384B Companies excluded from being treated as micro-entities
(1) The micro-entity provisions do not apply in relation to a company’s accounts for a particular financial year if the company ... at any time within that year—
(a) was a company excluded from the small companies regime by virtue of section 384,
(b) would have been an investment undertaking as defined in Article 2(14) of Directive 2013/34/ EU of 26 June 2013 on the annual financial statements etc. of certain types of undertakings were the United Kingdom a member State,
(c) would have been a financial holding undertaking as defined in Article 2(15) of that Directive were the United Kingdom a member State,
(d) a credit institution within the meaning given by Article 4(1)(1) of Regulation (EU) No. 575/2013 of the European Parliament and of the Council, which is a CRR firm within the meaning of Article 4(1)(2A) of that Regulation,
(e) would have been an insurance undertaking as defined in Article 2(1) of Council Directive 91/674/EEC of 19 December 1991 on the annual accounts of insurance undertakings were the United Kingdom a member State, or
(f) was a charity.
(2) The micro-entity provisions also do not apply in relation to a company’s accounts for a financial year if —
(a) the company is a parent company which prepares group accounts for that year as permitted by section 399(4), or
(b) the company is not a parent company but its accounts are included in consolidated group accounts for that year.
(1) For the purposes of this Part a company is a quoted company in relation to a financial year if it is a quoted company immediately before the end of the accounting reference period by reference to which that financial year was determined.
(2) A “quoted company” means a company whose equity share capital—
(a) has been included in the official list in accordance with the provisions of Part 6 of the Financial Services and Markets Act 2000 (c. 8), or
(b) is officially listed in an EEA State, or
(c) is admitted to dealing on either the New York Stock Exchange or the exchange known as Nasdaq.
In paragraph (a) “the official list” has the meaning given by section 103(1) of the Financial Services and Markets Act 2000.
(3) An “unquoted company” means a company that is not a quoted company.
(4) The Secretary of State may by regulations amend or replace the provisions of subsections (1) to (2) so as to limit or extend the application of some or all of the provisions of this Part that are expressed to apply to quoted companies.
(5) Regulations under this section extending the application of any such provision of this Part are subject to affirmative resolution procedure.
(6) Any other regulations under this section are subject to negative resolution procedure.
(1) Every company must keep adequate accounting records.
(2) Adequate accounting records 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 any accounts required to be prepared comply with the requirements of this Act ....
(3) Accounting records must, in particular, contain—
(a) entries from day to day of all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place, and
(b) a record of the assets and liabilities of the company.
(4) If the company's business involves dealing in goods, the accounting records must contain—
(a) statements of stock held by the company at the end of each financial year of the company,
(b) all statements of stocktakings from which any statement of stock as is mentioned in paragraph (a) has been or is to be prepared, and
(c) except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased, showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified.
(5) A parent company that has a subsidiary undertaking in relation to which the above requirements do not apply must take reasonable steps to secure that the undertaking keeps such accounting records as to enable the directors of the parent company to ensure that any accounts required to be prepared under this Part comply with the requirements of this Act ....
(1) If a company fails to comply with any provision of section 386 (duty to keep 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 honestly and that in the circumstances in which the company's business was carried on the default was excusable.
(3) 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);
(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 exceeding six months, or to a fine not exceeding the statutory maximum (or both).
(1) A company's accounting records—
(a) must be kept at its registered office or such other place as the directors think fit, and
(b) must at all times be open to inspection by the company's officers.
(2) If accounting records are kept at a place outside the United Kingdom, accounts and returns with respect to the business dealt with in the accounting records so kept must be sent to, and kept at, a place in the United Kingdom, and must at all times be open to such inspection.
(3) The accounts and returns to be sent to the United Kingdom must be such as to—
(a) disclose with reasonable accuracy the financial position of the business in question at intervals of not more than six months, and
(b) enable the directors to ensure that the accounts required to be prepared under this Part comply with the requirements of this Act ....
(4) Accounting records that a company is required by section 386 to keep must be preserved by it—
(a) in the case of a private company, for three years from the date on which they are made;
(b) in the case of a public company, for six years from the date on which they are made.
(5) Subsection (4) is subject to any provision contained in rules made under section 411 of the Insolvency Act 1986 (c. 45) (company insolvency rules) or Article 359 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).
389 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 388 (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 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 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);
(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 exceeding six months, or to a fine not exceeding the statutory maximum (or both).
(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 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 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 under which it is established), whether that period is a year or not.
(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.
391 Accounting reference periods and accounting reference date
(1) A company's accounting reference periods are determined according to its 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 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, 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 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 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.
(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
(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.
(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 392 (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
(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 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 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.
This does not apply—
(a) to a notice given by a company that is a subsidiary undertaking or parent undertaking of another UK undertaking if the new accounting reference date coincides with that of the other UK undertaking or, where that undertaking is not a company, with the last day of its 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 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 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.
