Accounting records

221 Duty to keep accounting records.

1

Every company shall keep accounting records which are sufficient to show and explain the company’s transactions and are such as to—

a

disclose with reasonable accuracy, at any time, the financial position of the company at that time, and

b

enable the directors to ensure that any balance sheet and profit and loss account prepared under this Part complies with the requirements of this Act.

2

The accounting records shall in particular contain—

a

entries from day to day of all sums of money received and expended by the company, and the matters in respect of which the receipt and expenditure takes place, and

b

a record of the assets and liabilities of the company.

3

If the company’s business involves dealing in goods, the accounting records shall contain—

a

statements of stock held by the company at the end of each financial year of the company,

b

all statements of stocktakings from which any such statement of stock as is mentioned in paragraph (a) has been or is to be prepared, and

c

except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased, showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified.

4

A parent company which has a subsidiary undertaking in relation to which the above requirements do not apply shall take reasonable steps to secure that the undertaking keeps such accounting records as to enable the directors of the parent company to ensure that any balance sheet and profit and loss account prepared under this Part complies with the requirements of this Act.

5

If a company fails to comply with any provision of this section, every officer of the company who is in default is guilty of an offence unless he shows that he acted honestly and that in the circumstances in which the company’s business was carried on the default was excusable.

6

A person guilty of an offence under this section is liable to imprisonment or a fine, or both.

222 Where and for how long records to be kept.

1

A company’s accounting records shall be kept at its registered office or such other place as the directors think fit, and shall at all times be open to inspection by the company’s officers.

2

If accounting records are kept at a place outside Great Britain, accounts and returns with respect to the business dealt with in the accounting records so kept shall be sent to, and kept at, a place in Great Britain, and shall at all times be open to such inspection.

3

The accounts and returns to be sent to Great Britain shall be such as to—

a

disclose with reasonable accuracy the financial position of the business in question at intervals of not more than six months, and

b

enable the directors to ensure that the company’s balance sheet and profit and loss account comply with the requirements of this Act.

4

If a company fails to comply with any provision of subsections (1) to (3), every officer of the company who is in default is guilty of an offence, and liable to imprisonment or a fine or both, unless he shows that he acted honestly and that in the circumstances in which the company’s business was carried on the default was excusable.

5

Accounting records which a company is required by section 221 to keep shall be preserved by it—

a

in the case of a private company, for three years from the date on which they are made, and

b

in the case of a public company, for six years from the date on which they are made.

This is subject to any provision contained in rules made under section 411 of the Insolvency Act 1986 (company insolvency rules).

6

An officer of a company is guilty of an offence, and liable to imprisonment or a fine or both, if he fails to take all reasonable steps for securing compliance by the company with subsection (5) or intentionally causes any default by the company under that subsection.

A company’s financial year and accounting reference periods

223 A company’s financial year.

1

A company’s “financial year” is determined as follows.

2

Its first financial year begins with the first day of its first accounting reference period and ends with the last day of that period or such other date, not more than seven days before or after the end of that period, as the directors may determine.

3

Subsequent financial years begin with the day immediately following the end of the company’s previous financial year and end with the last day of its next accounting reference period or such other date, not more than seven days before or after the end of that period, as the directors may determine.

4

In relation to an undertaking which is not a company, references in this Act to its financial year are to any period in respect of which a profit and loss account of the undertaking is required to be made up (by its constitution or by the law under which it is established), whether that period is a year or not.

5

The directors of a parent company shall secure that, except where in their opinion there are good reasons against it, the financial year of each of its subsidiary undertakings coincides with the company’s own financial year.

224 Accounting reference periods and accounting reference date.

1

A company’s accounting reference periods are determined according to its accounting reference date.

2

A company may, at any time before the end of the period of nine months beginning with the date of its incorporation, by notice in the prescribed form given to the registrar specify its accounting reference date, that is, the date on which its accounting reference period ends in each calendar year.

3

Failing such notice, a company’s accounting reference date is—

a

in the case of a company incorporated before the commencement of section 3 of the Companies Act 1989, 31st March;

b

in the case of a company incorporated after the commencement of that section, the last day of the month in which the anniversary of its incorporation falls.

4

A company’s first accounting reference period is the period of more than six months, but not more than 18 months, beginning with the date of its incorporation and ending with its accounting reference date.

5

Its subsequent accounting reference periods are successive periods of twelve months beginning immediately after the end of the previous accounting reference period and ending with its accounting reference date.

6

This section has effect subject to the provisions of section 225 relating to the alteration of accounting reference dates and the consequences of such alteration.

225 Alteration of accounting reference date.

1

A company may by notice in the prescribed form given to the registrar specify a new accounting reference date having effect in relation to the company’s current accounting reference period and subsequent periods.

2

A company may by notice in the prescribed form given to the registrar specify a new accounting reference date having effect in relation to the company’s previous accounting reference period and subsequent periods if—

a

the company is a subsidiary undertaking or parent undertaking of another company and the new accounting reference date coincides with the accounting reference date of that other company, or

b

an administration order under Part II of the Insolvency Act 1986 is in force.

A company’s “previous accounting reference period” means that immediately preceding its current accounting reference period.

3

The notice shall state whether the current or previous accounting reference period—

a

is to be shortened, so as to come to an end on the first occasion on which the new accounting reference date falls or fell after the beginning of the period, or

b

is to be extended, so as to come to an end on the second occasion on which that date falls or fell after the beginning of the period.

