Companies Act 2006 (c. 46)

(The document as of February, 2008)

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Chapter 5 Directors' report

Directors' report

415 Duty to prepare directors' report

(1) The directors of a company must prepare a directors' report for each financial year of the company.

(2) For a financial year in which--

(a) the company is a parent company, and

(b) the directors of the company prepare group accounts,

the directors' report must be a consolidated report (a "group directors' report") relating to the undertakings included in the consolidation.

(3) A group directors' report may, where appropriate, give greater emphasis to the matters that are significant to the undertakings included in the consolidation, taken as a whole.

(4) In the case of failure to comply with the requirement to prepare a directors' 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.

(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.

416 Contents of directors' report: general

(1) The directors' report for a financial year must state--

(a) the names of the persons who, at any time during the financial year, were directors of the company, and

(b) the principal activities of the company in the course of the year.

(2) In relation to a group directors' report subsection (1)(b) has effect as if the reference to the company was to the undertakings included in the consolidation.

(3) Except in the case of a company subject to the small companies regime, the report must state the amount (if any) that the directors recommend should be paid by way of dividend.

(4) The Secretary of State may make provision by regulations as to other matters that must be disclosed in a directors' report.

Without prejudice to the generality of this power, the regulations may make any such provision as was formerly made by Schedule 7 to the Companies Act 1985.

417 Contents of directors' report: business review

(1) Unless the company is subject to the small companies' regime, the directors' report must contain a business review.

(2) The purpose of the business review 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).

(3) The business review must contain--

(a) a fair review of the company's business, and

(b) a description of the principal risks and uncertainties facing the company.

(4) 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.

(5) In the case of a quoted company the business review 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 and community issues,

including information about any policies of the company in relation to those matters and the effectiveness of those policies; and

(c) subject to subsection (11), information about persons with whom the company has contractual or other arrangements which are essential to the business of the company.

If the review does not contain information of each kind mentioned in paragraphs (b)(i), (ii) and (iii) and (c), it must state which of those kinds of information it does not contain.

(6) 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.

"Key performance indicators" means factors by reference to which the development, performance or position of the company's business can be measured effectively.

(7) Where a company qualifies as medium-sized in relation to a financial year (see sections 465 to 467), the directors' report for the year need not comply with the requirements of subsection (6) so far as they relate to non-financial information.

(8) The review must, where appropriate, include references to, and additional explanations of, amounts included in the company's annual accounts.

(9) In relation to a group directors' report this section has effect as if the references to the company were references to the undertakings included in the consolidation.

(10) 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.

(11) Nothing in subsection (5)(c) requires the disclosure of information about a person if the disclosure would, in the opinion of the directors, be seriously prejudicial to that person and contrary to the public interest.

418 Contents of directors' report: statement as to disclosure to auditors

(1) This section applies to a company unless--

(a) it is exempt for the financial year in question from the requirements of Part 16 as to audit of accounts, and

(b) the directors take advantage of that exemption.

(2) The directors' report must contain a statement to the effect that, in the case of each of the persons who are directors at the time the report is approved--

(a) so far as the director is aware, there is no relevant audit information of which the company's auditor is unaware, and

(b) he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditor is aware of that information.

(3) "Relevant audit information" means information needed by the company's auditor in connection with preparing his report.

(4) A director is regarded as having taken all the steps that he ought to have taken as a director in order to do the things mentioned in subsection (2)(b) if he has--

(a) made such enquiries of his fellow directors and of the company's auditors for that purpose, and

(b) taken such other steps (if any) for that purpose,

as are required by his duty as a director of the company to exercise reasonable care, skill and diligence.

(5) Where a directors' report containing the statement required by this section is approved but the statement is false, every director of the company who--

(a) knew that the statement was false, or was reckless as to whether it was false, and

(b) failed to take reasonable steps to prevent the report from being approved,

commits an offence.

(6) A person guilty of an offence under subsection (5) 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).

419 Approval and signing of directors' report

(1) 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.

(2) If the report is prepared in accordance with the small companies regime, it must contain a statement to that effect in a prominent position above the signature.

(3) If a directors' report is approved that does not comply with the requirements of this Act, every director of the company who--

(a) knew that it did not comply, or was reckless as to whether it complied, and

(b) failed to take reasonable steps to secure compliance with those requirements or, as the case may be, to prevent the report from being approved,

commits an offence.

(4) 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.

Chapter 6 Quoted companies: directors' remuneration report

420 Duty to prepare directors' remuneration report

(1) The directors of a quoted company must prepare a directors' remuneration report for each financial year of the company.

(2) In the case of failure to comply with the requirement to prepare a directors' remuneration report, 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,

commits an offence.

(3) 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.

421 Contents of directors' remuneration report

(1) The Secretary of State may make provision by regulations as to--

(a) the information that must be contained in a directors' remuneration report,

(b) how information is to be set out in the report, and

(2) Without prejudice to the generality of this power, the regulations may make any such provision as was made, immediately before the commencement of this Part, by Schedule 7A to the Companies Act 1985 (c. 6).

