http://www.legislation.gov.uk/id/ukpga/2006/46

Chapter 1Introduction

General

C1 C2380Scheme of this Part

1

The requirements of this Part as to accounts and reports apply in relation to each financial year of a company.

2

In certain respects different provisions apply to different kinds of company.

3

The main distinctions for this purpose are—

a

between companies subject to the small companies regime (see section 381) and companies that are not subject to that regime; and

b

between quoted companies (see section 385) and companies that are not quoted.

4

b

if the qualifying conditions are met in that year and the company qualified as small in relation to the preceding financial year;

c

if the qualifying conditions were met in the preceding financial year and the company qualified as small in relation to that year.

3

The qualifying conditions are met by a company in a year in which it satisfies two or more of the following requirements—

1. Turnover	F2Not more than £6.5 million
2. Balance sheet total	F3Not more than £3.26 million
3. Number of employees	Not more than 50

4

For a period that is a company's financial year but not in fact a year the maximum figures for turnover must be proportionately adjusted.

5

The balance sheet total means the aggregate of the amounts shown as assets in the company's balance sheet.

6

The number of employees means the average number of persons employed by the company in the year, determined as follows—

a

find for each month in the financial year the number of persons employed under contracts of service by the company in that month (whether throughout the month or not),

b

add together the monthly totals, and

c

divide by the number of months in the financial year.

7

This section is subject to section 383 (companies qualifying as small: parent companies).

C7 C8383Companies qualifying as small: parent companies

1

A parent company qualifies as a small company in relation to a financial year only if the group headed by it qualifies as a small group.

2

A group qualifies as small in relation to the parent company's first financial year if the qualifying conditions are met in that year.

3

A group qualifies as small in relation to a subsequent financial year of the parent company—

a

if the qualifying conditions are met in that year and the preceding financial year;

b

if the qualifying conditions are met in that year and the group qualified as small in relation to the preceding financial year;

c

if the qualifying conditions were met in the preceding financial year and the group qualified as small in relation to that year.

4

The qualifying conditions are met by a group in a year in which it satisfies two or more of the following requirements—

1. Aggregate turnover	F4Not more than £6.5 million net (or £7.8 million gross)
2. Aggregate balance sheet total	F5Not more than £3.26 million net (or £3.9 million gross)
3. Aggregate number of employees	Not more than 50

5

The aggregate figures are ascertained by aggregating the relevant figures determined in accordance with section 382 for each member of the group.

6

In relation to the aggregate figures for turnover and balance sheet total—

“net” means after any set-offs and other adjustments made to eliminate group transactions—
1. a
  in the case of Companies Act accounts, in accordance with regulations under section 404,
2. b
  in the case of IAS accounts, in accordance with international accounting standards; and
“gross” means without those set-offs and other adjustments.

A company may satisfy any relevant requirement on the basis of either the net or the gross figure.

7

The figures for each subsidiary undertaking shall be those included in its individual accounts for the relevant financial year, that is—

a

if its financial year ends with that of the parent company, that financial year, and

b

if not, its financial year ending last before the end of the financial year of the parent company.

If those figures cannot be obtained without disproportionate expense or undue delay, the latest available figures shall be taken.

C9 C10384Companies excluded from the small companies regime

c

is admitted to dealing on either the New York Stock Exchange or the exchange known as Nasdaq.

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 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.

5

A parent company that has a subsidiary undertaking in relation to which the above requirements do not apply must 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 accounts required to be prepared under this Part comply with the requirements of this Act (and, where applicable, of Article 4 of the IAS Regulation).

C15387C14Duty to keep accounting records: offence

1

If a company fails to comply with any provision of section 386 (duty to keep accounting records), an offence is committed by every officer of the company who is in default.

2

It is a defence for a person charged with such an offence to show that he acted honestly and that in the circumstances in which the company's business was carried on the default was excusable.

3

A person guilty of an offence under this section is liable—

a

on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);

b

on summary conviction—

i

in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);

ii

in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).

after the commencement of this Act,

is the last day of the month in which the anniversary of its incorporation falls.

5

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.

6

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.

7

This section has effect subject to the provisions of section 392 (alteration of accounting reference date).

C30 C31 C32 C33 C34392Alteration of accounting reference date

1

A company may by notice given to the registrar specify a new accounting reference date having effect in relation to—

a

the company's current accounting reference period and subsequent periods, or

b

the company's previous accounting reference period and subsequent periods.

A company's “previous accounting reference period” means the one immediately preceding its current accounting reference period.

2

The notice must 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.

3

A notice extending a company's current or previous accounting reference period is not effective if given less than five years after the end of an earlier accounting reference period of the company that was extended under this section.

This does not apply—

a

to a notice given by a company that is a subsidiary undertaking or parent undertaking of another EEA undertaking if the new accounting reference date coincides with that of the other EEA undertaking or, where that undertaking is not a company, with the last day of its financial year, or

b

where the company is in administration under Part 2 of the Insolvency Act 1986 (c. 45) or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

c

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

4

A notice under this section may not be given in respect of a previous accounting reference period if the period for filing accounts and reports for the financial year determined by reference to that accounting reference period has already expired.

5

An accounting reference period may not 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.

This does not apply where the company is in administration under Part 2 of the Insolvency Act 1986 (c. 45) or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).

6

In this section “EEA undertaking” means an undertaking established under the law of any part of the United Kingdom or the law of any other EEA State.

C109Chapter 4Annual accounts

Annotations:

Modifications etc. (not altering text)

C109

Pt. 15 Ch. 4 applied (with modifications) (6.4.2008) by The Insurance Accounts Directive (Miscellaneous Insurance Undertakings) Regulations 2008 (S.I. 2008/565), reg. 3

General

C35 C36 C37 C38393Accounts to give true and fair view

1

The directors of a company must not approve accounts for the purposes of this Chapter unless they are satisfied that they give a true and fair view of the assets, liabilities, financial position and profit or loss—

a

in the case of the company's individual accounts, of the company;

b

in the case of the company's group accounts, of the undertakings included in the consolidation as a whole, so far as concerns members of the company.

2

The auditor of a company in carrying out his functions under this Act in relation to the company's annual accounts must have regard to the directors' duty under subsection (1).

Individual accounts

C39 C40 C41 C42394Duty to prepare individual accounts

The directors of every company must prepare accounts for the company for each of its financial years.

Those accounts are referred to as the company's “individual accounts”.

is an authorised insurance company, a banking company, an e-money issuer, a MiFID investment firm or a UCITS management company, or

ii

carries on insurance market activity, or

c

a special register body as defined in section 117(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (c 52) or an employers' association as defined in section 122 of that Act or Article 4 of the Industrial Relations (Northern Ireland) Order 1992 (S.I. 1992/807) (NI 5).

C45394CDormant subsidiaries exemption: parent undertaking declaration of guarantee

1

A guarantee is given by a parent undertaking under this section when the directors of the subsidiary company deliver to the registrar a statement by the parent undertaking that it guarantees the subsidiary company under this section.

2

The statement under subsection (1) must be authenticated by the parent undertaking and must specify—

a

the name of the parent undertaking,

b

if the parent undertaking is incorporated in the United Kingdom, its registered number (if any),

c

if the parent undertaking is incorporated outside the United Kingdom and registered in the country in which it is incorporated, the identity of the register on which it is registered and the number with which it is so registered,

d

the name and registered number of the subsidiary company in respect of which the guarantee is being given,

e

the date of the statement, and

f

the financial year to which the guarantee relates.

3

A guarantee given under this section has the effect that—

a

the parent undertaking guarantees all outstanding liabilities to which the subsidiary company is subject at the end of the financial year to which the guarantee relates, until they are satisfied in full, and

b

the guarantee is enforceable against the parent undertaking by any person to whom the subsidiary company is liable in respect of those liabilities.

C46 C47 C48 C49395Individual accounts: applicable accounting framework

1

A company's individual accounts may be prepared—

a

in accordance with section 396 (“Companies Act individual accounts”), or

b

in accordance with international accounting standards (“IAS individual accounts”).

This is subject to the following provisions of this section and to section 407 (consistency of financial reporting within group).

2

The individual accounts of a company that is a charity must be Companies Act individual accounts.

3

After the first financial year in which the directors of a company prepare IAS individual accounts (“the first IAS year”), all subsequent individual accounts of the company must be prepared in accordance with international accounting standards unless there is a relevant change of circumstance.