4

A notice under subsection (1) stating that the current accounting reference period is to be extended is ineffective, except as mentioned below, if given less than five years after the end of an earlier accounting reference period of the company which was extended by virtue of this section.

This subsection does not apply—

a

to a notice given by a company which is a subsidiary undertaking or parent undertaking of another company and the new accounting reference date coincides with that of the other company, or

b

where an administration order is in force under Part II of the Insolvency Act 1986,

or where the Secretary of State directs that it should not apply, which he may do with respect to a notice which has been given or which may be given.

5

A notice under subsection (2)(a) may not be given if the period allowed for laying and delivering accounts and reports in relation to the previous accounting reference period has already expired.

6

An accounting reference period may not in any case, unless an administration order is in force under Part II of the Insolvency Act 1986, be extended so as to exceed 18 months and a notice under this section is ineffective if the current or previous accounting reference period as extended in accordance with the notice would exceed that limit.

Approval and signing of accounts

233 Approval and signing of accounts.

1

A company’s annual accounts shall be approved by the board of directors and signed on behalf of the board by a director of the company.

2

The signature shall be on the company’s balance sheet.

3

Every copy of the balance sheet which is laid before the company in general meeting, or which is otherwise circulated, published or issued, shall state the name of the person who signed the balance sheet on behalf of the board.

4

The copy of the company’s balance sheet which is delivered to the registrar shall be signed on behalf of the board by a director of the company.

5

If annual accounts are approved which do not comply with the requirements of this Act, every director of the company who is party to their approval and who knows that they do not comply or is reckless as to whether they comply is guilty of an offence and liable to a fine.

For this purpose every director of the company at the time the accounts are approved shall be taken to be a party to their approval unless he shows that he took all reasonable steps to prevent their being approved.

6

If a copy of the balance sheet—

a

is laid before the company, or otherwise circulated, published or issued, without the balance sheet having been signed as required by this section or without the required statement of the signatory’s name being included, or

b

is delivered to the registrar without being signed as required by this section,

the company and every officer of it who is in default is guilty of an offence and liable to a fine.

Auditors’ report

235 Auditors’ report.

1

A company’s auditors shall make a report to the company’s members on all annual accounts of the company of which copies are to be laid before the company in general meeting during their tenure of office.

2

The auditors’ report shall state whether in the auditors’ opinion the annual accounts have been properly prepared in accordance with this Act, and in particular whether a true and fair view is given—

a

in the case of an individual balance sheet, of the state of affairs of the company as at the end of the financial year,

b

in the case of an individual profit and loss account, of the profit or loss of the company for the financial year,

c

in the case of group accounts, of the state of affairs as at the end of the financial year, and the profit or loss for the financial year, of the undertakings included in the consolidation as a whole, so far as concerns members of the company.

3

The auditors shall consider whether the information given in the directors’ report for the financial year for which the annual accounts are prepared is consistent with those accounts; and if they are of opinion that it is not they shall state that fact in their report.

236 Signature of auditors’ report.

1

The auditors’ report shall state the names of the auditors and be signed by them.

2

Every copy of the auditors’ report which is laid before the company in general meeting, or which is otherwise circulated, published or issued, shall state the names of the auditors.

3

The copy of the auditors’ report which is delivered to the registrar shall state the names of the auditors and be signed by them.

4

If a copy of the auditors’ report—

a

is laid before the company, or otherwise circulated, published or issued, without the required statement of the auditors’ names, or

b

is delivered to the registrar without the required statement of the auditors’ names or without being signed as required by this section,

the company and every officer of it who is in default is guilty of an offence and liable to a fine.

5

References in this section to signature by the auditors are, where the office of auditor is held by a body corporate or partnership, to signature in the name of the body corporate or partnership by a person authorised to sign on its behalf.

237 Duties of auditors.

1

A company’s auditors shall, in preparing their report, carry out such investigations as will enable them to form an opinion as to—

a

whether proper accounting records have been kept by the company and proper returns adequate for their audit have been received from branches not visited by them, and

b

whether the company’s individual accounts are in agreement with the accounting records and returns.

2

If the auditors are of opinion that proper accounting records have not been kept, or that proper returns adequate for their audit have not been received from branches not visited by them, or if the company’s individual accounts are not in agreement with the accounting records and returns, the auditors shall state that fact in their report.

3

If the auditors fail to obtain all the information and explanations which, to the best of their knowledge and belief, are necessary for the purposes of their audit, they shall state that fact in their report.

4

If the requirements of Schedule 6 (disclosure of information: emoluments and other benefits of directors and others) are not complied with in the annual accounts, the auditors shall include in their report, so far as they are reasonably able to do so, a statement giving the required particulars.

Publication of accounts and reports

238 Persons entitled to receive copies of accounts and reports.

1

A copy of the company’s annual accounts, together with a copy of the directors’ report for that financial year and of the auditors’ report on those accounts, shall be sent to—

a

every member of the company,

b

every holder of the company’s debentures, and

c

every person who is entitled to receive notice of general meetings,

not less than 21 days before the date of the meeting at which copies of those documents are to be laid in accordance with section 241.

