Annual Shareholders‘ Meeting 2019

Legal Alert, April 2019

Please find below the information on the preparation for the annual General Shareholders’ Meeting and decisions which are required or recommended to be adopted during the meeting.

Convening the General Shareholders’ Meeting

The Annual General Shareholders’ Meeting (hereinafter – the “Shareholders’ Meeting”) must be held each year within at least 4 months after the end of the financial year of public or private limited liability company (hereinafter – the “Company”). Thus, if the financial year of the Company coincides with the calendar year, the Shareholders’ Meeting, where the annual financial statements for FY 2018 shall be approved, has to take place by 30 April 2019. Shareholders must be informed about the upcoming Shareholders’ Meeting not later than 21 days before the meeting. Consequently, this year a notice of the convening of the Shareholder’s meeting has to be issued no later than 9 April inclusive.

Decisions of the Shareholders’ Meeting

The Shareholders’ Meeting has to approve the annual financial statements of the Company and to distribute the profit (loss), as well as to get acquainted with the annual report prepared by the Managing Director, except for the cases when the Company is exempted from this obligation. If an audit of annual financial statements is mandatory under the laws or Articles of Association of the Company, the Shareholders’ Meeting may approve only the audited financial statements.

Shareholders’ Meeting may adopt other decisions as well, such as decision on approval of a new wording of Articles of Association, election of board members, increase/reduction of the share capital, election of audit company for the following year, etc.

Members of the Board/Supervisory Board

The Board/Supervisory Board performs its functions for the period established by the Articles of Association of the Company or until the new Board/Supervisory Board is elected and start to act, however, no longer than until the Shareholders’ Meeting takes place in the last year of the tenure of the Board/Supervisory Board. We recommend verifying, whether authorizations of the members of the Board/Supervisory Board of your Company are not expiring this year, and adopting appropriate decisions, if necessary.

Annual Financial Statements

Managing Director is responsible for preparation of the Annual Financial Statements of the Company. If the Board is formed in the Company, it analyses and evaluates the Annual Financial Statements, as well as, the draft proposal on profit (loss) distribution and submits these documents for approval to the Shareholders’ Meeting (prior to the Supervisory Board, if it is formed).

In case the audit of the Annual Financial Statements is not required by the Articles of Association of the Company, the statutory audit has to be performed if at least two indicators exceed the following limits on the last day of the financial year:

  • net turnover during the reported financial year exceeds EUR 3,500,000;
  • the value of the assets reported in the balance sheet is above EUR 1,800,000;
  • the average number of the employees during the reported financial year exceeds 50 persons.

The audit of the Annual Financial Statements is also compulsory for private limited liability companies, whose shareholder is the state and/or municipality, and for all public limited liability companies.

Profit or loss distribution

When distributing profit or loss it is important to remember that dividends may be allocated and paid provided that all of the following conditions are satisfied:

  • a company has no outstanding obligations which ought to have been discharged prior to the adoption of the decision;
  • the aggregate of profit/loss of the reporting financial year available for distribution is positive (profit has been earned);
  • the equity capital of the Company is higher or upon payment of dividends would not become lower than the aggregate amount of the capital of the Company, the legal reserve, the revaluation reserve and the reserve for acquisition of its own shares;
  • a company has paid all the taxes prescribed by laws within the established time limits;
  • mandatory deductions to the legal reserve have been made.

If shareholders were paid interim dividends for the period shorter that the financial year, the sum of such interim dividends has to be indicated separately in the decision of the Shareholder’s Meeting. Please also be reminded that, a Company must pay allocated dividends not later than within one month from the day of the adoption of the decision.

If during the financial year losses were incurred, following a decision of the shareholders, they may be covered by transfers from reserves, share premiums or shareholders’ contributions. Also, please note that, if the equity capital is not restored to the amount equal to 1/2 of the share capital indicated in the Articles of Association, the law sets the requirement for the Shareholders’ Meeting to decide on the reduction of the share capital, the restructuring of the company or the liquidation of the Company.

Note: This summary is compiled for informational purposes only and cannot be treated as binding advice. 

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