Accounting records
Directors are responsible for keeping “adequate accounting records” (CA2006 s386-389). This 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 the company’s annual accounts comply with relevant accounting requirements.
For further information on this requirement and details of records that should be kept see ICAEW’s Tech 01/11.
Availability for inspection by the company’s officers
Accounting records must be open at all times for inspection by the company’s officers.
Retention for a prescribed period of time
Under CA2006, accounting records must be preserved for a minimum length of time depending upon the type of company concerned (three years for private companies). However, accounting and other records will often need to be kept for longer than this to meet other legal requirements (for instance, requirements to keep tax records, typically for six years) or in view of the periods that legal actions can be brought (for instance, for negligence or breach of contract).
Failure
Breach of these requirements is a criminal offence and can attract a prison sentence.
Annual accounts and reports and audit
Directors of every company must prepare annual accounts that give a true and fair view of the assets, liabilities, financial position and profit or loss of the company (CA2006 s393-419A). The accounts of private limited companies may be prepared under UK GAAP or EU-adopted IFRS. The required accounts are for the company alone (known as “individual accounts”) and, if the company is a parent, may also be for its group of companies (known as “group” or “consolidated accounts”).
The accounting requirements vary according to the size and other characteristics of the company. For instance, a company may apply the small companies accounting regime if it is a small company, and is otherwise eligible (for instance, it is not a public company or member of an ineligible group).
The annual accounts must be approved by the board of directors and signed on behalf of the board by a director of the company. The approval of defective accounts is a criminal offence (CA2006 s414) if the director knew the accounts did not comply, was reckless as to whether they complied or failed to take reasonable steps to secure compliance.
The directors of a company (other than a micro-entity) must prepare a directors’ report for each financial year of the company (CA2006 s415-419A). The directors’ report must be approved by the board of directors and signed on behalf of the board by a director or the secretary of the company. The information required to be disclosed varies depending upon the size or other characteristics of the company. For example, small companies are not required to disclose dividends recommended to be paid.
With certain exceptions, principally small companies and micro-entities, companies must prepare a strategic report (CA2006 s414A-414D). The report must be approved by the board of directors and signed on behalf of the board by a director or the secretary of the company.
A company’s annual accounts must be subject to an audit unless an exemption is available. Small companies (including micro-entities) for instance, are exempted, so long as they meet certain other eligibility requirements.
Further information on filing of small company accounts is available in ICAEW’s FAQs on the subject.
Maintenance of various registers
A company is required to maintain various registers, including:
- a register of directors (CA2006 s161A-167);
- a register of shareholders (referred to as a “register of members”) (CA2006 s112A-128);
- a register of people with significant control (often referred to as the “PSC register”)(CA2006 s790M-790VA); and
- a register of debenture holders (CA2006 s743-748).
A company may elect that this information is held at Companies House rather than in the company’s own register. However, additional information may then be publicly available.
Publishing information
A company is required to send copies of its annual accounts and reports (or in some cases, just its strategic report) to its shareholders and certain other persons (CA2006 s423-436).
It is also required to file the accounts with Companies House within a specified timeframe (nine months after the end of the relevant accounting period for a private company (CA2006 s441-453)). Companies House strictly applies the time limits; penalties are levied on late filing companies and fines may be imposed on their directors.
Companies are also required to make filings at Companies House, with details of shareholders, directors and people with significant control and to make an annual “confirmation statement” to confirm the accuracy and completeness of information already held by Companies House. Depending upon their size (or other characteristics), companies may be required to publish additional information, eg, regarding modern slavery, supplier payment practices, gender pay gap and on their compliance with s172 CA2006.