2

Copies need not be sent—

a

to a person who is not entitled to receive notices of general meetings and of whose address the company is unaware, or

b

to more than one of the joint holders of shares or debentures none of whom is entitled to receive such notices, or

c

in the case of joint holders of shares or debentures some of whom are, and some not, entitled to receive such notices, to those who are not so entitled.

3

In the case of a company not having a share capital, copies need not be sent to anyone who is not entitled to receive notices of general meetings of the company.

4

If copies are sent less than 21 days before the date of the meeting, they shall, notwithstanding that fact, be deemed to have been duly sent if it is so agreed by all the members entitled to attend and vote at the meeting.

5

If default is made in complying with this section, the company and every officer of it who is in default is guilty of an offence and liable to a fine.

6

Where copies are sent out under this section over a period of days, references elsewhere in this Act to the day on which copies are sent out shall be construed as references to the last day of that period.

239 Right to demand copies of accounts and reports.

1

Any member of a company and any holder of a company’s debentures is entitled to be furnished, on demand and without charge, with a copy of the company’s last annual accounts and directors’ report and a copy of the auditors’ report on those accounts.

2

The entitlement under this section is to a single copy of those documents, but that is in addition to any copy to which a person may be entitled under section 238.

3

If a demand under this section is not complied with within seven days, the company and every officer of it who is in default is guilty of an offence and liable to a fine and, for continued contravention, to a daily default fine.

4

If in proceedings for such an offence the issue arises whether a person had already been furnished with a copy of the relevant document under this section, it is for the defendant to prove that he had.

240 Requirements in connection with publication of accounts.

1

If a company publishes any of its statutory accounts, they must be accompanied by the relevant auditors’ report under section 235.

2

A company which is required to prepare group accounts for a financial year shall not publish its statutory individual accounts for that year without also publishing with them its statutory group accounts.

3

If a company publishes non-statutory accounts, it shall publish with them a statement indicating—

a

that they are not the company’s statutory accounts,

b

whether statutory accounts dealing with any financial year with which the non-statutory accounts purport to deal have been delivered to the registrar,

c

whether the company’s auditors have made a report under section 235 on the statutory accounts for any such financial year, and

d

whether any report so made was qualified or contained a statement under section 237(2) or (3) (accounting records or returns inadequate, accounts not agreeing with records and returns or failure to obtain necessary information and explanations);

and it shall not publish with the non-statutory accounts any auditors’ report under section 235.

4

For the purposes of this section a company shall be regarded as publishing a document if it publishes, issues or circulates it or otherwise makes it available for public inspection in a manner calculated to invite members of the public generally, or any class of members of the public, to read it.

5

References in this section to a company’s statutory accounts are to its individual or group accounts for a financial year as required to be delivered to the registrar under section 242; and references to the publication by a company of “non-statutory accounts” are to the publication of—

a

any balance sheet or profit and loss account relating to, or purporting to deal with, a financial year of the company, or

b

an account in any form purporting to be a balance sheet or profit and loss account for the group consisting of the company and its subsidiary undertakings relating to, or purporting to deal with, a financial year of the company,

otherwise than as part of the company’s statutory accounts.

6

A company which contravenes any provision of this section, and any officer of it who is in default, is guilty of an offence and liable to a fine.

Laying and delivering of accounts and reports

241 Accounts and reports to be laid before company in general meeting.

1

The directors of a company shall in respect of each financial year lay before the company in general meeting copies of the company’s annual accounts, the directors’ report and the auditors’ report on those accounts.

2

If the requirements of subsection (1) are not complied with before the end of the period allowed for laying and delivering accounts and reports, every person who immediately before the end of that period was a director of the company is guilty of an offence and liable to a fine and, for continued contravention, to a daily default fine.

3

It is a defence for a person charged with such an offence to prove that he took all reasonable steps for securing that those requirements would be complied with before the end of that period.

4

It is not a defence to prove that the documents in question were not in fact prepared as required by this Part.

242 Accounts and reports to be delivered to the registrar.

1

The directors of a company shall in respect of each financial year deliver to the registrar a copy of the company’s annual accounts together with a copy of the directors’ report for that year and a copy of the auditors’ report on those accounts.

If any document comprised in those accounts or reports is in a language other than English, the directors shall annex to the copy of that document delivered a translation of it into English, certified in the prescribed manner to be a correct translation.

2

If the requirements of subsection (1) are not complied with before the end of the period allowed for laying and delivering accounts and reports, every person who immediately before the end of that period was a director of the company is guilty of an offence and liable to a fine and, for continued contravention, to a daily default fine.

3

Further, if the directors of the company fail to make good the default within 14 days after the service of a notice on them requiring compliance, the court may on the application of any member or creditor of the company or of the registrar, make an order directing the directors (or any of them) to make good the default within such time as may be specified in the order.

The court’s order may provide that all costs of and incidental to the application shall be borne by the directors.

4

It is a defence for a person charged with an offence under this section to prove that he took all reasonable steps for securing that the requirements of subsection (1) would be complied with before the end of the period allowed for laying and delivering accounts and reports.

5

It is not a defence in any proceedings under this section to prove that the documents in question were not in fact prepared as required by this Part.

242A Civil penalty for failure to deliver accounts.

1

Where the requirements of section 242(1) are not complied with before the end of the period allowed for laying and delivering accounts and reports, the company is liable to a civil penalty.

This is in addition to any liability of the directors under section 242.

