Czech businesses to publish their financial statements in Commercial Register or they may be dissolved

Companies are under obligation to publish their annual financial statements in the Collection of Deeds of the Commercial Register in which they are accessible to public. If a firm fails to meet the obligation, it may be (even repeatedly) fined up to CZK 100,000 by the Registration Court, and in the most serious cases the company in question may be dissolved with liquidation. Also, the act of non-publishing of the statements may be deemed an administrative delict with the punishment of up to 3% of the value of the company’s assets imposed by the Tax Office. What is more, not meeting the obligation leads to a presumption that the statutory body members fail to meet due managerial care.

The statistics prepared by the Czech Ministry of Justice indicate that majority of businesses (81%) do not comply with the obligation to publish their annual financial statements before the set deadlines in numerous years. The possible motives may lie in the fact that courts are reluctant to impose more stricter punishments, and unwillingness of companies to publish sensitive data concerning their business may also play a significant role.

The situation is about to change since the amendment to the Business Corporations Act, which was approved by the Czech government in June 2018, introduces more severe sanctions for failing to publish the financial statements. The Ministry of Justice states that many companies appear to be mere empty “shells” without any property, and if Registration Courts decide to dissolve them, the Czech state would have to pay for a dissolution of business with liquidation costs exceeding CZK 10,000. The Registration Courts should now have the chance to dissolve these businesses without liquidation which is a considerably cheaper solution. The amendment aims to move courts to penalize the non-publishing of the financial statements on larger scale.

Taking the threatening sanctions into consideration, we recommend that companies should publish their financial statements duly and before the deadline, which is set 12 months after the balance sheet date. The courts may be expected to apply the above sanctions more often than they did until recently.