4

There is a relevant change of circumstance if, at any time during or after the first IAS year—

a

the company becomes a subsidiary undertaking of another undertaking that does not prepare IAS individual accounts,

F8aa

the company ceases to be a subsidiary undertaking,

b

the company ceases to be a company with securities admitted to trading on a regulated market in an EEA State, or

c

a parent undertaking of the company ceases to be an undertaking with securities admitted to trading on a regulated market in an EEA State.

5

If, having changed to preparing Companies Act individual accounts following a relevant change of circumstance, the directors again prepare IAS individual accounts for the company, subsections (3) and (4) apply again as if the first financial year for which such accounts are again prepared were the first IAS year.

additional information to be provided by way of notes to the accounts.

4

If compliance with the regulations, and any other provision made by or under this Act as to the matters to be included in a company's individual accounts or in notes to those accounts, would not be sufficient to give a true and fair view, the necessary additional information must be given in the accounts or in a note to them.

5

If in special circumstances compliance with any of those provisions is inconsistent with the requirement to give a true and fair view, the directors must depart from that provision to the extent necessary to give a true and fair view.

Particulars of any such departure, the reasons for it and its effect must be given in a note to the accounts.

C55 C56 C57 C58397IAS individual accounts

Where the directors of a company prepare IAS individual accounts, they must state in the notes to the accounts that the accounts have been prepared in accordance with international accounting standards.

Group accounts: small companies

C59 C60398Option to prepare group accounts

If at the end of a financial year a company subject to the small companies regime is a parent company the directors, as well as preparing individual accounts for the year, may prepare group accounts for the year.

Group accounts: other companies

C61 C62 C63 C64399Duty to prepare group accounts

1

This section applies to companies that are not subject to the small companies regime.

2

If at the end of a financial year the company is a parent company the directors, as well as preparing individual accounts for the year, must prepare group accounts for the year unless the company is exempt from that requirement.

3

There are exemptions under–

section 400 (company included in EEA accounts of larger group),
section 401 (company included in non-EEA accounts of larger group), and
section 402 (company none of whose subsidiary undertakings need be included in the consolidation).

4

A company to which this section applies but which is exempt from the requirement to prepare group accounts, may do so.

C65 C66400Exemption for company included in EEA group accounts of larger group

1

A company is exempt from the requirement to prepare group accounts if it is itself a subsidiary undertaking and its immediate parent undertaking is established under the law of an EEA State, in the following cases—

a

where the company is a wholly-owned subsidiary of that parent undertaking;

b

where that parent undertaking holds more than 50% of the allotted shares in the company and notice requesting the preparation of group accounts has not been served on the company by shareholders holding in aggregate—

i

more than half of the remaining allotted shares in the company, or

ii

ii

the parent undertaking's annual report,

together with the auditor's report on them;

f

any requirement of Part 35 of this Act as to the delivery to the registrar of a certified translation into English must be met in relation to any document comprised in the accounts and reports delivered in accordance with paragraph (e).

3

For the purposes of subsection (1)(b) shares held by a wholly-owned subsidiary of the parent undertaking, or held on behalf of the parent undertaking or a wholly-owned subsidiary, shall be attributed to the parent undertaking.

4

The exemption does not apply to a company any of whose securities are admitted to trading on a regulated market in an EEA State.

5

Shares held by directors of a company for the purpose of complying with any share qualification requirement shall be disregarded in determining for the purposes of this section whether the company is a wholly-owned subsidiary.

6

In subsection (4) “securities” includes—

a

shares and stock,

b

debentures, including debenture stock, loan stock, bonds, certificates of deposit and other instruments creating or acknowledging indebtedness,

c

warrants or other instruments entitling the holder to subscribe for securities falling within paragraph (a) or (b), and

in accordance with the provisions of the Seventh Directive (83/349/EEC) (as modified, where relevant, by the provisions of the Bank Accounts Directive (86/635/EEC) or the Insurance Accounts Directive (91/674/EEC)), or

ii

in a manner equivalent to consolidated accounts and consolidated annual reports so drawn up;

c

the group accounts must be audited by one or more persons authorised to audit accounts under the law under which the parent undertaking which draws them up is established;

d

the company must disclose in its individual accounts that it is exempt from the obligation to prepare and deliver group accounts;

e

the company must state in its individual accounts the name of the parent undertaking which draws up the group accounts referred to above and—

i

if it is incorporated outside the United Kingdom, the country in which it is incorporated, or

ii

if it is unincorporated, the address of its principal place of business;

f

the company must deliver to the registrar, within the period for filing its accounts and reports for the financial year in question, copies of—

i

the group accounts, and

ii

where appropriate, the consolidated annual report,

together with the auditor's report on them;

g

any requirement of Part 35 of this Act as to the delivery to the registrar of a certified translation into English must be met in relation to any document comprised in the accounts and reports delivered in accordance with paragraph (f).

3

For the purposes of subsection (1)(b), shares held by a wholly-owned subsidiary of the parent undertaking, or held on behalf of the parent undertaking or a wholly-owned subsidiary, are attributed to the parent undertaking.

4

The exemption does not apply to a company any of whose securities are admitted to trading on a regulated market in an EEA State.

5

Shares held by directors of a company for the purpose of complying with any share qualification requirement shall be disregarded in determining for the purposes of this section whether the company is a wholly-owned subsidiary.

6

In subsection (4) “securities” includes—

a

shares and stock,

b

debentures, including debenture stock, loan stock, bonds, certificates of deposit and other instruments creating or acknowledging indebtedness,

c

warrants or other instruments entitling the holder to subscribe for securities falling within paragraph (a) or (b), and

d

certificates or other instruments that confer—

i

property rights in respect of a security falling within paragraph (a), (b) or (c),

ii

any right to acquire, dispose of, underwrite or convert a security, being a right to which the holder would be entitled if he held any such security to which the certificate or other instrument relates, or

iii

a contractual right (other than an option) to acquire any such security otherwise than by subscription.

C69 C70 C71 C72402Exemption if no subsidiary undertakings need be included in the consolidation

A parent company is exempt from the requirement to prepare group accounts if under section 405 all of its subsidiary undertakings could be excluded from consolidation in Companies Act group accounts.

Group accounts: general

C73 C74 C75 C76403Group accounts: applicable accounting framework

1

The group accounts of certain parent companies are required by Article 4 of the IAS Regulation to be prepared in accordance with international accounting standards (“IAS group accounts”).

2

The group accounts of other companies may be prepared—

a

in accordance with section 404 (“Companies Act group accounts”), or

b

in accordance with international accounting standards (“IAS group accounts”).

This is subject to the following provisions of this section.

3

The group accounts of a parent company that is a charity must be Companies Act group accounts.

4

After the first financial year in which the directors of a parent company prepare IAS group accounts (“the first IAS year”), all subsequent group accounts of the company must be prepared in accordance with international accounting standards unless there is a relevant change of circumstance.

5

There is a relevant change of circumstance if, at any time during or after the first IAS year—

a

the company becomes a subsidiary undertaking of another undertaking that does not prepare IAS group accounts,

b

the company ceases to be a company with securities admitted to trading on a regulated market in an EEA State, or

c

a parent undertaking of the company ceases to be an undertaking with securities admitted to trading on a regulated market in an EEA State.

6

If, having changed to preparing Companies Act group accounts following a relevant change of circumstance, the directors again prepare IAS group accounts for the company, subsections (4) and (5) apply again as if the first financial year for which such accounts are again prepared were the first IAS year.

C77 C78 I3 C79 C80 C81404Companies Act group accounts

1

Companies Act group accounts must comprise—

a

a consolidated balance sheet dealing with the state of affairs of the parent company and its subsidiary undertakings, and

b

a consolidated profit and loss account dealing with the profit or loss of the parent company and its subsidiary undertakings.

2

The accounts must give a true and fair view 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 accounts must comply with provision made by the Secretary of State by regulations as to—

a

the form and content of the consolidated balance sheet and consolidated profit and loss account, and

b

additional information to be provided by way of notes to the accounts.

4

If compliance with the regulations, and any other provision made by or under this Act as to the matters to be included in a company's group accounts or in notes to those accounts, would not be sufficient to give a true and fair view, the necessary additional information must be given in the accounts or in a note to them.

