Nov. 8: Time to publish financial statements?

With Nov. 8, did we really get a new publication deadline? Long story short: I don't think so.

Law change for DGA

The legislator has stipulated in Article 2:210 paragraph 5 of the Civil Code that if all shareholders are also directors of the company (which is the case for many DGAs), the signing of the annual accounts by all directors (and, if applicable, the supervisory directors) also counts as adoption. Article 2:394(1) of the Dutch Civil Code provides that the legal entity is obliged to publish the annual accounts within eight days of their adoption. The question that has arisen in accountancy practice is whether this change in the law now also means that the financial statements must be published no later than November 8, 2017 (i.e., today). There are several publications on the Internet that argue that this is the case. Below I will argue that this is based on a misunderstanding, and that the regular publication deadline of 12 months also applies to DGAs.

There are 3 reasons why it is not correct that Nov. 8 should count as the publication deadline:

1. Creditors have no interest in internal deadlines

First of all, it should not be forgotten that case law has distinguished between internal rules relating to the annual accounts, and external rules affecting creditors' interests. In 1993, the Supreme Court ruled that the absence of a decision to extend the period for preparing the annual accounts is not relevant to the question of whether the publication obligation has been fulfilled in time (HR 11 June 1993, NJ 1993/713). The Supreme Court thereby considered (in brief) that creditors have an interest in compliance with the publication term of Section 2:394 of the Dutch Civil Code (at the time still 13 months, now 12 months). In this respect, it is not important for the creditors whether the period for preparing the annual accounts was formally correctly extended because this is an internal matter. In fact, all that matters to creditors is that the financial statements are published no later than the deadline that applies in the case of an extension of the deadline for preparation, i.e. (as of fiscal year 2016) no later than 12 months after the end of the fiscal year. There is no reason to believe that the Supreme Court will deviate from the line it took in the aforementioned ruling.

2. The legislature did not intend to change the publication deadline

Secondly, it neither follows from the text of article 2:210 paragraph 5 BW nor from the parliamentary history of this provision that an amendment was intended with respect to the publication obligation. Since the legislative amendment was prompted by a need for simplification, it is difficult to imagine that the legislator nevertheless intended (whether or not unconsciously) to shorten the publication term.

3. Formatting and signing financial statements are not the same thing

The preparation of financial statements is a management decision. That decision need not coincide with the board's signing of the financial statements. In other words, the financial statements may have to be prepared no later than 10 months (for a fiscal year equal to the calendar year), but nowhere does it say that they must be signed within the same period.

Conclusion

For those who fear not being able to complete and publish financial statements on time: there is a very good chance that the line of case law will remain that liability for violation of the publication deadline will only come into play after December 31, 2017. Incidentally, there is no man overboard even then. It has already been ruled many times that exceeding this deadline is allowed provided there is a good reason. The longer the period is exceeded, the better the reason must be.