2

The amount of the penalty is determined by reference to the length of the period between the end of the period allowed for laying and delivering accounts and reports and the day on which the requirements are complied with, and whether the company is a public or private company, as follows:—

Length of period	Public company	Private company
Not more than 3 months.	£500	£100
More than 3 months but not more than 6 months.	£1,000	£250
More than 6 months but not more than 12 months.	£2,000	£500
More than 12 months.	£5,000	£1,000

3

The penalty may be recovered by the registrar and shall be paid by him into the Consolidated Fund.

4

It is not a defence in proceedings under this section to prove that the documents in question were not in fact prepared as required by this Part.

243 Accounts of subsidiary undertakings to be appended in certain cases.

1

The following provisions apply where at the end of the financial year a parent company has as a subsidiary undertaking—

a

a body corporate incorporated outside Great Britain which does not have an established place of business in Great Britain, or

b

an unincorporated undertaking,

which is excluded from consolidation in accordance with section 229(4) (undertaking with activities different from the undertakings included in the consolidation).

2

There shall be appended to the copy of the company’s annual accounts delivered to the registrar in accordance with section 242 a copy of the undertaking’s latest individual accounts and, if it is a parent undertaking, its latest group accounts.

If the accounts appended are required by law to be audited, a copy of the auditors’ report shall also be appended.

3

The accounts must be for a period ending not more than twelve months before the end of the financial year for which the parent company’s accounts are made up.

4

If any document required to be appended is in a language other than English, the directors shall annex to the copy of that document delivered a translation of it into English, certified in the prescribed manner to be a correct translation.

5

The above requirements are subject to the following qualifications—

a

an undertaking is not required to prepare for the purposes of this section accounts which would not otherwise be prepared, and if no accounts satisfying the above requirements are prepared none need be appended;

b

a document need not be appended if it would not otherwise be required to be published, or made available for public inspection, anywhere in the world, but in that case the reason for not appending it shall be stated in a note to the company’s accounts;

c

where an undertaking and all its subsidiary undertakings are excluded from consolidation in accordance with section 229(4), the accounts of such of the subsidiary undertakings of that undertaking as are included in its consolidated group accounts need not be appended.

6

Subsections (2) to (4) of section 242 (penalties, &c. in case of default) apply in relation to the requirements of this section as they apply in relation to the requirements of subsection (1) of that section.

244 Period allowed for laying and delivering accounts and reports.

1

The period allowed for laying and delivering accounts and reports is—

a

for a private company, 10 months after the end of the relevant accounting reference period, and

b

for a public company, 7 months after the end of that period.

This is subject to the following provisions of this section.

2

If the relevant accounting reference period is the company’s first and is a period of more than 12 months, the period allowed is—

a

10 months or 7 months, as the case may be, from the first anniversary of the incorporation of the company, or

b

3 months from the end of the accounting reference period,

whichever last expires.

3

Where a company carries on business, or has interests, outside the United Kingdom, the Channel Islands and the Isle of Man, the directors may, in respect of any financial year, give to the registrar before the end of the period allowed by subsection (1) or (2) a notice in the prescribed form—

a

stating that the company so carries on business or has such interests, and

b

claiming a 3 month extension of the period allowed for laying and delivering accounts and reports;

and upon such a notice being given the period is extended accordingly.

4

If the relevant accounting period is treated as shortened by virtue of a notice given by the company under section 225 (alteration of accounting reference date), the period allowed for laying and delivering accounts is that applicable in accordance with the above provisions or 3 months from the date of the notice under that section, whichever last expires.

5

If for any special reason the Secretary of State thinks fit he may, on an application made before the expiry of the period otherwise allowed, by notice in writing to a company extend that period by such further period as may be specified in the notice.

6

In this section “the relevant accounting reference period” means the accounting reference period by reference to which the financial year for the accounts in question was determined.

Revision of defective accounts and reports

245 Voluntary revision of annual accounts or directors’ report.

1

If it appears to the directors of a company that any annual accounts of the company, or any directors’ report, did not comply with the requirements of this Act, they may prepare revised accounts or a revised report.

2

Where copies of the previous accounts or report have been laid before the company in general meeting or delivered to the registrar, the revisions shall be confined to—

a

the correction of those respects in which the previous accounts or report did not comply with the requirements of this Act, and

b

the making of any necessary consequential alterations.

3

The Secretary of State may make provision by regulations as to the application of the provisions of this Act in relation to revised annual accounts or a revised directors’ report.

4

The regulations may, in particular—

a

make different provision according to whether the previous accounts or report are replaced or are supplemented by a document indicating the corrections to be made;

b

make provision with respect to the functions of the company’s auditors in relation to the revised accounts or report;

c

require the directors to take such steps as may be specified in the regulations where the previous accounts or report have been—

i

sent out to members and others under section 238(1),

ii

laid before the company in general meeting, or

iii

delivered to the registrar,

or where a summary financial statement based on the previous accounts or report has been sent to members under section 251;

d

apply the provisions of this Act (including those creating criminal offences) subject to such additions, exceptions and modifications as are specified in the regulations.

5

Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

245A Secretary of State’s notice in respect of annual accounts.

1

Where copies of a company’s annual accounts have been sent out under section 238, or a copy of a company’s annual accounts has been laid before the company in general meeting or delivered to the registrar, and it appears to the Secretary of State that there is, or may be, a question whether the accounts comply with the requirements of this Act, he may give notice to the directors of the company indicating the respects in which it appears to him that such a question arises, or may arise.

