There is no doubt that the UK has a simple and straightforward process for setting up a company. According to current World Bank economy rankings, the UK is the 7th easiest country in the world to do business and the 16th most start-up friendly nation[1]. To add to the comfort that entrepreneurs feel when launching a start-up or a branch office in the UK, the English courts have an international reputation for providing fair, well-reasoned and impartial decisions when overseeing disputes. Despite the ease of doing business in the UK, there are several statutory company filing duties which must be complied with. Failure to do so could result in penalties being issued, or the company being removed from Companies House.

Company directors have a legal duty under the Companies Act to keep accurate accounts and records.

Some of these are ongoing obligations, but many are triggered by a change in the company’s particulars. Examples where a change must be reported to Companies House include:

• the appointment, retirement, resignation or removal of the company’s officers
• changes in the registered details of the company’s officers
• transfers and issues of shares resulting in changes to the company’s ownership
• changes to the company’s name
• changes to the company’s constitution
• circumstances where charges are granted over the company’s assets

Ongoing record-keeping obligations include keeping details of:

• the names of all directors, shareholders and company secretaries
• the outcome of any shareholder votes or resolutions
• any guarantees or indemnities given to third parties
• the buying and selling of company shares
• loans or mortgages secured against the company’s assets

Details of people with significant control (PSC) must also be kept. A PSC is defined as someone who:

• owns more than 25% of the company’s shares or voting rights
• can appoint or remove the majority of the company’s directors
• has significant influence or control over the company

If your records are kept somewhere other than the registered office of the company, you must inform the Companies Office of their location.

Your company’s annual accounts are prepared at the end of your financial year based on the company’s financial records. In most cases, an accountant or a company’s chief financial officer will prepare the accounts for filing with Companies House.

To be submitted correctly, statutory accounts must include:

• a balance sheet – this shows the company’s assets and liabilities to the end of its financial year
• a profit and loss account – this will show the turnover, operations costs and the profit left after the latter is deducted from the former
• notes about the company
• a director’s report
• an auditor’s report (depending on the size of your organisation)

Whether you will need to file an auditor’s report will depend on the size of your company and whether you are eligible for any exemptions[2].

Most small private companies do not need to produce an auditor’s report.

However, the following companies must provide audit reports:

• a public company (unless it is dormant)
• a subsidiary (unless it qualifies for an exemption)
• insurance and banking organisations
• a Markets in Financial Instruments Directive (MiFID) investment firm or an Undertakings for Collective Investment in Transferable Securities (UCITS) management company
• a corporate body which has had its shares traded on a regulated market in a European state

A company is considered dormant if it is not trading. Despite it’s status, a dormant company is still required to file annual accounts with Companies House including a balance sheet, profit and loss statement and any relevant notes.

It is essential that records are filed correctly and within the proper timescales with Companies House.

For example, Companies House may refuse to file a document if it does not clearly feature the company’s registration number on top of the document.

In addition, some company actions can only take effect once the relevant documents are filed (e.g. reductions of capital and a change of company name). Companies House generally requires such documents to be filed within 14 – 15 days of being signed by the company.

Therefore, following correct company filing duties and time limit requirements can be essential to a transaction’s success, and failure to comply can result in a major knock-on effect on the timetable for certain transactions.

Documents may be filed electronically or in hard copy by post. Electronic filing is available 24 hours a day and is generally less expensive than filing hard copy documents.

It is a civil and criminal offence to file company accounts late. A director, by virtue of his or her position, can be held liable for the late filing of accounts, even if the filing was delegated to an employee or accountant.

Companies can face penalties of up to £1,500, and its directors risk criminal prosecution and a fine of up to £5,000.

As an example of how these fines can accumulate, in 2014 Companies House collected £81 million in late filing penalties.

Failing to file accounts at all will result in a company being struck off the Companies House register and being dissolved. The current late filing penalties imposed on private companies are as follows:

• Up to one month late – £150.
• One to three months late – £375.
• Three to six months late – £750.
• Over six months late – £1,500.

If the company is late in delivering its accounts for two consecutive years, these penalties will be doubled.

Company directors need to understand their company filing duties and responsibilities when it comes to filing company accounts and maintaining accurate records. Failure to do so can result in penalties against both the company and its directors, and in some instances, a criminal record.

An experienced corporate solicitor can advise you on your company filing duties and any other director’s compliance matters.

Saracens Solicitors is a multi-service law firm based in London’s West End opposite Marble Arch. We have years of experience in advising on directors duties and corporate governance requirements. For more information, please call our office on 020 3588 3500.

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[1] http://www.doingbusiness.org/rankings

[2] https://www.gov.uk/audit-exemptions-for-private-limited-companies