Budapest, Hungary

Bankruptcy Aspects of Annual Financial Statements

By Dr Attila Kovács, Kovács Réti Szegheõ Attorneys at Law

The brief comparison below shows to what extent the criteria for the adequacy of annual financial statements are the same or different in the legal systems of EU countries, as well as briefly summarising that chief executives are responsible for the preparation and publication of financial reports.

Article 2423 of the Italian Civil Code stipulates that financial statements must give a true and fair view of a company’s assets and liabilities and of the economic result for the year. Paragraph 239 of the German HGB (Handelsgesetzbuch) also states that the accounts are adequate if they meet the requirements of authenticity and transparency. Section 41 of the German GmbHG (Company Law Code) also states that the manager is responsible for keeping of a company’s books and Paragraph 91 (2) of the German Aktiengesetz also entrusts the manager with not only the bookkeeping but also the maintenance of a system that allows to identify any signs of threats to the survival of the company in a timely manner.

The Finnish Accounting Act 1336/1997 also states in principle that the financial statements must give a true and fair view of the company’s operations and financial position.

Under Italian law, it can be a criminal offense if a false report is made public. (Article 2429 of the Italian Civil Code). The Finnish Penal Code 39/1889 criminalises the falsification of accounts, which is defined as the inclusion of false or misleading information in the books that prevents a reliable and true picture of a company’s financial results.

The Italian Supreme Court (Cassazione civile, sez. I, 04 April 2011, n.), in its decision No 7606, reversed the burden of proof and, in a liquidation proceeding against the general rule, the debtor’s former managers had to prove the absence of a causal link between negligent conduct and the damage precisely because the accounts were falsified but the liquidator could not prove this due to lack of authentic data.

Similarly, Chapter 22, Section 1 (3) of the Finnish Company Law Act states that negligence is presumed in the event of improper keeping of the company’s books, unless the responsible person proves that he acted with due diligence, i.e. the leaders have to exculpate themselves.

Articles 443.6. 456.1. of the Spanish Bankruptcy Act (Real Decreto Legislativo 1/2020 of May 5th) state that managers are liable towards creditors for the debts of a company if the accounts have been falsified. The Finnish legislature also places the responsibility for the proper preparation of the accounts on chief executives (Chapter 6, Section 2, Paragraph 1 of the Finnish Company Law Act 624/2006).

In accordance with Hungarian legislation (Section 18 of the Act C of 2000 on Accounting), annual accounts shall give a true and fair view of the financial position and performance of the economic entity, including any changes therein and the Hungarian Bankruptcy Code also contains that a managing director failing to prepare and produce proper financial statements shall have to prove by himself that he had acted in favour of the creditors, otherwise he would be liable for claims not settled during the bankruptcy procedure.

Most European legal systems penalise the falsification of financial statements and accounting records in a similar way, either by reversing the burden of proof or by imposing a liability to creditors and, of course, by means of criminal law.

Dr Attila Kovacs

Dr Attila Kovacs

GGI member firm
Kovacs Reti Szegheő Attorneys at Law
Law Firm Services, Tax
Budapest, Hungary
T: +36 1 275 27 85
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Kovacs Reti Szegheő Attorneys at Law, established in 1992, is one of the oldest independent Hungarian law firms. It is active in Hungarian, English, German, and Italian and operates over a wide spectrum within the fields of civil and business law, for both domestic and international clients.

Dr Attila Kovacs graduated in 1996. After gaining professional experience in Hungarian and German law offices, he became a member of Kovács Réti Szegheő, and has been Managing Partner since 2004. He speaks Hungarian, English, and German, and his primary areas of practice are bankruptcy law, real estate law and corporate law. Attila is Global Chairperson of the GGI DCRI Practice Group.

Published: Debt Collection, Restructuring & Insolvency Newsletter, No. 13, Spring 2021 l Photo: Horváth Botond -



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