This does not apply 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)).
(6) In this section “UK undertaking” means an undertaking established under the law of any part of the United Kingdom ....
(1) The directors of a company must not approve accounts for the purposes of this 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 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).
(1A) The following provisions apply to the directors of a company which qualifies as a micro-entity in relation to a financial year (see sections 384A and 384B) in their consideration of whether the Companies Act individual accounts of the company for that year give a true and fair view as required by subsection (1)(a)—
(a) where the accounts comprise only micro-entity minimum accounting items, the directors must disregard any provision of an accounting standard which would require the accounts to contain information additional to those items,
(b) in relation to a micro-entity minimum accounting item contained in the accounts, the directors must disregard any provision of an accounting standard which would require the accounts to contain further information in relation to that item, and
(c) where the accounts contain an item of information additional to the micro-entity minimum accounting items, the directors must have regard to any provision of an accounting standard which relates to that item.
The directors of every company must prepare accounts for the company for each of its financial years unless the company is exempt from that requirement under section 394A.
Those accounts are referred to as the company's “individual accounts”.
394A Individual accounts: exemption for dormant subsidiaries
(1) A company is exempt from the requirement to prepare individual accounts for a financial year if—
(a) it is itself a subsidiary undertaking,
(b) it has been dormant throughout the whole of that year, and
(c) its parent undertaking is established under the law of any part of the United Kingdom.
(2) Exemption is conditional upon compliance with all of the following conditions—
(a) all members of the company must agree to the exemption in respect of the financial year in question,
(b) the parent undertaking must give a guarantee under section 394C in respect of that year,
(c) the company must be included in the consolidated accounts drawn up for that year or to an earlier date in that year by the parent undertaking in accordance with—
(i) if the undertaking is a company, the requirements of this Part of this Act, or, if the undertaking is not a company, the legal requirements which apply to the drawing up of consolidated accounts for that undertaking, or
(ii) UK-adopted international accounting standards,
(d) the parent undertaking must disclose in the notes to the consolidated accounts that the company is exempt from the requirement to prepare individual accounts by virtue of this section, and
(e) the directors of the company must deliver to the registrar within the period for filing the company's accounts and reports for that year—
(i) a written notice of the agreement referred to in subsection (2)(a),
(ii) the statement referred to in section 394C(1),
(iii) a copy of the consolidated accounts referred to in subsection (2)(c),
(iv) a copy of the auditor's report on those accounts, and
(v) a copy of the consolidated annual report drawn up by the parent undertaking.
394B Companies excluded from the dormant subsidiaries exemption
A company is not entitled to the exemption conferred by section 394A (dormant subsidiaries) if it was at any time within the financial year in question—
(a) a traded company,
(b) a company that—
(i) is an authorised insurance company, a banking company, an e-money issuer, a MiFID investment firm or a UCITS management company, or
(ii) carries on insurance market activity, or
(c) a special register body as defined in section 117(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (c 52) or an employers' association as defined in section 122 of that Act or Article 4 of the Industrial Relations (Northern Ireland) Order 1992 ( S.I. 1992/807) ( NI 5).
394C Dormant subsidiaries exemption: parent undertaking declaration of guarantee
(1) A guarantee is given by a parent undertaking under this section when the directors of the subsidiary company deliver to the registrar a statement by the parent undertaking that it guarantees the subsidiary company under this section.
(2) The statement under subsection (1) must be authenticated by the parent undertaking and must specify—
(a) the name of the parent undertaking,
(b) the registered number (if any) of the parent undertaking,
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) the name and registered number of the subsidiary company in respect of which the guarantee is being given,
(e) the date of the statement, and
(f) the financial year to which the guarantee relates.
(3) A guarantee given under this section has the effect that—
(a) the parent undertaking guarantees all outstanding liabilities to which the subsidiary company is subject at the end of the financial year to which the guarantee relates, until they are satisfied in full, and
(b) the guarantee is enforceable against the parent undertaking by any person to whom the subsidiary company is liable in respect of those liabilities.
(1) A company's individual accounts may be prepared—
(a) in accordance with section 396 (“Companies Act individual accounts”), or
(b) in accordance with UK-adopted international accounting standards (“IAS individual accounts”).
This is subject to the following provisions of this section and to section 407 (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 individual accounts (“the first IAS year”), all subsequent individual accounts of the company must be prepared in accordance with UK-adopted international accounting standards unless there is a relevant change of circumstance. This is subject to subsection (4A).
(4) There is a relevant change of circumstance if, at any time during or after the first IAS year—
(a) the company becomes a subsidiary undertaking of another undertaking that does not prepare IAS individual accounts,
(aa) the company ceases to be a subsidiary undertaking,
(b) the company ceases to be a company with securities admitted to trading on a UK regulated market, or
(c) a parent undertaking of the company ceases to be an undertaking with securities admitted to trading on a UK regulated market.
