Office of Public Sector Information
The provisions of this Part amend Part VII of the [1985 c. 6.] Companies Act 1985 (accounts and audit) by—
(a) inserting new provisions in place of sections 221 to 262 of that Act, and
(b) amending or replacing Schedules 4 to 10 to that Act and inserting new Schedules.
The following sections are inserted in Part VII of the [1985 c. 6.] Companies Act 1985 at the beginning of Chapter I (provisions applying to companies generally)—
(1) Every company shall keep accounting records which are sufficient to show and explain the company’s transactions and are such as to—
(a) disclose with reasonable accuracy, at any time, the financial position of the company at that time, and
(b) enable the directors to ensure that any balance sheet and profit and loss account prepared under this Part complies with the requirements of this Act.
(2) The accounting records shall in particular contain—
(a) entries from day to day of all sums of money received and expended by the company, and the matters in respect of which the receipt and expenditure takes place, and
(b) a record of the assets and liabilities of the company.
(3) If the company’s business involves dealing in goods, the accounting records shall contain—
(a) statements of stock held by the company at the end of each financial year of the company,
(b) all statements of stocktakings from which any such statement of stock as is mentioned in paragraph (a) has been or is to be prepared, and
(c) except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased, showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified.
(4) A parent company which has a subsidiary undertaking in relation to which the above requirements do not apply shall take reasonable steps to secure that the undertaking keeps such accounting records as to enable the directors of the parent company to ensure that any balance sheet and profit and loss account prepared under this Part complies with the requirements of this Act.
(5) If a company fails to comply with any provision of this section, every officer of the company who is in default is guilty of an offence unless he shows that he acted honestly and that in the circumstances in which the company’s business was carried on the default was excusable.
(6) A person guilty of an offence under this section is liable to imprisonment or a fine, or both.
(1) A company’s accounting records shall be kept at its registered office or such other place as the directors think fit, and shall at all times be open to inspection by the company’s officers.
(2) If accounting records are kept at a place outside Great Britain, accounts and returns with respect to the business dealt with in the accounting records so kept shall be sent to, and kept at, a place in Great Britain, and shall at all times be open to such inspection.
(3) The accounts and returns to be sent to Great Britain shall be such as to—
(a) disclose with reasonable accuracy the financial position of the business in question at intervals of not more than six months, and
(b) enable the directors to ensure that the company’s balance sheet and profit and loss account comply with the requirements of this Act.
(4) If a company fails to comply with any provision of subsections (1) to (3), every officer of the company who is in default is guilty of an offence, and liable to imprisonment or a fine or both, unless he shows that he acted honestly and that in the circumstances in which the company’s business was carried on the default was excusable.
(5) Accounting records which a company is required by section 221 to keep shall be preserved by it—
(a) in the case of a private company, for three years from the date on which they are made, and
(b) in the case of a public company, for six years from the date on which they are made.
This is subject to any provision contained in rules made under section 411 of the Insolvency Act 1986 (company insolvency rules).
(6) An officer of a company is guilty of an offence, and liable to imprisonment or a fine or both, if he fails to take all reasonable steps for securing compliance by the company with subsection (5) or intentionally causes any default by the company under that subsection.”.
The following sections are inserted in Part VII of the [1985 c. 66.] Companies Act 1985—
(1) A company’s “financial year” is determined as follows.
(2) Its first financial year begins with the first day of its first accounting reference period and ends with the last day of that period or such other date, not more than seven days before or after the end of that period, as the directors may determine.
(3) Subsequent financial years begin with the day immediately following the end of the company’s previous financial year and end with the last day of its next accounting reference period or such other date, not more than seven days before or after the end of that period, as the directors may determine.
(4) In relation to an undertaking which is not a company, references in this Act to its financial year are to any period in respect of which a profit and loss account of the undertaking is required to be made up (by its constitution or by the law under which it is established), whether that period is a year or not.
(5) The directors of a parent company shall secure that, except where in their opinion there are good reasons against it, the financial year of each of its subsidiary undertakings coincides with the company’s own financial year.
(1) A company’s accounting reference periods are determined according to its accounting reference date.
(2) A company may, at any time before the end of the period of nine months beginning with the date of its incorporation, by notice in the prescribed form given to the registrar specify its accounting reference date, that is, the date on which its accounting reference period ends in each calendar year.
