Approving the annual financial statements: the main stages
Approval of the annual financial statements is a procedure whereby the partners or shareholders approve the management of the company by its legal representative over a period called the "financial year". «accounting year». Other decisions are also taken on this occasion: appropriation of profits, approval of regulated agreements, appointment of new officers or renewal of their terms of office, appointment of an auditor or renewal of their terms of office, etc.
The financial statements are approved on the basis of documents drawn up by the company's director and sent to the partners/shareholders. A management report, as well as an inventory and various other documents (attendance sheet, text of draft resolutions, report on regulated agreements, etc.) complete the file.
The partners/shareholders have the option of refusing to approve the annual financial statements put to the vote by the managing director. In this case, they do not distribute the profit for the year, which remains to be allocated. However, this decision has no major impact on the company, which continues to operate normally.
Approval of the annual financial statements is a mandatory formality for all commercial companies. It is characterized by the completion of several important procedures:
- Preparing for the Annual General Meeting to approve the financial statements
- Preparing summary financial statements
The financial statements comprise the balance sheet, income statement, cash flow statement and notes.
It is the responsibility of the managing director and/or the Board of Directors to draw up and close the company's annual financial statements; if necessary, they may, of course, be assisted by a chartered accountant. The annual financial statements are drawn up at the end of each financial year, and in particular after the end of the financial year specified in the company's articles of association.
Failure to prepare financial statements, or the preparation of financial statements that do not give a true and fair view of the company's assets and liabilities, financial position or results for the year, is punishable by a prison sentence of three (3) months to three (3) years and a fine of 250,000 to 1,000,000 FCFA.
Also, any concealment of the company's true situation and the distribution of fictitious dividends are punishable by a prison sentence of one (1) to five (5) years and a fine of 500,000 to 1,000,000 FCFA.
- Drafting the annual management report
Company directors are accountable to their partners/shareholders.
This obligation takes the form of a management report.
The management report includes at least :
- Highlights of the year
- Key figures for the past year
- The outlook
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- Convene the shareholders to approve the annual financial statements
After preparing all the documents required for approval of the accounts, the director must convene the partners/shareholders to the Annual General Meeting (AGM), at least 15 days before the meeting. At the meeting, shareholders/associates can approve or reject the financial statements. They also allocate profits and approve the decisions on the agenda.
Anyone who knowingly prevents a shareholder/associate from taking part in a General Meeting is liable to a prison sentence of one (1) month to one (1) year and a fine of 250,000 to 1,000,000 FCFA.
In principle, associates/shareholders must vote on the annual financial statements within 6 months of the end of the financial year, i.e. by June 30 of the following year, although this deadline may be extended by the competent court.
Dividends must be paid within 9 months of the balance sheet date.
- Holding the meeting
A shareholders' attendance sheet must be kept, containing all the information required to identify the shareholders present or their proxies, as well as the number of shares held by each and the number of votes to which the total of these shares gives entitlement. This attendance sheet is signed by the shareholders present and their proxies at the start of the meeting. It is then certified as accurate by the officers of the meeting. Proxies of shareholders represented by proxy and postal voting forms are appended to the attendance sheet.
The next step is to appoint the officers of the meeting. The officers consist of a Chairman of the meeting, two scrutineers (the two accepting shareholders representing the greatest number of shares, either by themselves or as proxies) and a secretary appointed by the meeting to keep the minutes of proceedings.
In the event of participation in the meeting by videoconference, any technical incidents that may have occurred during the meeting and disrupted the proceedings are noted in the minutes.
Similarly, in the event of postal or absentee voting, this is noted in the minutes.
If the bylaws so provide, shareholders who vote by correspondence or attend the meeting by videoconference are deemed to be present for the purposes of calculating quorum and majority.
- Formalize the meeting
- Drawing up minutes for approval of annual financial statements
All decisions, whether adopted or rejected by the associates/shareholders, must in principle be recorded in writing. These are the minutes of the Ordinary Annual General Meeting (PV d'AGOA). These minutes record all resolutions put to the vote, as well as the results.
For multi-shareholder companies, an attendance sheet is also appended to the minutes. Associates/shareholders present and/or represented must sign it to confirm their attendance at the meeting.
Corporate officers who knowingly fail to draw up AGM minutes in the required form are liable to a fine of 250,000 FCFA to 1,000,000 FCFA.
- File summary financial statements with the commercial court clerk's office
The final stage in the process is the filing of the summary financial statements with the clerk of the commercial court. This must be done within one month of the date of the meeting. This formality is mandatory for commercial companies.
If approval is refused, simply file a copy of the AGM's deliberations with the clerk's office.
Any breach is punishable by a prison sentence of one (1) to three (3) months and a fine of 250,000 to 1,000,000 FCFA..png)
