The obligation to prepare annual accounts: much more than an accounting formality
Article 253 of the Spanish Companies Act (LSC) governs the obligation of directors to prepare annual accounts and constitutes one of the most important, though often underestimated, duties in Spanish corporate practice.
Far from being a mere accounting formality that is automatically repeated each financial year, it is an essential legal obligation that directly affects the responsibility of the governing body, corporate transparency, and the security of commercial transactions.
This article analyses the legal scope of the obligation to prepare annual accounts, the applicable legal deadlines, and the main exposures to liability for directors.
The law establishes that directors must prepare the annual accounts, the management report and the proposed allocation of profits within a maximum period of three months from the end of the financial year. For companies whose financial year coincides with the calendar year, this means that they must have formally assumed responsibility for the financial statements for the previous financial year by 31 March.
This deadline is not merely indicative or organisational: it defines a legal obligation with which the failure to comply can have significant consequences in terms of liability and company operations.
The concept of “preparing” deserves special attention. It is not the same as the accounting department having prepared balance sheets or drafted financial statements. Formulating implies a formal act by the governing body — whether a sole director, joint and several directors, or a board of directors, whereby the accounts are assumed and signed as a true reflection of the company’s financial position, results and performance.
This is a legal duty rather than simply a technical one, and it entails the direct assumption of responsibility by the directors.
The annual accounts comprise the balance sheet, the profit and loss account, the statement of changes in net equity, the cash flow statement where applicable, and the notes to the accounts. In addition, there is the management report (except in cases where there are legal exceptions) and the proposed appropriation of profits.
This documentation is not simply a technical formality but rather it constitutes the legal expression of the company’s financial position and is the main source of information for shareholders, creditors, and investors.
From a corporate governance perspective, the preparation of accounts is part of the director’s general duty of diligence, as set out in Article 225 of the LSC.
Corporate administration is not limited to strategic or commercial decision-making as it also requires ensuring the accuracy and integrity of financial information and compliance with associated legal obligations. Failure to prepare accounts on time may constitute a breach of the required standard of diligence and, in some cases, may give rise to liabilities towards the company, its shareholders, or third parties.
This aspect is particularly important when the company is experiencing financial difficulties. The correct preparation of the annual accounts makes it possible to detect whether there are grounds for dissolution due to losses, in accordance with Article 363 of the LSC.
Delaying or avoiding the preparation of the accounts may exacerbate the position of the director, especially if a situation of financial distress is unduly prolonged and new corporate debts are generated.
In practice, three distinct legal moments are often confused:
Each phase has its own characteristics and effects. If the accounts are not prepared, the process is paralysed from the outset. And if the accounts are not ultimately filed, the company may be struck off the register, with a direct impact on its operations and reputation.
Article 253 of the LSC requires the annual accounts and management report to be signed by all directors. If any signature is missing, the reason must be explicitly stated.
Signing implies the express assumption of responsibility for the content of the financial statements. The mere absence of a signature does not automatically exempt a director from liability; it will be necessary to prove that they acted diligently, expressed their opposition, and provided adequate documentation.
The obligation to prepare accounts remains in force as long as the company retains its legal status, even if it is not active. Dormant companies are not exempt from this obligation until they have been dissolved and liquidated.
Furthermore, even if accounting management is delegated to external advisors, legal responsibility always rests with the governing body. The advisor assists; the director prepares and responds.
Beyond its obligatory nature, the preparation of annual accounts acts as an annual control mechanism that allows for the review of the financial structure, the identification of risks, and the anticipation of legal and economic possibilities.
If managed rigorously, it strengthens internal governance and reduces future risks, especially in contexts of growth, restructuring or financial distress.
The obligation to prepare annual accounts, provided for in Article 253 of the LSC, is a structural part of the Spanish corporate system and is at the core of the directors’ responsibility.
Timely and rigorous compliance not only avoids penalties or registration restrictions, but also protects the governing body and strengthens the company’s credibility with shareholders, creditors and investors. In an increasingly demanding regulatory environment, proper management of the annual accounts is a clear demonstration of successful corporate governance and responsible compliance.
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