Our website is set to allow the use of cookies. For more information and to change settings click here. If you are happy with cookies please click "Continue" or simply continue browsing. Continue.

Law for Business

Knowhow - guidance - precedents

06 SEP 2012

Compliance: Companies Act - friend or foe?

Peter van Duzer

Solicitor and Company Secretary Consultant

The concerns of most SME's in the current economic climate will be gaining new business and cash flow. Behind those, on the regulatory side, are likely to be tax, VAT and accounting issues. The Companies Act 2006 is not likely to get a look in. Should you be concerned about this? The answer is, probably not - provided that you adhere to a few rules of compliance. However, fail in those basic compliance actions and you risk meeting a wedge of problems.

Compliance summary

The Companies Act 2006 sets out the UK law regulating companies. It is a mammoth piece of legislation, supplemented by a long list of regulations. The final parts of this Act came into force in October 2009, but some alterations to the details of the law continue, introduced by Regulations.

One aspect of company law is that in exchange for the benefit of limited liability enjoyed by companies, they are required to send certain information to Companies House so that it appears on the public record and can be inspected by others. Certain data is required on an annual basis and other data may be required to notify the happening of an event, such as a change of directors. The majority of data is now filed online, although paper filing is still used, and may be more appropriate in some cases

The data that you send may be looked at by credit reference agencies, banks, suppliers, customers, competitors and others. So it is important to deliver it in the right format at the right time.

Annual compliance

The basic annual Companies Act compliance requirements for a company relate to its annual accounts and its annual return.

Every company (even a company that is dormant and not carrying on any activity) must prepare an annual account in accordance with the requirements of the Companies Act. The annual accounts for a private company comprise:

  • A directors' report containing required information;
  • A balance sheet giving a true and fair view of the state of affairs of the company at the end of the financial year; and
  • A profit and loss account, giving a true and fair view of the profit or loss of the company for the financial year.

In concept this is simple. However, as so often with compliance requirements, the devil is in the detail. You must consider:

  • The date to which the accounts must be made up, which for a new company will be a default date set by the Companies Act, unless you have made an event related filing to Companies House within the period allowed to change your accounting reference date.
  • Whether your company qualifies as a ‘small' company, in which case it is subject to reduced requirements as to the content of its annual accounts and as to what must be delivered to Companies House (a company subject to the small companies regime may choose to deliver only a copy of the balance sheet).
  • Whether your company is parent company of a group of companies so that both individual and group accounts are required.
  • Whether your company can claim audit exemption and the correct wording to put on the balance sheet if you do.
  • The period within which accounts must be delivered to Companies House, which is normally within 9 months of the end of the financial year for a private company, but may be within 21 months of incorporation for the first set of accounts for a new company.
  • Make sure that the balance sheet and directors' report are signed and that the name of the signatory is stated on all copies - particularly on any copy delivered to Companies House.

Consider whether online delivery of accounts is suitable for your company. For smaller companies that are not in a group, filing online may make sense. Currently over a third of companies file accounts online.

The annual return is a totally separate item. It gives a ‘snapshot picture' of information about the company on a particular date (known as the ‘return date' and normally the anniversary of the date of incorporation) and must be delivered to Companies House each year within 28 days of that return date. A fee is payable and almost all annual returns are filed online. For single companies it makes sense to use the web filing facility provided by Companies House. For larger groups, it makes sense either to use one of the software packages available to deal with Companies Act compliance or to outsource to a firm of experts. The preferred option will depend on the size and resources of the group.

What if I don't do my annual compliance?

Failure to deliver annual accounts and returns to Companies House can cost money and cause problems. Both the cost and the problems are likely to increase the longer any such default persists. For instance:

  • If accounts are delivered late to Companies House, this results in an automatic penalty, which for a private company will be between £150 and £1,500 (depending on how late the accounts are delivered) and in the case of default for a second consecutive year double those penalties are payable; in the 2011-2012 period 229,315 penalties were levied with a total penalty value of £94.4m.
  • If there is continued failure to deliver annual returns and accounts, after issuing warnings to the company's registered office, if there is no response, the company is likely to be struck from the register and dissolved which, amongst several unpleasant consequences, will result in its bank account being frozen; it is possible to apply to court for the company to be restored, but this takes time and money.
  • If the company replies to warnings, unless it is able to commit to delivering overdue accounts and returns within an agreed time, the directors may face prosecution, as failure to deliver these in accordance with requirements is an offence.


The Companies Act requires every private company to keep the following registers:

  • Register of members (shareholders);
  • Register of directors;
  • Register of directors' residential addresses (this is ‘protected information' that can only be disclosed in very limited circumstances);
  • Register of company secretaries (if a company secretary is appointed; this is optional for private companies); and
  • Register of mortgages and charges.

There are detailed requirements about what information should be contained in the registers, where they may be kept and in what circumstances and how they should be made available for inspection. Companies Act compliance software is designed to deal with these requirements.

Event related compliance

There are also requirements to deliver information to Companies House following the happening of certain events during the life of a company. Some of the most common are:

  • To change the company's financial year end (known as the accounting reference date);
  • To change the registered office;
  • To notify a change of director (appointment or termination of appointment) or a change of director's particulars (such as residential address); and
  • To notify the issue of additional shares.

Failure to properly deal with and notify such events when they occur can cause difficulties later. For instance having the wrong registered office address on the public record can result in warnings from Companies House, official documents and writs failing to come to the notice of the company, with potentially disastrous results.

Friend or foe?

As with most compliance, if requirements are correctly dealt with at the right time, the Companies Act can be your friend, but ignore the basic requirements at your peril.

Peter van Duzer

Companies Limited by Guarantee

Companies Limited by Guarantee

The only book available that deals exclusively with such companies

Available in Lexis®Library
Jordan Publishing Company Administration and Governance

Jordan Publishing Company Administration and Governance

"This is an indispensable aid to the busy company secretary. The text is clear, the precedents...

Available in Lexis®Library