General Meeting and Annual Accounts: The same song every summer?
“When the sun warms up there on the beach”… (“Cuando calienta el sol, allí en la playa”) first summer signs show up: bikini operation with overbooked gyms and roaring stomachs, air conditioning war at the office and, of course, the summer hit, just in time for the hottest season.
But before enjoying “La barbacoa” (“The barbecue”) and “El Chiringuito” (“The beach bar”), most of Spanish companies – which close their fiscal year on December 31st – are usually examined at this time: what they have to do is to present to its partners the annual accounts for 2010, see if they are approved and if they get a little lucky maybe could give their body some joy “Macarena” in dividend form.
Since our blog readers are outstanding students, we are not going to explain any obviousness about Meetings and Annual Accounts, we are going to score high, and summarize below important aspects to consider, for General Meetings to be a bomb(Booooomba!!)
– All partners are entitled to attend the meeting. We cannot keep from inviting that tedious partner to this “Party, what a wonderful party” (fiesta, qué fantástica esta fiesta), who shows up singing aloud “I eventually sneaked in the meeting” (al fin me colé y en la Junta me planté). This is why the Capital Company Act (LSC) requires that the Meeting Board of a Public Company must be called a month before the scheduled date for it to be held, and just 15 days for Private Limited Companies.
– It is a Board’s job is to call the Meeting, although the minority (partners who represent at least 5% of capital) may also require the board of directors to do so. If the Board does not call the meeting on schedule according to the By-Laws or the Law, we will not require “Get them arrested!” (“Que la detengan!”), it is enough to make the call through the court, which any member can ask for.
– As explained in our post “Legislative hangover post-Christmas holidays: one of lime and one of sand” Royal Decree-Law 13/2010 regulated a new way of calling the Meetings: Public Company will do so by publishing an advertisement in the BORME and the other on the website of the company. Only if the company does not have a website the advertisement, the call will be published in a newspaper of wide circulation in the province, in addition to the BORME. On the other side, Private Limited Companies have more room to “dance, that they have loads of rhythm like Salomé” (“bailar, que ritmo les sobra como a Salomé”); they can use the described system or, in case of lack of a web, they can state in their By-Laws in which specific newspaper of the town the advertisement will be published, or even replace the advertisements by a written communication to each shareholder.
– At The Public Companies, if after publication of the call, partners representing 5% of capital consider the points on the agenda as insufficient and want to add more, they can do so by requesting a supplementary call. They have, like “Mambo No. 5”, 5 days from the publication of the first add to address a formal request to managers, who must publish the supplement with 15 days prior to the scheduled meeting.
– So that partners attend knowingly, and preventing that subject to be treated sound more weird than the “Asereje”, LSC provides a right to call for information, before and during the meeting, and to request reports or clarifications they deem necessary on the points on the agenda. For the specific case of the Annual Accounts LSC goes “one, two, three … three little steps forward, Mary!” (un, dos, tres pasitos p’alante, María”): 1) gives all partners the right to, from the call, immediately and for free, receive from the company the documents related to the accounts, plus the management report and the audit, if any; 2) This right must be mentioned in the call, otherwise the meeting is voidl, 3) in Private Limited Companies, the minority partners representing at least 5% can also examine the underlying documents used to prepare the accounts at the head office accompanied by an expert accountant.
– All agreements reached must be recorded in minutes, which have to be written by the Secretary and signed by all attendees. But if a mess is expected at the meeting, both managers and partners representing 1% of capital may require the presence of a notary (paid by the company) to write the minutes and put “a ray of sun, oh, oh, oh” on the conflict.
Speaking of mess, you also have to know that, whether the Company is required to be audited or not, managers and partners (whose % varies depending on each case) mayrequest the Registry to say “come, audit me again!” (“ven, audítame otra vez!”) to appoint an auditor for the company, but there is a deadline, so don’t fall asleep!
– Finally, a warning so you don’t fall into the trap of simply shooting the Report of the Financial Statements of the previous year. We know that “it’s been so long they’re living with her, so long they have been dreaming of her” (“Hace tanto que viven con ella, hace tanto que sueñan con ella”) that it would be weird to change it, but Law 15/2010 on Measures to Combat Late Payments and the General Accounting Plan established mentions to be made in the Report about the payment terms to suppliers (our post http://www.estudi-juridic.com/ca/ley-de-medidas-de-lucha-contra-la-morosidad-el-encierro-del-moroso/) and related transactionsin which the Company could have incurred during the year.
You can see that preparing the General Meeting for the approval of annual accounts has more tricky situations than expected. It may seem to be as repetitive and easy as a summer song, but if managers overlook the outlined details, do the same as usual and like “Eva Maria they go away, looking for the sun on the beach” (“Eva María se va, buscando el sol en la playa”), Accounts can be rejected by the Registry and the Meeting may even be void. We hope, then, that you will be good pupils, make a note of our advice and achieve in your exam, by your good management, the bicycle which Zipi and Zape never got.
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