In the previous newsletter, I reminded you not to forget to ensure that the General Meeting approved the financial statements of the previous year. Today, I will briefly follow up on this topic adding information about the deadline for deciding about the distribution of profit.
You surely recall that for many years the Supreme Court decision (Decision of 30 September 2009, file no. 29 Cdo 4284/2007 (Rc 80/2010)) was valid, in which the Supreme Court interpreted the provisions of the Commercial Code on holding the General Meeting within 6 months from the end of the fiscal year the way that the six-month period for holding the Annual General Meeting applies not only to convene the General Meeting for the purpose of approval of the Company's financial statements, but also to the General Meeting's decision how to deal with the economic result of the previous accounting period. The reason for this interpretation was that the six-month period represents the final deadline for which the financial statements can provide the General Meeting with a realistic view of the accounts for a qualified decision to distribute profits and pay dividends. A decision to pay dividends dated later on without the preparation of the interim financial statements meant in fact a violation of the law.
The aforementioned decision is no longer valid since this year, as on 27 February 2019, the Supreme Court issued a resolution (file no. 27 Cdo 3885/2017) in which it commented on the rules of the Business Corporations Act regulating the distribution of profits and convening the General Meeting of a joint-stock company. According to this resolution may, with effect from 1 January 2014, regular financial statements prepared for the previous accounting period serve as a basis for profit distribution until the end of the following accounting period. The reason for this interpretation is an implementation of the so-called insolvency test (in §40, par. 1, of the Business Corporations Act), which should be sufficient to decide on the distribution of profit and to prevent the payment of dividends to the detriment of creditors of a company.