Companies Act 2006 (c. 46)

(The document as of February, 2008)

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(a) section 393 (accounts to give true and fair view), or

(b) the provisions of Chapter 11 (revision of defective accounts and reports).

(4) The regulations may create criminal offences in cases corresponding to those in which an offence is created by an existing provision of this Part.

The maximum penalty for any such offence may not be greater than is provided in relation to an offence under the existing provision.

(5) The regulations may provide for civil penalties in circumstances corresponding to those within section 453(1) (civil penalty for failure to file accounts and reports).

The provisions of section 453(2) to (5) apply in relation to any such penalty.

Other supplementary provisions

469 Preparation and filing of accounts in euros

(1) The amounts set out in the annual accounts of a company may also be shown in the same accounts translated into euros.

(2) When complying with section 441 (duty to file accounts and reports), the directors of a company may deliver to the registrar an additional copy of the company's annual accounts in which the amounts have been translated into euros.

(3) In both cases--

(a) the amounts must have been translated at the exchange rate prevailing on the date to which the balance sheet is made up, and

(b) that rate must be disclosed in the notes to the accounts.

(4) For the purposes of sections 434 and 435 (requirements in connection with published accounts) any additional copy of the company's annual accounts delivered to the registrar under subsection (2) above shall be treated as statutory accounts of the company.

In the case of such a copy, references in those sections to the auditor's report on the company's annual accounts shall be read as references to the auditor's report on the annual accounts of which it is a copy.

470 Power to apply provisions to banking partnerships

(1) The Secretary of State may by regulations apply to banking partnerships, subject to such exceptions, adaptations and modifications as he considers appropriate, the provisions of this Part (and of regulations made under this Part) applying to banking companies.

(2) A "banking partnership" means a partnership which has permission under Part 4 of the Financial Services and Markets Act 2000 (c. 8).

But a partnership is not a banking partnership if it has permission to accept deposits only for the purpose of carrying on another regulated activity in accordance with that permission.

(3) Expressions used in this section that are also used in the provisions regulating activities under the Financial Services and Markets Act 2000 have the same meaning here as they do in those provisions.

See section 22 of that Act, orders made under that section and Schedule 2 to that Act.

(4) Regulations under this section are subject to affirmative resolution procedure.

471 Meaning of "annual accounts" and related expressions

(1) In this Part a company's "annual accounts", in relation to a financial year, means--

(a) the company's individual accounts for that year (see section 394), and

(b) any group accounts prepared by the company for that year (see sections 398 and 399).

This is subject to section 408 (option to omit individual profit and loss account from annual accounts where information given in group accounts).

(2) In the case of an unquoted company, its "annual accounts and reports" for a financial year are--

(a) its annual accounts,

(b) the directors' report, and

(3) In the case of a quoted company, its "annual accounts and reports" for a financial year are--

(a) its annual accounts,

(b) the directors' remuneration report,

(d) the auditor's report on those accounts, on the auditable part of the directors' remuneration report and on the directors' report.

472 Notes to the accounts

(1) Information required by this Part to be given in notes to a company's annual accounts may be contained in the accounts or in a separate document annexed to the accounts.

(2) References in this Part to a company's annual accounts, or to a balance sheet or profit and loss account, include notes to the accounts giving information which is required by any provision of this Act or international accounting standards, and required or allowed by any such provision to be given in a note to company accounts.

473 Parliamentary procedure for certain regulations under this Part

(1) This section applies to regulations under the following provisions of this Part--

section 396 (Companies Act individual accounts),
section 404 (Companies Act group accounts),
section 409 (information about related undertakings),
section 412 (information about directors' benefits: remuneration, pensions and compensation for loss of office),
section 416 (contents of directors' report: general),
section 421 (contents of directors' remuneration report),
section 444 (filing obligations of companies subject to small companies regime),
section 445 (filing obligations of medium-sized companies),
section 468 (general power to make further provision about accounts and reports).

(2) Any such regulations may make consequential amendments or repeals in other provisions of this Act, or in other enactments.

(3) Regulations that--

(a) restrict the classes of company which have the benefit of any exemption, exception or special provision,

(b) require additional matter to be included in a document of any class, or

are subject to affirmative resolution procedure.

(4) Otherwise, the regulations are subject to negative resolution procedure.

