Warning: Non-Publication of Financial Statements May Incur Significant Penalties

Individual organizations in the Czech Republic are required to publish their financial statements in a public register of documents. If a registered entity fails to comply with this obligation, they may face a fine of up to CZK 100,000 or even liquidation.

Who is required to publish financial statements in the Czech Republic?

Individuals and companies registered in public registers must publish their financial statements. This obligation is stipulated in the Accounting Law and the Law on Public Registers of Legal Entities and Individuals. The court may impose a fine of up to CZK 100,000 on a company that fails to publish financial statements according to the law.

According to the Accounting Act, financial statements are a single unit consisting of a balance sheet, an income statement, and notes. Often overlooked, the notes to the financial statements are just as important as the reports themselves, as they provide additional context and explanation for the information contained within.

Some companies are required to prepare more extensive financial statements, which may include a statement of cash flows or a statement of changes in equity.

Types of Financial Reporting in the Czech Republic

Financial statements are prepared as of specific reporting dates, with the balance sheet date signifying the closure of the accounting books. These statements can be categorized as regular, extraordinary, or interim.

• Regular financial statements are prepared at the end of the reporting period, typically annually.
  
• Extraordinary financial statements are also prepared at the end of the reporting period, but they arise due to specific events or circumstances, such as a change in ownership or liquidation.
  
• Interim financial statements, as defined by the Accounting Act, are prepared during the reporting period without closing the accounting books. Inventory is taken solely for valuation purposes.

Obligation to Publish Reports

Section 21a of the Accounting Law establishes the obligation for accounting entities to publish their financial statements. The Act further states that “accounting entities must publish financial statements to the extent that they have prepared them (section 18(4)), and, in the case of entities required to have their financial statements audited, in the edition in which they were verified.”

Unless specific legislation indicates otherwise, entities required to undergo financial statement audits must publish their financial statements and annual report within 30 days of review and approval by the competent authority, as per the specific legislation. However, the law mandates publication no later than 12 months from the balance sheet date.

Organizations registered in a public register fulfill their publication obligation by submitting their financial statements (or annual reports, which may include the financial statements) to the register no later than 12 months after the reporting date. Delivery to the registration court is considered sufficient for this purpose.

If the accounts are audited, they must not disclose information that has not been previously audited.

Small and micro businesses are not required to publish an income statement unless their accounts are subject to audit.

Responsibilities under the Public Registers Act

The Public Registers Act specifically addresses the collection of documents, with Article 66 outlining the contents of such a collection. This includes constituent documents or charters, decisions on elections and appointments, information on transformations, various court decisions, and other relevant items. One set of documents subject to mandatory publication is the financial statements.

Specifically, the collection of documents includes:

• Annual reports or annual financial statements.
• Regular, extraordinary, and consolidated financial statements, if not already part of the annual report or annual financial report, when required by accounting law or other legislation.
• The draft distribution of profits or other equity adjustments or loss adjustments, and their final form, if not included in the financial statements.
• The auditor’s report on the examination of the financial statements, when applicable.

How do I submit documents to the Companies House?

Government Decree No. 251/2018 Coll regulates the transfer of documents. Legal entities and individuals registered in the Commercial Register can send documents by e-mail, on a CD-R medium, to the competent court’s address, or through an electronic data box.

Please note that you must send financial statements as a single file, not as separate pages or documents, with a maximum file size of 150 kB.

Penalties for Failing to Submit Documents

If a business corporation fails to file regular or extraordinary financial statements for two consecutive financial years, the registration court will order it to file additional financial statements within one month of receiving the request. The corporation may face a fine of CZK 100,000 if it fails to comply. However, the financial punishment does not end there.

If a registered person repeatedly fails to comply with its obligations and this has serious consequences for third parties (or there is a legitimate interest in disclosure), the registration court may initiate proceedings for the winding up of the registered person even without filing a petition. At the same time, the law provides that “the registration court may decide on the liquidation of a commercial corporation no earlier than 1 year from the date of entry into the public register of information about the beginning of the liquidation procedure of a commercial corporation by paragraph 3.”

However, the consequences also apply to members of statutory bodies. If the corporation fails to publish the required documents in the document collection, a member of the legal entity’s statutory body is considered to have violated his duties.

For any questions regarding taxation and accounting, you can contact our experienced specialists. We provide online accounting services on an outsourced basis, monitor all changes in legislation, and take responsibility for managing your finances.

https://www.podnikatel.cz/clanky/pokuta-az-100-000-kc-za-nezverejneni-ucetni-zaverky-v-rejstriku