5

If in special circumstances compliance with any of those provisions is inconsistent with the requirement to give a true and fair view, the directors must depart from that provision to the extent necessary to give a true and fair view.

Particulars of any such departure, the reasons for it and its effect must be given in a note to the accounts.

C82 C83 C84 C85405Companies Act group accounts: subsidiary undertakings included in the consolidation

1

Where a parent company prepares Companies Act group accounts, all the subsidiary undertakings of the company must be included in the consolidation, subject to the following exceptions.

2

A subsidiary undertaking may be excluded from consolidation if its inclusion is not material for the purpose of giving a true and fair view (but two or more undertakings may be excluded only if they are not material taken together).

3

A subsidiary undertaking may be excluded from consolidation where—

a

severe long-term restrictions substantially hinder the exercise of the rights of the parent company over the assets or management of that undertaking, or

b

the information necessary for the preparation of group accounts cannot be obtained without disproportionate expense or undue delay, or

c

the interest of the parent company is held exclusively with a view to subsequent resale.

4

The reference in subsection (3)(a) to the rights of the parent company and the reference in subsection (3)(c) to the interest of the parent company are, respectively, to rights and interests held by or attributed to the company for the purposes of the definition of “parent undertaking” (see section 1162) in the absence of which it would not be the parent company.

C86 C87 C88 C89406IAS group accounts

Where the directors of a company prepare IAS group accounts, they must state in the notes to those accounts that the accounts have been prepared in accordance with international accounting standards.

C90 C91407Consistency of financial reporting within group

1

The directors of a parent company must secure that the individual accounts of—

a

the parent company, and

b

each of its subsidiary undertakings,

are all prepared using the same financial reporting framework, except to the extent that in their opinion there are good reasons for not doing so.

2

Subsection (1) does not apply if the directors do not prepare group accounts for the parent company.

3

Subsection (1) only applies to accounts of subsidiary undertakings that are required to be prepared under this Part.

4

Subsection (1) does not require accounts of undertakings that are charities to be prepared using the same financial reporting framework as accounts of undertakings which are not charities.

5

Subsection (1)(a) does not apply where the directors of a parent company prepare IAS group accounts and IAS individual accounts.

C92 C93408Individual profit and loss account where group accounts prepared

1

This section applies where—

a

a company prepares group accounts in accordance with this Act, and

b

the notes to the company's individual balance sheet show the company's profit or loss for the financial year determined in accordance with this Act.

2

F10The company's individual profit and loss account need not contain the information specified in section 411 (information about employee numbers and costs).

3

The company's individual profit and loss account must be approved in accordance with section 414(1) (approval by directors) but may be omitted from the company's annual accounts for the purposes of the other provisions of the Companies Acts.

4

The exemption conferred by this section is conditional upon its being disclosed in the company's annual accounts that the exemption applies.

Information to be given in notes to the accounts

C94 I4 C95409Information about related undertakings

1

The Secretary of State may make provision by regulations requiring information about related undertakings to be given in notes to a company's annual accounts.

2

The regulations—

a

may make different provision according to whether or not the company prepares group accounts, and

b

may specify the descriptions of undertaking in relation to which they apply, and make different provision in relation to different descriptions of related undertaking.

3

The regulations may provide that information need not be disclosed with respect to an undertaking that—

a

is established under the law of a country outside the United Kingdom, or

b

carries on business outside the United Kingdom,

if the following conditions are met.

4

The conditions are—

a

that in the opinion of the directors of the company the disclosure would be seriously prejudicial to the business of—

i

that undertaking,

ii

the company,

iii

any of the company's subsidiary undertakings, or

iv

any other undertaking which is included in the consolidation;

b

that the Secretary of State agrees that the information need not be disclosed.

5

Where advantage is taken of any such exemption, that fact must be stated in a note to the company's annual accounts.

C96 C97410Information about related undertakings: alternative compliance

1

This section applies where the directors of a company are of the opinion that the number of undertakings in respect of which the company is required to disclose information under any provision of regulations under section 409 (related undertakings) is such that compliance with that provision would result in information of excessive length being given in notes to the company's annual accounts.

2

The information need only be given in respect of—

a

the undertakings whose results or financial position, in the opinion of the directors, principally affected the figures shown in the company's annual accounts, and

b

where the company prepares group accounts, undertakings excluded from consolidation under section 405(3) (undertakings excluded on grounds other than materiality).

3

If advantage is taken of subsection (2)—

a

there must be included in the notes to the company's annual accounts a statement that the information is given only with respect to such undertakings as are mentioned in that subsection, and

b

the full information (both that which is disclosed in the notes to the accounts and that which is not) must be annexed to the company's next annual return.

For this purpose the “next annual return” means that next delivered to the registrar after the accounts in question have been approved under section 414.

4

3

The information need only be given to the extent necessary for enabling the financial position of the company to be assessed.

4

If the company qualifies as medium-sized in relation to the financial year (see sections 465 to 467) it need not comply with subsection (2)(b).

5

This section applies in relation to group accounts as if the undertakings included in the consolidation were a single company.

C100 C101411Information about employee numbers and costs

1

In the case of a company not subject to the small companies regime, the following information with respect to the employees of the company must be given in notes to the company's annual accounts—

a

the average number of persons employed by the company in the financial year, and

b

the average number of persons so employed within each category of persons employed by the company.

2

The categories by reference to which the number required to be disclosed by subsection (1)(b) is to be determined must be such as the directors may select having regard to the manner in which the company's activities are organised.

3

The average number required by subsection (1)(a) or (b) is determined by dividing the relevant annual number by the number of months in the financial year.

4

The relevant annual number is determined by ascertaining for each month in the financial year—

a

for the purposes of subsection (1)(a), the number of persons employed under contracts of service by the company in that month (whether throughout the month or not);

b

for the purposes of subsection (1)(b), the number of persons in the category in question of persons so employed;

and adding together all the monthly numbers.

5

In respect of all persons employed by the company during the financial year who are taken into account in determining the relevant annual number for the purposes of subsection (1)(a) there must also be stated the aggregate amounts respectively of—

a

wages and salaries paid or payable in respect of that year to those persons;

b

social security costs incurred by the company on their behalf; and

c

other pension costs so incurred.

This does not apply in so far as those amounts, or any of them, are stated elsewhere in the company's accounts.

6

In subsection (5)—

“pension costs” includes any costs incurred by the company in respect of—
1. a
  any pension scheme established for the purpose of providing pensions for persons currently or formerly employed by the company,
2. b
  any sums set aside for the future payment of pensions directly by the company to current or former employees, and
3. c
  any pensions paid directly to such persons without having first been set aside;
“social security costs” means any contributions by the company to any state social security or pension scheme, fund or arrangement.

F117

This section applies in relation to group accounts as if the undertakings included in the consolidation were a single company.

I5 C102412Information about directors' benefits: remuneration

If annual accounts are approved that do not comply with the requirements of this Act (and, where applicable, of Article 4 of the IAS Regulation), every director of the company who—

a

knew that they did not comply, or was reckless as to whether they complied, and

b

failed to take reasonable steps to secure compliance with those requirements or, as the case may be, to prevent the accounts from being approved,

commits an offence.

5

A person guilty of an offence under this section is liable—

a

on conviction on indictment, to a fine;

b

on summary conviction, to a fine not exceeding the statutory maximum.

C118Chapter 5Directors' report

Annotations:

Modifications etc. (not altering text)

C118

Pt. 15 Ch. 5 applied (with modifications) (6.4.2008) by The Insurance Accounts Directive (Miscellaneous Insurance Undertakings) Regulations 2008 (S.I. 2008/565), reg. 3

Directors' report

C110415Duty to prepare directors' report

1

The directors of a company must prepare a directors' report for each financial year of the company.

2

For a financial year in which—

a

the company is a parent company, and

b

the directors of the company prepare group accounts,

the directors' report must be a consolidated report (a “group directors' report”) relating to the undertakings included in the consolidation.

3

A group directors' report may, where appropriate, give greater emphasis to the matters that are significant to the undertakings included in the consolidation, taken as a whole.

4

In the case of failure to comply with the requirement to prepare a directors' report, an offence is committed by every person who—

a

was a director of the company immediately before the end of the period for filing accounts and reports for the financial year in question, and

b

failed to take all reasonable steps for securing compliance with that requirement.

