Company Law Reform Bill [HL] (215-220)

House of Commons

Session 2005 - 06
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Company Law Reform Bill [HL] (215-220)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 10 — Filing of accounts and reports
215

456
Unlimited companies exempt from obligation to file accounts
(1)
The directors of an unlimited company are not required to deliver accounts
and reports to the registrar in respect of a financial year if the following
conditions are met.
(2)
The conditions are that at no time during the relevant accounting reference
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period—
(a)
has the company been, to its knowledge, a subsidiary undertaking of an
undertaking which was then limited, or
(b)
have there been, to its knowledge, exercisable by or on behalf of two or
more undertakings which were then limited, rights which if exercisable
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by one of them would have made the company a subsidiary
undertaking of it, or
(c)
has the company been a parent company of an undertaking which was
then limited.

The references above to an undertaking being limited at a particular time are
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to an undertaking (under whatever law established) the liability of whose
members is at that time limited.
(3)
The exemption conferred by this section does not apply if—
(a)
the company is a banking or insurance company or the parent company
of a banking or insurance group, or
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(b)
the company is a qualifying company within the meaning of the
Partnerships and Unlimited Companies (Accounts) Regulations 1993
(S.I. 1993/1820).
(4)
Where a company is exempt by virtue of this section from the obligation to
deliver accounts—
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(a)
section 442(3) (requirements in connection with publication of statutory
accounts: meaning of “statutory accounts”) has effect with the
substitution for the words “as required to be delivered to the registrar
under section 449” of the words “as prepared in accordance with this
Part and approved by the board of directors”; and
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(b)
section 443(1)(b) (requirements in connection with publication of non-
statutory accounts: statement whether statutory accounts delivered)
has effect with the substitution for the words from “whether statutory
accounts” to “have been delivered to the registrar” of the words “that
the company is exempt from the requirement to deliver statutory
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accounts”.
(5)
In this section the “relevant accounting reference period”, in relation to a
financial year, means the accounting reference period by reference to which
that financial year was determined.
Requirements where abbreviated accounts delivered
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457
Special auditor’s report where abbreviated accounts delivered
(1)
This section applies where—
(a)
the directors of a company deliver abbreviated accounts to the
registrar, and
(b)
the company is not exempt from audit (or the directors have not taken
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advantage of any such exemption).

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 10 — Filing of accounts and reports
216

(2)
The directors must also deliver to the registrar a copy of a special report of the
company’s auditor stating that in his opinion—
(a)
the company is entitled to deliver abbreviated accounts in accordance
with the section in question, and
(b)
the abbreviated accounts to be delivered are properly prepared in
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accordance with regulations under that section.
(3)
The auditor’s report on the company’s annual accounts need not be delivered,
but—
(a)
if that report was qualified, the special report must set out that report
in full together with any further material necessary to understand the
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qualification, and
(b)
if that report contained a statement under—
(i)
section 512(2)(a) or (b) (accounts, records or returns inadequate
or accounts not agreeing with records and returns), or
(ii)
section 512(3) (failure to obtain necessary information and
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explanations),

the special report must set out that statement in full.
(4)
The provisions of—
sections 517, 518, 519 and 520 (signature of auditor’s report), and
sections 521 to 523 (offences in connection with auditor’s report),
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apply to a special report under this section as they apply to an auditor’s report
on the company’s annual accounts prepared under Part 17.
(5)
If abbreviated accounts are delivered to the registrar, the references in section
442 or 443 (requirements in connection with publication of accounts) to the
auditor’s report on the company’s annual accounts shall be read as references
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to the special auditor’s report required by this section.
458
Approval and signing of abbreviated accounts
(1)
Abbreviated accounts must be approved by the board of directors and signed
on behalf of the board by a director of the company.
(2)
The signature must be on the balance sheet.
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(3)
The balance sheet must contain in a prominent position above the signature a
statement to the effect that it is prepared in accordance with the special
provisions of this Act relating (as the case may be) to companies subject to the
small companies regime or to medium-sized companies.
(4)
If abbreviated accounts are approved that do not comply with the
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requirements of regulations under the relevant section, every director of the
company who—
(a)
knew that they did not comply, or was reckless as to whether they
complied, and
(b)
failed to take reasonable steps to prevent them from being approved,
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commits an offence.
(5)
A person guilty of an offence under subsection (4) is liable—
(a)
on conviction on indictment, to a fine;
(b)
on summary conviction, to a fine not exceeding the statutory
maximum.
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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 10 — Filing of accounts and reports
217

