Transparency in Business Operations – Submission of Financial Statements and Beneficial Ownership Declarations
Every business entity is required to operate transparently and make publicly available data related to its financial situation and assets. In this regard, there is an obligation to regularly submit financial statements.
A regular annual financial statement is understood as a report that provides a truthful and objective overview of the financial position and performance of the business entity, and it is prepared for a business year, which is most commonly the same as, though sometimes different from, the calendar year. In addition to the regular annual financial statement, there is also a consolidated annual financial statement, which must be prepared and submitted if there are parent and subsidiary companies, with the parent company being responsible for its preparation. The parent company includes the financial statements of its subsidiaries in the consolidated annual financial statement.
If the business entity operates independently and autonomously, it must prepare regular annual financial statements for a business year that matches the calendar year, in accordance with accounting regulations, and submit them to the Business Registers Agency. The deadline for submitting regular annual financial statements is March 31st of the current year for the previous year. If the business entity had no business activity in the previous year, and if there are no data regarding assets and liabilities in the business books, instead of the regular annual financial statement, it must submit a Declaration of Inactivity to the Business Registers Agency by the same deadline, i.e., no later than March 31st of the current year for the previous year.
In addition to the regular financial statements, there are also extraordinary financial statements, which must be prepared in the case of status changes (in the case of a merger, the extraordinary financial statement must be prepared by the legal entity that ceases to operate, while in the case of a division, the extraordinary financial statement must be prepared by the legal entity that is dividing part of its assets and liabilities, unless otherwise prescribed by a special law), the opening or closing of bankruptcy proceedings, the initiation or closure of liquidation proceedings over a legal entity, as well as in the case of the deletion of a branch of a business entity.
The responsibility for the proper maintenance of business books and the accuracy of the submitted financial statements lies with the director of the business entity. Financial statements are signed by the legal representative of the legal entity, or the entrepreneur, and are submitted to the Business Registers Agency within the prescribed deadline.
If the business entity fails to comply with the legal obligation and does not submit the required regular annual financial statements, extraordinary financial statements, or other reports with the required documentation within the prescribed deadline, it constitutes a business offense for which heavy fines are imposed. The business entity, as well as the responsible person in the business entity, will be fined. Therefore, it is essential that the financial aspect of a business entity’s operations be publicly available and transparent, as this minimizes the likelihood of legal proceedings due to the commission of a business offense.
Beneficial Owners
The issue of registering beneficial owners is of particular interest to newly established legal entities. Specifically, every legal entity registered in the business registry maintained by the Business Registers Agency is required, within 15 days of its establishment, to submit a request for the registration of its beneficial owners on a special user electronic platform at the Business Registers Agency, and to provide precise, accurate, and complete information about the individuals who are considered beneficial owners of the company.
Failure to register beneficial owners results in administrative liability for the legal entity and the responsible person within the legal entity, as well as serious fines, which may reach up to 2 million dinars.
Moreover, in the case of non-compliance with this legal obligation, criminal liability may also arise. Specifically, anyone who, with the intent to conceal the beneficial owner of a business entity, fails to register the information about the beneficial owner in the Central Register, enters false information about the beneficial owner and presents it as true, or changes or deletes true information about the beneficial owner, shall be punished with imprisonment for a period of three months to five years.