(3) Failing such notice, a company’s accounting reference date is—
(a) in the case of a company incorporated before the commencement of section 3 of the Companies Act 1989, 31st March;
(b) in the case of a company incorporated after the commencement of that section, the last day of the month in which the anniversary of its incorporation falls.
(4) A company’s first accounting reference period is the period of more than six months, but not more than 18 months, beginning with the date of its incorporation and ending with its accounting reference date.
(5) Its subsequent accounting reference periods are successive periods of twelve months beginning immediately after the end of the previous accounting reference period and ending with its accounting reference date.
(6) This section has effect subject to the provisions of section 225 relating to the alteration of accounting reference dates and the consequences of such alteration.
(1) A company may by notice in the prescribed form given to the registrar specify a new accounting reference date having effect in relation to the company’s current accounting reference period and subsequent periods.
(2) A company may by notice in the prescribed form given to the registrar specify a new accounting reference date having effect in relation to the company’s previous accounting reference period and subsequent periods if—
(a) the company is a subsidiary undertaking or parent undertaking of another company and the new accounting reference date coincides with the accounting reference date of that other company, or
(b) an administration order under Part II of the Insolvency Act 1986 is in force.
A company’s “previous accounting reference period” means that immediately preceding its current accounting reference period.
(3) The notice shall state whether the current or previous accounting reference period—
(a) is to be shortened, so as to come to an end on the first occasion on which the new accounting reference date falls or fell after the beginning of the period, or
(b) is to be extended, so as to come to an end on the second occasion on which that date falls or fell after the beginning of the period.
(4) A notice under subsection (1) stating that the current accounting reference period is to be extended is ineffective, except as mentioned below, if given less than five years after the end of an earlier accounting reference period of the company which was extended by virtue of this section.
This subsection does not apply—
(a) to a notice given by a company which is a subsidiary undertaking or parent undertaking of another company and the new accounting reference date coincides with that of the other company, or
(b) where an administration order is in force under Part II of the Insolvency Act 1986,
or where the Secretary of State directs that it should not apply, which he may do with respect to a notice which has been given or which may be given.
(5) A notice under subsection (2)(a) may not be given if the period allowed for laying and delivering accounts and reports in relation to the previous accounting reference period has already expired.
(6) An accounting reference period may not in any case, unless an administration order is in force under Part II of the Insolvency Act 1986, be extended so as to exceed 18 months and a notice under this section is ineffective if the current or previous accounting reference period as extended in accordance with the notice would exceed that limit.”.
(1) The following section is inserted in Part VII of the [1985 c. 6.] Companies Act 1985—
(1) The directors of every company shall prepare for each financial year of the company—
(a) a balance sheet as at the last day of the year, and
(b) a profit and loss account.
Those accounts are referred to in this Part as the company’s “individual accounts”.
(2) The balance sheet shall give a true and fair view of the state of affairs of the company as at the end of the financial year; and the profit and loss account shall give a true and fair view of the profit or loss of the company for the financial year.
(3) A company’s individual accounts shall comply with the provisions of Schedule 4 as to the form and content of the balance sheet and profit and loss account and additional information to be provided by way of notes to the accounts.
(4) Where compliance with the provisions of that Schedule, and the other provisions of 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 shall 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 shall 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 shall be given in a note to the accounts.”.
(2) Schedule 4 to the [1978 c. 30.] Companies Act 1985 (form and content of company accounts) is amended in accordance with Schedule 1 to this Act.
(1) The following section is inserted in Part VII of the [1986 c. 45.] Companies Act 1985—
(1) If at the end of a financial year a company is a parent company the directors shall, as well as preparing individual accounts for the year, prepare group accounts.
(2) Group accounts shall be consolidated accounts comprising—
(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.
(3) The accounts shall 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.
(4) A company’s group accounts shall comply with the provisions of Schedule 4A as to the form and content of the consolidated balance sheet and consolidated profit and loss account and additional information to be provided by way of notes to the accounts.
(5) Where compliance with the provisions of that Schedule, and the other provisions of 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 shall be given in the accounts or in a note to them.
(6) If in special circumstances compliance with any of those provisions is inconsistent with the requirement to give a true and fair view, the directors shall 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 shall be given in a note to the accounts.”.