(4A) After a financial year in which the directors of a company prepare IAS individual accounts for the company, the directors may change to preparing Companies Act individual accounts for a reason other than a relevant change of circumstance provided they have not changed to Companies Act individual accounts in the period of five years preceding the first day of that financial year.
(4B) In calculating the five year period for the purpose of subsection (4A), no account should be taken of a change due to a relevant change of circumstance.
(5) If, having changed to preparing Companies Act individual accounts . . . , the directors again prepare IAS individual accounts for the company, subsections (3) and (4) apply again as if the first financial year for which such accounts are again prepared were the first IAS year.
(A1) Companies Act individual accounts must state—
(a) the part of the United Kingdom in which the company is registered,
(b) the company’s registered number,
(c) whether the company is a public or a private company and whether it is limited by shares or by guarantee,
(d) the address of the company’s registered office, and
(e) where appropriate, the fact that the company is being wound-up.
(1) Companies Act individual accounts must comprise—
(a) a balance sheet as at the last day of the financial year, and
(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 profit or loss of the company for the financial year.
(2A) In the case of the individual accounts of a company which qualifies as a micro-entity in relation to the financial year (see sections 384A and 384B), the micro-entity minimum accounting items included in the company’s accounts for the year are presumed to give the true and fair view required by subsection (2).
(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
(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 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.
Particulars of any such departure, the reasons for it and its effect must be given in a note to the accounts.
(6) Subsections (4) and (5) do not apply in relation to the micro-entity minimum accounting items included in the individual accounts of a company for a financial year in relation to which the company qualifies as a micro-entity.
(1) IAS individual accounts must state—
(a) the part of the United Kingdom in which the company is registered,
(b) the company’s registered number,
(c) whether the company is a public or a private company and whether it is limited by shares or by guarantee,
(d) the address of the company’s registered office, and
(e) where appropriate, the fact that the company is being wound-up.
(2) The notes to the accounts must state that the accounts have been prepared in accordance with UK-adopted international accounting standards.
(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) If at the end of a financial year a company is a parent company the directors, as well as preparing individual accounts for the year, must prepare group accounts for the year unless the company is exempt from that requirement.
(2A) A company is exempt from the requirement to prepare group accounts if—
(a) at the end of the financial year, the company—
(i) is subject to the small companies regime, or
(ii) would be subject to the small companies regime but for being a public company, and
(b) is not a member of a group which, at any time during the financial year, has an undertaking falling within subsection (2B) as a member.
(2B) An undertaking falls within this subsection if—
(a) it is established under the law of any part of the United Kingdom,
(b) it has to prepare accounts in accordance with the requirements of this Part of this Act, and
(c) it—
(i) is an undertaking whose transferable securities are admitted to trading on a UK regulated market,
(ii) is a credit institution within the meaning given by Article 4(1)(1) of Regulation (EU) No. 575/2013 of the European Parliament and of the Council, which is a CRR firm within the meaning of Article 4(1)(2A) of that Regulation, or
(iii) would be an insurance undertaking within the meaning given by Article 2(1) of Council Directive 91/674/EEC of the European Parliament and of the Council on the annual accounts of insurance undertakings were the United Kingdom a member State.
(3) There are further exemptions under–
section 400 (company included in UK accounts of larger group),
section 401 (company included in non-UK accounts of larger group), and
section 402 (company none of whose subsidiary undertakings need be included in the consolidation).
(4) A company ... which is exempt from the requirement to prepare group accounts, may do so.
400 Exemption for company included in UK group accounts of larger group
(1) A company is exempt from the requirement to prepare group accounts if it is itself a subsidiary undertaking and its immediate parent undertaking is established under the law of any part of the United Kingdom, in the following cases—
(a) where the company is a wholly-owned subsidiary of that parent undertaking;
(b) where that parent undertaking holds 90% or more of the allotted shares in the company and the remaining shareholders have approved the exemption;
(c) where that parent undertaking holds more than 50% (but less than 90%) of the allotted shares in the company and notice requesting the preparation of group accounts has not been served on the company by the shareholders holding in aggregate at least 5% of the allotted shares in the company.
Such notice must be served at least six months before the end of the financial year to which it relates.
