Office of Public Sector Information
8. After section 410 of the 2006 Act insert—
410A.—(1) In the case of a company that is not subject to the small companies regime, if in any financial year—
(a) the company is or has been party to arrangements that are not reflected in its balance sheet, and
(b) at the balance sheet date the risks or benefits arising from those arrangements are material,
the information required by this section must be given in notes to the company’s annual accounts.
(2) The information required is—
(a) the nature and business purpose of the arrangements, and
(b) the financial impact of the arrangements on the company.
(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.”.
9. In section 395(4) of the 2006 Act (circumstances in which company which has opted to prepare IAS individual accounts may prepare Companies Act individual accounts), after paragraph (a) insert—
“(aa) the company ceases to be a subsidiary undertaking,”.
10. In section 408(2) of the 2006 Act (no obligation for profit and loss account to include information about employee numbers and costs where group accounts prepared) for “The profit and loss account” substitute “The company’s individual profit and loss account”.
11. For section 411(7) of the 2006 Act (information about employee numbers and costs: group accounts) substitute—
“(7) This section applies in relation to group accounts as if the undertakings included in the consolidation were a single company.”.
12. In section 444(2) of the 2006 Act (filing obligations of company subject to small companies regime: duty to deliver auditor’s report), for “those accounts (and on the directors’ report)” substitute “the accounts (and any directors’ report) that it delivers”.
13. In section 448(3) of the 2006 Act (unlimited companies exemption from obligation to file accounts: companies to which the exemption does not apply)—
(a) for paragraph (b) substitute—
“(b) each of the members of the company is—
(i) a limited company,
(ii) another unlimited company each of whose members is a limited company, or
(iii) a Scottish partnership each of whose members is a limited company.”;
(b) after that paragraph insert—
“The references in paragraph (b) to a limited company, another unlimited company or a Scottish partnership include a comparable undertaking incorporated in or formed under the law of a country or territory outside the United Kingdom.”.
Gareth Thomas
Parliamentary Under Secretary of State for Trade and Consumer Affairs,
Department for Business, Enterprise and Regulatory Reform
19th February 2008
(This note is not part of the Regulations)
These Regulations implement in part Directive 2006/46 of the European Parliament and the Council of 14th June 2006 amending Council Directives 78/660/EEC on the annual accounts of certain types of companies, 83/349/EEC on consolidated accounts, 86/635/EEC on the annual accounts and consolidated accounts of banks and other financial institutions and 91/674/EEC on the annual accounts and consolidated accounts of insurance undertakings (OJ L 224, 16.8.2006, pages 1 to 7). The Directive is also to be implemented by the Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008, the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, and by the Financial Services Authority using powers under the Financial Services and Markets Act 2000 (c.8).
Regulations 3 to 5 implement Article 1, paragraphs 1 to 4 of Directive 2006/46. They raise the financial thresholds contained in sections 382, 383, 465, 466, 477 and 479 of the 2006 Act which determine when a company or group qualifies as small or medium-sized for the purposes of certain accounting and reporting exemptions, and for exemption from audit.
For small companies, the turnover limit is increased from £5.6 million to £6.5 million, and the balance sheet total from £2.8 million to £3.26 million. For small groups, the aggregate turnover limit is increased from £5.6 million net (or £6.72 million gross) to £6.5 million net (or £7.8 million gross), and the aggregate balance sheet total from £2.8 million net (or £3.36 million gross) to £3.26 million net (or £3.9 million gross).
For medium-sized companies, the turnover limit is increased from £22.8 million to £25.9 million, and the balance sheet total from £11.4 million to £12.9 million. For medium-sized groups, the aggregate turnover limit is increased from £22.8 million net (or £27.36 million gross) to £25.9 million net (or £31.1 million gross), and the aggregate balance sheet total from £11.4 million net (or £13.68 million gross) to £12.9 million net (or £15.5 million gross).
Regulations 6 and 7 amend various provisions in order to reinstate certain exemptions relating to the directors’ report in section 247A(1A) of the Companies Act 1985 (c.6) for small and medium-sized companies that would otherwise not be able to take advantage of them only because they are members of ineligible groups.
Regulation 8 implements Articles 1.6 first point and 2.1 first point of Directive 2006/46. It inserts a new section 410A into the 2006 Act requiring companies to make certain disclosures about off-balance sheet arrangements in the notes to their accounts. Section 410A(4) provides that medium-sized companies do not have to disclose the financial impact of off-balance sheet arrangements.
Regulations 9 to 13 make minor amendments.
The Regulations come into force on 6th April 2008 and apply to financial years beginning on or after that date. Regulation 2(3) makes transitional provision to enable companies to take early advantage of the new financial thresholds for small and medium-sized companies.
A transposition note has been prepared which sets out how Directive 2006/46 is to be transposed into UK law. An Impact Assessment of the effect that the implementation of Directive 2006/46 will have on the costs of business, charities or voluntary bodies has also been prepared. Both are available from the Department for Business, Enterprise and Regulatory Reform, Corporate Law and Governance Directorate, 1 Victoria Street, London SW1. They are also available electronically at www.berr.gov.uk. Copies have also been placed in the libraries of both Houses of Parliament. Otherwise, an Impact Assessment has not been produced for these Regulations as they have only a negligible impact on the costs of business, charities or voluntary bodies.
The Companies Act 2006 (Amendment) (Accounts and Reports) Regulations 2008