2

The notice shall specify a period of not less than one month for the directors to give him an explanation of the accounts or prepare revised accounts.

3

If at the end of the specified period, or such longer period as he may allow, it appears to the Secretary of State that no satisfactory explanation of the accounts has been given and that the accounts have not been revised so as to comply with the requirements of this Act, he may if he thinks fit apply to the court.

4

The provisions of this section apply equally to revised annual accounts, in which case the references to revised accounts shall be read as references to further revised accounts.

245B Application to court in respect of defective accounts.

1

An application may be made to the court—

a

by the Secretary of State, after having complied with section 245A, or

b

by a person authorised by the Secretary of State for the purposes of this section,

for a declaration or declarator that the annual accounts of a company do not comply with the requirements of this Act and for an order requiring the directors of the company to prepare revised accounts.

2

Notice of the application, together with a general statement of the matters at issue in the proceedings, shall be given by the applicant to the registrar for registration.

3

If the court orders the preparation of revised accounts, it may give directions with respect to—

a

the auditing of the accounts,

b

the revision of any directors’ report or summary financial statement, and

c

the taking of steps by the directors to bring the making of the order to the notice of persons likely to rely on the previous accounts,

and such other matters as the court thinks fit.

4

If the court finds that the accounts did not comply with the requirements of this Act it may order that all or part of—

a

the costs (or in Scotland expenses) of and incidental to the application, and

b

any reasonable expenses incurred by the company in connection with or in consequence of the preparation of revised accounts,

shall be borne by such of the directors as were party to the approval of the defective accounts.

For this purpose every director of the company at the time the accounts were approved shall be taken to have been a party to their approval unless he shows that he took all reasonable steps to prevent their being approved.

5

Where the court makes an order under subsection (4) it shall have regard to whether the directors party to the approval of the defective accounts knew or ought to have known that the accounts did not comply with the requirements of this Act, and it may exclude one or more directors from the order or order the payment of different amounts by different directors.

6

On the conclusion of proceedings on an application under this section, the applicant shall give to the registrar for registration an office copy of the court order or, as the case may be, notice that the application has failed or been withdrawn.

7

The provisions of this section apply equally to revised annual accounts, in which case the references to revised accounts shall be read as references to further revised accounts.

245C Other persons authorised to apply to court.

1

The Secretary of State may authorise for the purposes of section 245B any person appearing to him—

a

to have an interest in, and to have satisfactory procedures directed to securing, compliance by companies with the accounting requirements of this Act,

b

to have satisfactory procedures for receiving and investigating complaints about the annual accounts of companies, and

c

otherwise to be a fit and proper person to be authorised.

2

A person may be authorised generally or in respect of particular classes of case, and different persons may be authorised in respect of different classes of case.

3

The Secretary of State may refuse to authorise a person if he considers that his authorisation is unnecessary having regard to the fact that there are one or more other persons who have been or are likely to be authorised.

4

Authorisation shall be by order made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

5

Where authorisation is revoked, the revoking order may make such provision as the Secretary of State thinks fit with respect to pending proceedings.

6

Neither a person authorised under this section, nor any officer, servant or member of the governing body of such a person, shall be liable in damages for anything done or purporting to be done for the purposes of or in connection with—

a

the taking of steps to discover whether there are grounds for an application to the court,

b

the determination whether or not to make such an application, or

c

the publication of its reasons for any such decision,

unless the act or omission is shown to have been in bad faith.

Dormant companies

250 Resolution not to appoint auditors.

1

A company may by special resolution make itself exempt from the provisions of this Part relating to the audit of accounts in the following cases—

a

if the company has been dormant from the time of its formation, by a special resolution passed before the first general meeting of the company at which annual accounts are laid;

b

if the company has been dormant since the end of the previous financial year and—

i

is entitled in respect of its individual accounts for that year to the exemptions conferred by section 246 on a small company, or would be so entitled but for being a member of an ineligible group, and

ii

is not required to prepare group accounts for that year,

by a special resolution passed at a general meeting of the company at which the annual accounts for that year are laid.

2

A company may not pass such a resolution if it is—

a

a public company,

b

a banking or insurance company, or

c

an authorised person under the Financial Services Act 1986.

3

A company is “dormant” during a period in which no significant accounting transaction occurs, that is, no transaction which is required by section 221 to be entered in the company’s accounting records; and a company ceases to be dormant on the occurrence of such a transaction.

For this purpose there shall be disregarded any transaction arising from the taking of shares in the company by a subscriber to the memorandum in pursuance of an undertaking of his in the memorandum.

4

Where a company is, at the end of a financial year, exempt by virtue of this section from the provisions of this Part relating to the audit of accounts—

a

sections 238 and 239 (right to receive or demand copies of accounts and reports) have effect with the omission of references to the auditors’ report;

b

no copies of an auditors’ report need be laid before the company in general meeting;

c

no copy of an auditors’ report need be delivered to the registrar, and if none is delivered, the copy of the balance sheet so delivered shall contain a statement by the directors, in a position immediately above the signature required by section 233(4), that the company was dormant throughout the financial year; and

d

the company shall be treated as entitled in respect of its individual accounts for that year to the exemptions conferred by section 246 on a small company notwithstanding that it is a member of an ineligible group.