(2) Exemption is conditional upon compliance with all of the following conditions—
(a) the company must be included in consolidated accounts for a larger group drawn up to the same date, or to an earlier date in the same financial year, by a parent undertaking established under the law of any part of the United Kingdom;
(b) those accounts must be drawn up and audited, and that parent undertaking's annual report must be drawn up ...—
(i) if the undertaking is a company, in accordance with the requirements of this Part of this Act, or, if the undertaking is not a company, the legal requirements which apply to the drawing up of consolidated accounts for that undertaking, or
(ii) in accordance with UK-adopted international accounting standards;
(c) the company must disclose in the notes to its individual accounts that it is exempt from the obligation to prepare and deliver group accounts;
(d) the company must state in its individual accounts the name of the parent undertaking that draws up the group accounts referred to above and—
(i) the address of the undertaking’s registered office..., or
(ii) if it is unincorporated, the address of its principal place of business;
(e) the company must deliver to the registrar, within the period for filing its accounts and reports for the financial year in question, copies of—
(i) those group accounts, and
(ii) the parent undertaking's annual report,
together with the auditor's report on them;
(f) any requirement of Part 35 of this Act as to the delivery to the registrar of a certified translation into English must be met in relation to any document comprised in the accounts and reports delivered in accordance with paragraph (e).
(3) For the purposes of subsection (1)(b) and (c) shares held by a wholly-owned subsidiary of the parent undertaking, or held on behalf of the parent undertaking or a wholly-owned subsidiary, shall be attributed to the parent undertaking.
(4) The exemption does not apply to a company which is a traded company.
(5) Shares held by directors of a company for the purpose of complying with any share qualification requirement shall be disregarded in determining for the purposes of this section whether the company is a wholly-owned subsidiary.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
401 Exemption for company included in non-UK group accounts of larger group
(1) A company is exempt from the requirement to prepare group accounts if it is itself a subsidiary undertaking and its parent undertaking is not established under the law of any part of the United Kingdom, in the following cases—
(a) where the company is a wholly-owned subsidiary of that parent undertaking;
(b) where that parent undertaking holds 90% or more of the allotted shares in the company and the remaining shareholders have approved the exemption; or
(c) where that parent undertaking holds more than 50% (but less than 90%) of the allotted shares in the company and notice requesting the preparation of group accounts has not been served on the company by the shareholders holding in aggregate at least 5% of the allotted shares in the company.
Such notice must be served at least six months before the end of the financial year to which it relates.
(2) Exemption is conditional upon compliance with all of the following conditions—
(a) the company and all of its subsidiary undertakings must be included in consolidated accounts for a larger group drawn up to the same date, or to an earlier date in the same financial year, by a parent undertaking;
(b) those accounts and, where appropriate, the group’s annual report, must be drawn up—
(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ii) in a manner equivalent to consolidated accounts and consolidated reports drawn up in accordance with the requirements of this Part of this Act,
(iii) in accordance with UK-adopted international accounting standards, or
(iv) in accordance with accounting standards which are equivalent to such international accounting standards, as determined pursuant to Commission Regulation (EC) No. 1569/2007 of 21 December 2007 establishing a mechanism for the determination of equivalence of accounting standards applied by third country issuers of securities pursuant to Directives 2003/71/ EC and 2004/109/ EC of the European Parliament and of the Council;
(c) the group accounts must be audited by one or more persons authorised to audit accounts under the law under which the parent undertaking which draws them up is established;
(d) the company must disclose in its individual accounts that it is exempt from the obligation to prepare and deliver group accounts;
(e) the company must state in its individual accounts the name of the parent undertaking which draws up the group accounts referred to above and—
(i) the address of the undertaking’s registered office (whether in or outside the United Kingdom), or;
(ii) if it is unincorporated, the address of its principal place of business;
(f) the company must deliver to the registrar, within the period for filing its accounts and reports for the financial year in question, copies of—
(i) the group accounts, and
(ii) where appropriate, the consolidated annual report,
together with the auditor's report on them;
(g) any requirement of Part 35 of this Act as to the delivery to the registrar of a certified translation into English must be met in relation to any document comprised in the accounts and reports delivered in accordance with paragraph (f).
(3) For the purposes of subsection (1)(b) and (c), shares held by a wholly-owned subsidiary of the parent undertaking, or held on behalf of the parent undertaking or a wholly-owned subsidiary, are attributed to the parent undertaking.
(4) The exemption does not apply to a company which is a traded company.
(5) Shares held by directors of a company for the purpose of complying with any share qualification requirement shall be disregarded in determining for the purposes of this section whether the company is a wholly-owned subsidiary.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
402 Exemption if no subsidiary undertakings need be included in the consolidation
A parent company is exempt from the requirement to prepare group accounts if under section 405 all of its subsidiary undertakings could be excluded from consolidation in Companies Act group accounts.
403 Group accounts: applicable accounting framework
(1) The group accounts of a parent company whose securities are, on its balance sheet date, admitted to trading on a UK regulated market must be prepared in accordance with UK-adopted international accounting standards (“IAS group accounts”).
(2) The group accounts of other companies may be prepared—
(a) in accordance with section 404 (“Companies Act group accounts”), or
(b) in accordance with UK-adopted international accounting standards (“IAS group accounts”).
This is subject to the following provisions of this section.
(3) The group accounts of a parent company that is a charity must be Companies Act group accounts.
