Reporting obligations of private companies and the payment of an annual fee

Reporting obligations of private companies and the payment of an annual fee

Doron Afik, Esq.
January 18, 2012

At the beginning of the tax year, it is advisable to refresh the issue of the reporting obligations of private companies under the Companies Law, 1999, and the obligation to pay an annual fee, in light of the fact that the failure to timely pay the fee may lead to an increase in the amount of the payment and even personal liability of directors and offices, it is advisable to take care of such issues even if no notice has been received from the Corporations Authority.
Under law, each company is required to pay an annual fee once a year. Failure to pay the fee may cause the Corporations Authority to refuse to deal with matters related to the Company, and in addition, in a few weeks, a higher rate will apply to any payment that was not made on time. In order to make the payment, there is no need to receive a letter from the Corporations Authority, and it is possible to check whether there are payment obligations and to pay them at the designated site: Corporate Authority
The Companies Law requires that an annual report be submitted to the Registrar of Companies once a year within fourteen days after the annual meeting. As a principle, a company is obliged to hold an annual general meeting every year, but may prescribe in the articles of association a provision stating that the company is not required to hold an annual meeting unless it is necessary for the appointment of an auditor of the company or at the demand of a director or shareholder. However, even if there is no obligation to hold an annual meeting, the Company is still obligated to send to the shareholders registered in the register of shareholders once a year at the date of the annual meeting, financial statements (in such case, the annual report to the Registrar of Companies is postponed to fourteen days After sending the financial statements to the shareholders).
The reports submitted to the Registrar of Companies (which are available to the public) are not required to include the financial statements, but the law states that companies which do not meet certain requirements are obligated to attach to the annual report the balance sheet included in the financial statements. Because a private company generally strives to preserve its privacy and its financial data and not to report them to the public (as distinct from a public company committed to such reports), it is important to properly formulate the bylaws by a lawyer specializing in the field and to amend the regulations insofar as it does not comply with the provisions of the law.
It is important to note that in addition to the annual report, a company is also required to report in other cases such as changes in the articles of association, changing the address of a registered office, changes in the composition of the board of directors, transfer of shares or allotment of shares. The regulations determine the dates on which this reporting requirement is required, and it is necessary to ensure timely reporting. Violation of the obligation to report to the Registrar of Companies is considered a breach of statutory duty vis-a-vis those who relied on registrations at the Registrar of Companies and thus creates exposure to claims by third parties. In addition, the Registrar of Companies may impose penalties on non-reporting that start with amounts of thousands of Shekels and in exceptional cases even order liquidation of a company. It is important to note that where a fine imposed on a company was not paid on time, the Registrar may impose the fine personally against directors of the Company. Another reason not to underestimate the reporting obligations required by law.