Legislation implementing the European directive on annual accounts (2013/34/EU) (the "Implementation Act") entered into effect on 1 November 2015. The Implementation Act has replaced the fourth and the seventh directives on corporate law. Legal entities are obliged to apply the amended regulations to their annual accounts pertaining to financial years starting on or after 1 January 2016. Legal entities can also decide to apply the amended regulations in preparing annual accounts pertaining to financial years starting before 1 January 2016. This Corporate Update addresses some of the effects of the Implementation Act.
Reduced filing term
An amendment that will be important in practice is the reduction of the maximum term for filing the annual accounts at the trade register, from 13 months to 12 months after the end of a financial year. The term for preparing the annual accounts remains the same: five months after the end of the financial year for (unlisted) public limited companies and private companies with limited liability, four months after the end of the financial year for legal entities that have listed securities admitted to trading on a regulated market ("listed companies"), and six months after the end of the financial year for cooperatives, mutual insurance associations, associations and foundations. However, the term by which the general meeting (or, in case of a foundation, the body designated for this purpose by the articles of association) can extend the period for preparation of the annual accounts, is reduced by a month: from six to five months for (unlisted) public limited companies and private companies with limited liability, and from five to four months for cooperatives, mutual insurance associations, associations and foundations. In relation to listed companies, it had already been stipulated that it is not possible to extend the term for preparation of the annual accounts.
Increase of the threshold amounts in categorizing small and medium-sized legal entities
The threshold amounts used in distinguishing the different categories of small, medium-sized and large legal entities have been amended. Moreover, a new category of microenterprises has been introduced. Click on this link for an overview of the amended amounts. The threshold amounts of small and medium-sized legal entities have been increased by approximately 20%, so more legal entities are eligible for the relevant exemptions. If the regime for small or medium-sized legal entities is applicable, the information to be filed at the trade register is reduced. In addition, the annual accounts of small legal entities do not need to be audited by an accountant. Listed companies and other legal entities of public interest ("PIEs")1 cannot make use of these exemptions.
Increasing the threshold amounts can also affect the limitation regulation applicable to the number of supervisory positions that directors and supervisory directors of "large" legal entities can hold at other "large" legal entities. The scope of the limitation regulation is also determined by the thresholds to be applied in identifying "large" legal entities, and due to the amendment of the thresholds, some of these "large" legal entities will now qualify as "medium-sized".
Prohibition to use 403-exemptions and amendment of article 2:402 of the Dutch Civil Code
From 1 January 2016, PIEs can no longer make use of the 403 group exemptions concerning the lay out, audit and publication of their own annual accounts (article 2:403 paragraph 4 of the Dutch Civil Code). PIEs can of course still issue a 403-statement. However, they can no longer make use of the option to include a simplified income statement in the separate annual accounts if the legal entity publishes consolidated annual accounts (article 2:402 paragraph 2 of the Dutch Civil Code). Before, listed companies used to include simplified income statements in the separate annual accounts. Due to the amended regulations, this is no longer permitted for annual accounts pertaining to financial years starting on or after 1 January 2016.
Annual report becomes directors' report
Last of all, the Implementation Act has resulted in a linguistic amendment. As from 1 November 2015, the annual report will be called a "directors' report".
Entering into effect
The amended regulations apply to annual reports and accounts prepared for financial years starting on or after 1 January 2016, but legal entities can also choose to apply these regulations in preparing the annual accounts pertaining to financial years starting before 1 January 2016. In the explanatory memorandum to the Implementation Act, the legislator has clarified that legal entities can apply the new regulations in preparing the annual accounts pertaining to the financial year 2015. However, whether or not these regulations can be applied retrospectively to the annual accounts over split financial years, prior financial years, or longer or shorter financial years remains unclear. Although the Implementation Act stipulates that the provisions refer to annual reports and accounts "that are prepared", in our opinion the amended regulations can only be applied to annual reports and accounts that still have to be adopted. This means that if the annual accounts pertaining to the financial year 2014 have already been adopted, the new regulations may only be applied with respect to the financial year 2015.
The Implementation Act does not explain how to deal with the transition regulation ("in- en uitgroeiregeling") in this respect. The transition regulation stipulates that a legal entity can only make use of the exemption for small or medium-sized legal entities if it continuously complies with the criteria prescribed by law on two consecutive balance sheet dates. Most legal entities will have adopted their annual accounts pertaining to the financial year 2014 by now. In our view, in that case the increased threshold amounts can be applied for the first time in the annual accounts pertaining to the financial year 2015, that are still to be prepared. If the annual accounts pertaining to the financial year 2014 have not yet been adopted however, the increased thresholds can already be applied in preparing these annual accounts.