(4) After the first financial year in which the directors of a parent company prepare IAS group accounts (“the first IAS year”), all subsequent group accounts of the company must be prepared in accordance with UK-adopted international accounting standards unless there is a relevant change of circumstance. This is subject to subsection (5A).
(5) There is a relevant change of circumstance if, at any time during or after the first IAS year—
(a) the company becomes a subsidiary undertaking of another undertaking that does not prepare IAS group accounts,
(b) the company ceases to be a company with securities admitted to trading on a UK regulated market, or
(c) a parent undertaking of the company ceases to be an undertaking with securities admitted to trading on a UK regulated market.
(5A) After a financial year in which the directors of a parent company prepare IAS group accounts for the company, the directors may change to preparing Companies Act group accounts for a reason other than a relevant change of circumstance provided they have not changed to Companies Act group accounts in the period of five years preceding the first day of that financial year.
(5B) In calculating the five year period for the purpose of subsection (5A), no account should be taken of a change due to a relevant change of circumstance.
(6) If, having changed to preparing Companies Act group accounts . . . , the directors again prepare IAS group accounts for the company, subsections (4) and (5) apply again as if the first financial year for which such accounts are again prepared were the first IAS year.
(A1) Companies Act group accounts must state, in respect of the parent company—
(a) the part of the United Kingdom in which the company is registered,
(b) the company’s registered number,
(c) whether the company is a public or a private company and whether it is limited by shares or by guarantee,
(d) the address of the company’s registered office, and
(e) where appropriate, the fact that the company is being wound-up.
(1) Companies Act group accounts must comprise—
(a) a consolidated balance sheet dealing with the state of affairs of the parent company and its subsidiary undertakings, and
(b) a consolidated profit and loss account dealing with the profit or loss of the parent company and its subsidiary undertakings.
(2) The accounts must give a true and fair view of the state of affairs as at the end of the financial year, and the profit or loss for the financial year, of the undertakings included in the consolidation as a whole, so far as concerns members of the company.
(3) The accounts must comply with provision made by the Secretary of State by regulations as to—
(a) the form and content of the consolidated balance sheet and consolidated profit and loss account, and
(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 group 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 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.
Particulars of any such departure, the reasons for it and its effect must be given in a note to the accounts.
405 Companies Act group accounts: subsidiary undertakings included in the consolidation
(1) Where a parent company prepares Companies Act group accounts, all the subsidiary undertakings of the company must be included in the consolidation, subject to the following exceptions.
(2) A subsidiary undertaking may be excluded from consolidation if its inclusion is not material for the purpose of giving a true and fair view (but two or more undertakings may be excluded only if they are not material taken together).
(3) A subsidiary undertaking may be excluded from consolidation where—
(a) severe long-term restrictions substantially hinder the exercise of the rights of the parent company over the assets or management of that undertaking, or
(b) extremely rare circumstances mean that the information necessary for the preparation of group accounts cannot be obtained without disproportionate expense or undue delay, or
(c) the interest of the parent company is held exclusively with a view to subsequent resale.
(4) The reference in subsection (3)(a) to the rights of the parent company and the reference in subsection (3)(c) to the interest of the parent company are, respectively, to rights and interests held by or attributed to the company for the purposes of the definition of “parent undertaking” (see section 1162) in the absence of which it would not be the parent company.
(1) IAS group accounts must state—
(a) the part of the United Kingdom in which the company is registered,
(b) the company’s registered number,
(c) whether the company is a public or a private company and whether it is limited by shares or by guarantee,
(d) the address of the company’s registered office, and
(e) where appropriate, the fact that the company is being wound-up.
(2) The notes to the accounts must state that the accounts have been prepared in accordance with UK-adopted international accounting standards.
407 Consistency of financial reporting within group
(1) The directors of a parent company must secure that the individual accounts of—
(a) the parent company, and
(b) each of its subsidiary undertakings,
are all prepared using the same financial reporting framework, except to the extent that in their opinion there are good reasons for not doing so.
(2) Subsection (1) does not apply if the directors do not prepare group accounts for the parent company.
(3) Subsection (1) only applies to accounts of subsidiary undertakings that are required to be prepared under this Part.
(4) Subsection (1) does not require accounts of undertakings that are charities to be prepared using the same financial reporting framework as accounts of undertakings which are not charities.
(5) Subsection (1)(a) does not apply where the directors of a parent company prepare IAS group accounts and IAS individual accounts.
408 Individual profit and loss account where group accounts prepared
(1) This section applies where—
(a) a company prepares group accounts in accordance with this Act, and
(b) the company’s individual balance sheet shows the company’s profit and loss for the financial year determined in accordance with this Act.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) The company's individual profit and loss account must be approved in accordance with section 414(1) (approval by directors) but may be omitted from the company's annual accounts for the purposes of the other provisions of the Companies Acts.
(4) The exemption conferred by this section is conditional upon its being disclosed in the company's annual accounts that the exemption applies.
