Annual accounts reporting and auditing and publication requirements Gillis Kempe Often, our clients ask us about the legal requirements for their Dutch entities with respect to the preparation of annual accounts, auditing, consolidation and publication. Below, we have summarized the most important rules and obligations for a Dutch private company with limited liability (BV) and cooperative. Preparation, adoption and publication of annual accounts The management board of a BV is required to prepare the annual accounts within 5 months after the end of each financial year. It is possible to extend this term with 6 months on account of special circumstances. The extension should be approved by the general meeting. The management board of a cooperative should prepare the accounts within 6 months, unless this period has been extended with a maximum of 5 months. For a BV, the accounts should then be adopted by the general meeting within 2 months after preparation. For a cooperative, a term of 1 month applies. The annual accounts must be filed with the Dutch Chamber of Commerce within 8 days after adoption. If the accounts have not been adopted within 2 months after expiration of the ultimate term for preparation, the accounts should be filed immediately. Taking into account the term of the extension, this means: filing within 13 months after the end of the financial year (5+6+2). This is the ultimate term! The requirements with respect to the preparation and filing of annual accounts also apply to a limited partnership (cv) if all general partners of said partnership are capital companies under foreign law. Not satisfying the filing obligations is an economic offence and may be sanctioned with a fine (max. EUR 19,500) or prison sentence (max. 6 months). In addition, it may lead to personal liability of a managing director in case of bankruptcy and there is a risk that the Chamber of Commerce may decide to dissolve the company or cooperative. Corporate reporting requirements Title 9 of Book 2 of the Dutch Civil Code provides the rules and requirements with respect to annual accounts reporting, auditing and publication. The minimum reporting, auditing and publication requirements depend on the size of the company. For small and medium-sized companies it is sufficient to publish an abridged balance sheet and explanatory notes. A medium-sized company is only required to publish an abridged version of its profit and loss accounts, whereas a small company may refrain entirely from publication of its profit and loss accounts and notes thereto. A company qualifies as a small, medium-sized or large company respectively if it meets 2 out of 3 of the following criteria on 2 consecutive balance sheet dates: Small Medium Large total value of assets < EUR 4.4 m < EUR 17.5 m > EUR 17.5 m net turnover < EUR 8.8 m < EUR 35 m > EUR 35 m number of employees < 50 < 250 > 250 Audit requirements Medium-sized and large companies are required to have their annual accounts audited. A small company is exempted from audit requirements. Small, medium-sized and group companies of which the accounts are included in the consolidated accounts of another company (see below) are also exempted from audit requirements. Exemption from filing standalone accounts (article 2:403 Dutch Civil Code) An important exemption to full compliance with the statutory requirements for presenting the annual accounts applies to a direct or indirect subsidiary company if its financial data are consolidated into parent accounts. A subsidiary company is not required to comply with the formalities of Title 9 of Book 2 of the Dutch Civil Code in drawing up its own financial statements provided that: a) its balance sheet states the sum of fixed assets, current assets, as well as the amount of shareholders’ equity, provisions and liabilities; b) the profit and loss account states the results of operations and the net amount of other income and expenses (both after taxes); c) the shareholders have agreed in writing, after the commencement of the financial year and before the adoption of the annual accounts, to depart from the provisions of Title 9 of Book 2 of the Dutch Civil Code (“consent statement”); d) the financial information of the particular company is consolidated with that of another company which is situated within the EU or European Economic Area; e) the consolidated accounts have been drawn up in accordance with the requirements of the IAS Regulation or the Seventh EEC Directive (e.g. US GAAP is not permitted); f) mention is made in the notes to the consolidated accounts that the subsidiary company has not presented its annual accounts in accordance with the statutory provisions of Title 9 of Book 2 of the Dutch Civil Code; g) the consolidating group company has declared in writing that it accepts joint and several liability for debts arising from legal acts of the subsidiary company (“403 statement”); and h) the consent statement, the 403 statement, the consolidated annual accounts (of its parent), the annual report and the audit report, all prepared in the English, French, German or Dutch language, are filed at the office of the Trade Register of the Chamber of Commerce. If the company has not complied with one of the abovementioned requirements, it cannot make use of the exemption. Consolidation requirements (article 2:406 Dutch Civil Code) A legal entity that, solely or jointly with another group company, heads its group, must prepare consolidated annual accounts. These accounts need to include its own financial information together with that of its subsidiaries in the group, other group companies and other legal entities over which it can exercise control or of which it conducts the central management. Furthermore, each legal entity that is not the head of a group, but which has in its group one or more subsidiaries or other legal entities over which it can exercise control or of which it conducts the central management, shall prepare consolidated annual accounts. No consolidation is required if the company still qualifies as a small company in consolidated status (article 2:407 Dutch Civil Code). This means that if it qualifies as a small company on a stand-alone basis but, should it consolidate accounts of group companies, exceeds the limits of a small company, it is required to consolidate and cannot make use of the exemption. Exemption to consolidate part of the group (article 2:408 Dutch Civil Code) A part of a group may be excluded from consolidation, provided that: a) the legal entity has not been notified in writing, by holders of at least one-tenth part of its issued capital, of an objection thereto, within six months from the commencement of its financial year; b) the financial information that the legal entity should consolidate has been included in the consolidated annual accounts of another entity; c) the consolidated annual accounts and the annual report have been prepared in accordance with the provisions of the Seventh EEC Directive, or, if this provision need not be observed, in an equivalent manner (e.g. US GAAP); d) the consolidated annual accounts with the audit report and annual report have been written in or translated into Dutch, French, German or English and are all in the same language; and e) within six months from each balance sheet date or within one month after a permitted later publication, the documents mentioned under d) have been filed with the Trade Register or a notice has been lodged referring to the commercial register where they are available. If the company has not complied with one of the abovementioned requirements, it cannot make use of the exemption. If a legal entity duly applies the exemption of article 2:408, its intermediate holding company should however still prepare stand-alone accounts in accordance with Title 9, Book 2 of the Dutch Civil Code. The above is only a summary of the most important rules and obligations. For different entities other requirements may apply. It is therefore recommended to consult your legal advisors at all times when preparing, adopting and publishing your annual accounts.