Legal Documents to Have in Place for the Timely Closure of the Annual Financial Statements

Legal Documents to Have in Place for the Timely Closure of the Annual Financial Statements  

The closing of financial statements is often associated with complexity, stress, and tight deadlines. That’s the time when fiduciaries must reconcile financial records, finalise balance sheets, review asset depreciation, and manage a lot of other critical tasks.  

Quite often, during the preparation process, you can find out that your client lacks the necessary legal documents. At this point, things get even more difficult, as without some contracts, it’s impossible to verify financial data accurately.  

In this article, we will share with you the legal documents that are essential for the timely closure of the annual financial statements, the key points to cover in them, and the online contract templates that will help you. 

Subordination agreement 

If the company is in a state of over-indebtedness, or when its assets do not cover ½ of the nominal capital and legal reserves, it should ideally file for bankruptcy. If it does not do so, the director may be held personally liable for any future accumulated losses.  

To avoid this, the creditor may sign a subordination agreement. With this document, it’s possible to:  

• Delay repayment of the debt until the improvement of the company’s financial situation; 

• Prevent the creditor from claiming and the debtor from voluntarily repaying or compensating the debt; 

• Allow interest to accrue without payment while the debt is subordinated; 

• Prioritise repayment to other creditors in case of the company’s bankruptcy.  

 
The best time to create the subordination agreement is at the beginning of the year while closing the financial statements.  

Key points to cover in the subordination agreement 

While preparing the contract for the subordination of claims, you’ll be asked to include the following information: 

• The date when the debt amount is recorded; 

• The origin of the debt, its currency, and amount; 

• The subordinated amount, its currency, and suspension or waiver of interest. 

Subordinated loan agreement  

When the company is facing excessive debt and wants to get an additional loan, it can enter into a subordinated loan agreement with a shareholder or related party to secure the necessary funding. This contract focuses specifically on outlining a supplementary loan, its subordinated amount as well as the conditions under which it will be paid back. Thanks to the subordinated loan agreement, it’s possible to:  

• Allow the borrower to access additional capital despite existing debt; 

• Delay repayment of the loan until the improvement of the company’s financial situation. 

The best time to create the subordinated loan agreement is at the beginning of the year while closing the financial statements. 

Key points to cover in the subordinated loan agreement 

Once you come to the preparation of the subordinated loan agreement, you should include the details about: 

• The amount of the loan, its currency, and the date from which it is granted; 

• The subordinated amount and its currency. 

Additionally, it’s possible to specify a precondition. But this point is rather optional and is used when a lender wants to ensure that certain conditions are satisfied before granting the loan. 

Shareholder’s borrowing agreement 

In reverse, if a shareholder owes a debt to the company (for example, a loan, personal invoices paid by a company card, etc.), the tax administration may request a shareholder’s borrowing agreement. This document clearly states loan details and allows parties to:  

• Settle financial obligations; 

• Outline the repayment terms; 

• Apply a minimum interest rate, which is recalculated annually. 

The best time to create the shareholder’s borrowing agreement is at the beginning of the year while closing the financial statements. 

Key points to cover in the shareholder’s borrowing agreement 

During the creation of the shareholder’s borrowing agreement, it’s necessary to add the loan specifics such as: 

• The borrowed amount, its currency, and the date from which it is granted; 

• The deadline by which a borrower is expected to repay the loan; 

• The interest rate applicable to the loan and the frequency of its payment. 

Additionally, parties can add the precondition details, as well as the bank accounts into which the loan shall be paid and repaid.  

 
Minutes of the annual general meeting 

Within 6 months from the end of the financial year, the financial statements must be approved by the shareholders’ meeting. Following that, the AGM minutes must be prepared and signed. This document serves as the official record of the approval process and financial decisions made during the meeting.  

 
Please note that the company is required to sign AGM minutes even if it has only one shareholder. 

The best time to create AGM minutes is once the annual general meeting has been held.  

Key points to cover in the minutes of the annual general meeting 

The AGM minutes must provide a detailed summary of the main discussions, decisions, and resolutions made during the meeting. Consequently, it’s necessary to include the information regarding: 

• The place, date, and time of the meeting; 

• The minimum percentage of members or shareholders that need to be present for the meeting to be valid; 

• Meeting chairman, secretary, and auditor; 

• The approval of the financial statements, legal reserves, dividends, and carry forward; 

• General record of the board of directors. 

Opposition to tax decision 

If a company hasn’t filed its tax return by the deadline, the tax administration may issue a discretionary tax decision, potentially resulting in excessive penalties. In this situation, the taxpayer has only 30 days to submit a written and motivated opposition, together with the tax return itself. The document enables the company to: 

• Contest the discretionary tax decision and possibly reduce excessive penalties; 

• Correct the tax assessments to ensure accurate reporting of tax liabilities in the financial statements. 

The best time to prepare the opposition to tax decision is immediately upon receiving the tax decision. You have 30 days to file your opposition. Failure to do so will result in penalties.  

Key points to cover in the opposition to tax decision 

To correctly file the opposition, you should cover such points as: 

• The tax decision; 

• Elements of taxation; 

• Elements of the declaration. 

Please note that during the preparation of the opposition, it’s important to cite the correct federal and cantonal laws on tax procedure.  

Using online contract templates on AdminTech, you can create: 

Réclamation contre taxation d’office pour Genève (personne morale); 

Réclamation contre taxation d’office pour Genève (personne physique); 

Réclamation contre taxation d’office pour Vaud (personne morale); 

Réclamation contre taxation d’office pour Vaud (personne physique). 

Prepare your contracts easier and faster with AdminTech’s dynamic contract engine  

Have you discovered that your client is missing an important document? There is no need to worry. You can easily create the needed legal paper with AdminTech’s online contract templates. The only thing you need to do is to get all the required details from your client and then enter them into the fields. Our dynamic contract engine will automatically adapt the contract and ensure that it complies with Swiss legal standards. 

If the information is still incomplete, you can start by creating a draft and finalise the document once all the details are in place. In addition to this, you can easily modify the contract without the need to start it from scratch. But please note, these features are only available when you have a subscription.  

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AdminTech team is always ready to help you with legal agreements and ensure their legal compliance