Company Law Reform Bill [HL]

House of Commons

Session 2005 - 06
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Company Law Reform Bill [HL]

Company Law Reform Bill [HL]
Part 15 — Accounts and reports
Chapter 11 — Revision of defective accounts and reports
204

437
Civil penalty for failure to file accounts and reports
(1)
Where the requirements of section 425 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.
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This is in addition to any liability of the directors under section 435.
(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
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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
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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 11
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Revision of defective accounts and reports
Voluntary revision
438
Voluntary revision of accounts etc
(1)
If it appears to the directors of a company that—
(a)
the company’s annual accounts,
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(b)
the directors’ remuneration report or the directors’ report, or
(c)
a summary financial statement of the company,

did not comply with the requirements of this Act (or, where applicable, of
Article 4 of the IAS Regulation), they may prepare revised accounts or a revised
report or statement.
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(2)
Where copies of the previous accounts or report have been sent out to
members, delivered to the registrar or (in the case of a public company) laid
before the company in general meeting, the revisions must be confined to—
(a)
the correction of those respects in which the previous accounts or
report did not comply with the requirements of this Act (or, where
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applicable, of Article 4 of the IAS Regulation), and
(b)
the making of any necessary consequential alterations.
(3)
The Secretary of State may make provision by regulations as to the application
of the provisions of this Act in relation to—
(a)
revised annual accounts,
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(b)
a revised directors’ remuneration report or directors’ report, or
(c)
a revised summary financial statement.

Company Law Reform Bill [HL]
Part 15 — Accounts and reports
Chapter 11 — Revision of defective accounts and reports
205

(4)
The regulations may, in particular—
(a)
make different provision according to whether the previous accounts,
report or statement are replaced or are supplemented by a document
indicating the corrections to be made;
(b)
make provision with respect to the functions of the company’s auditor
5
or independent examiner in relation to the revised accounts, report or
statement;
(c)
require the directors to take such steps as may be specified in the
regulations where the previous accounts or report have been—
(i)
sent out to members and others under section 405,
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(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 408;
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(d)
apply the provisions of this Act (including those creating criminal
offences) subject to such additions, exceptions and modifications as are
specified in the regulations.
(5)
Regulations under this section are subject to negative resolution procedure.
Secretary of State’s notice
20
439
Secretary of State’s notice in respect of accounts or reports
(1)
This section applies where—
(a)
copies of a company’s annual accounts or directors’ report have been
sent out under section 405, or
(b)
a copy of a company’s annual accounts or directors’ report has been
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delivered to the registrar or (in the case of a public company) laid before
the company in general meeting,

and it appears to the Secretary of State that there is, or may be, a question
whether the accounts or report comply with the requirements of this Act (or,
where applicable, of Article 4 of the IAS Regulation).
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(2)
The Secretary of State may give notice to the directors of the company
indicating the respects in which it appears that such a question arises or may
arise.
(3)
The notice must specify a period of not less than one month for the directors to
give an explanation of the accounts or report or prepare revised accounts or a
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revised report.
(4)
If at the end of the specified period, or such longer period as the Secretary of
State may allow, it appears to the Secretary of State that the directors have
not—
(a)
given a satisfactory explanation of the accounts or report, or
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(b)
revised the accounts or report so as to comply with the requirements of
this Act (or, where applicable, of Article 4 of the IAS Regulation),

the Secretary of State may apply to the court.
(5)
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
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Company Law Reform Bill [HL]
Part 15 — Accounts and reports
Chapter 11 — Revision of defective accounts and reports
206

revised accounts or reports were references to further revised accounts or
reports.
Application to court
440
Application to court in respect of defective accounts or reports
(1)
An application may be made to the court—
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(a)
by the Secretary of State, after having complied with section 439, or
(b)
by a person authorised by the Secretary of State for the purposes of this
section,

for a declaration (in Scotland, a declarator) that the annual accounts of a
company do not comply, or a directors’ report does not comply, with the
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requirements of this Act (or, where applicable, of Article 4 of the IAS
Regulation) and for an order requiring the directors of the company to prepare
revised accounts or a revised report.
(2)
Notice of the application, together with a general statement of the matters at
issue in the proceedings, shall be given by the applicant to the registrar for
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registration.
(3)
If the court orders the preparation of revised accounts, it may give directions
as to—
(a)
the auditing of the accounts,
(b)
the revision of any directors’ remuneration report, directors’ report or
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summary financial statement, and
(c)
the taking of steps by the directors to bring the making of the order to
the notice of persons likely to rely on the previous accounts,

and such other matters as the court thinks fit.
(4)
If the court orders the preparation of a revised directors’ report it may give
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directions as to—
(a)
the review of the report by the auditors,
(b)
the revision of any summary financial statement,
(c)
the taking of steps by the directors to bring the making of the order to
the notice of persons likely to rely on the previous report, and
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(d)
such other matters as the court thinks fit.
(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,
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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
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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
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whether the directors party to the approval of the defective accounts or report

Company Law Reform Bill [HL]
Part 15 — Accounts and reports
Chapter 11 — Revision of defective accounts and reports
207

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
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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
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revised accounts or reports were references to further revised accounts or
reports.
441
Other persons authorised to apply to the court
(1)
The Secretary of State may by order (an “authorisation order”) authorise for the
purposes of section 440 any person appearing to him—
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(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
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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.
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(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
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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
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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
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as the Secretary of State thinks fit with respect to pending proceedings.
(7)
An order under this section is subject to negative resolution procedure.