(3) 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.

(4) A person who makes default in complying with subsection (3) commits an offence and is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

422 Approval and signing of directors' remuneration report

(1) The directors' remuneration 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.

(2) If a directors' remuneration report is approved that does not comply with the requirements of this Act, every director of the company who--

(a) knew that it did not comply, or was reckless as to whether it complied, and

(b) failed to take reasonable steps to secure compliance with those requirements or, as the case may be, to prevent the report from being approved,

commits an offence.

(3) 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.

Chapter 7 Publication of accounts and reports

Duty to circulate copies of accounts and reports

423 Duty to circulate copies of annual accounts and reports

(1) Every company must send a copy of its annual accounts and reports for each financial year to--

(a) every member of the company,

(b) every holder of the company's debentures, and

(2) Copies need not be sent to a person for whom the company does not have a current address.

(3) A company has a "current address" for a person if--

(a) an address has been notified to the company by the person as one at which documents may be sent to him, and

(b) the company has no reason to believe that documents sent to him at that address will not reach him.

(4) In the case of a company not having a share capital, copies need not be sent to anyone who is not entitled to receive notices of general meetings of the company.

(5) Where copies are sent out over a period of days, references in the Companies Acts to the day on which copies are sent out shall be read as references to the last day of that period.

(6) This section has effect subject to section 426 (option to provide summary financial statement).

424 Time allowed for sending out copies of accounts and reports

(1) The time allowed for sending out copies of the company's annual accounts and reports is as follows.

(2) A private company must comply with section 423 not later than--

(a) the end of the period for filing accounts and reports, or

(b) if earlier, the date on which it actually delivers its accounts and reports to the registrar.

(3) A public company must comply with section 423 at least 21 days before the date of the relevant accounts meeting.

(4) If in the case of a public company copies are sent out later than is required by subsection (3), they shall, despite that, be deemed to have been duly sent if it is so agreed by all the members entitled to attend and vote at the relevant accounts meeting.

(5) Whether the time allowed is that for a private company or a public company is determined by reference to the company's status immediately before the end of the accounting reference period by reference to which the financial year for the accounts in question was determined.

(6) In this section the "relevant accounts meeting" means the accounts meeting of the company at which the accounts and reports in question are to be laid.

425 Default in sending out copies of accounts and reports: offences

(1) If default is made in complying with section 423 or 424, an offence is committed by--

(a) the company, and

(b) every officer of the company who is in default.

(2) 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.

Option to provide summary financial statement

426 Option to provide summary financial statement

(1) A company may--

(a) in such cases as may be specified by regulations made by the Secretary of State, and

(b) provided any conditions so specified are complied with,

provide a summary financial statement instead of copies of the accounts and reports required to be sent out in accordance with section 423.

(2) Copies of those accounts and reports must, however, be sent to any person entitled to be sent them in accordance with that section and who wishes to receive them.

(3) The Secretary of State may make provision by regulations as to the manner in which it is to be ascertained, whether before or after a person becomes entitled to be sent a copy of those accounts and reports, whether he wishes to receive them.

(4) A summary financial statement must comply with the requirements of--

section 427 (form and contents of summary financial statement: unquoted companies), or
section 428 (form and contents of summary financial statement: quoted companies).

(5) This section applies to copies of accounts and reports required to be sent out by virtue of section 146 to a person nominated to enjoy information rights as it applies to copies of accounts and reports required to be sent out in accordance with section 423 to a member of the company.

(6) Regulations under this section are subject to negative resolution procedure.

427 Form and contents of summary financial statement: unquoted companies

(1) A summary financial statement by a company that is not a quoted company must--

(a) be derived from the company's annual accounts, and

(b) be prepared in accordance with this section and regulations made under it.

(2) The summary financial statement must be in such form, and contain such information, as the Secretary of State may specify by regulations.

The regulations may require the statement to include information derived from the directors' report.

(3) Nothing in this section or regulations made under it prevents a company from including in a summary financial statement additional information derived from the company's annual accounts or the directors' report.

(4) The summary financial statement must--

(a) state that it is only a summary of information derived from the company's annual accounts;

(b) state whether it contains additional information derived from the directors' report and, if so, that it does not contain the full text of that report;

(c) state how a person entitled to them can obtain a full copy of the company's annual accounts and the directors' report;

(d) contain a statement by the company's auditor of his opinion as to whether the summary financial statement--

(i) is consistent with the company's annual accounts and, where information derived from the directors' report is included in the statement, with that report, and

(ii) complies with the requirements of this section and regulations made under it;

(e) state whether the auditor's report on the annual accounts was unqualified or qualified and, if it was qualified, set out the report in full together with any further material needed to understand the qualification;

(f) state whether, in that report, the auditor's statement under section 496 (whether directors' report consistent with accounts) was qualified or unqualified and, if it was qualified, set out the qualified statement in full together with any further material needed to understand the qualification;

(g) state whether that auditor's report contained a statement under--

(i) section 498(2)(a) or (b) (accounting records or returns inadequate or accounts not agreeing with records and returns), or

(ii) section 498(3) (failure to obtain necessary information and explanations),

and if so, set out the statement in full.

