Reinforcing the penalty system for not filing annual accounts

The recent implementing Regulation of Law 22/2015, 20 July, concerning the Audit of Accounts, provides new channels for effectively applying penalties to companies that fail to comply with the obligation of filing their annual accounts with the Commercial Registry.

Article 283 of the Companies Act ("CA"), even from its original wording in 2010, imposes sanctions for companies that do not meet the obligation to file their annual accounts before the legal deadline. However, to date, the enforcement of these penalties (between 1,200 and 300,000 euros based on the yearly turnover of the company) may be classified as circumstantial, limiting, as a general rule, any legal consequence arising from the failure to file the annual accounts before a deadline, as set out in article 282 of the CA. This situation may change once Royal Decree 2/2021, 12 January, comes into effect and approves the implementing regulation of Law 22/2015, 20 July, on Audit Accounts (the "Audit Regulation").

The Legislator's new features in the Audit Regulation prove the readiness to effectively apply this penalty system.

Therefore, disposition number ten of this new Regulation sets out, in its last paragraph, the possibility of entrusting the commercial registrars with the management and recommendation of imposing disciplinary sanctions for failing to comply with the obligation to file the accounts. This activity would involve applying a charge that commercial registrars would receive for carrying it out. The charge would be viewed as a settlement award, and its amount would be specified and agreed upon between the Accounting and Audit Institute (the "ICAC") and the Directorate-General for Legal Security and Public Faith (formerly, Directorate-General of Registry and Notary Services).

After analysing the rule, it would be desirable that more precision in the management and proposal procedures is susceptible to an assumption by a commercial registrar. This is because it is not clear starting a penalty procedure is among these entrusted powers. We could consider that this fact may be a decisive element in fine-tuning this change's actual effectiveness. If commercial registrars may begin a sanction procedure independently, because they have the capacity to manage and directly access the information, increased flexibility in its application may be predicted. However, if starting this process continues to depend on the ICAC, we can imagine things will not change much unless the beginning of a procedure is automatized while immediately entrusting it to a commercial registrar.

Another item showing the motivation to generalize these procedures can be found in section number 11 of the Audit Regulation, which coordinates the penalty system with Law 39/2015 (Common Administrative Procedure of Public Administrations) concerning the resolution and notification of deadlines and also setting out the objective criteria to determine the amount of the fine according to the following:

1. The penalty will be 0.5 per thousand of the total amount of the assets, over 0.5 per thousand of the entity's turnover included in the last statement submitted to the Tax Authorities. The company must provide the original statement during the procedure.
2. If the company does not provide the tax statement specified in section (a), the penalty will amount to 2% of the social capital recorded in the Commercial Registry.
3. Suppose the company provides the tax statement, and the result of applying said percentages to the sum of the assets and the turnover is over 2% of the social capital. In that case, the penalty will be calculated, taking into account the figure with a 10% deduction.

The Audit Regulation came into effect on 31 January 2021, so we should start seeing evidence or not of the application of this new sanction procedure during this fiscal year.

Given these novelties, it would be advisable to act with care when complying with the obligation to file the annual accounts, as well as to regularize any previous exercises in which a company had not filed its accounts, since, according to item four of article 283 of the CA, three years need to pass for the said infringement to prescribe. Therefore, under these new management features, procedures could be initiated against any breaches that have taken place in the last three years, because the Forth Transitional Provision of the new Regulation only keeps the previous rule for the procedures already initiated. Moreover, the novelties, in order to determine the amount of the sanctions, will apply to any past infringement when they are more favourable to the offender, according to article 26 of the Law 40/2015, 1 October, on the Regulation of the Legal Regime and Public Sector.