(2) Schedule 2 to this Act (form and content of group accounts) is inserted after Schedule 4 to the [1985 c. 6.] Companies Act 1985, as Schedule 4A.
(3) The following sections are inserted in Part VII of the [1985 c. 6.] Companies Act 1985—
(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 a member State of the European Economic Community, 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 per cent. of the 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 shares in the company, or
(ii) 5 per cent. of the total shares in the company.
Such notice must be served not later than six months after the end of the financial year before that to which it relates.
(2) Exemption is conditional upon compliance with all of the following conditions—
(a) that the company is included in consolidated accounts for a larger group drawn up to the same date, or to an earlier date in the same financial year, by a parent undertaking established under the law of a member State of the European Economic Community;
(b) that those accounts are drawn up and audited, and that parent undertaking’s annual report is drawn up, according to that law, in accordance with the provisions of the Seventh Directive (83/349/EEC);
(c) that the company discloses in its individual accounts that it is exempt from the obligation to prepare and deliver group accounts;
(d) that the company states 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 Great Britain, the country in which it is incorporated,
(ii) if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland, and
(iii) if it is unincorporated, the address of its principal place of business;
(e) that the company delivers to the registrar, within the period allowed for delivering its individual accounts, copies of those group accounts and of the parent undertaking’s annual report, together with the auditors' report on them; and
(f) that if any document comprised in accounts and reports delivered in accordance with paragraph (e) is in a language other than English, there is annexed to the copy of that document delivered a translation of it into English, certified in the prescribed manner to be a correct translation.
(3) The exemption does not apply to a company any of whose securities are listed on a stock exchange in any member State of the European Economic Community.
(4) 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 subsection (1)(a) whether the company is a wholly-owned subsidiary.
(5) 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.
(6) In subsection (3) “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 which 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.
(1) Subject to the exceptions authorised or required by this section, all the subsidiary undertakings of the parent company shall be included in the consolidation.
(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) In addition, 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 and the undertaking has not previously been included in consolidated group accounts prepared by the parent company.
The reference in paragraph (a) to the rights of the parent company and the reference in paragraph (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 section 258 (definition of “parent undertaking”) in the absence of which it would not be the parent company.
(4) Where the activities of one or more subsidiary undertakings are so different from those of other undertakings to be included in the consolidation that their inclusion would be incompatible with the obligation to give a true and fair view, those undertakings shall be excluded from consolidation.
This subsection does not apply merely because some of the undertakings are industrial, some commercial and some provide services, or because they carry on industrial or commercial activities involving different products or provide different services.
(5) Where all the subsidiary undertakings of a parent company fall within the above exclusions, no group accounts are required.”.
(4) The following section is inserted in Part VII of the [1985 c. 6.] Companies Act 1985—
(1) The following provisions apply with respect to the individual profit and loss account of a parent company where—
(a) the company is required to prepare and does prepare 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) The profit and loss account need not contain the information specified in paragraphs 52 to 57 of Schedule 4 (information supplementing the profit and loss account).
(3) The profit and loss account must be approved in accordance with section 233(1) (approval by board of directors) but may be omitted from the company’s annual accounts for the purposes of the other provisions below in this Chapter.
(4) The exemption conferred by this section is conditional upon its being disclosed in the company’s annual accounts that the exemption applies.”.
(1) The following section is inserted in Part VII of the [1985 c. 6.] Companies Act 1985—
(1) The information specified in Schedule 5 shall be given in notes to a company’s annual accounts.
(2) Where the company is not required to prepare group accounts, the information specified in Part I of that Schedule shall be given; and where the company is required to prepare group accounts, the information specified in Part II of that Schedule shall be given.
(3) The information required by Schedule 5 need not be disclosed with respect to an undertaking which—
(a) is established under the law of a country outside the United Kingdom, or
(b) carries on business outside the United Kingdom,
if in the opinion of the directors of the company the disclosure would be seriously prejudicial to the business of that undertaking, or to the business of the company or any of its subsidiary undertakings, and the Secretary of State agrees that the information need not be disclosed.
This subsection does not apply in relation to the information required under paragraph 5(2), 6 or 20 of that Schedule.
(4) Where advantage is taken of subsection (3), that fact shall be stated in a note to the company’s annual accounts.