(5) Regulations under this section may provide that any specified material may, instead of being included in the summary financial statement, be sent separately at the same time as the statement.

(6) Regulations under this section are subject to negative resolution procedure.

428 Form and contents of summary financial statement: quoted companies

(1) A summary financial statement by a quoted company must--

(a) be derived from the company's annual accounts and the directors' remuneration report, and

(b) be prepared in accordance with this section and regulations made under it.

(2) The summary financial statement must be in such form, and contain such information, as the Secretary of State may specify by regulations.

The regulations may require the statement to include information derived from the directors' report.

(4) The summary financial statement must--

(a) state that it is only a summary of information derived from the company's annual accounts and the directors' remuneration report;

(b) state whether it contains additional information derived from the directors' report and, if so, that it does not contain the full text of that report;

(c) state how a person entitled to them can obtain a full copy of the company's annual accounts, the directors' remuneration report or the directors' report;

(d) contain a statement by the company's auditor of his opinion as to whether the summary financial statement--

(i) is consistent with the company's annual accounts and the directors' remuneration report and, where information derived from the directors' report is included in the statement, with that report, and

(ii) complies with the requirements of this section and regulations made under it;

(e) state whether the auditor's report on the annual accounts and the auditable part of the directors' remuneration report was unqualified or qualified and, if it was qualified, set out the report in full together with any further material needed to understand the qualification;

(f) state whether that auditor's report contained a statement under--

(i) section 498(2) (accounting records or returns inadequate or accounts or directors' remuneration report not agreeing with records and returns), or

(ii) section 498(3) (failure to obtain necessary information and explanations),

and if so, set out the statement in full;

(g) state whether, in that report, the auditor's statement under section 496 (whether directors' report consistent with accounts) was qualified or unqualified and, if it was qualified, set out the qualified statement in full together with any further material needed to understand the qualification.

(5) Regulations under this section may provide that any specified material may, instead of being included in the summary financial statement, be sent separately at the same time as the statement.

(6) Regulations under this section are subject to negative resolution procedure.

429 Summary financial statements: offences

(1) If default is made in complying with any provision of section 426, 427 or 428, or of regulations under any of those sections, an offence is committed by--

(a) the company, and

(b) every officer of the company who is in default.

(2) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

Quoted companies: requirements as to website publication

430 Quoted companies: annual accounts and reports to be made available on website

(1) A quoted company must ensure that its annual accounts and reports--

(a) are made available on a website, and

(b) remain so available until the annual accounts and reports for the company's next financial year are made available in accordance with this section.

(2) The annual accounts and reports must be made available on a website that--

(a) is maintained by or on behalf of the company, and

(b) identifies the company in question.

(3) Access to the annual accounts and reports on the website, and the ability to obtain a hard copy of the annual accounts and reports from the website, must not be--

(a) conditional on the payment of a fee, or

(b) otherwise restricted, except so far as necessary to comply with any enactment or regulatory requirement (in the United Kingdom or elsewhere).

(4) The annual accounts and reports--

(a) must be made available as soon as reasonably practicable, and

(b) must be kept available throughout the period specified in subsection (1)(b).

(5) A failure to make the annual accounts and reports available on a website throughout that period is disregarded if--

(a) the annual accounts and reports are made available on the website for part of that period, and

(b) the failure is wholly attributable to circumstances that it would not be reasonable to have expected the company to prevent or avoid.

(6) In the event of default in complying with this section, an offence is committed by every officer of the company who is in default.

(7) A person guilty of an offence under subsection (6) is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

Right of member or debenture holder to demand copies of accounts and reports

431 Right of member or debenture holder to copies of accounts and reports: unquoted companies

(1) A member of, or holder of debentures of, an unquoted company is entitled to be provided, on demand and without charge, with a copy of--

(a) the company's last annual accounts,

(b) the last directors' report, and

(2) The entitlement under this section is to a single copy of those documents, but that is in addition to any copy to which a person may be entitled under section 423.

(3) If a demand made under this section is not complied with within seven days of receipt by the company, an offence is committed by--

(a) the company, and

(b) every officer of the company who is in default.

(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

432 Right of member or debenture holder to copies of accounts and reports: quoted companies

(1) A member of, or holder of debentures of, a quoted company is entitled to be provided, on demand and without charge, with a copy of--

(a) the company's last annual accounts,

(b) the last directors' remuneration report,

(d) the auditor's report on those accounts (including the report on the directors' remuneration report and on the directors' report).

(2) The entitlement under this section is to a single copy of those documents, but that is in addition to any copy to which a person may be entitled under section 423.

(3) If a demand made under this section is not complied with within seven days of receipt by the company, an offence is committed by--

(a) the company, and

(b) every officer of the company who is in default.

Requirements in connection with publication of accounts and reports

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