5

A person guilty of an offence under this section is liable—

a

on conviction on indictment, to a fine;

b

on summary conviction, to a fine not exceeding the statutory maximum.

C111415AF17Directors' report: small companies exemption

1

A company is entitled to small companies exemption in relation to the directors' report for a financial year if—

a

it is entitled to prepare accounts for the year in accordance with the small companies regime, or

b

it would be so entitled but for being or having been a member of an ineligible group.

2

The exemption is relevant to—

section 416(3) (contents of report: statement of amount recommended by way of dividend),
section 417 (contents of report: business review), and
sections 444 to 446 (filing obligations of different descriptions of company).

I6 C112416Contents of directors' report: general

1

The directors' report for a financial year must state—

a

the names of the persons who, at any time during the financial year, were directors of the company, and

b

the principal activities of the company in the course of the year.

2

In relation to a group directors' report subsection (1)(b) has effect as if the reference to the company was to the undertakings included in the consolidation.

3

Except in the case of a company F14entitled to the small companies exemption, the report must state the amount (if any) that the directors recommend should be paid by way of dividend.

4

The Secretary of State may make provision by regulations as to other matters that must be disclosed in a directors' report.

Without prejudice to the generality of this power, the regulations may make any such provision as was formerly made by Schedule 7 to the Companies Act 1985.

I7417Contents of directors' report: business review

1

Unless the company is F15entitled to the small companies exemption, the directors' report must contain a business review.

2

The purpose of the business review is to inform members of the company and help them assess how the directors have performed their duty under section 172 (duty to promote the success of the company).

3

The business review must contain—

a

a fair review of the company's business, and

b

a description of the principal risks and uncertainties facing the company.

4

The review required is a balanced and comprehensive analysis of—

a

the development and performance of the company's business during the financial year, and

b

the position of the company's business at the end of that year,

consistent with the size and complexity of the business.

5

In the case of a quoted company the business review must, to the extent necessary for an understanding of the development, performance or position of the company's business, include—

a

the main trends and factors likely to affect the future development, performance and position of the company's business; and

b

information about—

i

environmental matters (including the impact of the company's business on the environment),

ii

the company's employees, and

iii

social and community issues,

including information about any policies of the company in relation to those matters and the effectiveness of those policies; and

c

subject to subsection (11), information about persons with whom the company has contractual or other arrangements which are essential to the business of the company.

If the review does not contain information of each kind mentioned in paragraphs (b)(i), (ii) and (iii) and (c), it must state which of those kinds of information it does not contain.

6

The review must, to the extent necessary for an understanding of the development, performance or position of the company's business, include—

a

analysis using financial key performance indicators, and

b

where appropriate, analysis using other key performance indicators, including information relating to environmental matters and employee matters.

“Key performance indicators” means factors by reference to which the development, performance or position of the company's business can be measured effectively.

7

Where a company qualifies as medium-sized in relation to a financial year (see sections 465 to 467), the directors' report for the year need not comply with the requirements of subsection (6) so far as they relate to non-financial information.

8

The review must, where appropriate, include references to, and additional explanations of, amounts included in the company's annual accounts.

9

In relation to a group directors' report this section has effect as if the references to the company were references to the undertakings included in the consolidation.

10

Nothing in this section requires the disclosure of information about impending developments or matters in the course of negotiation if the disclosure would, in the opinion of the directors, be seriously prejudicial to the interests of the company.

11

Nothing in subsection (5)(c) requires the disclosure of information about a person if the disclosure would, in the opinion of the directors, be seriously prejudicial to that person and contrary to the public interest.

made such enquiries of his fellow directors and of the company's auditors for that purpose, and

b

taken such other steps (if any) for that purpose,

as are required by his duty as a director of the company to exercise reasonable care, skill and diligence.

5

Where a directors' report containing the statement required by this section is approved but the statement is false, every director of the company who—

a

knew that the statement was false, or was reckless as to whether it was false, and

b

failed to take reasonable steps to prevent the report from being approved,

commits an offence.

6

A person guilty of an offence under subsection (5) is liable—

Any separate corporate governance statement must be approved by the board of directors and signed on behalf of the board by a director or the secretary of the company.

Chapter 6Quoted companies: directors' remuneration report

C119420Duty to prepare directors' remuneration report

1

c

what is to be the auditable part of the report.

2

Without prejudice to the generality of this power, the regulations may make any such provision as was made, immediately before the commencement of this Part, by Schedule 7A to the Companies Act 1985 (c. 6).

3

It is the duty of—

a

any director of a company, and

b

any person who is or has at any time in the preceding five years been a director of the company,

to give notice to the company of such matters relating to himself as may be necessary for the purposes of regulations under this section.

4

A person who makes default in complying with subsection (3) commits an offence and is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

C121 C122422Approval and signing of directors' remuneration report

how information is to be set out in the document.

5

Sections 422(2) and (3), 454, 456 and 463 apply in relation to such a document as they apply in relation to a directors' remuneration report.

6

In this section, “directors' remuneration policy” means the policy of a company with respect to the matters mentioned in section 421(2A).

Chapter 7Publication of accounts and reports

Duty to circulate copies of accounts and reports

C123 C124 C125 C126 C127 C128 C129423Duty to circulate copies of annual accounts and reports

1

Every company must send a copy of its annual accounts and reports for each financial year 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.

C1302

Copies need not be sent to a person for whom the company does not have a current address.

C1303

A company has a “current address” for a person if—

a

an address has been notified to the company by the person as one at which documents may be sent to him, and

b

the company has no reason to believe that documents sent to him at that address will not reach him.

C1304

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.

5

Where copies are sent out over a period of days, references in the Companies Acts to the day on which copies are sent out shall be read as references to the last day of that period.

6

This section has effect subject to section 426 (option to provide summary financial statement).

C131 C132 C133 C134424Time allowed for sending out copies of accounts and reports

1

The time allowed for sending out copies of the company's annual accounts and reports is as follows.

2

A private company must comply with section 423 not later than—

a

the end of the period for filing accounts and reports, or

b

if earlier, the date on which it actually delivers its accounts and reports to the registrar.

3

A public company must comply with section 423 at least 21 days before the date of the relevant accounts meeting.

4

If in the case of a public company copies are sent out later than is required by subsection (3), they shall, despite that, be deemed to have been duly sent if it is so agreed by all the members entitled to attend and vote at the relevant accounts meeting.

5

Whether the time allowed is that for a private company or a public company is determined by reference to the company's status immediately before the end of the accounting reference period by reference to which the financial year for the accounts in question was determined.

6

In this section the “relevant accounts meeting” means the accounts meeting of the company at which the accounts and reports in question are to be laid.

C135 C136 C137 C138 C139 C140425Default in sending out copies of accounts and reports: offences

b

provided any conditions so specified are complied with,

provide a summary financial statement instead of copies of the accounts and reports required to be sent out in accordance with section 423.

C142 C1432

Copies of those accounts and reports must, however, be sent to any person entitled to be sent them in accordance with that section and who wishes to receive them.

C1423

The Secretary of State may make provision by regulations as to the manner in which it is to be ascertained, whether before or after a person becomes entitled to be sent a copy of those accounts and reports, whether he wishes to receive them.

C1424

A summary financial statement must comply with the requirements of—

section 427 (form and contents of summary financial statement: unquoted companies), or
section 428 (form and contents of summary financial statement: quoted companies).

5

This section applies to copies of accounts and reports required to be sent out by virtue of section 146 to a person nominated to enjoy information rights as it applies to copies of accounts and reports required to be sent out in accordance with section 423 to a member of the company.

6

Regulations under this section are subject to negative resolution procedure.

I10 C144427Form and contents of summary financial statement: unquoted companies

1

A summary financial statement by a company that is not a quoted company must—

a

be derived from the company's annual accounts, and

b

be prepared in accordance with this section and regulations made under it.

2

The summary financial statement must be in such form, and contain such information, as the Secretary of State may specify by regulations.

The regulations may require the statement to include information derived from the directors' report.

3

Nothing in this section or regulations made under it prevents a company from including in a summary financial statement additional information derived from the company's annual accounts or the directors' report.