474 Minor definitions

(1) In this Part--

"e-money issuer" means a person who has permission under Part 4 of the Financial Services and Markets Act 2000 (c. 8) to carry on the activity of issuing electronic money within the meaning of article 9B of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544);
"group" means a parent undertaking and its subsidiary undertakings;
"IAS Regulation" means EC Regulation No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards;
"included in the consolidation", in relation to group accounts, or "included in consolidated group accounts", means that the undertaking is included in the accounts by the method of full (and not proportional) consolidation, and references to an undertaking excluded from consolidation shall be construed accordingly;
"international accounting standards" means the international accounting standards, within the meaning of the IAS Regulation, adopted from time to time by the European Commission in accordance with that Regulation;
"ISD investment firm" has the meaning given by the Glossary forming part of the Handbook made by the Financial Services Authority under the Financial Services and Markets Act 2000;
"profit and loss account", in relation to a company that prepares IAS accounts, includes an income statement or other equivalent financial statement required to be prepared by international accounting standards;
"regulated activity" has the meaning given in section 22 of the Financial Services and Markets Act 2000, except that it does not include activities of the kind specified in any of the following provisions of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544)--
(a)
article 25A (arranging regulated mortgage contracts),
(b)
article 25B (arranging regulated home reversion plans),
(c)
article 25C (arranging regulated home purchase plans),
(d)
article 39A (assisting administration and performance of a contract of insurance),
(e)
article 53A (advising on regulated mortgage contracts),
(f)
article 53B (advising on regulated home reversion plans),
(g)
article 53C (advising on regulated home purchase plans),
(h)
article 21 (dealing as agent), article 25 (arranging deals in investments) or article 53 (advising on investments) where the activity concerns relevant investments that are not contractually based investments (within the meaning of article 3 of that Order), or
(i)
article 64 (agreeing to carry on a regulated activity of the kind mentioned in paragraphs (a) to (h));
"turnover", in relation to a company, means the amounts derived from the provision of goods and services falling within the company's ordinary activities, after deduction of--
(a)
trade discounts,
(b)
value added tax, and
(c)
any other taxes based on the amounts so derived;
"UCITS management company" has the meaning given by the Glossary forming part of the Handbook made by the Financial Services Authority under the Financial Services and Markets Act 2000 (c. 8).

(2) In the case of an undertaking not trading for profit, any reference in this Part to a profit and loss account is to an income and expenditure account.

References to profit and loss and, in relation to group accounts, to a consolidated profit and loss account shall be construed accordingly.

Part 16 Audit

Chapter 1 Requirement for audited accounts

Requirement for audited accounts

475 Requirement for audited accounts

(1) A company's annual accounts for a financial year must be audited in accordance with this Part unless the company--

(a) is exempt from audit under--

section 477 (small companies), or
section 480 (dormant companies);

(b) is exempt from the requirements of this Part under section 482 (non-profit-making companies subject to public sector audit).

(2) A company is not entitled to any such exemption unless its balance sheet contains a statement by the directors to that effect.

(3) A company is not entitled to exemption under any of the provisions mentioned in subsection (1)(a) unless its balance sheet contains a statement by the directors to the effect that--

(a) the members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476, and

(b) the directors acknowledge their responsibilities for complying with the requirements of this Act with respect to accounting records and the preparation of accounts.

(4) The statement required by subsection (2) or (3) must appear on the balance sheet above the signature required by section 414.

476 Right of members to require audit

(1) The members of a company that would otherwise be entitled to exemption from audit under any of the provisions mentioned in section 475(1)(a) may by notice under this section require it to obtain an audit of its accounts for a financial year.

(2) The notice must be given by--

(a) members representing not less in total than 10% in nominal value of the company's issued share capital, or any class of it, or

(b) if the company does not have a share capital, not less than 10% in number of the members of the company.

(3) The notice may not be given before the financial year to which it relates and must be given not later than one month before the end of that year.

Exemption from audit: small companies

477 Small companies: conditions for exemption from audit

(1) A company that meets the following conditions in respect of a financial year is exempt from the requirements of this Act relating to the audit of accounts for that year.

(2) The conditions are--

(a) that the company qualifies as a small company in relation to that year,

(b) that its turnover in that year is not more than £5.6 million, and

(3) For a period which is a company's financial year but not in fact a year the maximum figure for turnover shall be proportionately adjusted.

(4) For the purposes of this section--

(a) whether a company qualifies as a small company shall be determined in accordance with section 382(1) to (6), and

(b) "balance sheet total" has the same meaning as in that section.

(5) This section has effect subject to--

section 475(2) and (3) (requirements as to statements to be contained in balance sheet),
section 476 (right of members to require audit),
section 478 (companies excluded from small companies exemption), and
section 479 (availability of small companies exemption in case of group company).

478 Companies excluded from small companies exemption

A company is not entitled to the exemption conferred by section 477 (small companies) if it was at any time within the financial year in question--

(a) a public company,

(b) a company that--

(i) is an authorised insurance company, a banking company, an e-money issuer, an ISD 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 (N.I. 5)).

479 Availability of small companies exemption in case of group company

(1) A company is not entitled to the exemption conferred by section 477 (small companies) in respect of a financial year during any part of which it was a group company unless--

(a) the conditions specified in subsection (2) below are met, or

(b) subsection (3) applies.

