Part 15Accounts and reports
Chapter 5Directors' report
Directors' report
415Duty to prepare directors' report
(1)
The directors of a company must prepare a directors' report for each financial year of the company.
F1(1A)
Subsection (1) does not apply if the company qualifies as a micro-entity (see sections 384A and 384B).
(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.
F2 415A Directors' 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)
416Contents 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
F5(b)
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F6(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
Except in the case of a company F7entitled 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.
F8417Contents of directors' report: business review
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418Contents of directors' report: statement as to disclosure to auditors
(1)
This section applies to a company unless—
(a)
it is exempt for the financial year in question from the requirements of Part 16 as to audit of accounts, and
(b)
the directors take advantage of that exemption.
(2)
The directors' report must contain a statement to the effect that, in the case of each of the persons who are directors at the time the report is approved—
(a)
so far as the director is aware, there is no relevant audit information of which the company's auditor is unaware, and
(b)
he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditor is aware of that information.
(3)
“Relevant audit information” means information needed by the company's auditor in connection with preparing his report.
(4)
A director is regarded as having taken all the steps that he ought to have taken as a director in order to do the things mentioned in subsection (2)(b) if he has—
(a)
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—
(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).
419Approval and signing of directors' report
(1)
The directors' report must be approved by the board of directors and signed on behalf of the board by a director or the secretary of the company.
(2)
F9If in preparing the report advantage is taken of the small companies exemption,, it must contain a statement to that effect in a prominent position above the signature.
(3)
If a directors' report is approved that does not comply with the requirements of this Act, every director of the company who—
(a)
knew that it did not comply, or was reckless as to whether it complied, and
(b)
failed to take reasonable steps to secure compliance with those requirements or, as the case may be, to prevent the report from being approved,
commits an offence.
(4)
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.
F10 419A Approval and signing of separate corporate governance statement
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.