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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.
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.
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:
In concept this is simple. However, as so often with compliance requirements, the devil is in the detail. You must consider:
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.
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:
The Companies Act requires every private company to keep the following registers:
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.
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:
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.
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
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