Failure to file accounts and reports
459
Default in filing accounts and reports: offences
(1)
If the requirements of section 449 (duty to file accounts and reports) 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, every
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person who immediately before the end of that period was a director of the
company commits an offence.
(2)
It is a defence for a person charged with such an offence to prove that he took
all reasonable steps for securing that those requirements would be complied
with before the end of that period.
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(3)
It is not a defence to prove that the documents in question were not in fact
prepared as required by this Part.
(4)
A person guilty of an offence under this section is liable on summary
conviction to a fine not exceeding level 5 on the standard scale and, for
continued contravention, a daily default fine not exceeding one-tenth of level
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5 on the standard scale.
460
Default in filing accounts and reports: court order
(1)
If—
(a)
the requirements of section 449 (duty to file accounts and reports) are
not complied with in relation to a company’s accounts and reports for
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a financial year before the end of the period for filing those accounts
and reports, and
(b)
the directors of the company fail to make good the default within 14
days after the service of a notice on them requiring compliance,

the court may, on the application of any member or creditor of the company or
25
of the registrar, make an order directing the directors (or any of them) to make
good the default within such time as may be specified in the order.
(2)
The court’s order may provide that all costs (in Scotland, expenses) of and
incidental to the application are to be borne by the directors.
461
Civil penalty for failure to file accounts and reports
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(1)
Where the requirements of section 449 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.
This is in addition to any liability of the directors under section 459.
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(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
requirements are complied with, and
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(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.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 11 — Revision of defective accounts and reports
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(4)
It is not a defence in proceedings under this section to prove that the
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.
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Chapter 11
Revision of defective accounts and reports
Voluntary revision
462
Voluntary revision of accounts etc
(1)
If it appears to the directors of a company that—
10
(a)
the company’s annual accounts,
(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
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report or statement.
(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
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report did not comply with the requirements of this Act (or, where
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—
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(a)
revised annual accounts,
(b)
a revised directors’ remuneration report or directors’ report, or
(c)
a revised summary financial statement.
(4)
The regulations may, in particular—
(a)
make different provision according to whether the previous accounts,
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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
or independent examiner in relation to the revised accounts, report or
statement;
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(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 429,
(ii)
laid before the company in general meeting, or
(iii)
delivered to the registrar,
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or where a summary financial statement containing information
derived from the previous accounts or report has been sent to members
under section 432;

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 11 — Revision of defective accounts and reports
219

(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
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463
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 429, or
(b)
a copy of a company’s annual accounts or directors’ report has been
10
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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revised accounts or reports were references to further revised accounts or
reports.
Application to court
464
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 463, 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
40
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.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 11 — Revision of defective accounts and reports
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(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
registration.
(3)
If the court orders the preparation of revised accounts, it may give directions
as to—
5
(a)
the auditing of the accounts,
(b)
the revision of any directors’ remuneration report, directors’ report or
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,
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and such other matters as the court thinks fit.
(4)
If the court orders the preparation of a revised directors’ report it may give
directions as to—
(a)
the review of the report by the auditors,
(b)
the revision of any summary financial statement,
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(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
(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
20
Regulation) it may order that all or part of—
(a)
the costs (in Scotland, expenses) of and incidental to the application,
and
(b)
any reasonable expenses incurred by the company in connection with
or in consequence of the preparation of revised accounts or a revised
25
report,

are to be borne by such of the directors as were party to the approval of the
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
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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
whether the directors party to the approval of the defective accounts or report
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
35
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
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
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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
revised accounts or reports were references to further revised accounts or
reports.
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