4

The summary financial statement must—

a

state that it is only a summary of information derived from the company's annual accounts;

b

state whether it contains additional information derived from the directors' report and, if so, that it does not contain the full text of that report;

c

state how a person entitled to them can obtain a full copy of the company's annual accounts and the directors' report;

d

contain a statement by the company's auditor of his opinion as to whether the summary financial statement—

i

is consistent with the company's annual accounts and, where information derived from the directors' report is included in the statement, with that report, and

ii

complies with the requirements of this section and regulations made under it;

e

state whether the auditor's 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;

f

state whether, in that report, the auditor's statement under section 496 (whether directors' report consistent with accounts) was qualified or unqualified and, if it was qualified, set out the qualified statement in full together with any further material needed to understand the qualification;

g

state whether that auditor's report contained a statement under—

i

section 498(2)(a) or (b) (accounting records or returns inadequate or accounts not agreeing with records and returns), or

ii

section 498(3) (failure to obtain necessary information and explanations),

and if so, set out the statement in full.

5

Regulations under this section may provide that any specified material may, instead of being included in the summary financial statement, be sent separately at the same time as the statement.

6

Regulations under this section are subject to negative resolution procedure.

I11 C145428Form and contents of summary financial statement: quoted companies

1

A summary financial statement by a quoted company must—

a

be derived from the company's annual accounts and the directors' remuneration report, and

b

be prepared in accordance with this section and regulations made under it.

2

The summary financial statement must be in such form, and contain such information, as the Secretary of State may specify by regulations.

The regulations may require the statement to include information derived from the directors' report.

3

Nothing in this section or regulations made under it prevents a company from including in a summary financial statement additional information derived from the company's annual accounts, the directors' remuneration report or the directors' report.

4

The summary financial statement must—

a

state that it is only a summary of information derived from the company's annual accounts and the directors' remuneration report;

b

state whether it contains additional information derived from the directors' report and, if so, that it does not contain the full text of that report;

c

state how a person entitled to them can obtain a full copy of the company's annual accounts, the directors' remuneration report or the directors' report;

d

contain a statement by the company's auditor of his opinion as to whether the summary financial statement—

i

is consistent with the company's annual accounts and the directors' remuneration report and, where information derived from the directors' report is included in the statement, with that report, and

ii

complies with the requirements of this section and regulations made under it;

e

state whether the auditor's report on the annual accounts and the auditable part of the directors' remuneration report 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;

f

state whether that auditor's report contained a statement under—

i

section 498(2) (accounting records or returns inadequate or accounts or directors' remuneration report not agreeing with records and returns), or

ii

section 498(3) (failure to obtain necessary information and explanations),

and if so, set out the statement in full;

g

state whether, in that report, the auditor's statement under section 496 (whether directors' report consistent with accounts) was qualified or unqualified and, if it was qualified, set out the qualified statement in full together with any further material needed to understand the qualification.

5

Regulations under this section may provide that any specified material may, instead of being included in the summary financial statement, be sent separately at the same time as the statement.

6

Regulations under this section are subject to negative resolution procedure.

C146 C147429Summary financial statements: offences

C157 C158 C159 C160 C161 C162432Right of member or debenture holder to copies of accounts and reports: quoted companies

If a company publishes any of its statutory accounts, they must be accompanied by the auditor's report on those accounts (unless the company is exempt from audit and the directors have taken advantage of that exemption).

2

A company that prepares statutory group accounts for a financial year must not publish its statutory individual accounts for that year without also publishing with them its statutory group accounts.

C1713

A company's “statutory accounts” are its accounts for a financial year as required to be delivered to the registrar under section 441.

4

If a company contravenes any provision of this section, an offence is committed by—

a

the company, and

b

every officer of the company who is in default.

5

A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

C172 C1736

This section does not apply in relation to the provision by a company of a summary financial statement (see section 426).

C174 C175 C176 C177435Requirements in connection with publication of non-statutory accounts

1

If a company publishes non-statutory accounts, it must 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, and

c

whether an auditor's report has been made on the company's statutory accounts for any such financial year, and if so whether the report—

i

was qualified or unqualified, or included a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report, or

ii

contained a statement under section 498(2) (accounting records or returns inadequate or accounts or directors' remuneration report not agreeing with records and returns), or section 498(3) (failure to obtain necessary information and explanations).

2

The company must not publish with non-statutory accounts the auditor's report on the company's statutory accounts.

3

References in this section 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 a group headed by the company relating to, or purporting to deal with, a financial year of the company,

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

4

In subsection (3)(b) “a group headed by the company” means a group consisting of the company and any other undertaking (regardless of whether it is a subsidiary undertaking of the company) other than a parent undertaking of the company.

5

If a company contravenes any provision of this section, an offence is committed by—

a

the company, and

b

every officer of the company who is in default.

6

A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

C178 C1797

This section does not apply in relation to the provision by a company of a summary financial statement (see section 426).

C180 C181 C182 C183 C184 C185 C186 C187 C188 C189436Meaning of “publication” in relation to accounts and reports

1

This section has effect for the purposes of—

section 433 (name of signatory to be stated in published copies of accounts and reports),
section 434 (requirements in connection with publication of statutory accounts), and
section 435 (requirements in connection with publication of non-statutory accounts).

C190 C1912

For the purposes of those sections a company is 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.

Chapter 8Public companies: laying of accounts and reports before general meeting

C192 C193 C194 C195 C196437Public companies: laying of accounts and reports before general meeting

1

The directors of a public company must lay before the company in general meeting copies of its annual accounts and reports.

2

This section must be complied with not later than the end of the period for filing the accounts and reports in question.

3

In the Companies Acts“accounts meeting”, in relation to a public company, means a general meeting of the company at which the company's annual accounts and reports are (or are to be) laid in accordance with this section.

C197 C198 C199 C200438Public companies: offence of failure to lay accounts and reports

1

If the requirements of section 437 (public companies: laying of accounts and reports before general meeting) are not complied with before the end of the period allowed, every person who immediately before the end of that period was a director of the company commits an offence.

2

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.

3

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

4

A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 5 on the standard scale.

Chapter 9Quoted companies: members' approval of directors' remuneration report

C201439Quoted companies: members' approval of directors' remuneration report

1

A quoted company must, prior to the accounts meeting, give to the members of the company entitled to be sent notice of the meeting notice of the intention to move at the meeting, as an ordinary resolution, a resolution approving the directors' remuneration report for the financial year.

2

The notice may be given in any manner permitted for the service on the member of notice of the meeting.

3

The business that may be dealt with at the accounts meeting includes the resolution.

This is so notwithstanding any default in complying with subsection (1) or (2).

4

The existing directors must ensure that the resolution is put to the vote of the meeting.

5

No entitlement of a person to remuneration is made conditional on the resolution being passed by reason only of the provision made by this section.

6

In this section—

“the accounts meeting” means the general meeting of the company before which the company's annual accounts for the financial year are to be laid; and
“existing director” means a person who is a director of the company immediately before that meeting.

C202440Quoted companies: offences in connection with procedure for approval

1

In the event of default in complying with section 439(1) (notice to be given of resolution for approval of directors' remuneration report), an offence is committed by every officer of the company who is in default.

2

If the resolution is not put to the vote of the accounts meeting, an offence is committed by each existing director.

3

It is a defence for a person charged with an offence under subsection (2) to prove that he took all reasonable steps for securing that the resolution was put to the vote of the meeting.

4

A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

5

In this section—

“the accounts meeting” means the general meeting of the company before which the company's annual accounts for the financial year are to be laid; and
“existing director” means a person who is a director of the company immediately before that meeting.

Chapter 10Filing of accounts and reports

Duty to file accounts and reports

C203 C204 C205 C206 C207 C208 C209 C210 C211441Duty to file accounts and reports with the registrar

1

The directors of a company must deliver to the registrar for each financial year the accounts and reports required by—

section 444 (filing obligations of companies subject to small companies regime),
F20section 444A (filing obligations of companies entitled to small companies exemption in relation to directors' report),
section 445 (filing obligations of medium-sized companies),
section 446 (filing obligations of unquoted companies), or
section 447 (filing obligations of quoted companies).

2

This is subject to section 448 (unlimited companies exempt from filing obligations).

C212 C213 C214 C215 C216 C217 C218442Period allowed for filing accounts

1

This section specifies the period allowed for the directors of a company to comply with their obligation under section 441 to deliver accounts and reports for a financial year to the registrar.

