New penalty regime for failure to file annual accounts

The Commercial Registry Regulations (Reglamento del Registro Mercantil) provide that the directors of public limited companies (S.A.), limited liability companies (S.L.), partnerships limited by shares (sociedades comanditarias por acciones), and mutual guarantee companies (sociedades de garantía recíproca), of pension funds, and, in general, of any other businesses required to publish their annual accounts must file them for deposit with the Commercial Registry of their registered office within one month following their approval.

Failure by the management body to comply with its obligation to file the annual accounts within the established time limit will result in the imposition of a fine by the Institute of Accounting and Auditing (Instituto de Contabilidad y Auditoría de Cuentas, ICAC), which may range from €1,200 to €60,000, following the investigation of the case under the procedure laid down in accordance with the Law on Public Administrations and the Common Administrative Procedure. However, where the company or, where applicable, the group of companies has an annual turnover exceeding €6,000,000, the cap on the fine for each year of delay will rise to €300,000.

Notwithstanding the foregoing, if the company has filed its annual accounts before the penalty proceedings are initiated, the penalty will be imposed in its minimum degree and reduced by 50%.

However, although the Capital Companies Law (Ley de Sociedades de Capital) already established the penalty regime for failure to comply with the obligation to file accounts, in many cases the ICAC has not been applying it.

Royal Decree 2/2021, of January 12, approving the Regulations implementing the Audit Law (Ley de Auditoría de Cuentas), published in the Official State Gazette (BOE) on January 30, incorporates in its eleventh additional provision a new penalty regime for failure to comply with the obligation to file accounts.

Key changes

Royal Decree 2/2021, approving the Regulations implementing the Audit Law, introduces measures intended to complement the existing penalty regime established in Article 283 of the Capital Companies Law (LSC).

First, the regulation makes it possible for commercial registrars to carry out both the handling of, and the proposed decision on, penalty proceedings for failure to comply with the duty to file annual accounts.

The second new development is that the time limit for conducting the penalty proceedings is set at 6 months from the adoption of the decision to initiate them, without prejudice to the suspension of the proceedings and the possible extension of that time limit.

Third, the regulation sets out the criteria based on assets and sales used to impose the penalties, within the limits established in the LSC:

– In general, the penalty will be 0.5 per thousand of total assets, plus 0.5 per thousand of the company’s sales, according to the latest tax return filed with the Spanish Tax Agency (AEAT), the original of which must be submitted during the proceedings.

– If the company does not submit the tax return, the penalty will be set at 2% of its share capital according to the information on file at the Commercial Registry.

– If the tax return is submitted and the result of applying the above percentages to the sum of the asset and sales items exceeds 2% of the share capital, the penalty will be quantified at the latter amount reduced by 10%

In short, the aim of this new penalty regime for failure to file annual accounts with the Commercial Registry is to step up the fight against dormant companies.