Office of Public Sector Information
(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) In this Part, where provisions do not apply to all kinds of company—
(a) provisions applying to companies subject to the small companies regime appear before the provisions applying to other companies,
(b) provisions applying to private companies appear before the provisions applying to public companies, and
(c) provisions applying to quoted companies appear after the provisions applying to other companies.
The small companies regime for accounts and reports applies to a company for a financial year in relation to which the company—
(a) qualifies as small (see sections 382 and 383), and
(b) is not excluded from the regime (see section 384).
(1) A company qualifies as small in relation to its first financial year if the qualifying conditions are met in that year.
(2) A company qualifies as small in relation to a subsequent financial year—
(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 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 | Not more than £5.6 million |
| 2. Balance sheet total | Not more than £2.8 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).
(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 | Not more than £5.6 million net (or £6.72 million gross) |
| 2. Aggregate balance sheet total | Not more than £2.8 million net (or £3.36 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—
in the case of Companies Act accounts, in accordance with regulations under section 404,
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.
(1) The small companies regime does not apply to a company that is, or was at any time within the financial year to which the accounts relate—
(a) a public company,
(b) a company that—
(i) is an authorised insurance company, a banking company, an e-money issuer, an ISD investment firm or a UCITS management company, or
(ii) carries on insurance market activity, or
(c) a member of an ineligible group.
(2) A group is ineligible if any of its members is—
(a) a public company,
(b) a body corporate (other than a company) whose shares are admitted to trading on a regulated market in an EEA State,
(c) a person (other than a small company) who has permission under Part 4 of the Financial Services and Markets Act 2000 (c. 8) to carry on a regulated activity,
(d) a small company that is an authorised insurance company, a banking company, an e-money issuer, an ISD investment firm or a UCITS management company, or
(e) a person who carries on insurance market activity.
(3) A company is a small company for the purposes of subsection (2) if it qualified as small in relation to its last financial year ending on or before the end of the financial year to which the accounts relate.
(1) For the purposes of this Part a company is a quoted company in relation to a financial year if it is a quoted company immediately before the end of the accounting reference period by reference to which that financial year was determined.
(2) A “quoted company” means a company whose equity share capital—
(a) has been included in the official list in accordance with the provisions of Part 6 of the Financial Services and Markets Act 2000 (c. 8), or
(b) is officially listed in an EEA State, or
(c) is admitted to dealing on either the New York Stock Exchange or the exchange known as Nasdaq.
In paragraph (a) “the official list” has the meaning given by section 103(1) of the Financial Services and Markets Act 2000.
(3) An “unquoted company” means a company that is not a quoted company.
(4) The Secretary of State may by regulations amend or replace the provisions of subsections (1) to (2) so as to limit or extend the application of some or all of the provisions of this Part that are expressed to apply to quoted companies.
(5) Regulations under this section extending the application of any such provision of this Part are subject to affirmative resolution procedure.
(6) Any other regulations under this section are subject to negative resolution procedure.
(1) Every company must keep adequate accounting records.
(2) Adequate accounting records means records that are sufficient—
(a) to show and explain the company’s transactions,
(b) to disclose with reasonable accuracy, at any time, the financial position of the company at that time, and
(c) to enable the directors to ensure that any accounts required to be prepared comply with the requirements of this Act (and, where applicable, of Article 4 of the IAS Regulation).
(3) Accounting records must, 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.
(4) If the company’s business involves dealing in goods, the accounting records must 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 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).
(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).
(1) A company’s accounting records—
(a) must be kept at its registered office or such other place as the directors think fit, and
(b) must at all times be open to inspection by the company’s officers.
(2) If accounting records are kept at a place outside the United Kingdom, accounts and returns with respect to the business dealt with in the accounting records so kept must be sent to, and kept at, a place in the United Kingdom, and must at all times be open to such inspection.
(3) The accounts and returns to be sent to the United Kingdom must 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 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).
(4) Accounting records that a company is required by section 386 to keep must be preserved by it—
(a) in the case of a private company, for three years from the date on which they are made;
(b) in the case of a public company, for six years from the date on which they are made.
(5) Subsection (4) is subject to any provision contained in rules made under section 411 of the Insolvency Act 1986 (c. 45) (company insolvency rules) or Article 359 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).
(1) If a company fails to comply with any provision of subsections (1) to (3) of section 388 (requirements as to keeping of 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) An officer of a company commits an offence if he—
(a) fails to take all reasonable steps for securing compliance by the company with subsection (4) of that section (period for which records to be preserved), or
(b) intentionally causes any default by the company under that subsection.
(4) 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).
(1) A company’s financial year is determined as follows.
(2) Its first financial year—
(a) begins with the first day of its first accounting reference period, and
(b) 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—
(a) begin with the day immediately following the end of the company’s previous financial year, and
(b) 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 that 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 must 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 in each calendar year.
(2) The accounting reference date of a company incorporated in Great Britain before 1st April 1996 is—
(a) the date specified by notice to the registrar in accordance with section 224(2) of the Companies Act 1985 (c. 6) (notice specifying accounting reference date given within nine months of incorporation), or
(b) failing such notice—
(i) in the case of a company incorporated before 1st April 1990, 31st March, and
(ii) in the case of a company incorporated on or after 1st April 1990, the last day of the month in which the anniversary of its incorporation falls.
(3) The accounting reference date of a company incorporated in Northern Ireland before 22nd August 1997 is—
(a) the date specified by notice to the registrar in accordance with article 232(2) of the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) (notice specifying accounting reference date given within nine months of incorporation), or
(b) failing such notice—
(i) in the case of a company incorporated before the coming into operation of Article 5 of the Companies (Northern Ireland) Order 1990 (S.I. 1990/593 (N.I. 5)), 31st March, and
(ii) in the case of a company incorporated after the coming into operation of that Article, the last day of the month in which the anniversary of its incorporation falls.
(4) The accounting reference date of a company incorporated—
(a) in Great Britain on or after 1st April 1996 and before the commencement of this Act,
(b) in Northern Ireland on or after 22nd August 1997 and before the commencement of this Act, or
(c) 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).
(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.
(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).
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”.
(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,
(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.
(1) Companies Act individual accounts must comprise—
(a) a balance sheet as at the last day of the financial year, and
(b) a profit and loss account.
(2) The accounts must—
(a) in the case of the balance sheet, give a true and fair view of the state of affairs of the company as at the end of the financial year, and
(b) in the case of the profit and loss account, give a true and fair view of the profit or loss of the company for the financial year.
(3) The accounts must comply with provision made by the Secretary of State by regulations as to—
(a) the form and content of the balance sheet and 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 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.
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.
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.
(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.
(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) 5% of the total allotted 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.
Companies Act 2006