5

Where a company which is exempt by virtue of this section from the provisions of this Part relating to the audit of accounts—

a

ceases to be dormant, or

b

would no longer qualify (for any other reason) to make itself exempt by passing a resolution under this section,

it shall thereupon cease to be so exempt.

Listed public companies

251 Provision of summary financial statement to shareholders.

1

A public company whose shares, or any class of whose shares, are listed need not, in such cases as may be specified by regulations made by the Secretary of State, and provided any conditions so specified are complied with, send copies of the documents referred to in section 238(1) to members of the company, but may instead send them a summary financial statement.

In this subsection “listed” means admitted to the Official List of The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited.

2

Copies of the documents referred to in section 238(1) shall, however, be sent to any member of the company who wishes to receive them; and the Secretary of State may by regulations make provision as to the manner in which it is to be ascertained whether a member of the company wishes to receive them.

3

The summary financial statement shall be derived from the company’s annual accounts and the directors’ report and shall be in such form and contain such information as may be specified by regulations made by the Secretary of State.

4

Every summary financial statement shall—

a

state that it is only a summary of information in the company’s annual accounts and the directors’ report;

b

contain a statement by the company’s auditors of their opinion as to whether the summary financial statement is consistent with those accounts and that report and complies with the requirements of this section and regulations made under it;

c

state whether the auditors’ report on the annual accounts was unqualified or qualified, and if it was qualified set out the report in full together with any further material needed to understand the qualification;

d

state whether the auditors’ report on the annual accounts contained a statement under—

i

section 237(2) (accounting records or returns inadequate or accounts not agreeing with records and returns), or

ii

section 237(3) (failure to obtain necessary information and explanations),

and if so, set out the statement in full.

5

Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

6

If default is made in complying with this section or regulations made under it, the company and every officer of it who is in default is guilty of an offence and liable to a fine.

7

Section 240 (requirements in connection with publication of accounts) does not apply in relation to the provision to members of a company of a summary financial statement in accordance with this section.

Private companies

252 Election to dispense with laying of accounts and reports before general meeting.

1

A private company may elect (by elective resolution in accordance with section 379A) to dispense with the laying of accounts and reports before the company in general meeting.

2

An election has effect in relation to the accounts and reports in respect of the financial year in which the election is made and subsequent financial years.

3

Whilst an election is in force, the references in the following provisions of this Act to the laying of accounts before the company in general meeting shall be read as references to the sending of copies of the accounts to members and others under section 238(1)—

a

section 235(1) (accounts on which auditors are to report),

b

section 270(3) and (4) (accounts by reference to which distributions are justified), and

c

section 320(2) (accounts relevant for determining company’s net assets for purposes of ascertaining whether approval required for certain transactions);

and the requirement in section 271(4) that the auditors’ statement under that provision be laid before the company in general meeting shall be read as a requirement that it be sent to members and others along with the copies of the accounts sent to them under section 238(1).

4

If an election under this section ceases to have effect, section 241 applies in relation to the accounts and reports in respect of the financial year in which the election ceases to have effect and subsequent financial years.

253 Right of shareholder to require laying of accounts.

1

Where an election under section 252 is in force, the copies of the accounts and reports sent out in accordance with section 238(1)—

a

shall be sent not less than 28 days before the end of the period allowed for laying and delivering accounts and reports, and

b

shall be accompanied, in the case of a member of the company, by a notice informing him of his right to require the laying of the accounts and reports before a general meeting;

and section 238(5) (penalty for default) applies in relation to the above requirements as to the requirements contained in that section.

2

Before the end of the period of 28 days beginning with the day on which the accounts and reports are sent out in accordance with section 238(1), any member or auditor of the company may by notice in writing deposited at the registered office of the company require that a general meeting be held for the purpose of laying the accounts and reports before the company.

3

If the directors do not within 21 days from the date of the deposit of such a notice proceed duly to convene a meeting, the person who deposited the notice may do so himself.

4

A meeting so convened shall not be held more than three months from that date and shall be convened in the same manner, as nearly as possible, as that in which meetings are to be convened by directors.

5

Where the directors do not duly convene a meeting, any reasonable expenses incurred by reason of that failure by the person who deposited the notice shall be made good to him by the company, and shall be recouped by the company out of any fees, or other remuneration in respect of their services, due or to become due to such of the directors as were in default.

6

The directors shall be deemed not to have duly convened a meeting if they convene a meeting for a date more than 28 days after the date of the notice convening it.

Unlimited companies

254 Exemption from requirement to deliver accounts and reports.

1

The directors of an unlimited company are not required to deliver accounts and reports to the registrar in respect of a financial year if the following conditions are met.

2

The conditions are that at no time during the relevant accounting reference period—

a

has the company been, to its knowledge, a subsidiary undertaking of an undertaking which was then limited, or

b

have there been, to its knowledge, exercisable by or on behalf of two or more undertakings which were then limited, rights which if exercisable by one of them would have made the company a subsidiary undertaking of it, or

c

has the company been a parent company of an undertaking which was then limited.

The references above to an undertaking being limited at a particular time are to an undertaking (under whatever law established) the liability of whose members is at that time limited.

3

The exemption conferred by this section does not apply if at any time during the relevant accounting period the company carried on business as the promoter of a trading stamp scheme within the Trading Stamps Act 1964.