(5) If the directors of the 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 Schedule 5 to this Act is such that compliance with that provision would result in information of excessive length being given, 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) undertakings excluded from consolidation under section 229(3) or (4).
This subsection does not apply in relation to the information required under paragraph 10 or 29 of that Schedule.
(6) If advantage is taken of subsection (5)—
(a) there shall 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) shall 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 233.
(7) If a company fails to comply with subsection (6)(b), the company and every officer of it who is in default is liable to a fine and, for continued contravention, to a daily default fine.”.
(2) Schedule 3 to this Act (disclosure of information: related undertakings) is substituted for Schedule 5 to the [1985 c. 6.] Companies Act 1985.
(3) The following section is inserted in Part VII of the [1985 c. 6.] Companies Act 1985—
(1) The information specified in Schedule 6 shall be given in notes to a company’s annual accounts.
(2) In that Schedule—
Part I relates to the emoluments of directors (including emoluments waived), pensions of directors and past directors, compensation for loss of office to directors and past directors and sums paid to third parties in respect of directors' services,
Part II relates to loans, quasi-loans and other dealings in favour of directors and connected persons, and
Part III relates to transactions, arrangements and agreements made by the company or a subsidiary undertaking for officers of the company other than directors.
(3) It is the duty of any director of a company, and any person who is or has at any time in the preceding five years been an officer of the company, to give notice to the company of such matters relating to himself as may be necessary for the purposes of Part I of Schedule 6.
(4) A person who makes default in complying with subsection (3) commits an offence and is liable to a fine.”.
(4) Schedule 6 to the [1985 c. 6.] Companies Act 1985 is amended in accordance with Schedule 4 to this Act.
The following section is inserted in Part VII of the [1985 c. 6.] Companies Act 1985—
(1) A company’s annual accounts shall be approved by the board of directors and signed on behalf of the board by a director of the company.
(2) The signature shall be on the company’s balance sheet.
(3) Every copy of the balance sheet which is laid before the company in general meeting, or which is otherwise circulated, published or issued, shall state the name of the person who signed the balance sheet on behalf of the board.
(4) The copy of the company’s balance sheet which is delivered to the registrar shall be signed on behalf of the board by a director of the company.
(5) If annual accounts are approved which do not comply with the requirements of this Act, every director of the company who is party to their approval and who knows that they do not comply or is reckless as to whether they comply is guilty of an offence and liable to a fine.
For this purpose every director of the company at the time the accounts are approved shall be taken to be a party to their approval unless he shows that he took all reasonable steps to prevent their being approved.
(6) If a copy of the balance sheet—
(a) is laid before the company, or otherwise circulated, published or issued, without the balance sheet having been signed as required by this section or without the required statement of the signatory’s name being included, or
(b) is delivered to the registrar without being signed as required by this section,
the company and every officer of it who is in default is guilty of an offence and liable to a fine.”.
(1) The following sections are inserted in Part VII of the [1985 c. 6.] Companies Act 1985—
(1) The directors of a company shall for each financial year prepare a report—
(a) containing a fair review of the development of the business of the company and its subsidiary undertakings during the financial year and of their position at the end of it, and
(b) stating the amount (if any) which they recommend should be paid as dividend and the amount (if any) which they propose to carry to reserves.
(2) The report shall state the names of the persons who, at any time during the financial year, were directors of the company, and the principal activities of the company and its subsidiary undertakings in the course of the year and any significant change in those activities in the year.
(3) The report shall also comply with Schedule 7 as regards the disclosure of the matters mentioned there.
(4) In Schedule 7—
Part I relates to matters of a general nature, including changes in asset values, directors' shareholdings and other interests and contributions for political and charitable purposes,
Part II relates to the acquisition by a company of its own shares or a charge on them,
Part III relates to the employment, training and advancement of disabled persons,
Part IV relates to the health, safety and welfare at work of the company’s employees, and
Part V relates to the involvement of employees in the affairs, policy and performance of the company.
(5) In the case of any failure to comply with the provisions of this Part as to the preparation of a directors' report and the contents of the report, every person who was a director of the company immediately before the end of the period for laying and delivering accounts and reports for the financial year in question is guilty of an offence and liable to a fine.
(6) In proceedings against a person for an offence under this section it is a defence for him to prove that he took all reasonable steps for securing compliance with the requirements in question.
Companies Act 1989