(2) The conditions are--

(a) that the group--

(i) qualifies as a small group in relation to that financial year, and

(ii) was not at any time in that year an ineligible group;

(b) that the group's aggregate turnover in that year is not more than £5.6 million net (or £6.72 million gross);

(c) that the group's aggregate balance sheet total for that year is not more than £2.8 million net (or £3.36 million gross).

(3) A company is not excluded by subsection (1) if, throughout the whole of the period or periods during the financial year when it was a group company, it was both a subsidiary undertaking and dormant.

(4) In this section--

(a) "group company" means a company that is a parent company or a subsidiary undertaking, and

(b) "the group", in relation to a group company, means that company together with all its associated undertakings.

For this purpose undertakings are associated if one is a subsidiary undertaking of the other or both are subsidiary undertakings of a third undertaking.

(5) For the purposes of this section--

(a) whether a group qualifies as small shall be determined in accordance with section 383 (companies qualifying as small: parent companies);

(b) "ineligible group" has the meaning given by section 384(2) and (3);

(c) a group's aggregate turnover and aggregate balance sheet total shall be determined as for the purposes of section 383;

(d) "net" and "gross" have the same meaning as in that section;

(e) a company may meet any relevant requirement on the basis of either the gross or the net figure.

(6) The provisions mentioned in subsection (5) apply for the purposes of this section as if all the bodies corporate in the group were companies.

Exemption from audit: dormant companies

480 Dormant companies: conditions for exemption from audit

(1) A company is exempt from the requirements of this Act relating to the audit of accounts in respect of a financial year if--

(a) it has been dormant since its formation, or

(b) it has been dormant since the end of the previous financial year and the following conditions are met.

(2) The conditions are that the company--

(a) as regards its individual accounts for the financial year in question--

(i) is entitled to prepare accounts in accordance with the small companies regime (see sections 381 to 384), or

(ii) would be so entitled but for having been a public company or a member of an ineligible group, and

(b) is not required to prepare group accounts for that year.

(3) This section has effect subject to--

section 475(2) and (3) (requirements as to statements to be contained in balance sheet),
section 476 (right of members to require audit), and
section 481 (companies excluded from dormant companies exemption).

481 Companies excluded from dormant companies exemption

A company is not entitled to the exemption conferred by section 480 (dormant companies) if it was at any time within the financial year in question a company that--

(a) is an authorised insurance company, a banking company, an e-money issuer, an ISD investment firm or a UCITS management company, or

(b) carries on insurance market activity.

Companies subject to public sector audit

482 Non-profit-making companies subject to public sector audit

(1) The requirements of this Part as to audit of accounts do not apply to a company for a financial year if it is non-profit-making and its accounts--

(a) are subject to audit--

(i) by the Comptroller and Auditor General by virtue of an order under section 25(6) of the Government Resources and Accounts Act 2000 (c. 20), or

(ii) by the Auditor General for Wales by virtue of section 96, or an order under section 144, of the Government of Wales Act 1998 (c. 38);

(b) are accounts--

(i) in relation to which section 21 of the Public Finance and Accountability (Scotland) Act 2000 (asp 1) (audit of accounts: Auditor General for Scotland) applies, or

(ii) that are subject to audit by the Auditor General for Scotland by virtue of an order under section 483 (Scottish public sector companies: audit by Auditor General for Scotland); or

(c) are subject to audit by the Comptroller and Auditor General for Northern Ireland by virtue of an order under Article 5(3) of the Audit and Accountability (Northern Ireland) Order 2003 (S.I. 2003/418 (N.I. 5)).

(2) In the case of a company that is a parent company or a subsidiary undertaking, subsection (1) applies only if every group undertaking is non-profit-making.

(3) In this section "non-profit-making" has the same meaning as in Article 48 of the Treaty establishing the European Community.

(4) This section has effect subject to section 475(2) (balance sheet to contain statement that company entitled to exemption under this section).

483 Scottish public sector companies: audit by Auditor General for Scotland

(1) The Scottish Ministers may by order provide for the accounts of a company having its registered office in Scotland to be audited by the Auditor General for Scotland.

(2) An order under subsection (1) may be made in relation to a company only if it appears to the Scottish Ministers that the company--

(a) exercises in or as regards Scotland functions of a public nature none of which relate to reserved matters (within the meaning of the Scotland Act 1998 (c. 46)), or

(b) is entirely or substantially funded from a body having accounts falling within paragraph (a) or (b) of subsection (3).

(3) Those accounts are--

(a) accounts in relation to which section 21 of the Public Finance and Accountability (Scotland) Act 2000 (asp 1) (audit of accounts: Auditor General for Scotland) applies,

(b) accounts which are subject to audit by the Auditor General for Scotland by virtue of an order under this section.