(1) The Secretary of State may make provision by regulations requiring information about related undertakings to be given in notes to a company's annual accounts.
(2) The regulations—
(a) may make different provision according to whether or not the company prepares group accounts, and
(b) may specify the descriptions of undertaking in relation to which they apply, and make different provision in relation to different descriptions of related undertaking.
(3) The regulations may provide that information need not be disclosed with respect to an undertaking that—
(a) is established under the law of a country outside the United Kingdom, or
(b) carries on business outside the United Kingdom,
if the following conditions are met.
(4) The conditions are—
(a) that in the opinion of the directors of the company the disclosure would be seriously prejudicial to the business of—
(i) that undertaking,
(ii) the company,
(iii) any of the company's subsidiary undertakings, or
(iv) any other undertaking which is included in the consolidation;
(b) that the Secretary of State agrees that the information need not be disclosed.
(5) Where advantage is taken of any such exemption, that fact must be stated in a note to the company's annual accounts.
410A Information about off-balance sheet arrangements
(1) If in any financial year—
(a) a 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 the 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 is subject to the small companies regime in relation to the financial year (see section 381), 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.
(1) The notes to a company’s annual accounts must disclose the average number of persons employed by the company in the financial year.
(1A) In the case of a company not subject to the small companies regime, the notes to the company’s accounts must also disclose the average number of persons within each category of persons so employed.
(2) The categories by reference to which the number required to be disclosed by subsection (1A) is to be determined must be such as the directors may select having regard to the manner in which the company's activities are organised.
(3) The average number required by subsection (1) or (1A) is determined by dividing the relevant annual number by the number of months in the financial year.
(4) The relevant annual number is determined by ascertaining for each month in the financial year—
(a) for the purposes of subsection (1), the number of persons employed under contracts of service by the company in that month (whether throughout the month or not);
(b) for the purposes of subsection (1A), the number of persons in the category in question of persons so employed;
and adding together all the monthly numbers.
(5) Except in the case of a company subject to the small companies regime, the notes to the company’s annual accounts or the profit and loss account must disclose, with reference to all persons employed by the company during the financial year, the total staff costs of the company relating to the financial year broken down between—
(a) wages and salaries paid or payable in respect of that year to those persons,
(b) social security costs incurred by the company on their behalf, and
(c) other pension costs so incurred.
(6) In subsection (5)—
“pension costs” includes any costs incurred by the company in respect of—
any pension scheme established for the purpose of providing pensions for persons currently or formerly employed by the company,
any sums set aside for the future payment of pensions directly by the company to current or former employees, and
any pensions paid directly to such persons without having first been set aside;
“social security costs” means any contributions by the company to any state social security or pension scheme, fund or arrangement.
(7) This section applies in relation to group accounts as if the undertakings included in the consolidation were a single company.
412 Information about directors' benefits: remuneration
(1) The Secretary of State may make provision by regulations requiring information to be given in notes to a company's annual accounts about directors' remuneration.
(2) The matters about which information may be required include—
(a) gains made by directors on the exercise of share options;
(b) benefits received or receivable by directors under long-term incentive schemes;
(c) payments for loss of office (as defined in section 215);
(d) benefits receivable, and contributions for the purpose of providing benefits, in respect of past services of a person as director or in any other capacity while director;
(e) consideration paid to or receivable by third parties for making available the services of a person as director or in any other capacity while director.
(3) Without prejudice to the generality of subsection (1), regulations under this section may make any such provision as was made immediately before the commencement of this Part by Part 1 of Schedule 6 to the Companies Act 1985 (c. 6).
(4) For the purposes of this section, and regulations made under it, amounts paid to or receivable by—
(a) a person connected with a director, or
(b) a body corporate controlled by a director,
are treated as paid to or receivable by the director.
The expressions “connected with” and “controlled by” in this subsection have the same meaning as in Part 10 (company directors).
(5) It is the duty of—
(a) any director of a company, and
(b) any person who is or has at any time in the preceding five years been a director of the company,
to give notice to the company of such matters relating to himself as may be necessary for the purposes of regulations under this section.
(6) A person who makes default in complying with subsection (5) commits an offence and is liable on summary conviction to a fine not exceeding level 3 on the standard scale.
413 Information about directors' benefits: advances, credit and guarantees
(1) In the case of a company that does not prepare group accounts, details of—
(a) advances and credits granted by the company to its directors, and
(b) guarantees of any kind entered into by the company on behalf of its directors,
must be shown in the notes to its individual accounts.
(2) In the case of a parent company that prepares group accounts, details of—
(a) advances and credits granted to the directors of the parent company, by that company or by any of its subsidiary undertakings, and
(b) guarantees of any kind entered into on behalf of the directors of the parent company, by that company or by any of its subsidiary undertakings,
must be shown in the notes to the group accounts.