This is referred to in the Companies Acts as the “period for filing” those accounts and reports.

2

The period is—

a

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

b

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

This is subject to the following provisions of this section.

3

If the relevant accounting reference period is the company's first and is a period of more than twelve months, the period is—

a

nine months or six months, as the case may be, from the first anniversary of the incorporation of the company, or

b

three months after the end of the accounting reference period,

whichever last expires.

4

If the relevant accounting reference period is treated as shortened by virtue of a notice given by the company under section 392 (alteration of accounting reference date), the period is—

a

that applicable in accordance with the above provisions, or

b

three 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

Whether the period allowed is that for a private company or a public company is determined by reference to the company's status immediately before the end of the relevant accounting reference period.

7

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.

C219 C220 C221 C222 C223 C224443Calculation of period allowed

1

This section applies for the purposes of calculating the period for filing a company's accounts and reports which is expressed as a specified number of months from a specified date or after the end of a specified previous period.

2

Subject to the following provisions, the period ends with the date in the appropriate month corresponding to the specified date or the last day of the specified previous period.

3

If the specified date, or the last day of the specified previous period, is the last day of a month, the period ends with the last day of the appropriate month (whether or not that is the corresponding date).

4

If—

a

the specified date, or the last day of the specified previous period, is not the last day of a month but is the 29th or 30th, and

b

the appropriate month is February,

the period ends with the last day of February.

5

“The appropriate month” means the month that is the specified number of months after the month in which the specified date, or the end of the specified previous period, falls.

Filing obligations of different descriptions of company

C225 C226 C227 C228 I12 C229444Filing obligations of companies subject to small companies regime

1

The directors of a company subject to the small companies regime—

a

must deliver to the registrar for each financial year a copy of a balance sheet drawn up as at the last day of that year, and

b

may also deliver to the registrar—

i

a copy of the company's profit and loss account for that year, and

ii

a copy of the directors' report for that year.

2

The directors must also deliver to the registrar a copy of the auditor's report on F21the accounts (and any directors' report) that it delivers.

The directors of a company that is entitled to small companies exemption in relation to the directors' report for a financial year—

a

must deliver to the registrar a copy of the company's annual accounts for that year, and

b

may also deliver to the registrar a copy of the directors' report.

2

The directors must also deliver to the registrar a copy of the auditor's report on the accounts (and any directors' report) that it delivers. This does not apply if the company is exempt from audit and the directors have taken advantage of that exception.

3

The copies of the balance sheet and directors' report delivered to the registrar under this section must state the name of the person who signed it on behalf of the board.

F224

The copy of the auditor's report delivered to the registrar under this section must—

a

state the name of the auditor and (where the auditor is a firm) the name of the person who signed it as senior statutory auditor, or

b

if the conditions in section 506 (circumstances in which names may be omitted) are met, state that a resolution has been passed and notified to the Secretary of State in accordance with that section.

5

This section does not apply to companies within section 444 (filing obligations of companies subject to the small companies regime).

C232 I13 C233 C234445Filing obligations of medium-sized companies

1

The directors of a company that qualifies as a medium-sized company in relation to a financial year (see sections 465 to 467) must deliver to the registrar a copy of—

a

the company's annual accounts, and

b

the directors' report.

2

They must also deliver to the registrar a copy of the auditor's report on those accounts (and on the directors' report).

This does not apply if the company is exempt from audit and the directors have taken advantage of that exemption.

3

Where the company prepares Companies Act accounts, the directors may deliver to the registrar a copy of the company's annual accounts for the financial year—

a

that includes a profit and loss account in which items are combined in accordance with regulations made by the Secretary of State, and

b

that does not contain items whose omission is authorised by the regulations.

These are referred to in this Part as “abbreviated accounts”.

4

If abbreviated accounts are delivered to the registrar the obligation to deliver a copy of the auditor's report on the accounts is to deliver a copy of the special auditor's report required by section 449.

5

The copies of the balance sheet and directors' report delivered to the registrar under this section must state the name of the person who signed it on behalf of the board.

6

The copy of the auditor's report delivered to the registrar under this section must—

a

state the name of the auditor and (where the auditor is a firm) the name of the person who signed it as senior statutory auditor, or

if the conditions in section 506 (circumstances in which names may be omitted) are met, state that a resolution has been passed and notified to the Secretary of State in accordance with that section.

5

This section does not apply to companies within—

a

section 444 (filing obligations of companies subject to the small companies regime), F28. . .

F29aa

section 444A (filing obligations of companies entitled to small companies exemption in relation to directors' report), or

b

section 445 (filing obligations of medium-sized companies).

C238 I15 C239447Filing obligations of quoted companies

1

The directors of a quoted company must deliver to the registrar for each financial year of the company a copy of—

a

the company's annual accounts,

b

the directors' remuneration report, F30. . .

c

the directors' report.F31, and

d

any separate corporate governance statement.

is an authorised insurance company, a banking company, an e-Money issuer, a MiFID investment firm or a UCITS management company, or

ii

carries on insurance market activity, or

c

a special register body as defined in section 117(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (c 52) or an employers' association as defined in section 122 of that Act or Article 4 of the Industrial Relations (Northern Ireland) Order 1992 (S.I. 1992/807) (NI 5).

C244448CDormant subsidiaries filing exemption: parent undertaking declaration of guarantee

b

if that report contained a statement under—

i

section 498(2)(a) or (b) (accounts, records or returns inadequate or accounts not agreeing with records and returns), or

ii

section 498(3) (failure to obtain necessary information and explanations),

the special report must set out that statement in full.

4

The provisions of—

sections 503 to 506 (signature of auditor's report), and
sections 507 to 509 (offences in connection with auditor's report),

apply to a special report under this section as they apply to an auditor's report on the company's annual accounts prepared under Part 16.

5

If abbreviated accounts are delivered to the registrar, the references in section 434 or 435 (requirements in connection with publication of accounts) to the auditor's report on the company's annual accounts shall be read as references to the special auditor's report required by this section.

C247 C248450Approval and signing of abbreviated accounts

1

Abbreviated accounts must be approved by the board of directors and signed on behalf of the board by a director of the company.

2

The signature must be on the balance sheet.

3

The balance sheet must contain in a prominent position above the signature a statement to the effect that it is prepared in accordance with the special provisions of this Act relating (as the case may be) to companies subject to the small companies regime or to medium-sized companies.

4

If abbreviated accounts are approved that do not comply with the requirements of regulations under the relevant section, every director of the company who—

a

knew that they did not comply, or was reckless as to whether they complied, and

b

failed to take reasonable steps to prevent them from being approved,

commits an offence.

5

A person guilty of an offence under subsection (4) is liable—

a

on conviction on indictment, to a fine;

b

on summary conviction, to a fine not exceeding the statutory maximum.

Failure to file accounts and reports

C251 C252 C253 C254 C255 C256 C257451C249 C250Default in filing accounts and reports: offences

1

If the requirements of section 441 (duty to file accounts and reports) are not complied with in relation to a company's accounts and reports for a financial year before the end of the period for filing those accounts and reports, every person who immediately before the end of that period was a director of the company commits an offence.

2

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.

3

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

4

A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 5 on the standard scale.

C260 C261 C262 C263 C264452C258 C259Default in filing accounts and reports: court order

1

If—

a

the requirements of section 441 (duty to file accounts and reports) are not complied with in relation to a company's accounts and reports for a financial year before the end of the period for filing those accounts and reports, and

b

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.

2

The court's order may provide that all costs (in Scotland, expenses) of and incidental to the application are to be borne by the directors.

I17 C267453C265 C266Civil penalty for failure to file accounts and reports

1

Where the requirements of section 441 are not complied with in relation to a company's accounts and reports for a financial year before the end of the period for filing those accounts and reports, the company is liable to a civil penalty.

This is in addition to any liability of the directors under section 451.

2

The amount of the penalty shall be determined in accordance with regulations made by the Secretary of State by reference to—

a

the length of the period between the end of the period for filing the accounts and reports in question and the day on which the requirements are complied with, and

b

whether the company is a private or public company.

3

The penalty may be recovered by the registrar and is to be paid 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.

5

Regulations under this section having the effect of increasing the penalty payable in any case are subject to affirmative resolution procedure.

Otherwise, the regulations are subject to negative resolution procedure.

