Approval of Financial Reports in China
In accordance with the Company Law of the People's Republic of China (PRC), Chapter X on Corporate Finance and Accounting 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 208: Companies shall prepare a financial accounting report at the end of each financial year and have it audited by an accounting firm in accordance with the law. Financial accounting reports shall be prepared in accordance with laws, administrative regulations, and the regulations of the finance authority under the State Council.”
Submission to Shareholders:
“Article 209: A limited liability company shall submit its financial report to each shareholder within the time limit prescribed in the company's articles of association. The financial report of a joint stock limited company shall be prepared at least 20 days before the annual shareholders' meeting and placed within its premises for inspection by shareholders; a joint stock limited company that has publicly offered shares shall publish its financial accounting 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).
Financial deadlines:
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)
Approval Process:
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.