(3) The details required of an advance or credit are—
(a) its amount,
(b) an indication of the interest rate,
(c) its main conditions, ...
(d) any amounts repaid.
(e) any amounts written off, and
(f) any amounts waived.
(4) The details required of a guarantee are—
(a) its main terms,
(b) the amount of the maximum liability that may be incurred by the company (or its subsidiary), and
(c) any amount paid and any liability incurred by the company (or its subsidiary) for the purpose of fulfilling the guarantee (including any loss incurred by reason of enforcement of the guarantee).
(5) There must also be stated in the notes to the accounts the totals—
(a) of amounts stated under subsection (3)(a),
(b) of amounts stated under subsection (3)(d),
(ba) of amounts stated under subsection 3(e),
(bb) of amounts stated under subsection 3(f),
(c) of amounts stated under subsection (4)(b), and
(d) of amounts stated under subsection (4)(c).
(6) References in this section to the directors of a company are to the persons who were directors at any time in the financial year to which the accounts relate.
(7) The requirements of this section apply in relation to every advance, credit or guarantee subsisting at any time in the financial year to which the accounts relate—
(a) whenever it was entered into,
(b) whether or not the person concerned was a director of the company in question at the time it was entered into, and
(c) in the case of an advance, credit or guarantee involving a subsidiary undertaking of that company, whether or not that undertaking was such a subsidiary undertaking at the time it was entered into.
(8) Banking companies and the holding companies of credit institutions need only state the details required by subsection (5)(a) and (c).
(1) A company's annual 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 company's balance sheet.
(3) If the accounts are prepared in accordance with the small companies regime, the balance sheet must contain, in a prominent position above the signature—
(a) in the case of individual accounts prepared in accordance with the micro-entity provisions, a statement to that effect, or
(b) in the case of accounts not prepared as mentioned in paragraph (a), a statement to the effect that the accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.
(4) If annual accounts are approved that do not comply with the requirements of this Act ..., 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 secure compliance with those requirements or, as the case may be, to prevent the accounts from being approved,
commits an offence.
(5) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.
(1) The directors of a company must prepare a strategic report for each financial year of the company.
(2) Subsection (1) does not apply if the company is entitled to the small companies exemption.
(3) For a financial year in which—
(a) the company is a parent company, and
(b) the directors of the company prepare group accounts,
the strategic report must be a consolidated report (a “group strategic report”) relating to the undertakings included in the consolidation.
(4) A group strategic report may, where appropriate, give greater emphasis to the matters that are significant to the undertakings included in the consolidation, taken as a whole.
(5) In the case of failure to comply with the requirement to prepare a strategic report, an offence is committed by every person who—
(a) was a director of the company immediately before the end of the period for filing accounts and reports for the financial year in question, and
(b) failed to take all reasonable steps for securing compliance with that requirement.
(6) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.
A company is entitled to the small companies exemption in relation to the strategic report for a financial year if—
(a) it is entitled to prepare accounts for the year in accordance with the small companies regime, or
(b) it would be so entitled but for being or having been a member of an ineligible group.
(1) The purpose of the strategic report is to inform members of the company and help them assess how the directors have performed their duty under section 172 (duty to promote the success of the company).
(2) The strategic report must contain—
(a) a fair review of the company’s business, and
(b) a description of the principal risks and uncertainties facing the company.
Section 414CZA (section 172(1) statement) and sections 414CA and 414CB (non-financial and sustainability information statement) make further provision about the contents of a strategic report.
(3) The review required is a balanced and comprehensive analysis of—
(a) the development and performance of the company’s business during the financial year, and
(b) the position of the company’s business at the end of that year,
consistent with the size and complexity of the business.
(4) The review must, to the extent necessary for an understanding of the development, performance or position of the company’s business, include—
(a) analysis using financial key performance indicators, and
(b) where appropriate, analysis using other key performance indicators, including information relating to environmental matters and employee matters.
(5) In subsection (4), “key performance indicators” means factors by reference to which the development, performance or position of the company’s business can be measured effectively.
(6) Where a company qualifies as medium-sized in relation to a financial year (see sections 465 to 467), the review for the year need not comply with the requirements of subsection (4) so far as they relate to non-financial information.
(7) In the case of a quoted company the strategic report must, to the extent necessary for an understanding of the development, performance or position of the company’s business, include—
(a) the main trends and factors likely to affect the future development, performance and position of the company’s business, and
(b) information about—
(i) environmental matters (including the impact of the company’s business on the environment),
(ii) the company’s employees, and
(iii) social, community and human rights issues,
including information about any policies of the company in relation to those matters and the effectiveness of those policies.
If the report does not contain information of each kind mentioned in paragraphs (b)(i), (ii) and (iii), it must state which of those kinds of information it does not contain.
