Simplified Adoption: shorter period for publishing annual accounts
Introduction
As a promising startup, you may have been developing your product through a Dutch limited liability company (“BV”). As a BV, you are obliged to comply with Dutch regulations for Dutch limited liability companies, inter alia with respect to preparing and filing your annual accounts. Through this newsflash, we would like to inform you and alert you regarding a potentially obligatory shorter mandatory period within which your startup’s annual accounts have to be published (“Simplified Adoption”).
When is this important for you
If all the shareholders of the startup are at the same time managing directors of the startup, the Simplified Adoption applies. The Dutch Civil Code prescribes that the board of managing directors prepares the annual accounts within five months after the end of each financial year. The general meeting of shareholders (“GM”) may extend this time frame with a maximum of an additional six months, if required. After preparation of the annual accounts, the managing directors are required to sign them. Following the signing, the GM has to adopt the annual accounts within two months and following the adoption, the startup has to publish the annual accounts within eight days with the Dutch trade register. Ultimately, the annual accounts have to be published within thirteen months (if the GM resolves to extend the preparation time frame with the maximum period allowed by Dutch law) after the end of the financial year.
However, the Simplified Adoption results in the signing of the annual accounts being considered the adoption of the annual accounts, because all managing directors are at the same time the complete shareholders meeting. This means that following the signing by the managing directors the period of two months for adoption does not commence and the annual accounts thus have to be published within eight days of the signing. Consequently if the Simplified Adoption applies, the maximum period for preparing, signing and publishing of the annual accounts is eleven months and eight days, provided that the GM has extended the period for preparation with the maximum permitted period of 6 months.
What are the consequences for you
The Simplified Adoption may lead to undesirable consequence for you if you fail to publish the annual accounts timely due to the simple reason that you were not aware of this obligation. The consequence thereof is that it might lead to directors’ liability (your liability as you are managing director of the startup) in case of bankruptcy, since in that case, not filing the annual accounts (timely) constitutes mismanagement, and such management is considered a presumed (which can be contested by the management) to be an important reason for the bankruptcy. As a startup in a highly competitive market, the risk of bankruptcy is ever present and easily avoidable risks of director’s liability should of course be taken into account.
Conclusion
Pursuant to the Simplified Adoption, the time frame to publish the startup’s annual accounts has been shortened. This might lead to unwanted and unexpected consequences in case of a bankruptcy. Please be aware of the Simplified Adoption and file the annual accounts timely at the trade register.
We would be more than happy to provide you with more detailed information on the Simplified Adoption. Don’t hesitate to contact the Startup Team if you have any questions concerning this obligation.