4

Where a company is exempt by virtue of this section from the obligation to deliver accounts, section 240 (requirements in connection with publication of accounts) has effect with the following modifications—

a

in subsection (3)(b) for the words from “whether statutory accounts” to “have been delivered to the registrar” substitute “that the company is exempt from the requirement to deliver statutory accounts”, and

b

in subsection (5) for “as required to be delivered to the registrar under section 242” substitute “as prepared in accordance with this Part and approved by the board of directors”.

Chapter III Supplementary Provisions

Accounting standards

256 Accounting standards.

1

In this Part “accounting standards” means statements of standard accounting practice issued by such body or bodies as may be prescribed by regulations.

2

References in this Part to accounting standards applicable to a company’s annual accounts are to such standards as are, in accordance with their terms, relevant to the company’s circumstances and to the accounts.

3

The Secretary of State may make grants to or for the purposes of bodies concerned with—

a

issuing accounting standards,

b

overseeing and directing the issuing of such standards, or

c

investigating departures from such standards or from the accounting requirements of this Act and taking steps to secure compliance with them.

4

Regulations under this section may contain such transitional and other supplementary and incidental provisions as appear to the Secretary of State to be appropriate.

Power to alter accounting requirements

257 Power of Secretary of State to alter accounting requirements.

1

The Secretary of State may by regulations made by statutory instrument modify the provisions of this Part.

2

Regulations which—

a

add to the classes of documents required to be prepared, laid before the company in general meeting or delivered to the registrar,

b

restrict the classes of company which have the benefit of any exemption, exception or special provision,

c

require additional matter to be included in a document of any class, or

d

otherwise render the requirements of this Part more onerous,

shall not be made unless a draft of the instrument containing the regulations has been laid before Parliament and approved by a resolution of each House.

3

Otherwise, a statutory instrument containing regulations under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament.

4

Regulations under this section may—

a

make different provision for different cases or classes of case,

b

repeal and re-enact provisions with modifications of form or arrangement, whether or not they are modified in substance,

c

make consequential amendments or repeals in other provisions of this Act, or in other enactments, and

d

contain such transitional and other incidental and supplementary provisions as the Secretary of State thinks fit.

5

Any modification by regulations under this section of section 258 or Schedule 10A (parent and subsidiary undertakings) does not apply for the purposes of enactments outside the Companies Acts unless the regulations so provide.

Other interpretation provisions

259 Meaning of “undertaking” and related expressions.

1

In this Part “undertaking” means—

a

a body corporate or partnership, or

b

an unincorporated association carrying on a trade or business, with or without a view to profit.

2

In this Part references to shares—

a

in relation to an undertaking with a share capital, are to allotted shares;

b

in relation to an undertaking with capital but no share capital, are to rights to share in the capital of the undertaking; and

c

in relation to an undertaking without capital, are to interests—

i

conferring any right to share in the profits or liability to contribute to the losses of the undertaking, or

ii

giving rise to an obligation to contribute to the debts or expenses of the undertaking in the event of a winding up.

3

Other expressions appropriate to companies shall be construed, in relation to an undertaking which is not a company, as references to the corresponding persons, officers, documents or organs, as the case may be, appropriate to undertakings of that description.

This is subject to provision in any specific context providing for the translation of such expressions.

4

References in this Part to “fellow subsidiary undertakings” are to undertakings which are subsidiary undertakings of the same parent undertaking but are not parent undertakings or subsidiary undertakings of each other.

5

In this Part “group undertaking”, in relation to an undertaking, means an undertaking which is—

a

a parent undertaking or subsidiary undertaking of that undertaking, or

b

a subsidiary undertaking of any parent undertaking of that undertaking.

260 Participating interests.

1

In this Part a “participating interest” means an interest held by an undertaking in the shares of another undertaking which it holds on a long-term basis for the purpose of securing a contribution to its activities by the exercise of control or influence arising from or related to that interest.

2

A holding of 20 per cent. or more of the shares of an undertaking shall be presumed to be a participating interest unless the contrary is shown.

3

The reference in subsection (1) to an interest in shares includes—

a

an interest which is convertible into an interest in shares, and

b

an option to acquire shares or any such interest;

and an interest or option falls within paragraph (a) or (b) notwithstanding that the shares to which it relates are, until the conversion or the exercise of the option, unissued.

4

For the purposes of this section an interest held on behalf of an undertaking shall be treated as held by it.

5

For the purposes of this section as it applies in relation to the expression “participating interest” in section 258(4) (definition of “subsidiary undertaking”)—

a

there shall be attributed to an undertaking any interests held by any of its subsidiary undertakings, and

b

the references in subsection (1) to the purpose and activities of an undertaking include the purposes and activities of any of its subsidiary undertakings and of the group as a whole.

6

In the balance sheet and profit and loss formats set out in Part I of Schedule 4, “participating interest” does not include an interest in a group undertaking.

7

For the purposes of this section as it applies in relation to the expression “participating interest”—

a

in those formats as they apply in relation to group accounts, and

b

in paragraph 20 of Schedule 4A (group accounts: undertakings to be accounted for as associated undertakings),

the references in subsections (1) to (4) to the interest held by, and the purposes and activities of, the undertaking concerned shall be construed as references to the interest held by, and the purposes and activities of, the group (within the meaning of paragraph 1 of that Schedule).

