Company Annual Report: What Must It Include?

Quick Overview

• Who prepares the annual report? Primarily large and medium-sized entities subject to mandatory audits and other entities required to do so by law.
• What must the annual report contain? Information on the company’s financial performance and operations, its expected development, and other data required by law. It also includes the financial statements and the auditor’s report.
• When is it published? Generally within 30 days of approval and verification by the auditor, but no later than 12 months from the balance sheet date.
• Who prepares the management report? A controlled business corporation, whose statutory body must prepare it within three months of the end of the fiscal year.
• Where are the reports published? Mandatory documents are filed in the collection of documents of the relevant public registry.

Not sure whether your company is required to prepare an annual report or undergo a mandatory audit? Contact our attorneys to have your legal obligations assessed before you run into problems complying with them.

Who is required to prepare an annual report?

The obligation to prepare a company’s annual report is governed by the Accounting Act. Starting in 2026 , this requirement generally applies primarily to medium-sized and large accounting entities, which must have their financial statements audited by an auditor. Small accounting entities are no longer subject to mandatory audits solely based on their size. However, a specific legal regulation may impose this obligation on them.

Three criteria are used to determine the size of an accounting entity: total assets, annual net revenue, and average number of employees. A company is not classified into the relevant category based on a single figure alone, but according to the rules established by law for assessing threshold values.

Political parties, endowment funds, public and private universities, and health insurance companies are also required to prepare an annual report.

What must a company’s annual report contain?

Above all, an annual report must comply with the requirements set forth by law. At the same time, however, it can also serve as a valuable PR and marketing tool, allowing the company to showcase its current achievements as well as its vision and plans. With the help of custom-designed graphics and carefully selected photographs, the final product can go a long way in negotiations with investors, future partners, and even customers seeking detailed information.

Some creations go beyond the boundaries of conventional marketing materials. A famous example in this regard was the annual report of Austria Solar, in which information about the company’s annual activities was displayed thematically only when sunlight hit the pages of the report. The text of a certain food company’s annual report, on the other hand, appeared only after it had been “baked” in an oven.

What must an annual report contain under the Accounting Act? The basis is a comprehensive and balanced picture of the accounting entity’s performance, activities, and financial position. To the extent required by law, the report must also include:

• significant events that occurred after the balance sheet date,
• the expected development of the company’s operations,
• research and development activities,
• information on the acquisition of treasury stock or equity interests,
• activities related to environmental protection and labor relations,
• information regarding branches or other parts of the business abroad,
• other information required by specific legal regulations.

The scope of mandatory disclosures varies depending on the size and nature of the entity. For example, medium-sized, small, and micro entities are not required to disclose non-financial information as defined by law. The annual report also includes the financial statements and the auditor’s report.

The annual report includes the financial statements and the auditor’s report on the audit of the financial statements.

Public-interest entities—such as banks, insurance companies, and pension funds—also include so-called non-financial information in their annual reports, which relates to issues such as the environment, social matters, employee matters, and human rights compliance.

How and where is the annual report published?

Under the Accounting Act, business entities are required to publish their annual report by filing it with the Commercial Register within 30 days of its approval by the statutory body and verification by an auditor.

Beyond these legal obligations, it is, of course, up to the companies themselves to decide how and where they wish to use their reports. Publication on the company’s website is standard practice, while the paper format is increasingly being phased out by many environmentally conscious companies.

The deadline for preparing the annual report is twelve months from the balance sheet date for which the financial statements are prepared. If the financial statement data and the annual report are not published within this period, companies may be fined up to 3% of the value of their assets.

Report on Relations

If your company is part of a business group (i.e., it is controlled by another entity or is part of a group of companies or a conglomerate), it is also required to prepare a report on relations between related parties (i.e., the controlling and controlled entities), which is typically included in the annual report.

A controlling entity is defined as an entity that can directly or indirectly exercise a decisive influence over a business corporation. A controlled entity is a business corporation controlled by a controlling entity. Through the report on relations, you should provide the public and government authorities with information on the structure of relations between controlling and controlled entities, as well as the potential impact of specific relationships, any advantages and disadvantages of being part of the structure, and similar matters.

According to the Corporations Act, the mandatory information to be included in the report on relationships is as follows:

• the structure of the relationships between the controlling entity and the controlled entity,
• the role of the controlled entity during the given fiscal period,
• the manner and means of control,
• an overview of transactions carried out during the most recent fiscal period that were initiated at the instigation of or in the interest of the controlling entity or entities controlled by it, provided that such transactions involved assets exceeding 10% of the controlled entity’s equity as determined by the most recent financial statements,
• a summary of mutual agreements between the controlled entity and the controlling entity or between controlled entities, and
• an assessment of whether the controlled entity has suffered harm and an assessment of its compensation.

At this time, many companies (rather incorrectly) do not go into excessive detail and, for example, merely list the contracts or mention the controlling entity, but do not mention other companies belonging to the corporate structure.

To fulfill the purpose of the law, however, the entire structure should be described comprehensively—that is, not only its vertical relationships but also, for example, its horizontal and diagonal relationships. Similarly, the information provided regarding contracts should go into at least enough detail to make it possible to determine with whom the contract was concluded, its subject matter, what performances the contracting parties provided under the contract, and, where applicable, other contractual provisions. In this regard, the Supreme Court also commented on the report on relationships in one of its rulings.

Practical example: Imaginea company that is part of a larger business group and regularly provides services to another company within the same group. Although it lists the other company’s name in the report on related-party transactions, it fails to describe the mutual contract and the related performance. Such a report may not meet the legal requirements for completeness of information. An insufficient description of relationships and contracts between related companies is precisely one of the errors to which special attention should be paid when preparing the document.

The report on related-party transactions is usually part of the annual report and is prepared by the statutory body of the controlled entity within three months of the end of the fiscal year. If a business corporation has a supervisory body (e.g., a supervisory board), that body reviews the report on relations and then informs the general meeting of the results. If the controlling entity is a sole shareholder, such a review is not required. If the supervisory body identifies deficiencies in the report, it will request that the statutory body take corrective action.

Are you unsure whether your report on related-party transactions adequately describes affiliated companies, contracts entered into, and any potential harm? Have its content reviewed by an attorney to prevent errors before publication.

It is then filed with the relevant registry court. Failure to comply with the obligation to prepare a related-party report may result in an administrative fine of up to 100,000 CZK. A fine from the tax authority amounting to 3% of the value of the controlled entity’s assets cannot be ruled out either.

Summary

A company’s annual report and its report on relations between related parties represent two distinct legal obligations. While the annual report is primarily prepared by companies subject to mandatory audits, the report on relations must be prepared by controlled business entities regardless of whether they are required to prepare an annual report. Both documents must contain the information required by law and be prepared within the prescribed deadlines. Timely assessment of obligations, the completeness of supporting documents, and the method of disclosure helps companies avoid penalties and disputes related to relationships within business groups.