Information to be given in notes to the accounts
Section 409: Information about related undertakings
658.This section replaces section 231(1) to (4) of the 1985 Act. The requirement to disclose information about related undertakings in the notes to a company’s annual accounts applies whether or not the company has to produce group accounts but there are different disclosure requirements in each case. This section gives the Secretary of State a new power to make regulations requiring information about related undertakings to be given in notes to a company’s annual accounts. These regulations are subject to the Parliamentary procedure in section 473. The regulations will replace the provisions of Schedule 5 to the 1985 Act.
659.Subsection (3) enables regulations under the section to make provision corresponding to section 231(3) of the 1985 Act authorising the omission from the notes to the accounts of information in respect of undertakings established outside the UK, or carrying on business outside the UK where the directors consider that disclosure would be seriously prejudicial to the business of that undertaking, or to the business of the company or any of its subsidiary undertakings. The Secretary of State must agree to the omission. This exemption is sought by a very small number of companies each year.
Section 410: Information about related undertakings: alternative compliance
660.This section replaces section 231(5) to (7) of the 1985 Act. Where there are numerous related undertakings and the directors believe that full disclosure would result in information of excessive length in the notes to the accounts, they may give more limited information. As a minimum this must include information in subsection (2)(a) and (b). Subsection (3) provides that the full information on the related undertakings must be submitted with the next annual return.
Section 411: Information about employee numbers and costs
661.This section replaces section 231A of the 1985 Act concerning particulars of staff. Section 231A was inserted by the 1985 Act (International Accounting Standards and Other Accounting Amendments) Regulations 2004 (S.I. 2004/2947) re-enacting provisions previously in the Schedules to Part 7 of the 1985 Act so that they continued to apply both to companies preparing Companies Act accounts and to those preparing IAS accounts.
Section 412: Information about directors’ benefits: remuneration
662.This section, together with section 413, replaces section 232 of the 1985 Act. Section 232 of the 1985 Act, with Schedules 6 and 7A, provides for disclosure of specified information on directors’ remuneration in notes to a company’s annual accounts. Section 412 of the 2006 Act instead gives the Secretary of State a new power to make provision by regulations requiring information about directors’ remuneration to be given in notes to a company’s annual accounts. Regulations under this section are subject to the Parliamentary procedure in section 473.
Section 413: Information about directors’ benefits: advances, credit and guarantees
663.This section replaces section 232 of the 1985 Act as regards the disclosure of advances, credit and guarantees. Under section 232 of the 1985 Act, information on the following areas must be given in notes to a company’s annual accounts:
details of loans, quasi-loans, credit transactions and related guarantees and security between a company and its directors or persons connected with its directors;
details of any other transactions or arrangements in which a director, indirectly or directly, has a material interest.
This can be seen as an extension of the internal disclosure of directors’ interests required by section 317 of the 1985 Act.
664.Section 413 sets out the new disclosure requirements in respect of (a) advances and credits granted by the company to its directors, and (b) guarantees of any kind entered into by the company on behalf of its directors. The wording of section 413 is much closer to that of articles 43(1)(13) and 34(13) of the Fourth (78/660/EEC) and Seventh (83/349/EEC) Company Law Directives.
665.The powers under section 396(3)(b) (Companies Act individual accounts) and section 404(3)(b) (Companies Act group accounts) will be used to require the disclosure of information about certain related party transactions in the notes to Companies Act accounts. Companies will no longer be required to disclose transactions made between the company and officers other than directors.
666.Under section 413(8) banks and the holding companies of credit institutions need only state (a) the amount of an advance or credit, and (b) in relation to a guarantee, the amount of the maximum liability that may be incurred by the company (or its subsidiary). In the light of the simplified disclosure regime for advances, credit and guarantees, sections 343 and 344 of the 1985 Act, which make special provision for financial institutions, are repealed.
Section 414: Approval and signing of accounts
667.This section replaces section 233 of the 1985 Act. It provides that a company’s annual accounts (its individual accounts and any group accounts) must be approved by the board of directors and the balance sheet must be signed. Subsection (3), which requires the balance sheet of accounts prepared in accordance with the small companies regime to carry a statement to that effect, re-enacts section 246(8) of the 1985 Act. Subsections (4) and (5) re-enact the criminal offence in section 233 of the 1985 Act for approval of accounts that do not comply with the requirements of the Companies Act or, where applicable, of Article 4 of the IAS Regulation. Section 233 (4) of the 1985 Act, which required that a director of the company should sign the copy of the balance sheet delivered to the registrar, has not been reproduced. This requirement would have hampered developments in the electronic delivery of accounts.
