Relief measures related to approval and publication of financial statements

Similarly to many countries all around the world, on 11 March the government of Hungary declared a state of emergency due to the coronavirus pandemic. The restrictions implemented during the state of emergency had a severe impact on numerous areas of the Hungarian economy, so regulations to ease the implications of the pandemic on the national economy were quickly announced in the weeks that followed. In our article we take a look at the measures related to financial statements. 

Amended deadline for publication of financial statements 

Although the deadline for disclosing, filing, publishing and submitting (depositing, sending) financial statements (31 May) has already passed, companies subject to the Act on Accounting, who for whatever reason were unable to keep to the deadline of the last day of the fifth month following the reporting date of the financial year as defined in the Act on Accounting, are not in default pursuant to Government Decree 140/2020 (IV.21) on the tax relief measures necessary to alleviate the economic impacts of the coronavirus pandemic under the Economy Protection Action Plan  According to the decision, entities subject to the Act on Accounting, where the filing date of the financial statements falls between the date of the decree taking effect (21 April 2020) and 30 September 2020, may submit their financial statements by 30 September 2020. The relief does not apply to public-interest entities (such as listed companies limited by shares, banks, insurance companies, to name but a few).

Acceptance of financial statements under the state of emergency

Various restrictions were implemented owing to the coronavirus pandemic, which make it hard or impossible for entities to convene their decision-making bodies, and thus to approve, based on their authorisation, the financial statements compiled in accordance with the Accounting Act. Government Decree 102/2020 (IV.10) on the different regulations pertaining to partnerships and capital companies during the state of emergency was designed to govern this.

The decree provides two options if the decision-making body of the legal entity cannot convene due to restrictions on the members to meet in person, irrespective of whether the articles of association of the entity sets the rules of members’ meetings or defines alternative ways:

• meet using electronic communication devices;
• pass resolutions without convening a meeting as initiated by the management.

The decree makes the use of the above forms of decision-making subject to the following conditions depending on the number of the members:

• these forms of decision-making may be applied at companies with a maximum of 5 members, provided that all members are able to participate in the decision-making;
• or at legal entities with 6-10 members at the request of the members holding the majority of votes;
• with more than 10 members, the forms of meeting detailed above may be used at the request of the legal entity’s management.

The decree details how a meeting using electronic communication devices may be conducted, or how resolutions can be passed without convening a meeting.

If the members are unable to reach a resolution on the approval of the financial statements and on the use of the profit after tax because the conditions are not met, the decision-making power passes to the management of the legal entity. However, at legal entities which have a supervisory board, the management must request the written report of the supervisory board to approve the financial statements.

The financial statements can be audited even if they are approved by the management.