Approval of Financial Reports in China
In accordance with the Company Law of the People's Republic of China (PRC), Chapter VIII on Financial Affairs and Company Accounts stipulates specific regulations concerning the preparation, audit, submission, and publication of annual financial reports by companies. These regulations ensure transparency, accountability, and adherence to established standards within the corporate sector.
Financial Report Drafting and Audit:
“Article 164: A company shall, after the end of each financial year, draft a financial report and have it audited by an accounting firm. The financial report shall be prepared in accordance with laws, administrative regulations, and the provisions of the treasury department of the State Council.”
Submission to Shareholders:
“Article 165: A limited liability company shall submit its financial report to each shareholder within the time limit prescribed Articles of association. The financial report of a joint stock limited company shall be prepared for inspection by shareholders at the offices of the company 20 days in advance of the date on which the annual general meeting of shareholders is held. A joint stock limited company that has offered its shares to the public shall publicize its financial report.”
Annual Financial Reports Deadline:
The deadline corresponds with the annual settlement of the corporate income tax (deadline May 31) and the annual reporting to the authorities (deadline June 30).
annual audit (deadline before company income tax clearance)
settlement of the corporate income tax (deadline May 31)
annual reporting to the authorities (deadline June 30)
approval of the financials by the shareholders (according to the Group internal policy or articles of association of the company)
While the law does not explicitly mention a deadline for approving the certified annual report, companies typically adhere to the deadline specified in their Articles of Association or by any instruction or internal policy provided by the headquarters of the group.
These internal regulations within the company or group dictate the steps and requirements for obtaining approval and ensuring compliance with applicable laws and regulations. So, no specific requirement is given by the company law in terms of the approval procedure, which can also take place online without the preparation of meeting minutes.
The Company Law of the PRC provides clear guidelines on preparing, auditing, submitting, and publishing annual financial reports by companies operating in China. Adhering to these regulations promotes transparency, accountability, and investor confidence within the corporate sector.