(4) An order under subsection (1) may make such supplementary or consequential provision (including provision amending an enactment) as the Scottish Ministers think expedient.

(5) An order under subsection (1) shall not be made unless a draft of the statutory instrument containing it has been laid before, and approved by resolution of, the Scottish Parliament.

General power of amendment by regulations

484 General power of amendment by regulations

(1) The Secretary of State may by regulations amend this Chapter or section 539 (minor definitions) so far as applying to this Chapter by adding, altering or repealing provisions.

(2) The regulations may make consequential amendments or repeals in other provisions of this Act, or in other enactments.

(3) Regulations under this section imposing new requirements, or rendering existing requirements more onerous, are subject to affirmative resolution procedure.

(4) Other regulations under this section are subject to negative resolution procedure.

Chapter 2 Appointment of auditors

Private companies

485 Appointment of auditors of private company: general

(1) An auditor or auditors of a private company must be appointed for each financial year of the company, unless the directors reasonably resolve otherwise on the ground that audited accounts are unlikely to be required.

(2) For each financial year for which an auditor or auditors is or are to be appointed (other than the company's first financial year), the appointment must be made before the end of the period of 28 days beginning with--

(a) the end of the time allowed for sending out copies of the company's annual accounts and reports for the previous financial year (see section 424), or

(b) if earlier, the day on which copies of the company's annual accounts and reports for the previous financial year are sent out under section 423.

This is the "period for appointing auditors".

(3) The directors may appoint an auditor or auditors of the company--

(a) at any time before the company's first period for appointing auditors,

(b) following a period during which the company (being exempt from audit) did not have any auditor, at any time before the company's next period for appointing auditors, or

(4) The members may appoint an auditor or auditors by ordinary resolution--

(a) during a period for appointing auditors,

(b) if the company should have appointed an auditor or auditors during a period for appointing auditors but failed to do so, or

(5) An auditor or auditors of a private company may only be appointed--

(a) in accordance with this section, or

(b) in accordance with section 486 (default power of Secretary of State).

This is without prejudice to any deemed re-appointment under section 487.

486 Appointment of auditors of private company: default power of Secretary of State

(1) If a private company fails to appoint an auditor or auditors in accordance with section 485, the Secretary of State may appoint one or more persons to fill the vacancy.

(2) Where subsection (2) of that section applies and the company fails to make the necessary appointment before the end of the period for appointing auditors, the company must within one week of the end of that period give notice to the Secretary of State of his power having become exercisable.

(3) If a company fails to give the notice required by this section, 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.

487 Term of office of auditors of private company

(1) An auditor or auditors of a private company hold office in accordance with the terms of their appointment, subject to the requirements that--

(a) they do not take office until any previous auditor or auditors cease to hold office, and

(b) they cease to hold office at the end of the next period for appointing auditors unless re-appointed.

(2) Where no auditor has been appointed by the end of the next period for appointing auditors, any auditor in office immediately before that time is deemed to be re-appointed at that time, unless--

(a) he was appointed by the directors, or

(b) the company's articles require actual re-appointment, or

(d) the members have resolved that he should not be re-appointed, or

(e) the directors have resolved that no auditor or auditors should be appointed for the financial year in question.

(3) This is without prejudice to the provisions of this Part as to removal and resignation of auditors.

(4) No account shall be taken of any loss of the opportunity of deemed re-appointment under this section in ascertaining the amount of any compensation or damages payable to an auditor on his ceasing to hold office for any reason.

488 Prevention by members of deemed re-appointment of auditor

(1) An auditor of a private company is not deemed to be re-appointed under section 487(2) if the company has received notices under this section from members representing at least the requisite percentage of the total voting rights of all members who would be entitled to vote on a resolution that the auditor should not be re-appointed.

(2) The "requisite percentage" is 5%, or such lower percentage as is specified for this purpose in the company's articles.

(3) A notice under this section--

(a) may be in hard copy or electronic form,

(b) must be authenticated by the person or persons giving it, and

(c) must be received by the company before the end of the accounting reference period immediately preceding the time when the deemed re-appointment would have effect.

Public companies

489 Appointment of auditors of public company: general

(1) An auditor or auditors of a public company must be appointed for each financial year of the company, unless the directors reasonably resolve otherwise on the ground that audited accounts are unlikely to be required.

(3) The directors may appoint an auditor or auditors of the company--

(a) at any time before the company's first accounts meeting;

(b) following a period during which the company (being exempt from audit) did not have any auditor, at any time before the company's next accounts meeting;

(4) The members may appoint an auditor or auditors by ordinary resolution--

(a) at an accounts meeting;

(b) if the company should have appointed an auditor or auditors at an accounts meeting but failed to do so;

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