#ClientAlert 6/2023

IMPORTANCE OF THE ANNUAL SHAREHOLDERS’ MEETING

Due to the annual closing of the fiscal year, and in accordance with the provisions set forth in article 181 of the General Law of Commercial Companies (“LGSM”), an Annual Ordinary Shareholders’ Meeting must be held within the first 4 (four) months of the year so that the following matters get reviewed and approved:

i. Discuss, approve or modify the Manger/Director’s report, taking into account the report of the Statutory Examiner, and take the measures it deems appropriate;

ii. Appoint/Ratify the Company’s Sole Administrator/Manager or its Board of Directors/Managers and the Statutory Examiners; and

iii. Determine the emoluments corresponding to the Company’s Administrators and Statutory Examiners, if said payments were not established in the company’s bylaws.

The Administrator’s report must include the following information: (i) report on the progress of the Company throughout the fiscal year, the policies followed by the administrators and the Company’s main existing projects; (ii) a report that explains the main accounting and information policies and criteria in the preparation of the Company’s financial information; (iii) a statement showing the financial situation of the Company at the end of the business year; (iv) the Company’s income statement for that business year; (v) a statement of the changes in the Company’s financial situation; (vi) a statement of the changes in the items that make up the corporate equity that occurred during the year; and (vii) notes necessary to complete or clarify the information provided by the statements described above.

As a result of the foregoing, all companies have until April 30th, 2023 to hold the Annual Ordinary Shareholders’ Meeting for the business year of 2022.

Regardless of whether the Company is managed individually or by a collegiate body, the celebration of the Annual Shareholders’ Meeting is part of the legal support to verify the adequate management and administration of the Company, being that it is approved by the Shareholders or Partners; if the Annual Shareholders’ Meeting is not held, there are various liability actions that the administrative bodies may incur in.

Additionally, the purpose of the Annual Shareholders’ Meeting is the distribution of profits or, where appropriate, the recording of losses in the various items that make up the financial statements, therefore, such matter and action becomes mandatory.

Finally, derived from the Tax Reform, there is an obligation to keep the Company’s Corporate Books up to date, since they are considered part of the accounting side of the Company; the books aforementioned will help you evidence and oppose any decision or act that is being carried or filed by third parties against the resolutions taken by the Meeting, as well as aiding you to avoid contingencies of a Civil, Commercial and/or Fiscal nature. Failure to prepare the Meeting’s Minutes may make you liable to a fine if discovered by the tax authorities.

Without further ado for the moment, we invite all our clients to contact us in case of doubt regarding this matter so that we may provide you with adequate and personalized counsel.