The annual approval of accounts in commercial companies is a fundamental process to ensure transparency and financial compliance, and companies in Portugal must comply with the rules, established legal requirements and observe legal deadlines to avoid penalties.
Annual approval of accounts is a legal obligation for all commercial companies.
The process involves the analysis and approval of the accounting statements, regardless of the type of company/corporation, including the balance sheet, the income statement and the management report.
Civil companies in commercial form are subject to the provision of accounts, as are European public limited companies, public companies, companies with headquarters abroad and permanent representation in Portugal (in the part concerning the permanent representation itself) and individual establishments with limited liability.
Approval of accounts is essential to ensure transparency and accountability to partners and shareholders, suppliers, customers, the state, banks and other interested parties. The annual approval of accounts helps to assess the company’s financial performance and identify possible areas for improvement and action by the company.
The process of annual approval of accounts in commercial companies in Portugal generally occurs as follows:
• Preparation of financial statements by the company’s management
• Review of financial statements by certified public accountant and/or external auditor (if applicable)
• Convening of the General Meeting of shareholders/partners to approve the accounts
• Presentation of financial statements to shareholders/partners during the General Assembly meeting
• Discussion and voting to approve the company’s accounts
• Preparation by the company of the minutes of the General Assembly meeting, in which the decisions taken there will be recorded.
After the accounts have been approved, the accounting report is registered, which is translated into the deposit of the information that forms part of it.
The registration obligation is fulfilled through the submission of the IES (Simplified Business Information), thus fulfilling the obligations of submitting the annual declaration of accounting and tax information to the Tax Authority, the provision of accounts to the Commercial Registry Office, in addition to the provision of information for statistical purposes to the INE, the Bank of Portugal and the Directorate-General for Economic Activities.
The accounting record will include:
– minutes of approval of the accounts for the year and the application of results
– balance sheet, income statement and annex to the balance sheet and income statement
– demonstration of results
– statement of changes in equity/net worth
– cash flow statement
– attached to the financial statements, the legal certification of the accounts (if applicable)
– the opinion of the supervisory body, if applicable.
The legal deadlines established for the submission of the registration of the financial statements, which in the case of public limited companies (single-member or not), must be carried out by the 15th day of the seventh month following the date of the end of the financial year, as a rule coinciding with the end of the calendar year, therefore the financial statements must be registered by July 15th.
Failure to comply with the established deadlines may result in fines and other financial penalties and other legal consequences, including the impossibility of distributing dividends to shareholders/partners or completing registrations with the competent Commercial Board.