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Company Law Reform Bill [HL] (180-184)


Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 3 — A company’s financial year

180

 

395     

Where and for how long records to be kept: offences

(1)   

If a company fails to comply with any provision of subsections (1) to (3) of

section 394 (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

5

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

10

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);

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(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

20

exceeding six months, or to a fine not exceeding the statutory

maximum (or both).

Chapter 3

A company’s financial year

396     

A company’s financial year

25

(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

30

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

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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

40

under which it is established), whether that period is a year or not.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 3 — A company’s financial year

181

 

(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.

397     

Accounting reference periods and accounting reference date

(1)   

A company’s accounting reference periods are determined according to its

5

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

10

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,

15

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

20

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

25

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.

30

(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

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(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.

40

(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 398 (alteration of

accounting reference date).

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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 3 — A company’s financial year

182

 

398     

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

5

(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

10

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

15

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.

20

   

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

25

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

30

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

35

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.

40

   

This does not apply where the company is in administration under Part 2 of the

Insolvency Act 1986 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.

45

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 4 — Annual accounts

183

 

Chapter 4

Annual accounts

General

399     

Accounts to give true and fair view

(1)   

The directors of a company must not approve accounts for the purposes of this

5

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

10

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).

Individual accounts

15

400     

Duty to prepare individual accounts

   

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”.

401     

Individual accounts: applicable accounting framework

20

(1)   

A company’s individual accounts may be prepared—

(a)   

in accordance with section 402 (“Companies Act individual accounts”),

or

(b)   

in accordance with international accounting standards (“IAS

individual accounts”).

25

   

This is subject to the following provisions of this section and to section 413

(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

30

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—

35

(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

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 4 — Annual accounts

184

 

(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 (4) and (5) apply again as if the first

5

financial year for which such accounts are again prepared were the first IAS

year.

402     

Companies Act individual accounts

(1)   

Companies Act individual accounts must comprise—

(a)   

a balance sheet as at the last day of the financial year, and

10

(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

15

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

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(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

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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.

30

   

Particulars of any such departure, the reasons for it and its effect must be given

in a note to the accounts.

403     

IAS individual 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

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accordance with international accounting standards.

Group accounts: small companies

404     

Option to prepare group accounts

   

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

40

accounts for the year, may prepare group accounts for the year.

 
 

 
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Revised 28 July 2006