Companies Act 1989

JurisdictionUK Non-devolved
Citation1989 c. 40


Companies Act 1989

1989 CHAPTER 40

An Act to amend the law relating to company accounts; to make new provision with respect to the persons eligible for appointment as company auditors; to amend the Companies Act 1985 and certain other enactments with respect to investigations and powers to obtain information and to confer new powers exercisable to assist overseas regulatory authorities; to make new provision with respect to the registration of company charges and otherwise to amend the law relating to companies; to amend the Fair Trading Act 1973; to enable provision to be made for the payment of fees in connection with the exercise by the Secretary of State, the Director General of Fair Trading and the Monopolies and Mergers Commission of their functions under Part V of that Act; to make provision for safeguarding the operation of certain financial markets; to amend the Financial Services Act 1986; to enable provision to be made for the recording and transfer of title to securities without a written instrument; to amend the Company Directors Disqualification Act 1986, the Company Securities (Insider Dealing) Act 1985, the Policyholders Protection Act 1975 and the law relating to building societies; and for connected purposes.

[16th November 1989]

B e it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

I Company Accounts

Part I

Company Accounts

Introduction

Introduction

S-1 Introduction.

1 Introduction.

The provisions of this Part amend Part VII of the Companies Act 1985(accounts and audit) by—

(a) inserting new provisions in place of sections 221 to 262 of that Act, and

(b) amending or replacing Schedules 4 to 10 to that Act and inserting new Schedules.

Provisions applying to companies generally

Provisions applying to companies generally

S-2 Accounting records.

2 Accounting records.

The following sections are inserted in Part VII of the Companies Act 1985 at the beginning of Chapter I (provisions applying to companies generally)—

Accounting records

‘Accounting records

S-221 Duty to keep accounting records.

221 Duty to keep accounting records.

(1) Every company shall keep accounting records which are sufficient to show and explain the company's transactions and are such as to—

(a) disclose with reasonable accuracy, at any time, the financial position of the company at that time, and

(b) enable the directors to ensure that any balance sheet and profit and loss account prepared under this Part complies with the requirements of this Act.

(2) The accounting records shall in particular contain—

(a) entries from day to day of all sums of money received and expended by the company, and the matters in respect of which the receipt and expenditure takes place, and

(b) a record of the assets and liabilities of the company.

(3) If the company's business involves dealing in goods, the accounting records shall contain—

(a) statements of stock held by the company at the end of each financial year of the company,

(b) all statements of stocktakings from which any such statement of stock as is mentioned in paragraph (a) has been or is to be prepared, and

(c) except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased, showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified.

(4) A parent company which has a subsidiary undertaking in relation to which the above requirements do not apply shall take reasonable steps to secure that the undertaking keeps such accounting records as to enable the directors of the parent company to ensure that any balance sheet and profit and loss account prepared under this Part complies with the requirements of this Act.

(5) If a company fails to comply with any provision of this section, every officer of the company who is in default is guilty of an offence unless he shows that he acted honestly and that in the circumstances in which the company's business was carried on the default was excusable.

(6) A person guilty of an offence under this section is liable to imprisonment or a fine, or both.

S-222 Where and for how long records to be kept.

222 Where and for how long records to be kept.

(1) A company's accounting records shall be kept at its registered office or such other place as the directors think fit, and shall at all times be open to inspection by the company's officers.

(2) If accounting records are kept at a place outside Great Britain, accounts and returns with respect to the business dealt with in the accounting records so kept shall be sent to, and kept at, a place in Great Britain, and shall at all times be open to such inspection.

(3) The accounts and returns to be sent to Great Britain shall be such as to—

(a) disclose with reasonable accuracy the financial position of the business in question at intervals of not more than six months, and

(b) enable the directors to ensure that the company's balance sheet and profit and loss account comply with the requirements of this Act.

(4) If a company fails to comply with any provision of subsections (1) to (3), every officer of the company who is in default is guilty of an offence, and liable to imprisonment or a fine or both, unless he shows that he acted honestly and that in the circumstances in which the company's business was carried on the default was excusable.

(5) Accounting records which a company is required by section 221 to keep shall be preserved by it—

(a) in the case of a private company, for three years from the date on which they are made, and

(b) in the case of a public company, for six years from the date on which they are made.

This is subject to any provision contained in rules made under section 411 of the Insolvency Act 1986 (company insolvency rules).

(6) An officer of a company is guilty of an offence, and liable to imprisonment or a fine or both, if he fails to take all reasonable steps for securing compliance by the company with subsection (5) or intentionally causes any default by the company under that subsection.’.

S-3 A company's financial year and accounting referenceperiods.

3 A company's financial year and accounting referenceperiods.

The following sections are inserted in Part VII of the Companies Act 1985

A company's financial year and accounting reference periods.

‘A company's financial year and accounting reference periods.

S-223 A company's financial year.

223 A company's financial year.

(1) A company's ‘financial year’ is determined as follows.

(2) Its first financial year begins with the first day of its first accounting reference period and ends with the last day of that period or such other date, not more than seven days before or after the end of that period, as the directors may determine.

(3) Subsequent financial years begin with the day immediately following the end of the company's previous financial year and end with the last day of its next accounting reference period or such other date, not more than seven days before or after the end of that period, as the directors may determine.

(4) In relation to an undertaking which is not a company, references in this Act to its financial year are to any period in respect of which a profit and loss account of the undertaking is required to be made up (by its constitution or by the law under which it is established), whether that period is a year or not.

(5) The directors of a parent company shall secure that, except where in their opinion there are good reasons against it, the financial year of each of its subsidiary undertakings coincides with the company's own financial year.

S-224 Accounting reference periods and accountingreference date.

224 Accounting reference periods and accountingreference date.

(1) A company's accounting reference periods are determined according to its accounting reference date.

(2) A company may, at any time before the end of the period of nine months beginning with the date of its incorporation, by notice in the prescribed form given to the registrar specify its accounting reference date, that is, the date on which its accounting reference period ends in each calendar year.

(3) Failing such notice, a company's accounting reference date is—

(a) in the case of a company incorporated before the commencement of section 3 of the Companies Act 1989, 31st March;

(b) in the case of a company incorporated after the commencement of that section, the last day of the month in which the anniversary of its incorporation falls.

(4) A company's first accounting reference period is the period of more than six months, but not more than 18 months, beginning with the date of its incorporation and ending with its accounting reference date.

(5) Its subsequent accounting reference periods are successive periods of twelve months beginning immediately after the end of the previous accounting reference period and ending with its accounting reference date.

(6) This section has effect subject to the provisions of section 225 relating to the alteration of accounting reference dates and the consequences of such alteration.

S-225 Alteration of accounting reference date.

225 Alteration of accounting reference date.

(1) A company may by notice in the prescribed form given to the registrar specify a new accounting reference date having effect in relation to the company's current accounting reference period and subsequent periods.

(2) A company may by notice in the prescribed form given to the registrar specify a new accounting reference date having effect in relation to the company's previous accounting reference period and subsequent periods...

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