(8) In the case of a quoted company the strategic report must include—
(a) a description of the company’s strategy,
(b) a description of the company’s business model,
(c) a breakdown showing at the end of the financial year—
(i) the number of persons of each sex who were directors of the company;
(ii) the number of persons of each sex who were senior managers of the company (other than persons falling within sub-paragraph (i)); and
(iii) the number of persons of each sex who were employees of the company.
(9) In subsection (8), “senior manager” means a person who—
(a) has responsibility for planning, directing or controlling the activities of the company, or a strategically significant part of the company, and
(b) is an employee of the company.
(10) In relation to a group strategic report—
(a) the reference to the company in subsection (8)(c)(i) is to the parent company; and
(b) the breakdown required by subsection (8)(c)(ii) must include the number of persons of each sex who were the directors of the undertakings included in the consolidation.
(11) The strategic report may also contain such of the matters otherwise required by regulations made under section 416(4) to be disclosed in the directors’ report as the directors consider are of strategic importance to the company.
(12) The report must, where appropriate, include references to, and additional explanations of, amounts included in the company’s annual accounts.
(13) Subject to paragraph (10), in relation to a group strategic report this section has effect as if the references to the company were references to the undertakings included in the consolidation.
(14) Nothing in this section requires the disclosure of information about impending developments or matters in the course of negotiation if the disclosure would, in the opinion of the directors, be seriously prejudicial to the interests of the company.
(1) A strategic report for a financial year of a company must include a statement (a “section 172(1) statement”) which describes how the directors have had regard to the matters set out in section 172(1)(a) to (f) when performing their duty under section 172.
(2) Subsection (1) does not apply if the company qualifies as medium-sized in relation to that financial year (see sections 465 to 467).
414CA Non-financial and sustainability information statement
(A1) A strategic report of a company to which this subsection applies must include a non-financial and sustainability information statement.
(1) Subsection (A1) applies to a company if it was at any time within the financial year to which the report relates—
(a) a traded company,
(b) a banking company,
(c) an authorised insurance company, ...
(d) a company carrying on insurance market activity or
(e) a company any securities of which are admitted to trading on the market known as the Alternative Investment Market.
(1A) Subsection (A1) also applies to a company if it was a high turnover company in relation to that financial year.
(1B) Subsections (1) and (1A) are subject to subsections (3) to (7).
(2) If the company’s strategic report is a group strategic report, the non-financial and sustainability information statement to be included in the report under subsection (A1) must be a consolidated statement (a “group non-financial and sustainability information statement”) relating to the undertakings included in the consolidation.
(2A) A company is a “high turnover company” in relation to a financial year—
(a) where the company was not a parent company in that financial year, if in that year the company’s turnover was more than £500 million;
(b) where the company was a parent company at any time within that financial year, if in that year a group headed by the company had an aggregate turnover of more than £500 million net.
(2B) For a period that is a company’s financial year but not in fact a year the figures for turnover given by subsection (2A) must be proportionately adjusted.
(2C) For the purposes of subsection (2A)(b)—
(a) aggregate turnover is ascertained by aggregating the relevant figures determined for each member of the group;
(b) “net”, in relation to aggregate turnover, is to be interpreted in accordance with section 383(6).
(2D) Section 383(7) applies for the purposes of subsection (2A)(b) of this section as it applies for the purposes of section 383.
(3) Subsection (A1) does not apply to a company if—
(a) the company is subject to the small companies regime in relation to that financial year (see sections 382 to 384), or
(b) the company qualifies as medium-sized in relation to that financial year (see sections 465 to 467).
(4) Subsection (A1) does not apply—
(a) to a company which was not a parent company in that financial year, if the company had no more than 500 employees in that financial year, or
(b) to a company which was a parent company at any time within that financial year, if the aggregate number of employees for a group headed by that company in that financial year was no more than 500.
(5) The number of employees means the average number of persons employed by the company in the year, determined as follows—
(a) find for each month in the financial year the number of persons employed under contracts of service by the company in that month (whether throughout the month or not),
(b) add together the monthly totals, and
(c) divide by the number of months in the financial year.
(6) The aggregate number of employees for a group is ascertained by aggregating the relevant figures determined in accordance with subsection (5) for each member of the group.
(7) Subsection (A1) does not apply to a company if the company is a subsidiary undertaking at the end of that financial year and is included in—
(a) a group strategic report of a parent undertaking of the company that satisfies the requirements in subsection (8), ...
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) The requirements in this subsection are that—
(a) the group strategic report relates to undertakings that include the company and its subsidiary undertakings (if any),
(b) the report is prepared for a financial year of the parent undertaking that ends at the same time as, or before the end of, the company’s financial year, and
(c) the report includes a group non-financial and sustainability information statement in respect of all the undertakings included in the consolidation.
(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10) A company to which subsection (A1) does not apply may include a non-financial and sustainability information statement in its strategic report or, as the case may be, a group non-financial and sustainability information statement in its group strategic report.