GUIDANCE FOR LIMITED COMPANIES
The following sections act as a brief guide for directors of limited companies relating to issues of a statutory nature and administration of a company. This does not set out to explain the complexities of company law, nor is it intended as a full list of the issues facing directors. We do, however, aim to give directors of companies some basic up to date information to assist in the administration and management of a limited company.
Statutory Records
Directors can be and often are prosecuted for non-compliance with Companies House filing rules, particularly in respect of maintenance of statutory records, accounts and annual returns. Such offences in default of the Companies Act are criminal matters and are taken very seriously by the Courts, carrying severe fines, disqualification or even prison sentences.
Any change of directors, secretary, registered office or allotment of shares, as well as many other events, must be recorded in the company minute books, and various official forms and resolutions lodged at Companies House. There are strict time limits for the filing of such returns, often as little as 14 days. This also applies to any change of a director's residential address.
The Companies Act also requires that all companies maintain comprehensive statutory registers and minute books, which record details of company structure in respect of officers and shareholders. Whilst this is something often overlooked by many company directors, it is a criminal offence not to maintain such records.
Upon incorporation, Company Registrations Online provides your company documents fully completed in accordance with these regulations. However, should any changes occur, it is important that these records are properly maintained. We provide a comprehensive Managed Company Secretarial Service to assist in this respect, and we would urge you to consider this facility to ensure that your company records are correctly maintained and remain up to date with current regulations.
Accounting Reference Dates
The accounting reference date (ARD) is the date to which accounts will be drawn up each year – the company’s financial year end.
Once incorporated, the ARD for a new company automatically becomes the end of the month in which the anniversary of the incorporation date of the company lies.
This date can be altered at any time at the discretion of the directors, although there are strict rules governing such changes. It is possible in effect to set any date of the year as a company's ARD although it is usual practice for the date to be a month end. The rules governing how and when changes can be made become quite complicated, and it is advisable never to leave decisions until the last minute. One important note here is that unless under exceptional circumstances, the ARD can be extended only once in any 5 year period.
In general terms, accounts for private companies must be filed within 9 months of the ARD, but note that for new companies, the first accounts must be filed no later than 21 months from the date of incorporation. This rule applies from the exact date of incorporation – not the end of that month. The first accounting period cannot exceed eighteen months from the incorporation date. For public companies the filing period is reduced to 6 months from the ARD.
There are automatic financial penalties imposed by Companies House for late filing of accounts, as well as the possibility of criminal action against the company’s directors. Company Registrations Online provide a comprehensive Managed Company Secretarial Service that will assist in monitoring these dates and provide advice regarding how and when necessary changes can be made.
Company Seals
Under UK Company Law there is no requirement for documents to be signed under seal. Any document formerly requiring a seal can be signed “as a deed” by two officers of the company or where there is only a sole director, a witness must also sign. A company may elect to use a seal if it prefers.
However, there may be circumstances when a seal can be required. For instance, if conducting business overseas or entering into contracts with overseas customers, it is possible that foreign lawyers or local regulations may require that a company affixes an official seal to legal documents, contracts or lease agreements.
Many companies still use a seal for executing documents in the UK such as formal contracts and lease agreements. Use of a seal helps to prevent any question of irregularity in the execution of a document as there is usually only one seal available to the signatories and it’s use is closely controlled by the directors or the company secretary.
Accounts
All private companies must file accounts with Companies House within 9 months of the accounting reference date, but it must be remembered that the maximum period allowed for a company's first accounts is 21 months from the incorporation date. This may reduce the usual 9 month period if the first accounting period is extended beyond twelve months. Beware that the 21 month rule applies from the incorporation date itself, not the ARD. This rule often catches out uninformed directors who expect to file their accounts by the end of the 21st month.
Example:
- A company is incorporated on 12 May 2010 making it first accounting reference date 31 May 2011. It extends its accounting reference date to 31 October so its first accounts will cover the period from incorporation to 31 October 2011.
- The first accounts must be filed by 12 February 2012 – 21 months from the date of incorporation.
- The second financial year will end on 31 October 2012, and accounts for this period will have to be filed by 31 July 2013– 9 months from the last ARD.
There are automatic financial penalties imposed by Companies House in respect of late filing of accounts. Such fines can be as high as £1500 for private companies, and our experience shows that it is virtually impossible to defend against these penalties once they have been imposed.
At present, companies with a turnover not exceeding £5.6m per annum do not need to appoint auditors or produce fully audited accounts.
Annual Returns
In addition to accounts, every company must also file an Annual Return AR01 with Companies House each year. The date of the Annual Return is each anniversary of the date of incorporation.
Companies House no longer provides a “shuttle return” service whereby your Annual Return was sent to the registered office in advance of the return date. The responsibility to file the form on time rests with the Directors and it is a criminal offence to delay the filing of this document. Company Registrations Online provides a comprehensive Managed Compliance Service that will assist in the annual preparation of your Annual Return, ensuring it is correctly competed and filed on time. We would urge you to consider this facility so as to ensure that your routine filings are always up to date.
Business Stationery & Web Sites
All company stationery including letterheads, invoices, order notes, delivery notes etc must clearly show all the following information:
- The full registered name of the company including the word limited or its abbreviation ltd (or equivalent for a PLC or LLP)
- A statement registered in England, registered in England & Wales, registered in Scotland or registered in Northern Ireland depending obviously on the place of registration
- The company registration number
- The registered office address, which must be clearly designated as such if different to the trading address. Specific reference to the address as the registered office need not be made if the registered office and trading address are the same, and if this is so, the address need only appear once on the letterhead
- It is not necessary to show the names of the directors, but if any are shown, they must all be shown
- All company cheques must show the word limited or the abbreviation ltd. Failure in this respect will render the signatory personally liable to the amount of the cheque.
The above rules on display of the correct designation and name of the company must also be clearly shown on any web site operated by the company,
Failure in this respect renders the Directors of the company liable to criminal prosecution and may create a personal liability in respect of certain dealings and transactions.