Chapter 11Revision of defective accounts and reports

Voluntary revision

C268 C269 I18 C270454Voluntary revision of accounts etc

1

If it appears to the directors of a company that—

a

the company's annual accounts,

b

the directors' remuneration report or the directors' report, or

c

i

sent out to members and others under section 423,

ii

laid before the company in general meeting, or

iii

delivered to the registrar,

or where a summary financial statement containing information derived from the previous accounts or report has been sent to members under section 426;

d

5

If the court finds that the accounts or report did not comply with the requirements of this Act (or, where applicable, of Article 4 of the IAS Regulation) it may order that all or part of—

a

the costs (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 or a revised report,

are to be borne by such of the directors as were party to the approval of the defective accounts or report.

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

6

Where the court makes an order under subsection (5) it shall have regard to whether the directors party to the approval of the defective accounts or report knew or ought to have known that the accounts or report did not comply with the requirements of this Act (or, where applicable, of Article 4 of the IAS Regulation), and it may exclude one or more directors from the order or order the payment of different amounts by different directors.

7

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

8

The provisions of this section apply equally to revised annual accounts and revised directors' reports, in which case they have effect as if the references to revised accounts or reports were references to further revised accounts or reports.

C278 I19457Other persons authorised to apply to the court

1

The Secretary of State may by order (an “authorisation order”) authorise for the purposes of section 456 any person appearing to him—

a

to have an interest in, and to have satisfactory procedures directed to securing, compliance by companies with the requirements of this Act (or, where applicable, of Article 4 of the IAS Regulation) relating to accounts and directors' reports,

b

to have satisfactory procedures for receiving and investigating complaints about companies' annual accounts and directors' reports, 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

If the authorised person is an unincorporated association, proceedings brought in, or in connection with, the exercise of any function by the association as an authorised person may be brought by or against the association in the name of a body corporate whose constitution provides for the establishment of the association.

5

An authorisation order may contain such requirements or other provisions relating to the exercise of functions by the authorised person as appear to the Secretary of State to be appropriate.

No such order is to be made unless it appears to the Secretary of State that the person would, if authorised, exercise his functions as an authorised person in accordance with the provisions proposed.

6

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

7

An order under this section is subject to negative resolution procedure.

C279 C280 C281458Disclosure of information by tax authorities

1

The Commissioners for Her Majesty's Revenue and Customs may disclose information to a person authorised under section 457 for the purpose of facilitating—

a

the taking of steps by that person to discover whether there are grounds for an application to the court under section 456 (application in respect of defective accounts etc), or

b

a decision by the authorised person whether to make such an application.

2

This section applies despite any statutory or other restriction on the disclosure of information.

Provided that, in the case of personal data within the meaning of the Data Protection Act 1998 (c. 29), information is not to be disclosed in contravention of that Act.

3

Information disclosed to an authorised person under this section—

a

may not be used except in or in connection with—

i

taking steps to discover whether there are grounds for an application to the court under section 456, or

ii

deciding whether or not to make such an application,

If it appears to the court that the person has failed to comply with a requirement under subsection (2), it may order the person to take such steps as it directs for securing that the documents are produced or the information or explanations are provided.

6

A statement made by a person in response to a requirement under subsection (2) or an order under subsection (5) may not be used in evidence against him in any criminal proceedings.

7

Nothing in this section compels any person to disclose documents or information in respect of which a claim to legal professional privilege (in Scotland, to confidentiality of communications) could be maintained in legal proceedings.

8

In this section “document” includes information recorded in any form.

if the body is a company, any shadow director is treated as an officer of the company.

C289 C290 C291461C288Permitted disclosure of information obtained under compulsory powers

1

The prohibition in section 460 of the disclosure of information obtained in pursuance of a requirement or order under section 459 (power of authorised person to require documents etc) that relates to the private affairs of an individual or to any particular business has effect subject to the following exceptions.

2

It does not apply to the disclosure of information for the purpose of facilitating the carrying out by the authorised person of his functions under section 456.

3

It does not apply to disclosure to—

a

the Secretary of State,

b

the Department of Enterprise, Trade and Investment for Northern Ireland,

c

the Treasury,

d

the Bank of England,

e

the Financial Services Authority, or

f

the Commissioners for Her Majesty's Revenue and Customs.

4

It does not apply to disclosure—

a

for the purpose of assisting a body designated by an order under F52section 1252 (delegation of functions of the Secretary of State) to exercise its functions under F53Part 42 ;

b

with a view to the institution of, or otherwise for the purposes of, disciplinary proceedings relating to the performance by an accountant or auditor of his professional duties;

c

for the purpose of enabling or assisting the Secretary of State or the Treasury to exercise any of their functions under any of the following—

i

the Companies Acts,

ii

Part 5 of the Criminal Justice Act 1993 (c. 36) (insider dealing),

iii

the Insolvency Act 1986 (c. 45) or the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)),

iv

the Company Directors Disqualification Act 1986 (c. 46) or the Company Directors Disqualification (Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I. 4)),

v

the Financial Services and Markets Act 2000 (c. 8);

d

for the purpose of enabling or assisting the Department of Enterprise, Trade and Investment for Northern Ireland to exercise any powers conferred on it by the enactments relating to companies, directors' disqualification or insolvency;

e

for the purpose of enabling or assisting the Bank of England to exercise its functions;

f

for the purpose of enabling or assisting the Commissioners for Her Majesty's Revenue and Customs to exercise their functions;

g

for the purpose of enabling or assisting the Financial Services Authority to exercise its functions under any of the following—

i

the legislation relating to friendly societies or to industrial and provident societies,

ii

the Building Societies Act 1986 (c. 53),

iii

Part 7 of the Companies Act 1989 (c. 40),

iv

the Financial Services and Markets Act 2000; or

h

in pursuance of any F40EU obligation.

5

It does not apply to disclosure to a body exercising functions of a public nature under legislation in any country or territory outside the United Kingdom that appear to the authorised person to be similar to his functions under section 456 for the purpose of enabling or assisting that body to exercise those functions.

1. Turnover	F41Not more than £25.9 million
2. Balance sheet total	F42Not more than £12.9 million
3. Number of employees	Not more than 250

4

For a period that is a company's financial year but not in fact a year the maximum figures for turnover must be proportionately adjusted.

5

The balance sheet total means the aggregate of the amounts shown as assets in the company's balance sheet.

6

The number of employees means the average number of persons employed by the company in the year, determined as follows—

a

find for each month in the financial year the number of persons employed under contracts of service by the company in that month (whether throughout the month or not),

b

add together the monthly totals, and

c

divide by the number of months in the financial year.

7

This section is subject to section 466 (companies qualifying as medium-sized: parent companies).

C298 C299466Companies qualifying as medium-sized: parent companies

1

A parent company qualifies as a medium-sized company in relation to a financial year only if the group headed by it qualifies as a medium-sized group.

2

A group qualifies as medium-sized in relation to the parent company's first financial year if the qualifying conditions are met in that year.

3

A group qualifies as medium-sized in relation to a subsequent financial year of the parent company—

a

if the qualifying conditions are met in that year and the preceding financial year;

b

if the qualifying conditions are met in that year and the group qualified as medium-sized in relation to the preceding financial year;

c

if the qualifying conditions were met in the preceding financial year and the group qualified as medium-sized in relation to that year.

4

The qualifying conditions are met by a group in a year in which it satisfies two or more of the following requirements—

1. Aggregate turnover	F43Not more than £25.9 million net (or £31.1 million gross)
2. Aggregate balance sheet total	F44Not more than £12.9 million net (or £15.5 million gross)
3. Aggregate number of employees	Not more than 250

5

The aggregate figures are ascertained by aggregating the relevant figures determined in accordance with section 465 for each member of the group.

6

In relation to the aggregate figures for turnover and balance sheet total—

“net” means after any set-offs and other adjustments made to eliminate group transactions—
1. a
  in the case of Companies Act accounts, in accordance with regulations under section 404,
2. b
  in the case of IAS accounts, in accordance with international accounting standards; and
“gross” means without those set-offs and other adjustments.

A company may satisfy any relevant requirement on the basis of either the net or the gross figure.

7

The figures for each subsidiary undertaking shall be those included in its individual accounts for the relevant financial year, that is—

a

if its financial year ends with that of the parent company, that financial year, and

b

if not, its financial year ending last before the end of the financial year of the parent company.

