service is free of charge. Submissions can also be made via the S24 ICT system, although this is a paid service.