Threat of removal from the National Court Register will force reporting

Soon, because on 1 January 2017, two years will have passed after the entry into force of the amendment of the act on the national court register introducing a mechanism for resolving an entity entered into the National Court Register (KRS) without conducting a liquidation procedure (Journal of Laws of 2014, item 1924). This circumstance may be important for the practical aspects of the functioning of this regulation. And also discipline those entities, which have so far neglected the obligation of submitting financial statements.

The purpose of the new procedure laid down in art. 25a and following acts on the national court register (i.e. Journal of Laws of 2016, item 687 as amended) was, among others, to eliminate dead companies from the market – entities that do not operate, which have no assets, do not fulfil their reporting obligations, or other duties which a court may compel to perform. Generally speaking, it concerns situations in which the registration court finds that no entry was made or documents submitted whose submission is mandatory (art. 24 sec. 1 of the Act on KRS).

One of the reasons of the obligatory initiation by the court acting ex officio of proceedings for the removal of the entity without liquidation is failure by the company entered into the register – despite court summons – to submit annual financial statements for two subsequent financial years. It must be emphasized, that the content of this provision shows an obligation of the court to initiate proceedings of removal, whenever any of the conditions are met. Despite serious sanctions arising from other legal acts (act on accounting provides for criminal liability, i.e. a fine and imprisonment – i.e., Journal of Laws of 2013, item 330 as amended), the practice of not submitting financial documents in the KRS is still, unfortunately, quite common.