261 Notes to the accounts.

1

Information required by this Part to be given in notes to a company’s annual accounts may be contained in the accounts or in a separate document annexed to the accounts.

2

References in this Part to a company’s annual accounts, or to a balance sheet or profit and loss account, include notes to the accounts giving information which is required by any provision of this Act, and required or allowed by any such provision to be given in a note to company accounts.

262 Minor definitions.

1

In this Part—

• “annual accounts” means—

a

the individual accounts required by section 226, and

b

any group accounts required by section 227,

(but see also section 230 (treatment of individual profit and loss account where group accounts prepared));

• “annual report”, in relation to a company, means the directors’ report required by section 234;

• “balance sheet date” means the date as at which the balance sheet was made up;

• “capitalisation”, in relation to work or costs, means treating that work or those costs as a fixed asset;

• “credit institution” means an undertaking carrying on a deposit-taking business within the meaning of the Banking Act 1987;

• “fixed assets” means assets of a company which are intended for use on a continuing basis in the company’s activities, and “current assets” means assets not intended for such use;

• “group” means a parent undertaking and its subsidiary undertakings;

• “included in the consolidation”, in relation to group accounts, or “included in consolidated group accounts”, means that the undertaking is included in the accounts by the method of full (and not proportional) consolidation, and references to an undertaking excluded from consolidation shall be construed accordingly;

• “purchase price”, in relation to an asset of a company or any raw materials or consumables used in the production of such an asset, includes any consideration (whether in cash or otherwise) given by the company in respect of that asset or those materials or consumables, as the case may be;

• “qualified”, in relation to an auditors’ report, means that the report does not state the auditors’ unqualified opinion that the accounts have been properly prepared in accordance with this Act or, in the case of an undertaking not required to prepare accounts in accordance with this Act, under any corresponding legislation under which it is required to prepare accounts;

• “true and fair view” refers—

a

in the case of individual accounts, to the requirement of section 226(2), and

b

in the case of group accounts, to the requirement of section 227(3);

“turnover”, in relation to a company, means the amounts derived from the provision of goods and services falling within the company’s ordinary activities, after deduction of—

1. i

   trade discounts,

2. ii

   value added tax, and

3. iii

   any other taxes based on the amounts so derived.

2

In the case of an undertaking not trading for profit, any reference in this Part to a profit and loss account is to an income and expenditure account; and references to profit and loss and, in relation to group accounts, to a consolidated profit and loss account shall be construed accordingly.

3

References in this Part to “realised profits” and “realised losses”, in relation to a company’s accounts, are to such profits or losses of the company as fall to be treated as realised in accordance with principles generally accepted, at the time when the accounts are prepared, with respect to the determination for accounting purposes of realised profits or losses.

This is without prejudice to—

a

the construction of any other expression (where appropriate) by reference to accepted accounting principles or practice, or

b

any specific provision for the treatment of profits or losses of any description as realised.

262A Index of defined expressions.

The following Table shows the provisions of this Part defining or otherwise explaining expressions used in this Part (other than expressions used only in the same section or paragraph)—

accounting reference date and accounting reference period	section 224
accounting standards and applicable accounting standards	section 256
annual accounts
(generally)	section 262(1)
(includes notes to the accounts)	section 262(2)
annual report	section 262(1)
associated undertaking (in Schedule 4A)	paragraph 20 of that Schedule
balance sheet (includes notes)	section 261(2)
balance sheet date	section 262(1)
banking group	section 255A(3)
capitalisation (in relation to work or costs)	section 262(1)
credit institution	section 262(1)
current assets	section 262(1)
fellow subsidiary undertaking	section 259(4)
financial year	section 223
fixed assets	section 262(1)
group	section 262(1)
group undertaking	section 259(5)
historical cost accounting rules (in Schedule 4)	paragraph 29 of that Schedule
included in the consolidation and related expressions	section 262(1)
individual accounts	section 262(1)
insurance group	section 255A(4)
land of freehold tenure and land of leasehold tenure (in relation to Scotland)
—in Schedule 4	paragraph 36 of that Schedule
—in Schedule 9	paragraph 93 of that Schedule
lease, long lease and short lease
—in Schedule 4	paragraph 83 of that Schedule
—in Schedule 9	paragraph 34 of that Schedule
listed investment
—in Schedule 4	paragraph 84 of that Schedule
—in Schedule 9	paragraph 33 of that Schedule
notes to the accounts	section 261(1)
parent undertaking (and parent company)	section 258 and Schedule 10A
participating interest	section 260
pension costs (in Schedule 4)	paragraph 94(2) and (3) of that Schedule
period allowed for laying and delivering accounts and reports	section 244
profit and loss account
(includes notes)	section 261(2)
(in relation to a company not	section 261(2)
trading for profit)
provision
—in Schedule 4	paragraphs 88 and 89 of that Schedule
—in Schedule 9	paragraph 32 of that Schedule
purchase price	section 262(1)
qualified	section 262(1)
realised losses and realised profits	section 262(3)
reserve (in Schedule 9)	paragraph 32 of that Schedule
shares	section 259(2)
social security costs (in Schedule 4)	paragraph 94(1) and (3) of that Schedule
special provisions for banking and insurance companies and groups	sections 255 and 255A
subsidiary undertaking	section 258 and Schedule 10A
true and fair view	section 262(1)
turnover	section 262(1)
undertaking and related expressions	section 259(1) to (3)