If those figures cannot be obtained without disproportionate expense or undue delay, the latest available figures shall be taken.

C300 C301467Companies excluded from being treated as medium-sized

The maximum penalty for any such offence may not be greater than is provided in relation to an offence under the existing provision.

5

The regulations may provide for civil penalties in circumstances corresponding to those within section 453(1) (civil penalty for failure to file accounts and reports).

The provisions of section 453(2) to (5) apply in relation to any such penalty.

Other supplementary provisions

C304 C305 C306469Preparation and filing of accounts in euros

1

The amounts set out in the annual accounts of a company may also be shown in the same accounts translated into euros.

2

When complying with section 441 (duty to file accounts and reports), the directors of a company may deliver to the registrar an additional copy of the company's annual accounts in which the amounts have been translated into euros.

3

In both cases—

a

the amounts must have been translated at the exchange rate prevailing on the date to which the balance sheet is made up, and

b

that rate must be disclosed in the notes to the accounts.

4

For the purposes of sections 434 and 435 (requirements in connection with published accounts) any additional copy of the company's annual accounts delivered to the registrar under subsection (2) above shall be treated as statutory accounts of the company.

In the case of such a copy, references in those sections to the auditor's report on the company's annual accounts shall be read as references to the auditor's report on the annual accounts of which it is a copy.

I24470Power to apply provisions to banking partnerships

1

The Secretary of State may by regulations apply to banking partnerships, subject to such exceptions, adaptations and modifications as he considers appropriate, the provisions of this Part (and of regulations made under this Part) applying to banking companies.

2

A “banking partnership” means a partnership which has permission under Part 4 of the Financial Services and Markets Act 2000 (c. 8).

But a partnership is not a banking partnership if it has permission to accept deposits only for the purpose of carrying on another regulated activity in accordance with that permission.

3

Expressions used in this section that are also used in the provisions regulating activities under the Financial Services and Markets Act 2000 have the same meaning here as they do in those provisions.

See section 22 of that Act, orders made under that section and Schedule 2 to that Act.

4

Regulations under this section are subject to affirmative resolution procedure.

C307 C308 C309 C310471Meaning of “annual accounts” and related expressions

1

In this Part a company's “annual accounts”, in relation to a financial year, means—

a

the company's individual accounts for that year (see section 394), and

b

any group accounts prepared by the company for that year (see sections 398 and 399).

This is subject to section 408 (option to omit individual profit and loss account from annual accounts where information given in group accounts).

2

In the case of an unquoted company, its “annual accounts and reports” for a financial year are—

a

its annual accounts,

b

the directors' report, and

c

the auditor's report on those accounts and the directors' report (unless the company is exempt from audit).

3

In the case of a quoted company, its “annual accounts and reports” for a financial year are—

a

its annual accounts,

b

the directors' remuneration report,

c

the directors' report, and

d

the auditor's report on those accounts, on the auditable part of the directors' remuneration report and on the directors' report.

C311 C312 C313 C314472Notes 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 or international accounting standards, and required or allowed by any such provision to be given in a note to company accounts.

F51 C315472AMeaning of “corporate governance statement” etc

1

In this Part “corporate governance statement” means the statement required by rules 7.2.1 to 7.2.11 in the Disclosure Rules and Transparency Rules sourcebook issued by the Financial Services Authority.

2

Those rules were inserted by Annex C of the Disclosure Rules and Transparency Rules Sourcebook (Corporate Governance Rules) Instrument 2008 made by the Authority on 26th June 2008 (FSA 2008/32).

3

A “separate” corporate governance statement means one that is not included in the directors' report.

C316 I25 C317473Parliamentary procedure for certain regulations under this Part

1

This section applies to regulations under the following provisions of this Part—

section 396 (Companies Act individual accounts),
section 404 (Companies Act group accounts),
section 409 (information about related undertakings),
section 412 (information about directors' benefits: remuneration, pensions and compensation for loss of office),
section 416 (contents of directors' report: general),
section 421 (contents of directors' remuneration report),
section 444 (filing obligations of companies subject to small companies regime),
section 445 (filing obligations of medium-sized companies),
section 468 (general power to make further provision about accounts and reports).

2

Any such regulations may make consequential amendments or repeals in other provisions of this Act, or in other enactments.

3

Regulations that—

a

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

b

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

c

otherwise render the requirements of this Part more onerous,

are subject to affirmative resolution procedure.

4

Otherwise, the regulations are subject to negative resolution procedure.

C318 C319 C320 C321 C322474Minor definitions

1

In this Part—

“e-money issuer” means a person who has permission under Part 4 of the Financial Services and Markets Act 2000 (c. 8) to carry on the activity of issuing electronic money within the meaning of article 9B of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544);
“group” means a parent undertaking and its subsidiary undertakings;
“IAS Regulation” means EC Regulation No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards;
“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;
“international accounting standards” means the international accounting standards, within the meaning of the IAS Regulation, adopted from time to time by the European Commission in accordance with that Regulation;
F47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F48“MiFID investment firm” means an investment firm within the meaning of Article 4.1.1 of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments, other than—
1. a
  a company to which that Directive does not apply by virtue of Article 2 of that Directive,
2. b
  a company which is an exempt investment firm within the meaning of regulation 4A(3) of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2007, and
3. c
  any other company which fulfils all the requirements set out in regulation 4C(3) of those Regulations;
“profit and loss account”, in relation to a company that prepares IAS accounts, includes an income statement or other equivalent financial statement required to be prepared by international accounting standards;
“regulated activity” has the meaning given in section 22 of the Financial Services and Markets Act 2000, except that it does not include activities of the kind specified in any of the following provisions of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544)—
1. a
  article 25A (arranging regulated mortgage contracts),
2. b
  article 25B (arranging regulated home reversion plans),
3. c
  article 25C (arranging regulated home purchase plans),
4. ca
  F49article 25E (arranging regulated sale and rent back agreements),
5. d
  article 39A (assisting administration and performance of a contract of insurance),
6. e
  article 53A (advising on regulated mortgage contracts),
7. f
  article 53B (advising on regulated home reversion plans),
8. g
  article 53C (advising on regulated home purchase plans),
9. ga
  F50article 53D (advising on regulated sale and rent back agreements),
10. h
  article 21 (dealing as agent), article 25 (arranging deals in investments) or article 53 (advising on investments) where the activity concerns relevant investments that are not contractually based investments (within the meaning of article 3 of that Order), or
11. i
  article 64 (agreeing to carry on a regulated activity of the kind mentioned in paragraphs (a) to (h));
“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. a
  trade discounts,
2. b
  value added tax, and
3. c
  any other taxes based on the amounts so derived;
“UCITS management company” has the meaning given by the Glossary forming part of the Handbook made by the Financial Services Authority under the Financial Services and Markets Act 2000 (c. 8).

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.

References to profit and loss and, in relation to group accounts, to a consolidated profit and loss account shall be construed accordingly.

C323C324C325C326Part 15Accounts and reports

Chapter 1Introduction

General

C1C2380Scheme of this Part

1

2

3

a

b

4

a

b

c

Companies subject to the small companies regime

C3C4381Companies subject to the small companies regime

a

b

C5C6382Companies qualifying as small: general

1

2

a

b

c

3

4

5

6

a

b

c

7

C7C8383Companies qualifying as small: parent companies

1

2

3

a

b

c

4

5

6

7

a

b

C9C10384Companies excluded from the small companies regime

1

a

b

i

ii

c

2

a

b

c

d

e

3

Quoted and unquoted companies

I1C11385Quoted and unquoted companies

1

2

a

b

c

3

4

5

6

Chapter 2Accounting records

C12C13386Duty to keep accounting records

1

2

a

b

c

3

a

b

4

C323 C324 C325 C326Part 15Accounts and reports

C1 C2380Scheme of this Part

C3 C4381Companies subject to the small companies regime

C5 C6382Companies qualifying as small: general

C7 C8383Companies qualifying as small: parent companies

C9 C10384Companies excluded from the small companies regime

I1 C11385Quoted and unquoted companies

C12 C13386Duty to keep accounting records

C20 C21 C22 C23 C24390A company's financial year

C25 C26 C27 C28 C29391Accounting reference periods and accounting reference date

C30 C31 C32 C33 C34392Alteration of accounting reference date