Many Corporations Facing April 29 Deadline For Sending Annual Reports

California law requires that a corporation deliver an annual report to its shareholders no later than 120 days after the close of its fiscal year. This requirement applies to corporations incorporated under California's General Corporation Law as well as corporations incorporated in other states that either have their principal executive offices, or customarily hold board meetings, in California. As this year is a leap year, the due date for corporations with calendar fiscal years is April 29.

The corporation's annual report sent to shareholders must contain:

• A balance sheet as of the end of the preceding fiscal year,
• An income statement for the preceding fiscal year, and
• A statement of cash flows for the preceding fiscal year.

The annual report must also be accompanied by a report of independent accountants, if the financial statements were audited, or if unaudited, by a certificate of an authorized officer stating that the financial statements were prepared without an audit from the corporation's books and records. The financial statements need not be prepared in conformity with Generally Accepted Accounting Principles (GAAP) if the corporation has fewer than 100 shareholders. However, the financial statements must disclose the basis used in their preparation and reasonably set forth the corporation's assets and liabilities, and income and expense.

Unless waived or otherwise in compliance as described below, the corporation must send the annual report to its shareholders at least 15 (or, if sent by 3^rd class mail, 35) days before its annual meeting of shareholders, but this requirement does not limit the requirement for holding an annual meeting of shareholders.

The bylaws of a corporation with fewer than 100 shareholders may expressly waive the annual report requirement. However, any shareholder is entitled to request the financial statements that would be included in the annual report if that report had been furnished to shareholders. In such cases, the shareholder may make the request more than 120 days after the end of that fiscal year and the corporation must deliver or mail the financial statements within 30 days.

A shareholder or shareholders holding at least 5% of the outstanding shares of any class of a corporation may also make a written request for specified interim financial statements. The corporation must deliver or mail the requested statements within 30 days.

Corporations with an outstanding class of securities registered under Section 12 of the Securities Exchange Act of 1934 will be in compliance with California's annual report requirement if they are in compliance with the rules of the Securities and Exchange Commission's annual report requirement. Certain additional disclosures are required if a corporation has 100 or more shareholders and is not subject to the reporting requirements of Section 13 of the Securities Exchange Act of 1934 (or is exempt from those requirements pursuant to Section 12(g)(2)).

Corporations in violation of the annual report requirement may be subject to a monetary penalty as well as shareholder lawsuits to enforce the requirement.

Allen Matkins corporate attorneys are available to advise on whether an annual report is due, whether a corporation may be exempt, and what next steps may be required.